Final Results

TT electronics PLC 21 March 2005 TT electronics plc TT ELECTRONICS PLC REPORTS ON STRONG PERFORMANCE IN 2004 TT electronics is a world leader in resistor and sensor technology and today announces its preliminary results for the year to 31 December 2004. KEY POINTS â€¢ Group turnover on continuing activities of Â£597.4 million (2003: Â£527.5 million). â€¢ Profit before goodwill amortisation and taxation was Â£30.1 million (2003: Â£20.0 million, before exceptional items). â€¢ Demand for automotive products remained strong and sales to this market grew by 10 per cent. â€¢ Sales to the telecom and computer market grew by 35 per cent as this market experienced a recovery. â€¢ Our acquisition Optek Technology, which substantially expanded our sensor business, performed ahead of expectations and provided the group with its entry into the active component market. â€¢ The recent acquisition of Dage Limited establishes TT electronics' manufacturing base in China and will be earnings enhancing with immediate effect. â€¢ Performance of the electrical division was substantially improved following the reorganisation of the UK genset business. â€¢ The group generated cash from operations of Â£58.3 million (2003: Â£45.2 million) and gearing at the year end was 32 per cent (2003: 40 per cent). â€¢ The Board is recommending a maintained final dividend of 6.36p per share bringing the total for the year to 10.05p (2003: 10.05p). John Newman, Executive Chairman, said today: 'These results reflect the continued growth in demand from the automotive market and the sustained recovery of the electronic component market. 'Our future strategy lies in both passive and active components and we continue to develop new technologies such as our advanced inductive sensors and high intensity visible light emitting diodes which are attracting significant interest. Our recent expansion into China is an important strategic development enabling us to continue to meet the requirements of our customers, particularly in the automotive industry. 'In 2005 we expect demand from North America to remain stable and to see continuing growth in China. With this relatively healthy background we are confident of our ability to achieve future growth.' 21 March 2005 Enquiries: TT electronics plc Tel: 01932 856647 John W Newman, Executive Chairman Biddicks Tel: 020 7448 1000 Zoe Biddick Financial Highlights 2004 2003 Â£million Â£million -------- -------- Turnover - continuing activities 597.4 527.5 - discontinued activities - 6.4 ----------------------------------------- -------- -------- Turnover - total 597.4 533.9 ----------------------------------------- -------- -------- Operating profit before goodwill amortisation 33.1 22.1 Interest (3.0) (2.1) ----------------------------------------- -------- -------- Profit before goodwill amortisation, exceptional items and taxation 30.1 20.0 ----------------------------------------- -------- -------- Profit on ordinary activities after taxation on continuing activities 19.0 10.8 ----------------------------------------- -------- -------- Earnings per share, basic 12.3p (0.1)p ----------------------------------------- -------- -------- Earnings per share before goodwill amortisation and exceptional items 13.9p 10.4p ----------------------------------------- -------- -------- Ordinary dividends per share 10.05p 10.05p ----------------------------------------- -------- -------- Chairman's statement This year has seen a significant improvement in operating profit. Turnover on continuing activities has grown from Â£527.5 million to Â£597.4 million, a growth of 13 per cent, whilst operating profit before goodwill amortisation has increased from Â£22.1 million to Â£33.1 million, an increase of 50 per cent. Goodwill amortisation was Â£2.5 million (2003 - Â£1.8 million). The increase in goodwill amortisation was primarily due to the acquisition of Optek Technology in December 2003. Profit before tax was Â£27.6 million (2003 - Â£3.2 million). Taxation charge in the year was Â£8.6 million (2003 - Â£3.2 million) at an effective rate of 29 per cent (2003 - 23 per cent). As a result of funding the acquisition of Optek Technology with bank indebtedness, interest in the year has increased from Â£2.1 million to Â£3.0 million. Earnings per share before goodwill amortisation were 13.9p compared with 10.4p. These figures show that the group had a strong second half following the improved first half. The electronic sector turnover for the year has increased by 16 per cent to Â£403.6 million. Excluding the full year effect of the acquisition of Optek Technology organic growth was 7 per cent. The electronic sector operating profit before goodwill amortisation was Â£26.0 million, compared with Â£16.9 million last year. The electrical sector turnover increased by 9 per cent to Â£193.8 million with operating profit improving from Â£5.7 million to Â£7.1 million. Neil Rodgers was appointed the Chief Executive in April 2004 and makes his first report in these accounts. Neil Rodgers' appointment has been at the time of a recovery in demand for electronic components and a continuing growth in the requirement for electronic products from the automotive industry. The increase in sales of electronic components has to a large extent been met out of excess manufacturing capacity in our factories which was caused by the downturn in the telecom industry in 2001 and 2002. During the year there has been a further reduction in the value of the US dollar against the Euro and Sterling. As TT electronics is a global manufacturer, the movement in currencies has provided the group with opportunities. The devaluation has reduced the cost of our manufactured products in US dollar areas and given us the opportunity to reduce costs by sourcing product outside the Euro area. The translation of profits has marginally affected the group's profit after tax. TT electronics continues to be a strong generator of cash. At the year end, the group's net indebtedness had reduced to Â£62.5 million compared with Â£78.2 million at the end of last year. International Financial Reporting Standards come into effect in 2005 and every effort will be made to assist all shareholders to understand the impact of the new standards on TT electronics' accounts. The Board of TT electronics recommends a final dividend of 6.36p per share, which following the 3.69p interim dividend provides a total dividend for the year of 10.05p, the same as last year. Following the retirement of Mark Evans, who reached the non-executive retirement age of 70, the Board was very pleased to invite David Crowther FCA to become a non-executive Director of TT electronics plc. I am sure that as a former partner of PricewaterhouseCoopers LLP, he will make a valuable contribution to the group. He joined the Board on 10 January 2005 and will offer himself for election at the Annual General Meeting. I would like to take this opportunity to thank Mark Evans for his contribution and wise counsel over the past six years. As Timothy Reed has been a non-executive Director for more than the nine year term recommended for guidance in the Revised Combined Code, he will again be offering himself for re-election at the Annual General Meeting. As I said last year Timothy Reed, a former corporate lawyer, has always presented a strong independent voice on the Board and it is the opinion of the whole Board that as an independent non-executive Director his continuing involvement in the group will be beneficial to the future of TT electronics plc. I would like to thank all our employees in the group's operations throughout the world for their contribution to TT electronics' performance during the year and its continuing success. On 10 March 2005 the acquisition of Dage Limited was announced. Dage Limited is a well established contract electronics manufacturer serving a blue chip client base. The company has manufacturing facilities in Aylesbury in the United Kingdom and in Suzhou, near Shanghai in China. The entire share capital of Dage Limited has been acquired for a cash consideration of Â£8.0 million, subject to completion accounts, for net assets of Â£4.9 million as at 30 April 2004. In the year ended 30 April 2004, on a turnover of Â£19.3 million Dage Limited's profit before tax was Â£1.2 million. As well as extending the group's contract electronic manufacturing services, this acquisition also provides TT electronics with facilities in China to meet the requirements of our major customers, particularly within the automotive industry. This important expansion into China forms part of the group's long-term plans and followed on from the Board's decision to acquire a base in China rather than start with a greenfield site. The future strategy of TT electronics lies in both active and passive electronic components. Growth will be achieved by continuing development of new products for our original equipment manufacturing customers and acquisitions to enhance and strengthen our position in the marketplace. The acquisition of Sensopad Technologies Ltd in March 2004 was part of this strategy as Sensopad provides the group with advanced inductive sensor technology to meet the future needs of the automotive industry. The 2005 global economy for electronic products is likely to be based on a stable demand from the North American market and the continuing growth in the Chinese market. With this relatively healthy background, TT electronics has the capability to gain new business from our customers, being the original equipment manufacturers, which will provide good future growth opportunities for the group. John W Newman Executive Chairman 18 March 2005 Chief Executive's statement The electronic sector showed strong profit growth, up by an impressive 54 per cent, on turnover growth of 16 per cent. Demand for our automotive products remained strong and we experienced healthy recovery in the telecom, computer and industrial markets. Our recent acquisition Optek Technology performed ahead of expectations and continues to provide a significant contribution towards overall profitability. Performance in our electrical sector also improved largely as a result of the reorganisation of our generator set operations in 2003. Electronic sector I am pleased to report the significant improvement in profitability of this sector which results from continuing success in product development and the effective management of our businesses in automotive and component markets. Automotive market Our overall automotive business grew by 10 per cent, a strong performance in a market where the volume of vehicles produced worldwide is essentially static. BMW and DaimlerChrysler have become increasingly successful in global markets, particularly North America, and our relationship with these major OEMs has contributed to our success as a leader in the European automotive sensor market. We continue to work closely with customers on development programmes of new technologies for next generation vehicles, a major strength of our European automotive business. Demand for electronics in vehicles is estimated to grow at 6 per cent per annum. Electronics are taking over more and more of a car's mechanical and electrical controls and the group's products are utilised in 'drive-by-wire' functions, temperature and pressure sensing, light current switching and a range of position and speed sensing applications. Automotive products and technologies TT electronics' product range is dominated by our sensor activities. The acquisition of Optek, a major sensor manufacturer based in North America and Mexico, has positioned the group well for growth in sales of sensors to the North American market. Highlights of our European operations are our continued strength in the field of electronic throttle control pedals, and a range of engine speed sensors supplied to the German market. Particularly exciting is the acquisition during early 2004 of Sensopad Technologies Ltd, which brings to the group highly accurate inductive sensor technology, primarily for position applications. Work on adapting this technology within our existing portfolio of products is well advanced and is generating major interest from both current and prospective customers. The development of the specific componentry and in particular the ASIC required for the units to be put into volume production is on target for completion early in 2006. Our climate control activities are suffering from reduced demand, primarily from North America. There are several new programmes due for launch during 2005 which are expected to recover some of the lost ground. The group's microcircuit hybrid businesses based in Europe have continued to develop new products, including an electronic control module for an electric water pump for German vehicles, sun sensors for the monitoring of climate control systems, and control circuits for the Xenon headlamps now fitted to many European vehicles. Component market TT electronics' components are sold into a variety of markets including telecom and computer, industrial and office equipment. Our overall component sales grew in a market which, during 2004, saw a recovery across the world. Sales to distribution customers have grown to 28 per cent of our component sales worldwide. Sales to the telecom and computer market grew by 35 per cent. Our products are primarily sold to computer and telecom equipment providers across the world for applications such as local and wide area networks, contributing towards the goal of the paperless office environment. TT electronics works closely with western based customers to design-in our components, thereby ensuring continuity of supply independent of the manufacturing location. Outlook for the component market in 2005 again shows growth, although at a more modest level. Our strong position in passive components plus our entry into the active component market following the acquisition of Optek positions us well in this market. Component products and technologies TT electronics' component operations are skilled at developing new products from a relatively mature product base. Our business is driven towards custom designed-in products, at lower volume but higher margin than many of our global competitors. During 2004 we developed a Ball Grid Array product range encompassing resistor and capacitor networks, and sales of this product range have commenced. This product maximises the number of connections for a given component size, thereby enhancing its functionality. Development of the AnothermTM product range,used in high intensity LED assemblies, is attracting significant interest from prospective customers and a number of prototype orders have been received for applications such as computer display backlighting, traffic signals, signage and speciality lighting. The demand for components which can function at very high frequencies is expected to grow over the coming years and TT electronics has designed application specific thick film products in anticipation of this growth. New programmes have been identified to develop a range of surface mounted opto-electronic devices. Plans to expand into the visible light emitting diode market are advanced and a new product range will be launched to market during 2005. Operations TT electronics' policy of investing in modern automated manufacturing equipment to support manufacture in high labour cost economies has been particularly successful in our German operations, where our factories specialise in leading edge manufacturing processes capable of producing zero defect products. Sensor manufacturing operations are concentrated in Western Europe and North America. However we continue to expand our low cost assembly facility in the Ukraine for simple products transferred from our German operations. We have maintained our policy of transferring component manufacturing operations to lower cost economies where appropriate. In 2004 we moved manufacture of product lines to Barbados, set up thick film printing capability in Mexico and completed the transfer of a range of products to our factory in Kuantan, Malaysia. During 2004 we completed the reorganisation of our remaining ferrite operations with the expansion of our factory in India. During the year two new initiatives commenced. The first is the establishment of an International Procurement Office based in China, the objective being to assist group companies to obtain competitive pricing for materials. The second initiative is the creation of our Manufacturing Improvement Team. The team, comprising lean-manufacturing and six-sigma skills, is tasked with establishing lasting improvements within each of our businesses, with the aim of becoming more cost competitive in our global markets. Electrical sector Performance in this sector shows a substantial improvement following the United Kingdom genset reorganisation carried out in 2003. Our connector and cable accessories businesses have performed well but the cable operations are being reorganised due to strong price competition. Market The dominant feature for 2004 was the continuing increase in worldwide copper prices which impacted on our cable manufacturing operations. Orders for industrial cable varied considerably throughout the year as customers attempted to predict short-term copper price fluctuations. Domestic cable volumes and margins showed improvement, and our specialist rubber cables have experienced high demand. The order for the cable for new naval vessels won during 2003 was largely completed during the year and the next phase of the contract has been awarded covering 2005 production. Our low cost genset manufacturing operation based in Mexico has performed well as a result of demand for power generation in China. The United Kingdom genset operation, now converted to a maintenance and panel upgrade business, returned to profitability. The demand for ground power units for aircraft improved, with specialist products being supplied to military and civilian airlines. Products and technologies Continued development has resulted in an application for patents on a new concept for tunnel lighting which avoids high installation costs. We have continued with the development of new compounds for harsh environment cable applications, for example our recently developed soft skin fire resistant cable. The cable accessory operations are designing new ranges of lower cost units for use by Regional Electricity Companies for power supply installations, and work is expected to be completed during 2005 for the resourcing of lower cost components from the Far East. TT electronics' connector operations have expanded rapidly during the year. Originally a connector-only supplier to the defence and industrial market, the company has expanded its product range to include sub assemblies and finished products, which in many cases comprise complex assembly cables, connectors and housing units. Demand continues to grow for this product type. Operations We have undertaken major changes to our manufacturing and distribution operations for cable products. In 2004 we initiated the closure of mineral insulated cable manufacture at our Merseyside operation and our distribution centre in North America. On 24 February 2005 we announced the proposed closure of the power cables division located at Gravesend. This loss making operation services a market dominated by low cost producers and has an old manufacturing facility. The company is currently in consultation with the workforce. Acquisitions On 10 March 2005 we announced the acquisition of Dage Limited, which is based in Buckinghamshire and in Suzhou near Shanghai, China. The company operates as an electronic manufacturing services supplier to major OEMs. This acquisition represents an important step for TT electronics in our entry into the Chinese market. The company has excellent relationships with locally based, foreign owned customers, and has demonstrated a profitable growth path in the past four years. Dage Limited's operation in China, has recently expanded into new production facilities which we will use to manufacture a range of TT products for sale into the growing Chinese market. Outlook We are pleased with the results for 2004 achieved from the drive and commitment of our people across the world. Our electronics sector has a strong product range, world class manufacturing facilities and a growing customer base. Key to our success remains our capability to develop new products and technologies to sustain growth for the future. Within our electrical sector we have some strong product groups and cost effective manufacturing strategies. We will continue to review these operations and will build upon our strengths to improve future profitability. We are positive about our business for 2005. Neil A Rodgers Chief Executive 18 March 2005 Consolidated profit and loss account For the year ended 31 December 2004 Note 2004 2003 2003 2003 Continuing Continuing Discontinued Total activities activities activities Â£million Total Â£million Â£million Â£million ------ --------- --------- --------- ------- Turnover 1 597.4 527.5 6.4 533.9 Cost of sales (486.0) (434.1) (6.1) (440.2) ------------------------ ------ --------- --------- --------- ------- Gross profit 111.4 93.4 0.3 93.7 Operating expenses (80.8) (72.6) (0.8) (73.4) ------------------------ ------ --------- --------- --------- ------- Operating profit 30.6 20.8 (0.5) 20.3 ------------------------ ------ --------- --------- --------- ------- Operating profit before goodwill amortisation 33.1 22.6 (0.5) 22.1 Goodwill amortisation (2.5) (1.8) - (1.8) ------------------------ ------ --------- --------- --------- ------- Operating profit 30.6 20.8 (0.5) 20.3 ------------------------ ------ --------- --------- --------- ------- Cost of reorganisation-magnetics 2 - (3.0) (10.8) (13.8) Loss on sale of business 2 - (1.2) - (1.2) ------------------------ ------ --------- --------- --------- ------- Profit on ordinary activities before interest 30.6 16.6 (11.3) 5.3 Interest (3.0) (2.1) - (2.1) ------------------------ ------ --------- --------- --------- ------- Profit on ordinary activities before taxation 1 27.6 14.5 (11.3) 3.2 Taxation (8.6) (3.7) 0.5 (3.2) ------------------------ ------ --------- --------- --------- ------- Profit on ordinary activities after taxation 19.0 10.8 (10.8) - Minority interests - (0.1) - (0.1) ------------------------ ------ --------- --------- --------- ------- Profit /(loss) for the year 19.0 10.7 (10.8) (0.1) Dividends 3 (15.6) (15.6) - (15.6) ------------------------ ------ --------- --------- --------- ------- Retained profit/(loss) 3.4 (4.9) (10.8) (15.7) ------------------------ ------ --------- --------- --------- ------- Earnings per share 4 - basic 12.3p (0.1)p - fully diluted 12.2p (0.1)p - before goodwill amortisation and exceptional items 13.9p 10.4p ---------------------------------------------------------------------------------- Consolidated balance sheet At 31 December 2004 Note 2004 2003 Â£million Â£million -------------------------------------- ------ ------- ------- Fixed assets Intangible assets 42.7 44.9 Tangible assets 133.6 143.5 Investments 5.3 5.3 -------------------------------------- ------ ------- ------- 181.6 193.7 -------------------------------------- ------ ------- ------- Current assets Property 0.1 1.8 Stocks 99.6 98.5 Debtors 107.2 108.7 Investments 0.1 0.1 Cash 5.4 8.5 -------------------------------------- ------ ------- ------- 212.4 217.6 Creditors falling due within one year (126.1) (147.2) -------------------------------------- ------ ------- ------- Net current assets 86.3 70.4 -------------------------------------- ------ ------- ------- Total assets less current liabilities 267.9 264.1 Creditors falling due after more than one year (65.9) (60.9) Provisions for liabilities and charges (2.5) (4.2) Minority interests (2.9) (2.9) -------------------------------------- ------ ------- ------- Total net assets 196.6 196.1 -------------------------------------- ------ ------- ------- Capital and reserves Share capital 38.7 38.7 Share premium account 56.0 56.0 Capital redemption reserve 4.4 4.4 Merger reserve 23.0 23.0 Profit and loss account 74.5 74.0 -------------------------------------- ------ ------- ------- Equity shareholders' funds 5 196.6 196.1 -------------------------------------- ------ ------- ------- Consolidated cash flow statement For the year ended 31 December 2004 Note 2004 2003 Â£million Â£million ------ ------- ------ Net cash inflow from operating activities 6 58.3 45.2 ------------------------------------- ------ ------- ------ Returns on investments and servicing of finance Interest paid (3.2) (2.6) Interest received 0.2 0.5 ------------------------------------- ------ ------- ------ Net cash outflow from returns on investments and servicing of finance (3.0) (2.1) ------------------------------------- ------ ------- ------ Taxation (15.8) (2.9) ------------------------------------- ------ ------- ------ Capital expenditure and financial investment Sale of tangible fixed assets 6.2 2.2 Government grants received 2.0 0.8 Loan repayment 6.0 - Purchase of fixed asset investments - (0.2) Purchase of tangible fixed assets (24.6) (23.5) ------------------------------------- ------ ------- ------ Net cash outflow from capital expenditure and financial investment (10.4) (20.7) ------------------------------------- ------ ------- ------ Acquisitions and disposals Purchase of businesses 8 (1.6) (31.0) Sale of business - 1.1 Reduction in purchase consideration 0.3 - ------------------------------------- ------ ------- ------ Net cash outflow from acquisitions and disposals (1.3) (29.9) ------------------------------------- ------ ------- ------ Ordinary dividends paid (15.6) (15.6) ------------------------------------- ------ ------- ------ Net cash inflow/(outflow) before liquid resources and financing 12.2 (26.0) ------------------------------------- ------ ------- ------ Net cash outflow from management of liquid resources - - ------------------------------------- ------ ------- ------ Financing New loans 4.9 6.7 Loan repayments (0.6) (0.4) ------------------------------------- ------ ------- ------ Net cash inflow from financing 4.3 6.3 ------------------------------------- ------ ------- ------ Increase/(decrease) in cash 7 16.5 (19.7) ------------------------------------- ------ ------- ------ Notes to the financial statements 1. Analysis of turnover and profit on ordinary activities before taxation 2004 2003 Turnover Â£million Â£million ------- -------- By sector Electronic 403.6 349.3 Electrical 193.8 178.2 ---------------------------------------- ------- -------- Continuing activities 597.4 527.5 Discontinued activities - 6.4 ---------------------------------------- ------- -------- 597.4 533.9 ---------------------------------------- ------- -------- By origin United Kingdom 281.8 258.6 Rest of Europe 149.1 136.2 North America 133.8 102.0 Rest of the World 32.7 30.7 ---------------------------------------- ------- -------- Continuing activities 597.4 527.5 Discontinued activities - 6.4 ---------------------------------------- ------- -------- 597.4 533.9 ---------------------------------------- ------- -------- By destination United Kingdom 179.9 155.8 Rest of Europe 227.5 206.5 North America 117.7 101.5 Rest of the World 72.3 63.7 ---------------------------------------- ------- -------- Continuing activities 597.4 527.5 Discontinued activities - 6.4 ---------------------------------------- ------- -------- 597.4 533.9 ---------------------------------------- ------- -------- 2004 2003 Profit on ordinary activities before taxation Â£million Â£million ------- ------- By sector Electronic 26.0 16.9 Electrical 7.1 5.7 ---------------------------------------- ------- ------- Continuing activities 33.1 22.6 Discontinued activities - (0.5) ---------------------------------------- ------- ------- Operating profit before goodwill amortisation 33.1 22.1 Goodwill amortisation (2.5) (1.8) ---------------------------------------- ------- ------- Total operating profit 30.6 20.3 Exceptional items - (15.0) ---------------------------------------- ------- ------- Profit on ordinary activities before interest 30.6 5.3 Interest (3.0) (2.1) ---------------------------------------- ------- ------- Profit on ordinary activities before taxation 27.6 3.2 ---------------------------------------- ------- ------- By origin United Kingdom 3.0 2.0 Rest of Europe 16.5 14.2 North America 10.7 4.4 Rest of the World 2.9 2.0 ---------------------------------------- ------- ------- Continuing activities 33.1 22.6 Discontinued activities - (0.5) ---------------------------------------- ------- ------- Operating profit before goodwill amortisation 33.1 22.1 Goodwill amortisation (2.5) (1.8) ---------------------------------------- ------- ------- Total operating profit 30.6 20.3 Exceptional items - (15.0) ---------------------------------------- ------- ------- Profit on ordinary activities before interest 30.6 5.3 Interest (3.0) (2.1) ---------------------------------------- ------- ------- Profit on ordinary activities before taxation 27.6 3.2 ---------------------------------------- ------- ------- The results include the first full year's contribution from Optek Technology Inc, acquired on 3 December 2003. The results of TT electronics technology Limited (formerly Sensopad Technologies Ltd) acquired on 11 March 2004 are not considered to be material and therefore are reported as continuing activities. Discontinued activities in 2003 were the results of the laminations business. Exceptional items for 2003 are described in note 2. Goodwill amortisation is in respect of the electronic sector. 2. Exceptional items - 2003 A major reorganisation of the group's magnetics business was carried out in 2003 and resulted in a charge of Â£13.8 million including Â£10.1 million of goodwill previously written-off to reserves. The group sold the business of Air Transport Avionics in 2003 at a loss of Â£1.2 million including Â£0.8 million of goodwill previously written-off to reserves. 3. Dividends 2004 2003 2004 2003 pence per pence per Â£million Â£million share share -------- ------- ------- ------- Equity Ordinary dividends - Interim, paid 3.69 3.69 5.7 5.7 - Final, proposed 6.36 6.36 9.9 9.9 ----------------------------- -------- ------- ------- ------- 10.05 10.05 15.6 15.6 ----------------------------- -------- ------- ------- ------- The final dividend will be paid on 27 May 2005 to shareholders on the register at 20 May 2005. 4. Earnings per share 2004 2003 pence per pence per share share -------- ------- Earnings per share Basic 12.3 (0.1) Fully diluted 12.2 (0.1) Before goodwill amortisation and exceptional items 13.9 10.4 --------------------------------------- -------- ------- Earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of shares in issue during the period. The numbers used in calculating basic and fully diluted earnings per share are reconciled below. An adjusted earnings per share has also been presented based on the profit attributable to shareholders before goodwill amortisation and exceptional items. The effect of these items on earnings is reconciled below. 2004 2003 Â£million Â£million ------- ------- Net profit/(loss) for the period attributable to shareholders Earnings basic and fully diluted 19.0 (0.1) Goodwill amortisation 2.5 1.8 Exceptional items, net of tax relief - 14.5 --------------------------------------- ------- ------- Earnings before goodwill amortisation and exceptional items 21.5 16.2 --------------------------------------- ------- ------- 2004 2003 million million ------- ------- Weighted average number of shares in issue Basic 154.8 154.8 Adjustment for share options 1.5 0.6 --------------------------------------- ------- ------- Fully diluted 156.3 155.4 --------------------------------------- ------- ------- 5. Reconciliation of movements in shareholders' funds 2004 2003 Â£million Â£million ------- ------- Profit/(loss) for the year 19.0 (0.1) Exchange differences on net foreign currency investments (2.9) (4.8) --------------------------------------- ------- ------- Total recognised gains and losses 16.1 (4.9) Dividends (15.6) (15.6) Goodwill included in exceptional items - 10.9 --------------------------------------- ------- ------- Net change in shareholders' funds 0.5 (9.6) Opening shareholders' funds 196.1 205.7 --------------------------------------- ------- ------- Closing shareholders' funds 196.6 196.1 --------------------------------------- ------- ------- 6. Reconciliation of group operating profit to net cash inflow from operating activities 2004 2003 Â£million Â£million ------- -------- Total operating profit 30.6 20.3 Depreciation 29.3 26.1 Amortisation 2.7 1.8 Government grants credited to profit (1.1) (0.8) Profit on sale of tangible fixed assets (2.8) (0.7) Closure and other costs - (1.5) Decrease in property current assets 1.7 0.8 (Increase)/decrease in stocks (1.1) 1.5 (Increase)/decrease in debtors (3.8) 8.6 Increase/(decrease) in creditors 5.4 (8.9) Movement on pension prepayments and accruals (0.8) (0.9) Exchange translation differences (1.8) (1.1) -------------------------------------- -------- -------- Net cash inflow from operating activities 58.3 45.2 -------------------------------------- -------- -------- 7. Reconciliation of net cash flow to movement in net debt Net cash/ Short-term Loans Net Debt (overdraft) investments and finance Â£million Â£million Â£million lease obligations Â£million --------- --------- --------- --------- Balance at 31 December 2002 (7.6) 0.1 (48.3) (55.8) Cash flow (19.7) - (6.3) (26.0) Acquisitions - - (0.6) (0.6) Exchange differences 0.1 - 4.1 4.2 ---------------------- --------- --------- --------- --------- Balance at 31 December 2003 (27.2) 0.1 (51.1) (78.2) Cash flow 16.5 - (4.3) 12.2 Exchange differences 1.0 - 2.5 3.5 ---------------------- --------- --------- --------- --------- Balance at 31 December 2004 (9.7) 0.1 (52.9) (62.5) ---------------------- --------- --------- --------- --------- 8. Acquisitions On 11 March 2004 the group acquired Sensopad Technologies Ltd, a technology development company, which then changed its name to TT electronics technology Limited. The purchase consideration was Â£3.5 million including future royalties provisionally valued at Â£2.1 million. The net cash outflow in respect of this acquisition was Â£1.6 million. 9. Post balance sheet event On 10 March 2005 the group announced the acquisition of Dage Limited, an electronic manufacturing services business with manufacturing facilities in the United Kingdom and China. The cash consideration was Â£8.0 million, subject to completion accounts, for Â£4.9 million of assets as at 30 April 2004. In the year ended 30 April 2004, Dage Limited's profit before taxation was Â£1.2 million on a turnover of Â£19.3 million. 10. Basis of preparation The information above, which does not constitute full financial statements within the meaning of S240 CA, 1985 is extracted from the audited financial statements of TT electronics plc for the year ended 31 December 2004 which: â€¢ have been prepared on a basis consistent with the accounting policies set out in the annual report for the year ended 31 December 2003 filed with the Registrar of Companies â€¢ were approved by the Directors on 18 March 2005 â€¢ carry an unqualified audit report, which did not contain statements under S237 CA, 1985 â€¢ will be posted to shareholders and available to the public in April 2005 â€¢ will be filed with the Registrar of Companies following the Annual General Meeting on 18 May 2005 This information is provided by RNS The company news service from the London Stock Exchange

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