Interim Results
TT electronics PLC
13 September 2005
TT electronics plc
TT electronics, a world leader in resistor and sensor technology, today
announces its interim results for the six months ended 30 June 2005.
KEY POINTS
• Group sales were £297.3 million (2004: £299.1 million) generating an
operating profit before exceptional items of £14.6 million (2004: £14.0
million).
• Group profit before tax, including an exceptional gain of £5.0 million
from the sale of the Gravesend site, was £16.4 million (2004: £11.1 million).
• Electronic sector sales were £201.6 million (2004: £207.4 million)
generating an operating profit of £10.3 million (2004: £11.8 million).
• Electrical sector sales were £95.7 million (2004: £91.7 million)
generating an operating profit of £4.3 million (2004: £2.2 million).
• The strategic acquisition of Dage Limited in March is performing ahead
of expectations and provides the group with the facilities to manufacture and
source low cost components in China.
• Earnings per share before exceptional profit is up by 18% to 5.2p
(2004: 4.4p)
• The interim dividend is maintained at 3.69p per share.
John Newman, Executive Chairman, said today:
'TT electronics has again returned a solid performance in less buoyant trading
conditions.
'In the electronic sector we experienced a softening of demand in the European
component market and reduced vehicle production in North America. We expect both
these markets to recover. Our electrical sector improved strongly as a result of
management action and increased demand for diesel generator sets manufactured in
Mexico.
'We remain focussed on the development of our successful world class electronics
businesses which operate in long term growth markets. We continue to exit
non-core, loss making businesses and to relocate our manufacturing operations to
low cost areas.'
Enquiries:
Biddicks Tel: 020 7448 1000
Zoe Biddick
Highlights
Half year % Change Half year Full year
30 June 2005 30 June 2004 2004
£ million £ million £ million
----------------------- ---------- ------- ---------- --------
Revenue 297.3 - 299.1 597.4
----------------------- ---------- ------- ---------- --------
Operating profit before
exceptional items 14.6 +4% 14.0 33.0
Exceptional items 5.0 - - -
----------------------- ---------- ------- ---------- --------
Operating profit 19.6 +40% 14.0 33.0
----------------------- ---------- ------- ---------- --------
Profit before tax 16.4 +48% 11.1 27.5
----------------------- ---------- ------- ---------- --------
Earnings per share
- basic 7.4p +68% 4.4p 11.9p
- fully diluted 7.3p +66% 4.4p 11.8p
----------------------- ---------- ------- ---------- --------
Dividends per share to be paid 3.69p - 3.69p 10.05p
----------------------- ---------- ------- ---------- --------
Chairman's statement
TT electronics made good progress this half year with its programme of focussing
on the core electronics business. The group achieved the profitable sale of the
land at Gravesend following the closure of the power cables division and has
made an important strategic expansion into China with the acquisition of Dage
Limited.
The market conditions were not as buoyant as in the first half of 2004 and as a
result revenue is slightly down at £297.3 million (2004: £299.1 million).
Operating profit before the exceptional items was £14.6 million (2004: £14.0
million) including the initial contribution of £0.7 million from the Dage
Limited group of companies. Profit before taxation, including the exceptional
profit of £5.0 million, was £16.4 million (2004: £11.1 million). The exceptional
profit of £5.0 million arises from the disposal of the Gravesend site after
deducting the costs of closing the power cables division on that site. It is
anticipated that the group will benefit from further proceeds when the site is
developed. Basic earnings per share were 7.4p (2004: 4.4p).
The electronic sector profits reduced to £10.3 million (2004: £11.8 million).
While sales of sensors in Europe remained strong, sales to the North American
automotive industry were adversely affected by slowdown in demand as was the
climate control business. Further restructuring actions to reduce costs are
being implemented. The UK printed circuit board business is uncompetitive with
the Far East and production will be significantly reduced before the end of the
year. Notwithstanding this, the group's major electronic businesses possess the
management skills, product knowledge and manufacturing facilities to benefit
from future growth in their markets.
The Dage Limited subsidiaries, now trading as TT electronic integrated systems,
were acquired in March this year and are performing ahead of expectations. This
is an important acquisition and provides the group with the facilities in China
to manufacture and source low cost components. It will improve TT electronics'
competitive edge with its major OEM customers and expand the group's electronics
business in the fast growing Asian market.
The electrical sector profit increased to £4.3 million (2004: £2.2 million)
benefiting from strong demand for standard diesel generating sets manufactured
by our subsidiary in Mexico and from the downsizing of the loss making cable
operations. The group recently sold Houchin Aerospace Limited, its standby power
generation equipment company, for £8.0 million cash, being a premium to net
assets. This sale continues TT electronics' strategy of disposing of non-core
electrical operations at attractive prices and re-investing in its growth
businesses.
The group has again demonstrated its ability to generate cash through tight
control over working capital. This strong cash generation together with the
strength of the group's balance sheet underpins the group's dividend payments.
The interim dividend will remain unchanged at 3.69 pence per share and will be
paid on 27 October 2005 to shareholders on the register on 21 October 2005.
The group's £50 million five year bank loan facility expires in June 2006 and is
therefore now classified as a short term borrowing on the balance sheet.
Discussions with our bankers are at an advanced stage to refinance this
borrowing with a long term bank facility on terms more attractive than those
currently in place.
These interim financial statements have been prepared under International
Financial Reporting Standards. Shareholders are referred to my letter and
accompanying circular dated 22 July 2005 in which the main changes to the
accounts were explained.
The group is focussing its management and financial resources more strongly on
its world class electronics businesses which are in long term growth markets and
will provide a sound basis for future performance.
John W Newman
Executive Chairman
13 September 2005
Chief Executive's review
The group has achieved operating profit before exceptional items of £14.6
million (2004: £14.0 million) on sales marginally below the first half of 2004.
Trading conditions in the electronics sector were weaker than those in the
strong first half of last year but comparable with those in the second half.
In the electrical sector there has been increased demand for household cables,
offset by the turnover reduction in the power cable business following the
closure of manufacturing at Gravesend.
On 9 September 2005 we announced a major reduction in the operations of
Prestwick Circuits Limited. This operation is loss making and the Board has
taken the view that in the face of competition in a market dominated by Far
Eastern supply profitability in the long term is unlikely.
Electronic sector
Sensors and electronic systems
Sensor sales to European OEMs were strong but demand from the North American
market for both sensors and climate control units was disappointing. This
followed the reduction in vehicle production levels by major North American
OEMs. Recent initiatives by these vehicle manufacturers have boosted their sales
and new products, including the Autopad(R), are due to commence manufacture in
the second half. These replace a number of programmes which ended in the first
half and therefore we expect improved demand by the end of this year. Our
European based climate control business has had a difficult first half. This
will be addressed by the transfer of manufacturing to our North American factory
and rationalisation of our European operations.
Electronic components
Sales in the first half of 2005 were £65.9 million (2004: £72.0 million). Demand
for components in North America and the Far East has remained good but in Europe
it has declined. This reflects competition from Far Eastern sources and the
expected transition to lead-free components being led by the European market.
This transition has led to a disruption to the market which we expect to
recover. Specialist hybrid modules manufactured for the European automotive
market are proving successful.
Electronic manufacturing services
Sales increased by 6 per cent to £38.3 million (2004: £36.1 million) including
the effect of the acquisition of Dage Limited and its subsidiaries based in
China and the UK.
The group's UK operations have been successful in further expanding the range of
customers particularly in the aerospace and defence markets and we look forward
to improved profitability following the reduction of losses incurred at our UK
printed circuit board business.
Electrical sector
Power systems
Sales have remained stable at £25.0 million (2004: £25.4 million). The group's
power generator set operation in Mexico has maintained its success in sales to
Far Eastern markets.
Power and data transmission
Sales were £70.7 million (2004: £66.3 million), reflecting the higher cost of
the copper content in electrical cables offset by reduced sales of power cables
following the closure of the Gravesend power cable business. Our cable accessory
operations continued to achieve good profits at a consistent level of revenue.
Outlook
We continue to rationalise our business operations and to dispose of operations
outside of our core focus which remains world class electronics manufacture.
Our core businesses remain strong and the group's employees are committed to
success in the market place. The current trading conditions are not expected to
change significantly in the second half of 2005.
Neil A Rodgers
Chief Executive
13 September 2005
Consolidated income statement
for the six months ended 30 June 2005
Note 2005 2004 2004
First half First half Full year
£ million £ million £ million
--------------------------- ----- --------- --------- ---------
Revenue 2 297.3 299.1 597.4
--------------------------- ----- --------- --------- ---------
Operating profit before exceptional
items 3 14.6 14.0 33.0
Exceptional items 4 5.0 - -
--------------------------- ----- --------- --------- ---------
Operating profit 19.6 14.0 33.0
Finance costs (net) 5 (3.2) (2.9) (5.5)
--------------------------- ----- --------- --------- ---------
Profit before taxation 16.4 11.1 27.5
Taxation 6 (4.9) (4.1) (9.1)
--------------------------- ----- --------- --------- ---------
Profit for the period attributable to
shareholders 11.5 7.0 18.4
--------------------------- ----- --------- --------- ---------
Earnings per share - basic 7 7.4p 4.4p 11.9p
- fully diluted 7 7.3p 4.4p 11.8p
--------------------------- ----- --------- --------- ---------
Dividends per share to be paid 3.69p 3.69p 10.05p
--------------------------- ----- --------- --------- ---------
Consolidated balance sheet
at 30 June 2005
2005 2004 2004
30 June 30 June 31 Dec
£ million £ million £ million
--------------------------- --------- --------- ---------
ASSETS
Non-current assets
Property, plant and equipment 124.1 141.1 136.3
Goodwill 50.8 44.7 42.4
Other intangible assets 16.9 16.2 17.4
Financial assets 1.0 2.1 1.0
Deferred tax assets 23.0 20.8 23.2
-------------------------- ---------- --------- ---------
Total non-current assets 215.8 224.9 220.3
-------------------------- ---------- --------- ---------
Current assets
Property - 0.7 0.1
Inventories 100.2 105.6 99.6
Trade and other receivables 115.7 108.1 103.8
Financial assets - 1.0 0.3
Cash and cash equivalents 18.0 7.0 5.5
-------------------------- ---------- --------- ---------
Total current assets 233.9 222.4 209.3
-------------------------- ---------- --------- ---------
Total assets 449.7 447.3 429.6
-------------------------- ---------- --------- ---------
LIABILITIES
Current liabilities
Short term borrowings 77.9 31.9 17.1
Financial liabilities 0.3 0.1 -
Trade and other payables 69.5 72.6 67.8
Current tax payable 6.4 7.2 7.0
Accruals and deferred income 31.1 28.9 24.4
-------------------------- ---------- --------- ---------
Total current liabilities 185.2 140.7 116.3
-------------------------- ---------- --------- ---------
Non-current liabilities
Long term borrowings 5.6 55.9 55.7
Deferred tax provision 8.6 9.5 8.7
Pensions and other post employment
benefits 70.4 61.9 70.9
Other provisions 1.3 3.2 1.6
Other non-current liabilities 8.4 7.3 9.7
-------------------------- ---------- --------- ---------
Total non-current liabilities 94.3 137.8 146.6
-------------------------- ---------- --------- ---------
Total liabilities 279.5 278.5 262.9
-------------------------- ---------- --------- ---------
Net assets 170.2 168.8 166.7
-------------------------- ---------- --------- ---------
EQUITY
Share capital 38.7 38.7 38.7
Share premium account 56.0 56.0 56.0
Capital redemption reserve 4.4 4.4 4.4
Merger reserve 23.0 23.0 23.0
Share options 0.3 0.2 0.2
Translation reserve (1.1) (2.8) (2.9)
Retained earnings 46.0 46.4 44.4
-------------------------- ---------- --------- ---------
167.3 165.9 163.8
Minority interests 2.9 2.9 2.9
-------------------------- ---------- --------- ---------
Total equity 170.2 168.8 166.7
-------------------------- ---------- --------- ---------
Consolidated cash flow statement
for the six months ended 30 June 2005
Note 2005 2004 2004
First half First half Full year
£ million £ million £ million
--------------------------- ----- --------- --------- ---------
Cash flows from operating activities
Operating profit 19.6 14.0 33.0
Adjustments for
Depreciation and amortisation 17.2 19.6 38.7
Other non cash items (8.0) 2.1 0.1
Movement in working capital (1.8) 0.2 2.8
Additional payments to pension funds (1.9) (1.4) (3.1)
Exchange differences 1.6 (1.7) (1.8)
Tax paid (5.8) (9.7) (15.8)
------------------------- ------ ---------- --------- ---------
Net cash from operating activities 20.9 23.1 53.9
------------------------- ------ ---------- --------- ---------
Cash flows from investing activities
Purchase of property, plant and
equipment (6.8) (14.3) (24.6)
Proceeds from sale of property, plant
and equipment and grants received 17.4 4.7 8.2
Development expenditure (5.2) (5.3) (10.8)
Acquisition of subsidiary net of cash
acquired (8.8) (1.6) (1.3)
Loan repayment - 6.0 6.0
------------------------- ------ ---------- --------- ---------
Net cash used in investing activities (3.4) (10.5) (22.5)
------------------------- ------ ---------- --------- ---------
Cash flows from financing activities
Interest paid (net) (1.8) (1.8) (3.5)
Change in loans and finance lease
liabilities (1.5) 2.3 4.2
Dividends paid (9.8) (9.8) (15.6)
------------------------- ------ ---------- --------- ---------
Net cash used in financing activities (13.1) (9.3) (14.9)
------------------------- ------ ---------- --------- ---------
Net increase in cash 9 4.4 3.3 16.5
Cash and bank overdrafts at beginning
of period (9.6) (27.1) (27.1)
Exchange difference (1.4) 0.5 1.0
------------------------- ------ ---------- --------- ---------
Cash and bank overdrafts at end of
period (6.6) (23.3) (9.6)
------------------------- ------ ---------- --------- ---------
Cash and bank overdrafts comprise
Cash and cash equivalents 18.0 7.0 5.5
Bank overdrafts (24.6) (30.3) (15.1)
------------------------- ------ ---------- --------- ---------
9 (6.6) (23.3) (9.6)
------------------------- ------ ---------- --------- ---------
Consolidated statement of recognised income and expense
for the six months ended 30 June 2005
2005 2004 2004
First half First half Full year
£ million £ million £ million
------------------------------ -------- --------- ----------
Profit for the period 11.5 7.0 18.4
Exchange differences on net foreign
currency investments 1.8 (2.8) (2.9)
Actuarial loss (net)
on defined benefit pension schemes - - (7.7)
------------------------------ -------- --------- ----------
Total recognised income and
expense for the period 13.3 4.2 7.8
------------------------------ -------- --------- ----------
Summary of movements in shareholders' equity
for the six months ended 30 June 2005
2005 2004 2004
First half First half Full year
£ million £ million £ million
------------------------------ -------- --------- ----------
Opening shareholders' equity 166.7 174.4 174.4
Profit for the period 11.5 7.0 18.4
Exchange differences on net foreign
currency investments 1.8 (2.8) (2.9)
Actuarial loss (net)
on defined benefit pension schemes - - (7.7)
Dividends paid (9.9) (9.9) (15.6)
Share options - value of employee services 0.1 0.1 0.1
------------------------------ -------- --------- ----------
Closing shareholders' equity 170.2 168.8 166.7
------------------------------ -------- --------- ----------
Notes to the financial statements
1. Basis of accounting
The interim financial statements and all the comparative information are
unaudited and have been prepared under International Financial Reporting
Standards (IFRS). The restatement of 2004 financial information from UK
Generally Accepted Accounting Principles (UK GAAP) to IFRS and the accounting
policies of the group under IFRS which apply to all three periods were issued to
shareholders on 22 July 2005 and are available on the group's website.
These interim statements have been prepared in accordance with IAS 34 'Interim
Financial Reporting' and the requirements of IFRS1 'First-time Adoption of
International Financial Reporting Standards' relevant to interim reports and
were approved by the Directors on 13 September 2005.
2. Analysis of revenue
2005 2004 2004
First half First half Full year
£ million £ million £ million
---------------------- ---------- ----------- ----------
By business sector
Electronic
- Sensors and electronic systems 97.4 99.3 191.5
- Electronic components 65.9 72.0 137.1
- Electronic manufacturing services 38.3 36.1 75.0
-------------------- ---------- ----------- ----------
Total electronic 201.6 207.4 403.6
-------------------- ---------- ----------- ----------
Electrical
- Power systems 25.0 25.4 56.0
- Power and data transmission 70.7 66.3 137.8
-------------------- ---------- ----------- ----------
Total electrical 95.7 91.7 193.8
-------------------- ---------- ----------- ----------
Total revenue 297.3 299.1 597.4
-------------------- ---------- ----------- ----------
By destination
United Kingdom 83.1 85.9 179.9
Rest of Europe 113.1 118.2 227.5
North America 56.0 61.2 117.7
Rest of the World 45.1 33.8 72.3
-------------------- ---------- ----------- ----------
Total revenue 297.3 299.1 597.4
-------------------- ---------- ----------- ----------
By origin
United Kingdom 133.8 140.6 281.8
Rest of Europe 75.3 76.3 149.1
North America 66.4 66.0 133.8
Rest of the World 21.8 16.2 32.7
-------------------- ---------- ----------- ----------
Total revenue 297.3 299.1 597.4
-------------------- ---------- ----------- ----------
The interim results for 2005 include the initial contribution of the TT
electronic integrated systems companies (formerly the Dage Limited group of
companies) acquired on 10 March 2005, see note 8.
The group's primary reporting format is by business segments and its secondary
format is by geographical segments.
3. Analysis of operating profit before exceptional items
2005 2004 2004
First half First half Full year
£ million £ million £ million
---------------------- ---------- ----------- ----------
By business sector
Electronic
- Sensors and electronic systems 5.3 9.3 18.2
- Electronic components 5.1 3.3 8.1
- Electronic manufacturing services (0.1) (0.8) (0.1)
---------------------- ---------- ----------- ----------
Total electronic 10.3 11.8 26.2
---------------------- ---------- ----------- ----------
Electrical
- Power systems 1.8 1.4 3.8
- Power and data transmission 2.5 0.8 3.0
---------------------- ---------- ----------- ----------
Total electrical 4.3 2.2 6.8
---------------------- ---------- ----------- ----------
Operating profit before exceptional items 14.6 14.0 33.0
---------------------- ---------- ----------- ----------
By origin
United Kingdom 1.8 0.5 2.0
Rest of Europe 5.1 8.0 17.2
North America 5.7 3.8 10.9
Rest of the World 2.0 1.7 2.9
---------------------- ---------- ----------- ----------
Operating profit before exceptional items 14.6 14.0 33.0
---------------------- ---------- ----------- ----------
4. Exceptional items
2005 2004 2004
First half First half Full year
£ million £ million £ million
---------------------- ---------- ---------- ----------
Profit on sale of Gravesend site 7.8 - -
Closure costs for Cables Division,
Gravesend (2.8) - -
---------------------- ---------- ---------- ----------
5.0 - -
---------------------- ---------- ---------- ----------
The profit on sale of Gravesend site has been calculated based on sales proceeds
of £12.5 million. Further proceeds may be received based on the development of
the site.
5. Finance costs
2005 2004 2004
First half First half Full year
£ million £ million £ million
---------------------- ---------- ----------- ----------
Interest payable (2.1) (1.8) (3.4)
Unwinding of the discount on pension
scheme liabilities (7.7) (7.1) (14.1)
---------------------- ---------- ----------- ----------
(9.8) (8.9) (17.5)
---------------------- ---------- ----------- ----------
Interest receivable 0.2 0.1 0.2
Expected return on pension scheme assets 6.4 5.9 11.8
---------------------- ---------- ----------- ----------
6.6 6.0 12.0
---------------------- ---------- ----------- ----------
Finance costs (3.2) (2.9) (5.5)
---------------------- ---------- ----------- ----------
6. Taxation
Taxation on the profit for the half year to 30 June 2005 has been based on the
estimated effective rate for the full year ending 31 December 2005.
7. Earnings per share
2005 2004 2004
First half First half Full year
pence per share pence per share pence per share
--------------------- ----------- ----------- -----------
Earnings per share
Basic 7.4 4.4 11.9
Fully diluted 7.3 4.4 11.8
--------------------- ----------- ----------- -----------
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.
2005 2004 2004
First half First half Full year
£ million £ million £ million
--------------------- ----------- ----------- -----------
Profit for the period attributable to
shareholders:
--------------------- ----------- ----------- -----------
Earnings basic and fully diluted 11.5 7.0 18.4
--------------------- ----------- ----------- -----------
Weighted average number of shares in million million million
issue:
Basic 154.8 154.8 154.8
Adjustment for share options 1.9 1.5 1.5
--------------------- ----------- ----------- -----------
Fully diluted 156.7 156.3 156.3
--------------------- ----------- ----------- -----------
8. Acquisition
On 10 March 2005 the group acquired the entire share capital of Dage Limited and
its subsidiaries, an electronic manufacturing services business located in the
UK and China. The purchase consideration was £10.3 million, of which £8.0
million was paid at completion. The book values of the net assets of Dage
Limited and its subsidiaries on acquisition were £5.9 million and have been
provisionally fair valued at £5.5 million. Turnover and operating profit of the
companies acquired for the post acquisition period were £7.6 million and £0.7
million respectively.
9. Reconciliation of net cash flow to movement in net debt
Net overdraft Loans and Net debt
£ million finance leases £million
£ million
---------------------- ---------- ----------- ----------
Balance at 31 December 2003 (27.1) (56.0) (83.1)
Cash flow 3.3 (2.3) 1.0
Exchange differences 0.5 0.8 1.3
---------------------- ---------- ----------- ----------
Balance at 30 June 2004 (23.3) (57.5) (80.8)
Cash flow 13.2 (1.9) 11.3
Exchange differences 0.5 1.7 2.2
---------------------- ---------- ----------- ----------
Balance at 31 December 2004 (9.6) (57.7) (67.3)
Cash flow 4.4 1.5 5.9
Exchange differences (1.4) (2.7) (4.1)
---------------------- ---------- ----------- ----------
Balance at 30 June 2005 (6.6) (58.9) (65.5)
---------------------- ---------- ----------- ----------
Net overdraft represents bank overdrafts less cash and cash equivalents.
10. Reconciliation of equity under UK GAAP to equity under IFRS at 30 June 2004
£ million
----------------------------------------- --------
Shareholders' equity at 30 June 2004 under UK GAAP 199.2
Recognition of pensions obligation (net of deferred tax) (40.9)
Development costs, previously written off now capitalised as
intangible assets 8.8
Interim dividend for 2004, recognised when declared and not
provided for at 30 June 5.7
Other changes (net), relating to goodwill amortisation, leases,
financial instruments, share options, deferred tax and fair valuations (4.0)
----------------------------------------- --------
Shareholders' equity at 30 June 2004 under IFRS 168.8
----------------------------------------- --------
Equivalent information for 31 December 2003 and 2004 is included in the circular
issued to shareholders on 22 July 2005 and is available on the group's website.
11. Reconciliation of profit under UK GAAP to profit under IFRS for the six
months to 30 June 2004
£ million
--------------------------------------- ---------
Profit attributable to shareholders under UK GAAP 8.7
Goodwill amortisation, no longer charged 1.3
Financial instruments, marked to market (2.7)
Other changes (net), relating to development costs, pensions,
leases and share options (0.3)
--------------------------------------- ----------
Profit attributable to shareholders under IFRS 7.0
--------------------------------------- ----------
12. Post balance sheet event
On 1 August 2005 the group announced the disposal of Houchin Aerospace Limited,
a supplier of standby power generation equipment, for £8.0 million cash, subject
to finalisation of completion accounts, being a premium to net assets.
13. Statutory accounts
These financial statements do not constitute statutory accounts. All the
information is unaudited. The comparative figures for the year ended 31 December
2004 which are now presented under IFRS are not the statutory accounts for that
year. The statutory accounts for the year ended 31 December 2004 were prepared
under UK GAAP, contained an unqualified audit report and are filed with the
Registrar of Companies.
The interim report will be sent to all shareholders on the register. Copies are
available at the Company's Registered Office, Clive House, 12-18 Queens Road,
Weybridge, Surrey KT13 9XB or at www.ttelectronics.com.
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