REG - TT Electronics PLC - Full Year Results
07/03/2024 07:00
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RNS Number : 8961F TT Electronics PLC 07 March 2024
2023 Final Results, 7 March 2024
TT Electronics plc
Results for the year ended 31 December 2023
For further information, please contact:
TT Electronics
Peter France, Chief Executive Officer
Mark Hoad, Chief Financial Officer
Kate Moy, Head of Investor Relations and
Communications
Tel: +44 (0)1932 827 779
MHP Communications
Tim Rowntree / Ollie Hoare
Tel: +44 (0)20 3128 8100
A management presentation for analysts and investors will be held today at
0800hrs and can be accessed on
https://stream.brrmedia.co.uk/broadcast/65a7a5a9c5ec665c02ecf6d4
(https://stream.brrmedia.co.uk/broadcast/65a7a5a9c5ec665c02ecf6d4)
A recording of the presentation and Q&A session will be available on the
website later in the day.
A PDF of this full year announcement is available for download from
https://www.ttelectronics.com/investors/investor-highlights/reports-presentations-videos/
(https://www.ttelectronics.com/investors/investor-highlights/reports-presentations-videos/)
.
Results for the year ended 31 December 2023
Strong profit growth, margin enhancement and cash generation
£ million (unless otherwise stated) Adjusted Results(1) Statutory Results
2023 2022 Change Change constant fx 2023 2022
Revenue 613.9 617.0 (1)% 1% 613.9 617.0
Operating profit/(loss) 52.8 47.1 12% 16% 8.7 (3.4)
Operating profit margin 8.6% 7.6% 100bps 110bps 1.4% (0.6)%
Profit/(loss) before taxation 43.0 40.4 6% 11% (1.1) (10.1)
Earnings/(loss) per share 19.2p 18.2p 5% 10% (3.9)p (7.5)p
Return on invested capital 12.0% 10.5%
Cash conversion 92% 33%
2023 2022
Free cash flow(1) 23.9 (13.1)
Net debt(1) 126.2 138.4
Leverage(1) 1.7x 2.0x
Dividend per share 6.8p 6.3p
Financial Highlights
· Free cash flow of £23.9 million with cash conversion at 92% and
leverage reduced to 1.7x
· Adjusted Group operating margin up 110 bps to 8.6% (8.9% excluding
pass-through), supported by strong recovery in Power & Connectivity
· Adjusted operating profit growth of 16%
· Full year revenue up 3% year-on-year at constant currency excluding
pass through revenue
· Statutory operating profit of £8.7 million (including a £32.5
million non-cash fair value write down of assets held for sale), statutory
basic EPS loss of 3.9p
· ROIC increased 150 bps to 12.0%
· Total dividend increase of 8% to 6.8p, reflecting strong performance
and positive outlook
Operational highlights
· Excellent business development success, with 37 significant contract
awards delivering c. £250 million of potential lifetime revenues
· Agreement for sale of Cardiff, Hartlepool and Dongguan business units
for £20.8 million on cash and debt free basis signed - expected to enhance
margins and reduce leverage
· Broadened our customer offering by extending our capabilities in
Mexico
· Successful transfer of Ferranti business to a modern facility in
Greater Manchester
· Achieved employee engagement score(2) in line with 3 star 'world
class companies to work for'
· Delivered an 18% reduction in Scope 1 & 2 emissions
· Environmental ratings of AA from MSCI and an improved B- rating from
CDP
Outlook
· Order book visibility remains above historic, pre-Covid levels -
total order cover at December c.11 months revenues of which c. 9 months
relates to 2024 revenues
· Focus on improved operational execution driving continued earnings
growth
· Strong free cash flow generation and continued reduction in leverage
expected
· On track to deliver 10% group operating margin in 2024
· Capital Markets event on 9 April to provide details of our actions
and plans to accelerate the execution of a refreshed strategy, that will
unlock value and deliver continued growth.
Peter France, Chief Executive Officer, commented:
"2023 was a year of strong operational and financial progress. The Group has
delivered against the priorities that were set for the year: strong free cash
generation has led to further reduction in leverage, and our strong order book
was converted into double-digit operating profit growth, with good operating
margin progression supported by a recovery in our P&C business.
I was delighted to join TT as CEO last October. TT is a strong business with
robust fundamentals, talented people and market leading technologies. It is
well-aligned with global megatrends, driving demand from our high growth end
markets. We have the foundations from which to accelerate the execution of our
strategy aimed at delivering sustainable disciplined growth, improved margins
and a strong balance sheet. I see considerable opportunity to unlock further
value in the business by strengthening operational execution, expanding and
optimising our routes to market and by enhancing product innovation. A first
step in driving improved margins and simplifying the portfolio is the recently
announced sale of our businesses in Cardiff, Hartlepool and Dongguan. I look
forward to sharing more detail of my plans as part of our Capital Markets
presentation on 9 April.
Based on the strength and level of visibility in our order book, current end
market activity and operational improvement initiatives that are underway,
while mindful of the wider macro environment, we are on track to deliver a 10%
operating margin in 2024."
About TT Electronics
TT Electronics is a global provider of engineered electronics for performance
critical applications.
TT solves technology challenges for a sustainable world. TT benefits from
enduring megatrends in structurally high-growth markets including healthcare,
aerospace, defence, electrification and automation. TT invests in R&D to
create designed-in products where reliability is mission critical. Products
designed and manufactured include sensors, power management and connectivity
solutions. TT has design and manufacturing facilities in the UK, North
America, and Asia.
Notes
1. Throughout this announcement we refer to a number of alternative
performance measures which provide additional useful information. The
Directors have adopted these measures to provide additional information on the
underlying trends, performance and position of the Group with further details
set out on pages 17 to 18. The adjusted measures used are set out in the
'Reconciliation of KPIs and non IFRS measures' section on pages 42 to 49.
2. Survey by Best Companies Ltd
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
Having joined TT in October, I have now visited nearly all of our sites, spent
time with colleagues and met a number of our customers and other stakeholders.
I have been greatly impressed by the quality of our people, the strength of
the TT culture and the depth of our customer relationships.
The Group has delivered on all its priorities set at the beginning of 2023: it
has converted its strong order book into revenue and profit growth, increased
the margin by 110bps, and continued to improve the performance in its Power
and Connectivity (P&C) division. From a balance sheet perspective, strong
free cash flow generation has resulted in reduced net debt and a further
reduction in leverage.
The Group's 2023 performance was led by the improvement in our P&C
business, with Global Manufacturing Solutions (GMS) sustaining its
best-in-class margin performance. The overall result of our Sensors &
Specialist Components (S&SC) business was impacted by the one-off HVAC
breakdown at Plano, which affected production from June through to September
and resulted in a £3 million reduction in divisional profits.
I am excited about the potential for TT and can see opportunities to unlock
further value across the business: driving growth, efficiencies and
performance by capitalising on our positions in the structural growth markets
in which we operate, by optimising our operational execution and by enhancing
our innovation and product development strengths.
Our relationships with customers are long-term and collaborative in nature
delivering positive order intake in the year. We secured 37 significant
contract wins that are expected to deliver circa £250 million of potential
lifetime revenue. As anticipated, we have seen order intake normalisation
during the second half as lead times have reduced, however, our order book
continues to provide levels of forward visibility ahead of historic, pre-Covid
levels, and we are now starting to see order intake begin to improve again. At
the end of December, the order book gives us visibility over circa 11 months
of revenues, of which 9 months relates to 2024 revenues.
During the year organic investment in the business totalled £33.2m; we have
invested £10.8 million in research and development (R&D) and £22.4
million in capital expenditure. This is an important and substantial
investment in our future to support growth and the development and enhancement
of our pipeline of new products. It included £4.5 million on the move of the
acquired Ferranti business to a new facility in Greater Manchester and £4.1
million on expanding our manufacturing capabilities in Mexicali.
Environmental, social and governance (ESG) principles are central to our
purpose, and our growth expectations partly reflect opportunities presented by
the move to a lower carbon world for our design-led technologies. We have made
further excellent progress in 2023 to reduce our Scope 1 and Scope 2 carbon
emissions. These have decreased by 18 per cent in the year to 10,533 tonnes
and are down 62 per cent against our 2019 baseline. In adjusting for revenue
growth within the business, the intensity ratio has improved from 56 in 2019
to 17 in 2023. This improvement has been achieved due to our energy efficiency
actions and switching to the use of electricity from renewable sources.
We were delighted to attain a 2023 employee engagement score in line with the
three star "world class companies to work for" Best Companies Ltd benchmark,
reflecting the importance we attribute to living the TT values every day.
Results and operations
Revenue for the year was £613.9 million, 1 per cent higher than the prior
year at constant currency and 3 per cent higher excluding the impact of the
unwind of pass-through revenues. Reported revenue included £19.9 million of
zero margin pass-through revenues, a £10.4 million reduction on 2022 at
constant currency. This relates to materials where we experienced very
significant cost inflation which was being transparently passed on to
customers with no margin mark-up.
Adjusted operating profit was £52.8 million, 16 per cent higher than the
prior year at constant currency, reflecting the benefits of volume growth,
improved pricing and the balance of the benefits of our self-help programme.
The adjusted operating margin was 8.6 per cent. Excluding zero margin
pass-through revenues, adjusted operating margin was 8.9 per cent.
After the impact of adjusting items, including restructuring, pension,
acquisition and disposal costs, and a non-cash asset write-down, the Group's
full-year statutory operating profit was £8.7 million. The non-cash
write-down of £32.5 million relates to the recently announced disposal of
businesses in the P&C and GMS divisions, referred to internally as
"Project Albert". Cash flow impacting adjusting items totalled £4.0 million.
Adjusted earnings per share (EPS) increased to 19.2 pence (2022: 18.2 pence),
reflecting the improved adjusted operating profit in the period offset by
higher interest charges. Basic EPS was a loss of 3.9 pence (2022: 7.5 pence
loss).
Cash conversion returned to target levels, at 92 per cent (2022: 33 per cent)
and with significantly reduced cash impacting adjusting items and a pension
surplus refund (see below), cash generation has inflected resulting in a free
cash inflow of £23.9 million (2022: outflow £13.1 million). Adjusted
operating cash inflow post capital expenditure during the period was £48.8
million (2022: £15.7 million). On a statutory basis, cash flow from operating
activity was £62.9 million (2022: £12.7 million).
Following the buy-in of our UK defined benefit pension scheme (the "Scheme")
in November 2022, the Scheme is de-risked with scheme liabilities now matched
by the buy-in insurance policy. Given the higher level of confidence over
there ultimately being a surplus in the Scheme at the point of wind-up, in
December, the Scheme made an initial surplus refund to the Company of £5.0
million less tax (£3.2 million net).
We ended the year with net debt of £126.2 million 1 (2022: £138.4 million),
including lease liabilities of £20.8 million (2022: £23.1 million). Year-end
leverage was 1.7 times (2022: 2.0 times), within the Board's target leverage
range of 1-2 times. We are confident this downward trajectory will continue as
EBITDA increases and as we deliver further strong free cash flow in 2024.
Our return on invested capital was 12.0 per cent in 2023, increasing by 150
basis points due to the growth in adjusted operating profit, combined with the
high cash conversion which meant there was only a limited increase in invested
capital.
On 4 March 2024 we announced that we had agreed to divest our business units
in Cardiff and Hartlepool, UK and Dongguan, China for £20.8 million on a cash
and debt free basis. These assets were classified as held for sale at 31
December 2023 and were written down by £32.5 million reflecting fair value
and costs to sell. The disposal is expected to complete by the end of Q1 2024
and is expected to enhance group margins and improve leverage.
Dividend
Given our strong trading performance in 2023 and the positive outlook, the
Board is proposing a final dividend of 4.65 pence per share. The total cash
cost of this dividend will be approximately £8.2 million. This, when combined
with the interim dividend of 2.15 pence per share gives an increase of 8 per
cent in the total dividend to 6.8 pence (2022: 6.3 pence per share). Payment
of the dividend will be made on 15 May 2024, to shareholders on the register
at 12 April 2024.
Our strategy
The Group is positioned in attractive structurally growing markets. Our
customer partnerships are long-term in nature with an extended order book
providing circa 11 months of visibility. We are targeting through-cycle,
outperformance of the medium-term growth in our end markets of 4-6 per cent,
driven in part by our business development success with higher growth,
blue-chip customers. We are focused on generating optimum returns for all our
stakeholders while maintaining capital discipline, delivering strong cash
generation and careful use of the balance sheet to facilitate continued
investment.
We look forward to presenting more detailed thoughts on a refreshed strategy
for the Group at the Capital Markets event on 9 April 2024. TT has a strong
platform from which to accelerate growth. Alongside this, we see a number of
opportunities across the Group to create additional value by focusing on
operational excellence, commercial discipline and innovation. The Group
structure is evolving to improve execution and enable greater collaboration
and we will provide more details of our plans in April.
On track to deliver 10% margins in 2024
The pursuit of higher margins remains core to the Group's strategy. In 2023
the Group made good progress delivering a 110 basis point improvement in
adjusted operating margin to 8.6 per cent. Excluding the impact of
pass-through revenues, adjusted operating margin was 8.9 per cent. We
anticipate pass-through revenues becoming significantly less pronounced in
2024.
The reduction in pass-through revenues, the recently announced Project Albert
disposal and our focus on efficiency, costs and pricing discipline alongside
operational leverage on growth, where we have good visibility from our order
book, all underpin our confidence in achieving a 10% operating margin in 2024.
Outlook
TT is a strong business with robust fundamentals, talented people and market
leading technologies. It is well-aligned with global megatrends, driving
demand from our high growth end markets. The foundations are set from which to
accelerate the execution of our strategy aimed at delivering sustainable,
disciplined growth, improved margins and a strong balance sheet. There is
considerable opportunity to unlock further value in the business by
strengthening operational execution, expanding and optimising our routes to
market and by enhancing product innovation. A first step in driving improved
margins and simplifying the portfolio is the recently announced sale of our
businesses in Cardiff, Hartlepool and Dongguan.
Based on the strength and level of visibility in our order book, current end
market activity and operational improvement initiatives that are underway,
while mindful of the wider macro environment, we are confident we are on track
to deliver a 10% operating margin in 2024.
Our markets
Healthcare (24 per cent of Group revenue)
In healthcare, we provide design and manufacturing solutions for a range of
diagnostic, surgical and direct patient care devices critical to the
identification, treatment and prevention of disease. Growth is driven by a
combination of ageing populations, growing patient expectations and the
importance of digitalisation; electronics plays a central role in advancing
the progress of medical technology.
We have increased our exposure to this attractive end market from 13 per cent
of Group revenue in 2015 to 24 per cent in 2023. Our power, connectivity and
sensor technologies span the modern surgical suite from patient monitoring and
therapeutic devices to surgical navigation, diagnostic equipment and life
sciences. By supporting our life sciences partners, we are improving
laboratory automation systems and enabling samples to be collected and
analysed with minimal human intervention, the benefits of which are improved
data reliability and accuracy, minimised wastage, and time-efficient
procedures. TT is focused on growing in three areas where we are well placed
to capitalise on increasing demand for high-complexity products driven by
technological advancement: robotic surgery, implantable devices and life
sciences. We are supporting the development of smaller, lighter, more precise
surgical devices, enabling reduced size of incisions, thereby shortening
recovery times and improving overall patient outcomes. In addition, by
improving the portability and ease of use of diagnostics, we are increasing
the availability of medical imaging to point-of-care facilities. This promotes
earlier detection and better monitoring, hence supporting measures taken to
address the rising prevalence of cancer, cardiac, neurological, and
musculoskeletal disorders.
Demand for elective surgery and for large installations for hospital or life
science applications are expected to be supportive of market growth over the
next few years.
Examples of some of our new wins in the year:
· In our Cleveland facility we have won a new healthcare customer which
reflects our credentials in partnering with OEMs in highly regulated markets,
such as healthcare. We will work on a new, innovative, infant feeding device
for premature babies and will support the project to meet the stringent
regulatory requirements of ISO 13485 and FDA (Food & Drug Administration)
registration. This novel neonatal medical device will improve neurological
development with the aim of reducing the length of stay in neonatal intensive
care units and hence costs.
· The next stage of our GMS expansion into our Kuantan site in Malaysia
is evidenced by a life sciences contract win to provide printed circuit board
assemblies (PCBAs) and systems integration for a mass spectrometer. Such
machines are used in spectrometry elemental isotope analysis to understand the
chemistry and composition of materials used in healthcare and life sciences.
We are currently undertaking sample builds (first articles) with volume
production expected to commence in H2 2024. This work was secured given our
proven, 10+ year customer partnership and demonstrates the success of our
global manufacturing footprint expansion strategy.
· The U.S. team secured two different optical sensor opportunities with
a medical device company, for use in a blood gas analyser. These sensors are
used in the disposable test vessel cartridges designed for the device which is
used for rapid blood analysis in laboratories and at point of care to measure,
for example, blood gases, pH, electrolytes, metabolites and CO-Oximetry. The
sensors are critical to detect the proper loading of the cartridge as its
alignment with the analyser optics, for spectral measurements, is essential
for proper execution of the test.
Aerospace and Defence (20 per cent of Group revenue)
In aerospace and defence we provide solutions for high-reliability
applications across a broad range of platforms operating on land, air and sea.
Growth is driven by increasing electrification of these platforms, which
supports fuel efficiency and safety. Air travel is rebounding strongly to
pre-COVID levels, with continuing tailwinds given a growing, global
middle-class population with a greater propensity to travel. Robust activity
levels span both aftermarket and, increasingly, original equipment (narrow
body predominantly) as supply chains continue to show signs of steady
improvement. Fundamentally, the need for more efficient, safer, and
environmentally friendly aircraft remains.
The defence electronics manufacturing market exhibits consistent, moderate
expansion as governments invest to maintain state-of-the-art capabilities.
With the focus of global growth shifting to the east and south, creating more
powerful national economies in different regions, there will be greater
requirement for protection, and greater resources available to invest in
security and defence. This rising tide looks set to support strong,
sustainable compound growth over the next decade, with priorities shifting to
intelligence and multi-domain integration.
Active conflict and geopolitical tensions have increased weapons demand and
replenishment of stores. This is compounded by elevated security concerns in
several regions. In defence our central focus is on next generation
requirements for high-density power electronics and electrical machines,
collaborating with our customers on the development of technologies that
reduce size, weight, power, and cost (SWaP-C), while simultaneously enhancing
command, control, communications, computing, intelligence, surveillance, and
reconnaissance (C4ISR) capabilities. We have been successful recently in
providing more integrated, design-led solutions, demonstrating our ability to
deliver SWaP-C improvements.
Recent wins in the aerospace and defence end market:
· We secured the first order for the development of a new power module
as part of a long term collaborative agreement with a leading commercial
aircraft engine manufacturer, aimed at advancing electric propulsion systems
for electric aircraft applications. The cornerstone of this partnership
revolves around the E Drive 150 Power Module which enhances various electrical
switching functionalities, critical for vital aircraft systems. These include
electric starter generators, cabin air systems, electric pumps, and electric
actuation with future potential for use in urban air mobility and small
modular (nuclear) reactors. We believe our power module expertise, along with
our persistence in finding a solution, were key factors in securing this win.
· An example of TT moving up the value chain and engineering power
solutions being used in highly efficient, cutting-edge platforms is a new win
with a global aerospace and defence innovator. TT will design and manufacture
two novel custom AC/DC converters that will meet SWaP-C and electrical
requirements for airborne applications. This multi-million dollar win
showcases our ability to align our tech roadmap with our customers and provide
an airborne solution that has never been seen in the market before. This
technology is being designed and built in Kansas City.
· Building on existing work on the UK Tempest programme, TT was awarded
a further contract during 2023 to support feasibility studies for advanced
electrical power solutions on the sixth-generation Tempest fighter aircraft
entering service from 2035 in the UK's future combat air system ("FCAS"). The
Team Tempest consortium is composed of the UK Ministry of Defence and industry
partners BAE Systems, Rolls-Royce, Leonardo UK and MBDA, working together to
deliver a FCAS that pioneers advanced technology including deep learning AI,
ability to fly unmanned, and a virtual helmet cockpit to stay ahead of
evolving threats. This award expands the longstanding business relationship
and multiple development and manufacturing touchpoints between TT and BAE
Systems on the Tempest military aircraft.
· We have secured a multi-million, five-year contract with defence
innovator, Marotta Controls, to provide complex printed circuit board
assemblies for production of high-reliability electronics on a next generation
military air platform. Our ability to scale to meet the customer and market
demand was a key factor in this award.
Automation and Electrification (36 per cent of Group revenue)
In automation and electrification markets, we are continuing to invest in
developing capabilities to address the needs of sophisticated automation
applications. Customers rely on us to help solve their toughest automation and
electrification challenges; streamlining their supply chains, increasing their
efficiency and helping them bring smart, new products to the market.
Digitalisation is a megatrend in its own right as it permeates every industry
and offers solutions for many of the challenges faced. Industrial automation
is the backbone of manufacturing and production processes that support
economies and, with increased focus on climate change and natural resources,
there is continuing pressure to facilitate higher efficiency and productivity.
Given the wide scope of these markets, performance correlates strongly with
global economic growth, with key indicators being GDP growth and the
Purchasing Managers' Index (PMI), but the digitisation and proliferation of
electronics and electrification means markets will grow faster than these
indicators. Growth is also being driven by demand for sustainable solutions to
improve energy efficiency, the use of robotics to improve productivity and the
increasing use of remote asset tracking. Within electrification, our priority
is in developing capabilities which will support increasing energy efficiency
and connectivity. Core focus areas include complex systems integrations and AC
and DC power conversion technologies. We are increasingly able to develop
complete, high-value products and durable components featuring higher
voltages. The positive long-term growth drivers in this market give us
confidence that demand will increase for our power, sensing and connectivity
solutions.
Recent wins in the automation and electrification space:
· In Suzhou we have won a contract with Casco, a TT customer of over 10
years, for signalling solutions across the Urban Rail network in China. We
will provide complex, high level assembly build cabinets and electronics
solutions. The majority of Casco projects are focused on China, where it is
the number one player in the domestic rail transit market. This win is further
recognition of the success of our China for Asia strategy.
· Our focus on working with our customers to bring smart, sustainable
products to market is illustrated by a collaboration with one of the largest
Tier-1 companies in India which supplies manual and hydraulic steering systems
to all major commercial vehicle manufacturers in the country. TT is supplying
an Electronic Power Steering ("EPS") sensor which is used to measure required
torque and desired angle of the steering system by the driver. The steering
torque and position sensor is mounted in line with the steering shaft of a
vehicle and is a critical part of the EPS assembly. We started supporting the
customer at an early design stage and provided technical assistance to
complete the design and build stage of the EPS system for the company's 4W
Electric Vehicles commercial segment. Our ability to provide the required
customisation of our sensor established us as the right partner, leading to a
growing business and technology relationship that has positioned TT as the
single source of supply for all this customer's EPS projects.
· Two long-standing customers in the Automation and Electrification
sector are secured for our new Mexicali facility as they leverage the
best-cost geography while retaining manufacturing footprint in the Americas to
serve local markets.
Distribution sales channel (20 per cent of Group revenue)
We grew our revenues through distributors again in 2023 and this area now
represents 20 per cent of our overall sales. The demand from distributors
comes from a very wide range of customers and end markets but is, in large
part, driven by the same megatrends supporting our focus end markets including
rapid technological change and digital transformation.
Environmental, social and governance (ESG)
We are moving at pace to reduce our carbon emissions and have set ourselves a
target to be Net Zero by 2035 for our Scope 1 & 2 emissions. In 2023 we
made further excellent progress, with an 18 per cent reduction in year and our
Scope 1 & 2 carbon emissions are now 62 per cent lower than our 2019
baseline. This has been accomplished by switching to renewable tariffs,
further site rationalisation, transferring manufacturing capability and
capacity to modern, green facilities and local site energy saving initiatives.
Our intensity ratio, which measures our Scope 1 & 2 emissions against our
revenue has reduced to 17, down from 56 in 2019. All our sites that are able
to purchase electricity on renewable tariffs are now doing so. Further
reductions in our carbon emissions will require other measures such as
infrastructure and process projects to reduce electricity consumption and
investment in solar power or other renewables and we will be ready to benefit
from renewables gradually coming on stream in China. In 2023 our first solar
project at Kuantan in Malaysia was commissioned and we have commenced work on
our next project in Mexicali. Each of our manufacturing sites has its own
energy efficiency plan to include further rolling out of LED lighting,
eliminating waste electricity, replacing inefficient legacy equipment or
reorganising space to save heating/lighting and managing shift patterns.
In addition to our work on CO2 emissions we are also committed to reducing our
impact on the environment due to use of precious resources such as water, use
of single use plastics and our waste to landfill.
ESG matters including culture, strategy, regulatory compliance, risk and
internal controls are controlled as part of our overall governance and risk
management frameworks, ultimately overseen by senior management and the Board.
An update on key health, safety and environmental (including sustainability)
metrics is provided at each Board meeting and in-depth reviews are undertaken
on at least an annual basis.
Engaging employees by continually building our culture, communicating,
listening and supporting is an important part of what we do every day. We
encourage our teams to take an active role in their local and national
communities, whether fundraising and volunteering for chosen charities or
committing time and resources to promoting STEM education and careers. The
resilience, contribution, and dedication of our employees in all regions has
been remarkable over a prolonged period of global uncertainty. We will
continue to focus on supporting them as they are critical to the success of
TT.
We have always believed strongly that high levels of employee engagement
enable excellent execution of strategy and we regularly test this. The latest
Group-wide employee engagement survey was undertaken in the summer of 2023. We
were delighted to attain a 2023 employee engagement score in line with the
three star "world class companies to work for" Best Companies Ltd benchmark.
Focus was directed on participation in 2023, encouraging our employees to have
their say and make their voice heard, concluding with a record 91% of
employees globally completing the survey, up from 86% in both 2021 and 2020.
Our continuing progress on ESG matters is recognised externally, with a rating
of 'AA' in the latest MSCI ESG Ratings assessment and an improved 'B-' rating
from CDP (2022: C rating).
FINANCIAL OVERVIEW
Group revenue was £613.9 million (2022: £617.0 million). This included a
currency translation headwind of £11.3 million. Group revenue was 1 per cent
higher than the prior year at constant currency. Excluding the zero margin
pass-through revenues, organic growth was 3 per cent, split approximately 1
per cent volume growth and 2 per cent pricing. Sales volumes across our key
markets have been buoyant and the strength of our order book, and the pipeline
of new business opportunities, gives us confidence that organic growth will
continue despite the headwind to headline organic growth from the further
unwind of pass-through revenue.
The Group's adjusted operating profit was £52.8 million (2022: £47.1
million) and statutory operating profit was £8.7 million (2022: £3.4 million
loss) after a charge for items excluded from adjusted operating profit of
£44.1 million (2022: £50.5 million) including:
· Restructuring costs of £2.0 million (2022: £6.4 million) largely
comprising costs associated with the relocation of production facilities from
our US site in Covina to Kansas, representing the last stage of the self-help
programme which started in 2020.
· Pension restructuring costs of £1.9 million (2022: £13.8 million)
relating mainly to work to prepare the UK defined benefit scheme for buy-out.
· Acquisition and disposal costs totalled £3.1 million (2022: £1.2
million) comprising £1.3 million (2022: £1.1 million) of integration costs
relating primarily to the Ferranti acquisition, which was acquired early in
2022; £1.2 million (2022: £nil) in preparing assets held for sale; £0.4
million (2022: £0.1 million) relating to integration activities for the
acquisition of Torotel, Inc. and £0.2 million (2022: £nil) of other costs.
· Amortisation of intangible assets arising on business combinations of
£4.6 million (2022: £6.0 million).
· Non-cash write-down costs totalled £32.5 million relating to the
Project Albert businesses held for sale in our IoT Solutions and GMS CGUs
(2022: £23.1 million relating to the impairment of goodwill and other assets
in the IoT Solutions business).
The adjusted operating margin of 8.6 per cent (2022: 7.6 per cent) reflects
the benefits of operational leverage and our self-help programme. We
successfully offset increases in input costs through price increases.
The net finance cost was £9.8 million (2022: £6.7 million) with the increase
being due to a combination of higher base rates and higher drawn debt levels.
The Group's overall tax charge was £5.7 million (2022: £3.1 million),
including a £3.5 million credit (2022: £5.3 million credit) on items
excluded from adjusted profit. The adjusted tax charge was £9.2 million
(2022: £8.4 million), resulting in an effective adjusted tax rate of 21.4 per
cent (2022: 20.8 per cent).
Adjusted EPS increased to 19.2 pence (2022: 18.2 pence), reflecting the
improved adjusted operating profit in the period. Basic EPS was a loss of 3.9
pence (2022: 7.5 pence loss). Adjusted operating cash inflow after capex was
£48.8 million (2022: £15.7 million inflow). The improvement was as a result
of increased profitability and a significantly reduced working capital outflow
both of which more than offset increased investment in capital expenditure.
Capital and development expenditure of £24.0 million (2022: £14.0 million)
reflected investment to support growth. This resulted in adjusted operating
cash conversion of 92 per cent (2022: 33 per cent). On a statutory basis, cash
flow from operating activities was £62.9 million (2022: £12.7 million).
There was a free cash inflow of £23.9 million (2022: outflow £13.1 million),
net of £4.0 million of restructuring and acquisition related costs (2022:
£11.1 million) primarily relating to integration costs of the Ferranti
acquisition (£1.3 million), restructuring costs to move our facility in
Covina, US to Kansas, US (£1.0 million), costs incurred in preparing assets
held for sale (£0.9 million), pension costs (£0.2 million) and other costs
(£0.6 million). There was a £3.2 million pension surplus refund from the UK
Scheme (2022: £nil) net of £1.8 million tax paid. Dividend payments totalled
£11.3 million (2022: £10.2 million).
In June 2022 the Group re-financed its bank revolving credit facility (RCF)
with a syndicate of five relationship banks at commercially attractive rates.
This £147.4 million facility had a four-year tenor with a one-year extension
option. In the first half of 2023 we exercised £15 million of a £32.6
million accordion, thereby increasing the facility size to £162.4 million,
and we also exercised the one-year extension, taking the facility maturity out
to June 2027. The RCF is complemented by £75 million of private placement
fixed rate loan notes, which were issued in December 2021, with 7 and 10 year
maturities.
At 31 December 2023, the Group's net debt was £126.2 million (31 December
2022: £138.4 million), including £20.8 million of lease liabilities (31
December 2022: £23.1 million). Leverage at 31 December 2023, consistent with
the bank covenants, was 1.7 times (31 December 2022: 2.0 times).
Following the buy-in of our UK defined benefit pension scheme (the "Scheme")
in November 2022, the Scheme is de-risked with scheme liabilities now matched
by the buy-in insurance policy. The Scheme had a surplus of £25.3 million at
December 2023 (December 2022: £31.3 million). Given the higher level of
confidence over there ultimately being a surplus in the Scheme at the point of
wind-up, in December the Scheme made an initial surplus refund to the Company
of £5.0 million less tax (£3.2 million net). TT is, in collaboration with
the Scheme Trustee, in the process of preparing the scheme for buy-out, which
is expected to be concluded by late 2024 or early 2025. Shortly after the
year-end, we completed the buy-out of one of our much smaller US approved
defined benefit pension schemes at a cash cost of £1.8 million.
The net surplus across all Group schemes (including some smaller defined
benefit schemes in the US) at 31 December 2023 was £22.2 million (2022:
£28.4 million).
Continued investment in the business
Organic investment in technology and capital is important to support new
project growth and totalled £33.2 million in 2023. This in part results in us
becoming firmly embedded with our customers as valued partners, enabling us to
stay ahead of their needs and meet the challenges they set us. Our investment
is focused on bringing higher growth, innovative, sustainable products to
market. These typically yield higher returns and development is often
undertaken in partnership with our customers.
Our R&D cash investment in the year was £10.8 million (2022: £11.0
million), representing 3.4 per cent (2022: 3.7 per cent) of the aggregate
revenue of our product businesses. Capital expenditure totalled £22.4 million
(2022: £11.7 million).
In the second half of 2023 we relocated our Ferranti business to a new
flagship Power Solutions facility in Greater Manchester. We are also expanding
our GMS offering in existing TT facilities. This started in 2020 with Kuantan,
Malaysia and we are now adopting the same low capital intensity approach in
Mexicali, Mexico to support growth programmes for our customers and to enable
their re-shoring priorities.
DIVISIONAL REVIEW
POWER AND CONNECTIVITY
The Power and Connectivity division develops and manufactures power
application products and connectivity devices which enable the capture and
wireless transfer of data. We collaborate with our customers to develop
innovative solutions to optimise their electronic systems.
2023 2022 Change Change constant fx
Revenue £169.7m £154.2m 10% 10%
Adjusted operating profit(1) £14.3m £7.9m 81% 83%
Adjusted operating profit margin(1) 8.4% 5.1% 330bps 330bps
(1) See note 1 on page 3 for an explanation of alternative performance
measures. Adjusting items are not allocated to divisions for reporting
purposes. For further discussion of these items please refer to the section
titled 'Reconciliation of KPIs and non IFRS measures' on pages 42 to 49 of
this document.
Revenue increased by £15.5 million to £169.7 million (2022: £154.2 million)
and includes a currency headwind of £0.4 million. Organic revenue was 10 per
cent higher with good growth from healthcare and aerospace & defence in
particular, reflecting increased market demand and previous business win
successes.
Adjusted operating profit increased by £6.4 million to £14.3 million (2022:
£7.9 million). Included within this was a £0.1 million foreign exchange
headwind. The material step up in operating profit reflects very healthy
levels of drop through on the revenue growth, price increases which more than
offset cost inflation and operational efficiencies. The adjusted operating
margin was up 330 basis points to 8.4 per cent (2022: 5.1 per cent) for the
full year and was 9.4 per cent in the second half.
Order intake has been good in the year and continues to exceed growing
revenues giving us confidence for further growth and margin expansion in 2024.
In 2023 we have invested in and transferred production to a new facility for
the acquired Ferranti Power and Control business, based in Greater Manchester,
which designs and manufactures mission-critical complex power and control
sub-assemblies for blue chip customers in high-reliability and
high-performance end markets, primarily aerospace and defence.
GLOBAL MANUFACTURING SOLUTIONS
The Global Manufacturing Solutions division provides manufacturing services
and engineering solutions for our product divisions and to customers that
often require a lower volume and higher mix of different products. We
manufacture complex integrated product assemblies for our customers and
provide engineering services including designing testing solutions and value
engineering.
2023 2022 Change Change constant fx
Revenue £299.2m £323.0m (7)% (4)%
Adjusted operating profit(1) £27.6m £25.2m 10% 16%
Adjusted operating profit margin(1) 9.2% 7.8% 140bps 160bps
(1) See note 1 on page 3 for an explanation of alternative performance
measures. Adjusting items are not allocated to divisions for reporting
purposes. For further discussion of these items please refer to the section
titled 'Reconciliation of KPIs and non IFRS measures' on pages 42 to 49 of
this document.
Revenue decreased, as expected, by £23.8 million to £299.2 million (2022:
£323.0 million) of which the currency headwind was £10.9 million, with
organic revenue 4 per cent lower. Excluding currency effects and the unwind of
pass-through revenues, total revenue was broadly unchanged as anticipated with
2023 a year of consolidation following two years of exceptionally strong
growth. Pass-through revenue was £12.5 million lower in the second half, than
in the second half of 2022, and £10.4 million lower for the full year, which
has created a head-wind to top line growth.
Adjusted operating profit increased by £2.4 million to £27.6 million (2022:
£25.2 million), including a £1.5 million foreign exchange headwind. The
constant currency increase reflects operational efficiencies and the benefit
of improved pricing. The adjusted operating profit margin was 9.2 per cent
(2022: 7.8 per cent), impacted by the pass-through revenues, without which
margins would have been 9.9 per cent.
This division performed well in 2023, reflecting the momentum built from
customers who are winners in their own markets and provide opportunities to
grow share of wallet. The order book remains strong with long visibility and
in 2023, GMS has made incremental capital investment to expand its
capabilities into an existing TT facility in Mexicali, Mexico. This follows
the successful addition of GMS capability to the Kuantan site in Malaysia,
back in 2020, which added value through the regional expansion of our
high-level assembly capabilities to a variety of key customers.
The order book position has been underpinned by several multi-million-pound
wins, a number of which extend beyond 12 months. We continue to improve our
understanding of how to leverage these opportunities from the customer
perspective. Whether customers are seeking best-value-geographies for their
product, risk mitigation against geopolitical uncertainties, or looking to
reduce their carbon footprint by manufacturing locally to the end market, TT
is well-positioned to support their needs.
Overall, the GMS division is in excellent shape and our enhanced customer
relationships and business development initiatives are delivering strong order
intake. GMS has achieved a step change in its margin profile over recent
years, reflecting the value of the service we bring to our customers,
reliability, and the value engineering and testing capability we offer. We
believe GMS margins can improve incrementally with growth.
SENSORS AND SPECIALIST COMPONENTS
The Sensors and Specialist Components division works with customers to develop
high-specification standard and customised solutions, including sensors and
power management devices. Our solutions improve the precision, speed and
reliability of critical aspects of our customers' applications.
2023 2022 Change Change constant fx
Revenue £145.0m £139.8m 4% 4%
Adjusted operating profit(1) £19.0m £21.8m (13)% (13)%
Adjusted operating profit margin(1) 13.1% 15.6% (250)bps (250)bps
(1) See note 1 on page 3 for an explanation of alternative performance
measures. Adjusting items are not allocated to divisions for reporting
purposes. For further discussion of these items please refer to the section
titled 'Reconciliation of KPIs and non IFRS measures' on pages 42 to 49 of
this document.
Revenue increased by £5.2 million to £145.0 million (2022: £139.8 million)
and the currency impact was neutral. Organic revenue was 4 per cent higher,
with good growth through the division's distribution partners a key driver.
This business is in the sweet spot of enabling our customers to reach their
sustainability goals with components for smart energy & city
infrastructure and factory automation.
Adjusted operating profit decreased by £2.8 million to £19.0 million (2022:
£21.8 million) with no currency impact. The reduction in profit is
attributable to the one-off impact of breakdown of the HVAC system in our
Plano facility.
The permanent fix to the HVAC system at Plano, essential to the operation of
our clean room, took longer to achieve than anticipated given delays in
receiving parts. The facility is now operating as expected. We have undertaken
a full review of the viability of the system to ensure it is fit for purpose
and identified some control software and physical improvements which will be
implemented before the return of warm weather.
We monitor the stock levels in our distribution channels and saw them increase
in 2023. We are now starting to see them reduce and expect them to return to
more normal levels in the first half of 2024. While order intake from
distributors therefore remains somewhat subdued, we achieved new business wins
from a number of blue-chip customers in 2023 which is benefitting our order
intake in 2024.
OTHER FINANCIAL INFORMATION
Summary of Adjusted results
To assist with the understanding of earnings trends, the Group has included
non-GAAP alternative performance measures including adjusted operating profit
and adjusted profit. Further information is contained in the 'Reconciliation
of KPIs and non IFRS measures' on pages 42 to 49. A reconciliation of
statutory to adjusted profit numbers is set out on page 18.
A summary of the Group's adjusted results is set out below:
£ million 2023 2022
Revenue 613.9 617.0
Operating profit 52.8 47.1
Operating margin 8.6% 7.6%
Net finance expense (9.8) (6.7)
Profit before tax 43.0 40.4
Tax (9.2) (8.4)
Tax rate 21.4% 20.8%
Profit after tax 33.8 32.0
Weighted average number of shares 175.6 million 175.8 million
EPS 19.2p 18.2p
Cash flow, net debt and leverage
The table below sets out Group cash flows and net debt movement:
£ million 2023 2022
Adjusted operating profit 52.8 47.1
Depreciation and amortisation 16.5 16.1
Net capital expenditure (22.4) (11.7)
Capitalised development expenditure (1.6) (2.3)
Working capital (0.5) (38.8)
Other 4.0 5.3
Adjusted operating cash flow after capex. 48.8 15.7
Adjusted operating cash conversion 92% 33%
Net interest and tax (19.7) (13.4)
Lease payments (4.4) (4.3)
Restructuring, acquisition and disposal related costs (4.0) (11.1)
Retirement benefit schemes 3.2 -
Free cash flow 23.9 (13.1)
Dividends (11.3) (10.2)
Lease payments 4.4 4.3
Equity issued/acquired 1.3 0.4
Acquisitions & disposals - (8.3)
Cash transferred to assets held for sale (3.6) -
Other (1.2) (3.0)
Decrease (increase in net debt) 13.5 (29.9)
Opening net debt (138.4) (102.5)
New, acquired, modified and surrendered leases (3.4) (2.3)
Leases acquired - (0.2)
Leases transferred to liabilities held for sale 2.6 -
FX and other (1.5) (3.5)
Closing net debt as per balance sheet (127.2) (138.4)
Cash and leases held within assets and liabilities held for sale 1.0 -
Closing net debt including assets and liabilities held for sale (126.2) (138.4)
At 31 December 2023 the Group's net debt was £126.2 million (31 December
2022: £138.4 million). Included within net debt was £20.8 million of lease
liabilities (31 December 2022: £23.1 million) and £1.0 million of assets and
liabilities classified as held for sale (£3.6 million cash and £2.6m lease
liabilities).
Consistent with the Group's borrowing agreements, which exclude the impact of
leases, leverage ratio was 1.7 times at 31 December 2023 (31 December 2022:
2.0 times). Net interest cover was 6.1 times (31 December 2022: 7.4 times).
The Group's debt covenants state that the leverage ratio must not exceed 3.0
times and that interest cover must be more than 4.0 times.
Reconciliation of Adjusted results
Details of the reasons for and uses of adjusted measures are included in the
section titled 'Reconciliation of KPIs and non IFRS measures' on pages 42 to
49 of this announcement.
£ million 2023 2022
Operating profit/(loss) 8.7 (3.4)
Adjusted to exclude:
Restructuring and other items
Restructuring 2.0 6.4
Pension restructuring costs 1.9 2.0
Pension enhanced value transfer value - 11.8
Asset impairments
Held for sale impairments 32.5
Goodwill impairment - 17.7
Other impairments - 5.4
Acquisition and disposal related costs
Amortisation of intangible assets arising on business combinations 4.6 6.0
Ferranti acquisition and integration costs 1.3 1.1
Torotel acquisition and integration costs 0.4 0.1
Disposal costs 1.2 -
Other costs 0.2 -
Total operating reconciling items 44.1 50.5
Adjusted operating profit 52.8 47.1
(Loss)/profit before tax (1.1) (10.1)
Total operating reconciling items (as above) 44.1 50.5
Adjusted profit before tax 43.0 40.4
Taxation charge on adjusted profit (9.2) (8.4)
Adjusted profit after taxation 33.8 32.0
Cautionary statement
This report contains forward-looking statements. These have been made by the
Directors in good faith based on the information available to them up to the
time of their approval of this report. The Directors can give no assurance
that these expectations will prove to have been correct. Due to the inherent
uncertainties, including both economic and business risk factors underlying
such forward-looking information, actual results may differ materially from
those expressed or implied by these forward-looking statements. The Directors
undertake no obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise
Consolidated income statement
For the year ended 31 December 2023
£million (unless otherwise stated) Note 2023 2022
Revenue 3 613.9 617.0
Cost of sales (466.9) (481.5)
Gross profit 147.0 135.5
Distribution costs (26.9) (29.6)
Administrative expenses (111.4) (109.3)
Operating profit/(loss) 8.7 (3.4)
Analysed as:
Adjusted operating profit 3 52.8 47.1
Restructuring costs 7 (2.0) (6.4)
Pension restructuring costs 7 (1.9) (13.8)
Asset impairments and measurement losses 7 (32.5) (23.1)
Amortisation of intangible assets arising on business combinations 7 (4.6) (6.0)
Acquisition and disposal related costs 7 (3.1) (1.2)
Finance income 6 1.6 2.3
Finance costs 6 (11.4) (9.0)
Loss before taxation (1.1) (10.1)
Taxation 8 (5.7) (3.1)
Loss for the year attributable to the owners of the Company (6.8) (13.2)
EPS attributable to owners of the Company (pence)
Basic 10 (3.9) (7.5)
Diluted 10 (3.9) (7.5)
Consolidated statement of comprehensive income
For the year ended 31 December 2023
£million 2023 2022
Loss for the year (6.8) (13.2)
Other comprehensive (loss) / income for the year after tax
Items that are or may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations (17.3) 26.9
Tax on exchange differences 1.1 (1.6)
Gain/(loss) on hedge of net investment in foreign operations 1.8 (3.4)
Gain/(loss) on cash flow hedges taken to equity less amounts recycled to the 3.5 (2.9)
income statement
Deferred tax loss on movement in cash flow hedges (0.7) (0.4)
Items that will never be reclassified to the income statement:
Remeasurement of defined benefit pension schemes 0.2 (35.9)
Tax on remeasurement of defined benefit pension schemes (0.1) 6.5
Total comprehensive loss for the year attributable to the owners of the (18.3) (24.0)
Company
Consolidated statement of financial position
For the year ended 31 December 2023
£million Note 2023 2022
ASSETS
Non-current assets
Right-of-use assets 15.8 19.6
Property, plant and equipment 61.3 54.8
Goodwill 5 140.8 155.1
Other intangible assets 32.7 53.7
Deferred tax assets 15.4 13.2
Derivative financial instruments 0.8 0.8
Pensions 12 25.3 31.3
Total non-current assets 292.1 328.5
Current assets
Inventories 143.5 189.2
Trade and other receivables 90.2 120.3
Income taxes receivable 2.0 1.1
Derivative financial instruments 5.2 3.1
Assets classified as held for sale 4 48.0 -
Cash and cash equivalents 74.1 65.0
Total current assets 363.0 378.7
Total assets 655.1 707.2
LIABILITIES
Current liabilities
Borrowings 11 1.2 3.7
Liabilities directly associated with assets classified as held for sale 4 28.1 -
Lease liabilities 3.8 4.4
Derivative financial instruments 1.5 3.6
Trade and other payables 127.9 173.2
Income taxes payable 10.9 9.6
Provisions 3.1 3.5
Total current liabilities 176.5 198.0
Non-current liabilities
Borrowings 11 181.9 176.6
Lease liabilities 14.4 18.7
Derivative financial instruments 0.6 0.8
Deferred tax liability 7.0 12.4
Pensions 12 3.1 2.9
Provisions and other non-current liabilities 1.1 0.8
Total non-current liabilities 208.1 212.2
Total liabilities 384.6 410.2
Net assets 270.5 297.0
EQUITY
Share capital 13 44.3 44.1
Share premium 24.0 22.9
Translation reserve 40.7 55.1
Other reserves 11.9 7.3
Retained earnings 149.6 167.6
Total equity 270.5 297.0
Approved by the Board of Directors on 6 March 2024 and signed on their behalf
by:
Peter France
Mark Hoad
Director
Director
Consolidated statement of changes in equity
For the year ended 31 December 2023
£million Share capital Share premium Translation Reserve Other reserves Retained earnings Sub- NCI( 1 ) Total
total
At 31 December 2021 44.1 22.6 33.2 7.1 221.0 328.0 2.0 330.0
Loss for the year - - - - (13.2) (13.2) - (13.2)
Other comprehensive income
Exchange differences on translation of foreign operations - - 26.9 - - 26.9 - 26.9
Tax on exchange differences - - (1.6) - - (1.6) - (1.6)
Loss on hedge of net investment in foreign operations - - (3.4) - - (3.4) - (3.4)
Loss on cash flow hedges taken to equity less amounts recycled to the income - - - (2.9) - (2.9) - (2.9)
statement
Deferred tax on movement in cash flow hedges - - - 0.2 (0.6) (0.4) - (0.4)
Remeasurement of defined benefit pension schemes - - - - (35.9) (35.9) - (35.9)
Tax on remeasurement of defined benefit pension schemes - - - - 6.5 6.5 - 6.5
Total comprehensive income/(loss) - - 21.9 (2.7) (43.2) (24.0) - (24.0)
Transactions with owners recorded directly in equity
Equity dividends paid by the Company - - - - (10.2) (10.2) - (10.2)
Share-based payments - - - 4.8 - 4.8 - 4.8
Deferred tax on share-based payments - - - (1.0) - (1.0) - (1.0)
New shares issued - 0.3 - - - 0.3 - 0.3
Other movements - - - (0.9) - (0.9) - (0.9)
Dividend to non-controlling interest - - - - - - (2.0) (2.0)
At 31 December 2022 44.1 22.9 55.1 7.3 167.6 297.0 - 297.0
At 31 December 2022 44.1 22.9 55.1 7.3 167.6 297.0 - 297.0
Loss for the year (6.8) (6.8) - (6.8)
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations - - (17.3) - - (17.3) - (17.3)
Tax on exchange differences - - 1.1 - - 1.1 - 1.1
Gain on hedge of net investment in foreign operations - - 1.8 - - 1.8 - 1.8
Gain on cash flow hedges taken to equity less amounts recycled to the income - - - 3.5 - 3.5 - 3.5
statement
Deferred tax on movement in cash flow hedges - - - (0.7) - (0.7) - (0.7)
Remeasurement of defined benefit pension schemes - - - - 0.2 0.2 - 0.2
Tax on remeasurement of defined benefit pension schemes - - - - (0.1) (0.1) - (0.1)
Total comprehensive (loss)/income - - (14.4) 2.8 (6.7) (18.3) - (18.3)
Transactions with owners recorded directly in equity
Equity dividends paid by the Company - - - - (11.3) (11.3) - (11.3)
Share-based payments - - - 3.1 - 3.1 - 3.1
Deferred tax on share-based payments - - - (0.1) - (0.1) - (0.1)
New shares issued 0.2 1.1 - - - 1.3 - 1.3
Other movements - - - (1.2) - (1.2) - (1.2)
At 31 December 2023 44.3 24.0 40.7 11.9 149.6 270.5 - 270.5
( )
1.NCI is an abbreviation of non-controlling interests which was eliminated
with a dividend payment in 2022. ( )
Consolidated statement of cash flows
For the year ended 31 December 2023
£million Note 2023 2022
Cash flows from operating activities
Loss for the year (6.8) (13.2)
Taxation 8 5.7 3.1
Net finance costs 9.8 6.7
Restructuring costs and non-underlying asset impairments and remeasurements 7 36.4 43.3
Acquisition and disposal related costs 7 7.7 7.2
Adjusted operating profit 52.8 47.1
Adjustments for:
Depreciation 14.0 13.9
Amortisation of intangible assets 2.5 2.2
Share based payment expense 3.1 4.8
Scheme funded pension administration costs 1.6 -
Other items (0.7) 0.5
Decrease/(increase) in inventories 4.5 (40.4)
Decrease/(increase) in receivables 10.5 (26.3)
(Decrease)/increase in payables and provisions (15.5) 27.9
Adjusted operating cash flow 72.8 29.7
Reimbursement of pension surplus 3.2 -
Restructuring and acquisition related costs (4.0) (11.1)
Net cash generated from operations 72.0 18.6
Net income taxes paid (9.1) (5.9)
Net cash flow from operating activities 62.9 12.7
Cash flows from investing activities
Purchase of property, plant and equipment (22.3) (11.4)
Proceeds from sale of property, plant and equipment and government grants 0.5 0.3
received
Capitalised development expenditure (1.6) (2.3)
Purchase of other intangibles (0.6) (0.6)
Acquisition of business - (8.3)
Net cash flow used in investing activities (24.0) (22.3)
Cash flows from financing activities
Issue of share capital 13 1.3 0.4
Interest paid (10.6) (7.5)
Repayment of borrowings (26.1) (149.3)
Proceeds from borrowings 32.7 174.3
Capital payment of lease liabilities (4.4) (4.3)
Other items (1.2) (1.0)
Dividends paid to minority shareholders - (2.0)
Dividends paid by the Company (11.3) (10.2)
Net cash flow (used in) / from financing activities (19.6) 0.4
Cash transferred to held for sale (3.6) -
Net increase / (decrease) in cash and cash equivalents 15.7 (9.2)
Cash and cash equivalents at beginning of year 11 61.3 67.2
Exchange differences 11 (4.1) 3.3
Cash and cash equivalents at end of year 11 72.9 61.3
Cash and cash equivalents comprise:
Cash at bank and in hand 74.1 65.0
Bank overdrafts (1.2) (3.7)
Cash and cash equivalents at end of year 72.9 61.3
Cash and cash equivalents included within assets classified as held for sale 4 3.6 -
Cash and cash equivalents at end of year including those within assets 76.5 61.3
classified as held for sale
TT Electronics Plc
Results for the year ended 31 December 2023
1 General information
The information set out below, which does not constitute full financial
statements, is extracted from the audited financial
statements
· was approved by the Directors on 6 March 2024;
· have been reported on by the Group's auditor; their reports were
unqualified, did not draw attention to any matters by way
of emphasis and did not contain statements under s498(2) or (3) of the
Companies Act 2006;
· will be available to the shareholders and the public in April
2024; and
· will be filed with the Registrar of Companies following the
Annual General Meeting.
While the financial information included in this preliminary announcement has
been prepared in accordance with the recognition
and measurement criteria of UK adopted International Financial Reporting
Standards ("IFRSs") adopted pursuant to IFRSs as issued by the
IASB, this announcement does not itself contain sufficient information to
comply with IFRSs. The Company expects to publish full
financial statements that comply with IFRSs during April 2024.
2 Basis of preparation
Going concern
The Group has experienced continued improvement in trading momentum and strong
growth on our 2022 results. We continue to see benefit from our strategic
repositioning in our chosen structural growth markets as well as our focus on
building close relationships with our clients and this can be seen in both the
order book and financial performance of the Group.
The Group's financial position remains strong, at 31 December 2023 it had:
• £263.3 million of total borrowing facilities available (comprising
committed facilities of £240.7 million and uncommitted facilities of £22.6
million representing overdraft lines and an accordion facility of £17.6
million). The Group's primary source of finance is the £162.4 million
committed revolving credit facility (RCF) which was signed in June 2022 and
will mature in June 2027 following the Group exercising an option to extend
the previously existing maturity by one year in May 2023. The RCF includes a
£15.0 million committed extension converted from the existing uncommitted
accordion facilities in February 2023. At 31 December 2023 £108.8 million of
this facility had been drawn down. The Group's RCF is payable on a floating
rate basis above GBP SONIA, USD SOFR or EURIBOR depending on the currency of
the loan.
In December 2021, the Group issued £75 million of fixed rate loan notes with
three institutional investors; the issue is evenly split between 7- and 10-
year maturities with an average interest rate of 2.9% and covenants in line
with our bank facility.
• A leverage ratio (banking covenant defined measure) of 1.7 times at 31
December 2023 compared to the RCF (and PP loan notes) covenant maximum of 3.0
times. Interest cover (banking covenant defined measure) of 6.1 times compared
to the RCF (and PP loan notes) covenant minimum of 4.0 times.
The Group has prepared and reviewed cash flow forecasts across the business
over the twelve-month period from the date of the approval of these financial
statements, considering the Group's current financial position and the
potential impact of our principal risks on divisions.
The Group's financial projections contain key assumptions surrounding revenue
and operating profit growth in 2024. Under the Group's base case financial
projections, the Group retains significant liquidity and covenant headroom
throughout the forecast period, with both metrics improving from the position
as at 31 December 2023.
The Group's financial projections have been stress tested for "business as
usual" risks (such as profit growth, supply chain pressure and working capital
variances), and the impact of the following principal risks: general revenue
reduction, contractual risks, research and development, people and capability,
supplier resilience and health and safety (occurring both individually and in
unison). Principal risks which were not specifically modelled were either
considered not likely to have an impact within the going concern period or
their financial effect was covered within the overall downside economic risks
implicit within the stress testing. Under the stress tested modelling, the
liquidity headroom within the group remains adequate throughout the forecast
period. Financial covenants continue to be in compliance under the stress
tested model and management have a number of mitigating actions which could be
undertaken if required.
TT Electronics Plc
Results for the year ended 31 December 2023
2 Basis of preparation continued
In addition to the stress tests described above the Group's stress test
scenario has been sensitised for supply chain challenges and capacity
constraints which shows a reduction in revenue and operating profit compared
to the latest forecast. Despite this further reduction these projections show
that the Group should remain within its facilities headroom and within bank
covenants for the twelve months following the approval of these financial
statements. A "reverse" stress-test was also modelled to understand the
conditions which could jeopardise the ability of the Group to continue as a
going concern including assessing against covenant testing and facility
headroom. The stress testing also considered mitigating actions which could be
put in place. Mitigating actions included limiting capital expenditure and
reducing controllable costs including items such as discretionary bonuses and
pay rises. The reverse stress test is deemed to have a remote likelihood and
help inform the Directors' assessment that there are no material uncertainties
in relation to going concern.
The Group's wide geographical and sector diversification helps minimise the
risk of serious business interruption or catastrophic reputational damage.
Furthermore, the business model is structured so that the Group is not overly
reliant on any single customer, market or geography.
The Directors have assessed the future funding requirements of the Group with
due regard to the risks and uncertainties to which the Group is exposed and
compared them with the level of available borrowing facilities and are
satisfied that the Group has adequate resources for at least twelve months
from the date of signing. Accordingly, the financial statements have been
prepared on a going concern basis.
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group's accounting policies the Directors are
required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other
sources.
The estimates and associated assumptions are based on historical experiences
and other factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of revision and future periods if the revision affects both current and future
periods.
The Directors have assessed that there is currently no material impact arising
from climate change on the judgements and estimates determining the valuations
within the financial statements.
Critical judgements
In the course of preparing the Financial Statements, critical judgements
within the scope of paragraph 122 of IAS 1: "Presentation of Financial
Statements" were made during the process of applying the Group's accounting
policies. These are outlined below.
Assets classified as held for sale and directly related liabilities
Judgement was required in determining the classification of the Group's assets
and directly associated liabilities classified as held for sale, particularly
with the timing of the held for sale classification as the transaction was not
complete by 31 December 2023. It is management's assessment that it is highly
probable that the transaction will be completed within 12 months of the
balance sheet date. Further details are set out in note 4.
Adjusting items
Judgements were required as to whether items were disclosed as adjusting, with
consideration given to both quantitative and qualitative factors. Further
information about the determination of adjusting items in the year ended 31
December 2023 is included below.
TT Electronics Plc
Results for the year ended 31 December 2023
Key sources of estimation uncertainty
Assumptions concerning the future and other key sources of estimation
uncertainty at the balance sheet date, that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
· Note 8 - Taxation. Accruals for tax contingencies require
management to make judgements and estimates in relation to tax authority
audits and exposures. Amounts accrued are based on management's interpretation
of country-specific tax law and the likelihood of settlement. Tax benefits are
not recognised unless the tax positions are probable of being sustained. Once
considered to be probable, management reviews each material tax benefit to
assess whether a provision should be taken against full recognition of the
benefit on the basis of potential settlement through negotiation and/or
litigation. These amounts are expected to be utilised or to reverse as tax
audits occur or as the statute of limitations is reached in the respective
countries concerned. The Group's current tax liability at 31 December 2023
includes tax provisions of £9.3 million (2022: £8.4 million). The Group
believes the range of reasonable possible outcomes in respect of these
exposures is tax liabilities of up to £12.3 million (2022: £11.1 million).
Alternative performance measures
The Group presents Alternative Performance Measures ("APMs") in addition to
the statutory results of the Group. These are presented in accordance with the
guidelines on APMs issued by the European Securities and Markets Authority
("ESMA").
Adjusted operating profit has been defined as operating profit from continuing
operations excluding the impacts of significant restructuring programmes,
significant one-off items including property disposals, impairment charges
significant in nature and/or value, business acquisition, integration, and
divestment related activity, and the amortisation of intangible assets
recognised on acquisition. Acquisition and disposal related items include the
writing off of the pre-acquisition profit element of inventory written up on
acquisition, other direct costs associated with business combinations and
adjustments to contingent consideration related to acquired businesses.
Restructuring includes significant changes in footprint (including movement of
production facilities) and significant costs of management changes.
In addition to the items above, adjusting items impacting profit after tax
include:
• The net effect on tax of significant restructuring from strategy changes
that are not considered by the Group to be part of the normal operating costs
of the business; and
• The tax effects of adjustments to profit before tax.
These financial statements include alternative performance measures that are
not prepared in accordance with IFRS. These APMs have been selected by the
Directors to assist them in making operating decisions because they represent
the underlying operating performance of the Group and facilitate internal
comparisons of performance over time.
The Directors consider the adjusted results to be an important measure used to
monitor how the businesses are performing as this provides a meaningful
reflection of how the businesses are managed and measured on a day-to-day
basis and achieves consistency and comparability between reporting periods.
TT Electronics Plc
Results for the year ended 31 December 2023
3 Segmental reporting
The Group is organised into three divisions, as shown below, according to the
nature of the products and services provided. Each of these divisions
represents an operating segment or an aggregation of operating segments in
accordance with IFRS 8 'Operating Segments'. The chief operating decision
maker is the Chief Executive Officer. The operating segments are:
· Power and Connectivity - The Power and Connectivity division
designs and manufactures power application products and connectivity devices
which enable the capture and wireless transfer of data. We collaborate with
our customers to develop innovative solutions to optimise their electronic
systems; Power and Connectivity is an aggregation of two operating segments
due to similarities in products and markets served;
· Global Manufacturing Solutions - The Global Manufacturing
Solutions division provides manufacturing services and engineering solutions
for our product divisions and to customers that often require a lower volume
and higher mix of different products. We manufacture complex integrated
product assemblies for our customers and provide engineering services
including designing testing solutions and value-engineering; and
· Sensors and Specialist Components - The Sensors and Specialist
Components division works with customers to develop standard and customised
solutions including sensors and power management devices. Our solutions
improve the precision, speed and reliability of critical aspects of our
customers' applications.
The key performance measure of the operating segments is adjusted operating
profit. Refer to the section titled 'Reconciliation of KPIs and non IFRS
measure' for the definition of adjusted profit.
Corporate costs - Resources and costs of the head office managed centrally but
deployed in support of the operating units are allocated to segments based on
a combination of revenue and operating profit. Resources and costs of the head
office which are not related to the operating activities of the trading units
are not allocated to divisions and are separately disclosed, equivalent to the
segment disclosure information, so that reporting is consistent with the
format that is used for review by the chief operating decision maker. This
gives greater transparency of the adjusted operating profits for each segment.
Inter-segment pricing is determined on an arms length basis in a manner
similar to transactions with third parties.
The Group's geographical segments are determined by the location of the
Group's non-current assets and, for revenue, the location of external
customers. Group financing (including finance costs and finance income) and
income taxes are managed on a Group basis and are not allocated
to operating segments. Goodwill is allocated to the individual cash
generating units which may be smaller than the segment of which they are part.
a) Income statement information
2023
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total Operating Segments Corporate Total
Sales to external customers 169.7 299.2 145.0 613.9 - 613.9
Adjusted operating profit 14.3 27.6 19.0 60.9 (8.1) 52.8
Add back: adjustments made to operating profit (note 7) (44.1)
Operating profit 8.7
Net finance costs (9.8)
Loss before taxation (1.1)
2022
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total Operating Segments Corporate Total
Sales to external customers 154.2 323.0 139.8 617.0 - 617.0
Adjusted operating profit 7.9 25.2 21.8 54.9 (7.8) 47.1
Add back: adjustments made to operating profit (note 7) (50.5)
Operating loss (3.4)
Net finance costs (6.7)
Loss before taxation (10.1)
TT Electronics Plc
Results for the year ended 31 December 2023
3 Segmental reporting continued
b) Geographic information
Revenue by destination
The Group operates on a global basis. Revenue from external customers by
geographical destination is shown below. Management monitors and reviews
revenue by region rather than by individual country given the significant
number of countries where customers are based.
£million 2023 2022
United Kingdom 144.7 130.0
Rest of Europe 95.7 104.3
North America 225.1 236.6
Asia 145.5 144.7
Rest of the World 2.9 1.4
613.9 617.0
Revenue from services is less than 1% of Group revenues. All other revenue is
from the sale of goods.
c) Market information key customers
The Group operates in the following markets:
£million 2023 2022 (1)
Healthcare 146.3 172.1
Aerospace and defence 123.5 95.3
Automation and electrification 221.4 237.0
Distribution 122.7 112.6
613.9 617.0
1. Revenue by market in 2022 has been represented following a reclassification
of end markets for several key customers.
The Group had no customers who contributed greater than 10% of revenues in
2023 (2022: one customer who contributed 12% and whose revenues were
recognised in the Global Manufacturing Solutions segment).
TT Electronics Plc
Results for the year ended 31 December 2023
4 Assets and liabilities classified as held for sale
On 4 March 2024 the Group announced the agreement to sell three business
operating units within the GMS and Power and Connectivity segments to the
Cicor Group for a cash consideration of £20.8 million on a cash and debt free
basis subject to normal working capital adjustments.
The divestment relates to business units in Hartlepool and Cardiff, UK and
Dongguan, China which provide electronics manufacturing services and certain
connectivity products, principally to industrial clients.
The criteria of a highly probable sale were met in December 2023 and the
Directors were committed to the disposal at the balance sheet date.
Accordingly, the assets and related liabilities of the disposal group are
shown as being held for sale. The carrying value of assets held for sale
exceeded the fair value less costs to sell and accordingly a measurement loss
of £32.5 million has been recognised within adjusting items of which £22.6
million related to the IoT Solutions CGU and £9.9 million related to the GMS
CGU.
Of the £32.5 million remeasurement, the following assets were fully written
down: other intangible assets (£14.9 million), goodwill (£8.6 million),
right of use assets (£4.5 million) and property plant and equipment (£3.1
million). The remaining write down of £1.4 million was recorded against
inventories.
In the prior year an impairment of £17.7 million was recognised to reduce the
carrying value of the IoT Solutions CGU to the recoverable amount as at 31
December 2022 (see note 7).
The assets and liabilities of the disposal group as well as the allocated
remeasurement has been presented below as follows:
£million Net
ASSETS
Derivative financial instruments 0.2
Inventories 29.5
Trade and other receivables 14.7
Cash and cash equivalents 3.6
Assets classified as held for sale 48.0
LIABILITIES
Lease liabilities 2.6
Derivative financial instruments 0.8
Trade and other payables 21.4
Income taxes payable 0.1
Provisions 1.9
Deferred tax liability 1.3
Liabilities directly associated with assets classified as held for sale 28.1
Held for sale net assets 19.9
The disposal group does not constitute a major line of business or
geographical location and therefore the results and cash flows continue to be
treated as continuing operations as required by IFRS 5.
TT Electronics Plc
Results for the year ended 31 December 2023
5 Goodwill
£million
Cost
At 1 January 2022 156.5
Additions 5.0
Net exchange adjustment 11.3
At 31 December 2022 172.8
Transferred to held for sale (26.3)
Net exchange adjustment (5.7)
At 31 December 2023 140.8
Impairment
At 1 January 2022 -
Impairment 17.7
At 31 December 2022 17.7
Transferred to held for sale (17.7)
At 31 December 2023 -
Net book value
At 31 December 2023 140.8
At 31 December 2022 155.1
£8.6 million of goodwill was transferred to assets classified as held for
sale (see note 4).
The £5.0 million addition in goodwill in 2022 arose upon the acquisition of
Power and Control business of Ferranti Technologies Ltd and is considered part
of the Power Solutions CGU. In the year ended 31 December 2023 £8.6 million
of goodwill (net of £17.7 million impairment) was transferred to assets held
for sale (see note 4). The amount transferred comprised £6.4 million (net of
£17.7 million impairment) relating to the IoT Solutions CGU and £2.2 million
related to the Global Manufacturing Solutions CGU.
The goodwill generated as a result of acquisitions represents the premium paid
in excess of the fair value of all net assets, including intangible assets,
identified at the point of acquisition. The future improvements applied to the
acquired businesses, achieved through a combination of revised strategic
direction, operational improvements and investment are expected to result in
improved profitability of the acquired businesses during the period of
ownership. The combined value achieved from these improvements is expected to
be in excess of the value of goodwill acquired.
Goodwill, excluding amounts transferred to assets held for sale, is attributed
to the following CGUs in the divisions shown below:
£million 2023 2022
Power and Connectivity:
Power Solutions 63.7 65.6
IoT Solutions 3.5 9.9
Global Manufacturing Solutions:
Global Manufacturing Solutions 16.7 19.5
Sensors and Specialist Components:
Resistors 32.3 34.2
Sensors 24.6 25.9
140.8 155.1
TT Electronics Plc
Results for the year ended 31 December 2023
5 Goodwill continued
Impairment Testing
The Group tests goodwill impairment annually or more frequently if there are
indications that goodwill might be impaired the recoverable amounts of the
CGUs are determined from value in use calculations. The key assumptions for
the value in use calculations are those regarding the discount rates, growth
rates and operating cash flow projections over a forecast period. The growth
rate assumed after this forecast period is based on long-term GDP projections
capped at long term growth rates (which are approximated as long-term
inflation rates) of the primary market for the CGU, in perpetuity. Long-term
growth rates are based on long-term forecasts for growth in the geography in
which the group of CGUs operates. Long-term growth rates are determined using
long-term growth rate forecasts that take into account the international
presence and the markets in which each business operates.
Management estimate discount rates using pre-tax rates that reflect current
market assessments of the Group's time value of money and the risks specific
to the CGU being measured.
In determining the cost of equity, the Capital Asset Pricing Model has been
used. Accordingly the cost of equity is determined by adding a risk premium,
based on an industry adjustment, to the expected return of the equity market
above the risk-free return. The relative risk adjustment reflects the risk
inherent in each group of CGUs relative to all other sectors and geographies
on average.
The cost of debt is determined using a risk-free rate based on the cost of
government bonds, and an interest rate premium equivalent to a corporate bond
with a similar credit rating to TT Electronics Plc.
The growth rates assume that demand for our products remains broadly in line
with the underlying economic environment in the long-term future. Taking into
account our expectation of future market conditions, we believe that the
evolution of selling prices and cost measures put into place will lead to a
sustained improvement in profitability.
Management has detailed plans in place reflecting the latest budget and
strategic growth plan. The pre-tax discount rates and periods of management
approved forecasts are shown below. The discount rates used in the annual
impairment test for the year ended 31 December 2023 are shown below:
2023 2022
Pre-tax discount rate Long term growth rate Period of forecast (years) Pre-tax discount rate Long term growth rate Period of forecast (years)
Power Solutions 13.8% 2.0% 5 13.4% 1.7% 5
IoT Solutions 14.1% 1.9% 5 14.3% 1.6% 5
Global Manufacturing Solutions 16.5% 3.1% 5 13.8% 1.9% 5
Resistors 13.8% 1.9% 5 13.5% 1.6% 5
Sensors 13.6% 2.0% 5 13.2% 1.7% 5
The date of the annual impairment test was 30 September 2023 to align with
internal forecasting and review processes. The impairment tests for were
performed as of September, with an additional impairment test for IoT
Solutions and GMS being tested as of December following the transfer of part
of the CGU to assets classified as held for sale. No impairment losses have
been recognised in the current year in respect of the other CGUs as
recoverable amounts exceed carrying value of assets in respect of those
businesses. Sensitivity analysis has been provided in respect of reasonably
possible changes to key assumptions where applicable.
Key assumptions in the value in use test are the projected performance of the
CGUs based on sales growth rates, cash flow forecasts and discount rate.
Forecast sales growth rates are based on past experience adjusted for the
strategic direction and near-term investment priorities within each CGU. The
key assumptions include externally obtained growth rates in the key markets
disclosed in note 3 and customer demand for product lines. Cash flow forecasts
are determined based on historic experience of operating margins, adjusted for
the impact of changes in product mix and cost-saving initiatives, including
the impact of our restructuring projects and cash conversion based on
historical experience.
The recoverable amounts associated with the goodwill balances which are based
on these performance projections and current forecast information do not
indicate that any goodwill balance is impaired. If a company's actual
performance does not meet these projections this could lead to an impairment
of the goodwill in future periods.
TT Electronics Plc
Results for the year ended 31 December 2023
5 Goodwill
continued
Sensitivity Analysis
Sensitivity analysis has been performed on the key assumptions; operating cash
flow projections, revenue growth rates and discount rate. Cash flows can be
impacted by changes to sales prices, direct costs and replacement capital
expenditure; individually they are not significant assumptions.
The directors have not identified reasonably possible changes in significant
assumptions that would cause the recoverable amount to fall below the carrying
value of recognised goodwill.
6 Finance costs and finance income
£million 2023 2022
Interest income 0.1 0.1
Net interest income on pension schemes in surplus 1.5 2.2
Finance income 1.6 2.3
Interest expense 9.9 7.1
Interest on lease liabilities 0.8 0.8
Net interest expense on pension schemes in deficit 0.1 0.1
Amortisation of arrangement fees 0.6 1.0
Finance costs 11.4 9.0
Net finance costs 9.8 6.7
Within 'Amortisation of arrangement fees' is an expense of £nil (2022: £0.5
million) relating to the acceleration of capitalised loan arrangement fees.
TT Electronics Plc
Results for the year ended 31 December 2023
7 Adjusting items
As described in note 2, adjusted profit measures are an alternative
performance measure used by the Board to monitor the operating performance of
the Group.
2023 2022
£million Operating profit Tax Operating profit Tax
As reported 8.7 (5.7) (3.4) (3.1)
Restructuring costs
Restructuring costs (2.0) 0.7 (6.4) 1.2
(2.0) 0.7 (6.4) 1.2
Pension restructuring costs
Pension restructuring costs (1.9) 0.7 (2.0) 0.4
Pension enhanced transfer value exercise - - (11.8) 2.2
(1.9) 0.7 (13.8) 2.6
Asset impairments and measurement losses
Goodwill impairment - - (17.7) -
Asset impairments - - (5.4) 1.0
Measurement loss on assets classified as held for sale (32.5) - - -
(32.5) - (23.1) 1.0
Amortisation of intangible assets arising on business combinations
Amortisation of intangible assets arising on business combinations (4.6) 1.6 (6.0) 0.3
(4.6) 1.6 (6.0) 0.3
Acquisition and disposal related costs
Torotel integration costs (0.4) 0.1 (0.1) -
Ferranti Power and Control acquisition and integration costs (1.3) 0.2 (1.1) 0.2
Disposal costs (1.2) 0.2 - -
Other (0.2) - - -
(3.1) 0.5 (1.2) 0.2
Total items excluded from adjusted measure (44.1) 3.5 (50.5) 5.3
Adjusted measure 52.8 (9.2) 47.1 (8.4)
Restructuring costs £2.0 million (2022: £6.4 million)
Restructuring costs charged in the period primarily relate to costs associated
with the relocation of production facilities from our USA site in Covina to
Kansas (£1.9 million), representing the last stage of the self-help programme
which started in 2020.
Prior year's restructuring costs of £6.4 million comprise £2.7 million
relating to the restructure of the North America Resistors business, which
includes pre-production costs at our new Plano facility; £2.0 million
relating to closure of our site in Lutterworth, UK, £1.5 million relating to
the relocation of production facilities from Covina, USA to Kansas, USA and
£0.2 million relating to the relocation of production facilities from Medina,
USA to Minneapolis, USA.
Pension restructuring costs £1.9 million (2022: £13.8 million)
Pension restructuring costs of £1.9 million (2022: £2.0 million relating to
costs associated with the enhanced transfer value exercise) relate to costs
associated with scheme buy-outs. Prior period's pension enhanced transfer
value exercise of £11.8 million represents the settlement cost of a liability
management exercise undertaken ahead of the buy-in completed in 2022.
Amortisation of intangible assets arising on business combinations £4.6
million (2022: £6.0 million)
Amortisation of intangible assets arising on business combinations £4.6
million (2022: £6.0 million) relate to amortisation of the fair value of
acquired order books, acquired customer relationships and other intangible
assets acquired on business combinations.
TT Electronics Plc
Results for the year ended 31 December 2023
7 Adjusting items continued
Asset impairments and measurement losses £32.5 million (2022: £23.1 million)
Measurement loss on assets classified as held for sale of £32.5 million
relate to the writing down of assets held for sale in our IoT Solutions and
GMS CGUs, further information is disclosed in note 4.
Prior year asset impairments of £23.1 million comprise £17.7 million to
reduce the carrying value of the IoT Solutions CGU to the recoverable amount
and £5.4 million associated with Virolens related assets both of which were
as a result of revised forecasts in the context of a weaker macro-economic
environment and the impact of the evolution of the COVID pandemic on the
potential demand for COVID testing.
Acquisition and disposal related costs £3.1 million (2022: £1.2 million)
Acquisition and disposal related costs charged in the year comprise £1.2
million (2022: £nil) relating to costs incurred in preparing held for sale
assets and liabilities for sale; £1.3 million (2022: £0.3 million
acquisition and £0.8 million integration) of integration costs relating to
the acquisition of the Power and Control business of Ferranti Technologies Ltd
based in Oldham, UK and £0.4 million (2022: £0.1 million) of integration
costs of Torotel, Inc.; and £0.2 million relating to other costs.
TT Electronics Plc
Results for the year ended 31 December 2023
8 Taxation
a) Analysis of the tax charge for the year
£million 2023 2022
Current tax
Current income tax charge 11.1 9.1
Adjustments in respect of current income tax of previous year 1.9 (0.5)
Total current tax charge 13.0 8.6
Deferred tax
Relating to origination and reversal of temporary differences (2.9) (3.4)
Change in tax rate - (1.2)
Adjustments in respect of deferred tax of previous years (4.4) (0.9)
Total deferred tax credit (7.3) (5.5)
Total tax charge in the income statement 5.7 3.1
The enacted UK tax rate applicable from 1 April 2017 to 31 March 2023 was 19%.
From 1 April 2023 the UK tax rate increased to 25%. The applicable tax rate
for the period is based on the UK standard rate of corporation tax of 23.5%
(2022: 19%). Overseas taxation is calculated at the rates prevailing in the
respective jurisdictions. The Group's effective tax rate for the year was
-518% (the adjusted tax rate was 21.4%, see section 'Reconciliation of KPIs
and non IFRS measures'). Included within the total tax charge above is a £3.5
million credit relating to items reported outside adjusted profit (2022:
£5.3 million credit).
b) Reconciliation of the total tax charge for the year
£million 2023 2022
Loss before tax from continuing operations (1.1) (10.1)
Loss before tax multiplied by the standard rate of corporation tax in the UK (0.2) (1.9)
of 23.5% (2022: 19%)
Effects of:
Impact on deferred tax arising from changes in tax rates 0.1 (1.2)
Overseas tax rate differences (0.5) 0.8
Items not deductible for tax purposes or income not taxable 9.6 8.8
Adjustment to current tax in respect of prior periods 0.1 (0.5)
Current year tax losses and other items not recognised (0.8) (2.0)
Adjustments in respect of deferred tax of previous years (2.6) (0.9)
Total tax charge reported in the income statement 5.7 3.1
The overall aim of the Group's tax strategy is to support business operations
by ensuring a sustainable tax rate, mitigating tax risks in a timely and
cost-efficient way and complying with tax legislation in the jurisdictions in
which the Group operates. It is however inevitable that the Group will be
subject to routine tax audits or is in ongoing disputes with tax authorities
in the multiple jurisdictions it operates within. This is much more likely to
arise in situations involving more than one tax jurisdiction. Differences in
interpretation of legislation, of global standards (e.g. OECD guidance) and of
commercial transactions undertaken by the Group between different tax
authorities are one of the main causes of tax exposures and tax risks for the
Group.
In order to manage the risk to the Group an assessment is made of such tax
exposures and provisions are created using the best estimate of the most
likely amount to be incurred within a range of possible outcomes. The
resolution of the Group's tax exposures can take a considerable period of time
to conclude and, in some circumstances, it can be difficult to predict the
final outcome.
The current tax liability at 31 December 2023 includes tax provisions of £9.3
million (2022: £8.4 million). The Group believes the range of reasonable
possible outcomes in respect of these exposures is tax liabilities of up to
£12.3 million (2022: £11.1 million).
TT Electronics Plc
Results for the year ended 31 December 2023
9 Dividends
2023 2023 2022 2022
pence per share
£million
pence per share
£million
Final dividend paid for prior year 4.30 7.5 3.80 6.7
Interim dividend declared for current year 2.15 3.8 2.00 3.5
The Directors recommend a final dividend of 4.65 pence per share. The Group
has a progressive dividend policy. The final dividend will be paid on 15 May
2024 to shareholders on the register on 12 April 2024.
10 Earnings per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss)
attributable to owners of the Company by the weighted average number of shares
in issue during the year.
Pence 2023 2022
Loss per share
Basic (3.9) (7.5)
Diluted (3.9) (7.5)
As the Group made a statutory loss in 2023 and 2022, diluted statutory EPS for
2023 and 2022 has been calculated using the basic weighted average number of
shares because using weighted average diluted shares would be anti-dilutive.
The numbers used in calculating adjusted, basic and diluted earnings per share
are shown below. Adjusted earnings per share is based on the adjusted profit
after interest and tax.
TT Electronics Plc
Results for the year ended 31 December 2023
10 Earnings per share continued
Adjusted earnings per share:
£million (unless otherwise stated) 2023 2022
Loss for the year attributable to owners of the Company (6.8) (13.2)
Restructuring costs 2.0 6.4
Pension restructuring costs 1.9 13.8
Asset impairments and measurement losses 32.5 23.1
Amortisation of intangible assets arising on business combinations 4.6 6.0
Acquisition and disposal related costs 3.1 1.2
Tax effect of above items (3.5) (5.3)
Adjusted earnings 33.8 32.0
Adjusted earnings per share (pence) 19.2 18.2
Adjusted diluted earnings per share (pence) 19.0 18.0
The weighted average number of shares in issue is as follows (new shares
issued in the year described in note 13):
million 2023 2022
Basic 175.6 175.8
Adjustment for share awards 2.6 2.0
Diluted 178.2 177.8
TT Electronics Plc
Results for the year ended 31 December 2023
11 Reconciliation of net cash flow to movement in net debt
Net cash of £76.5 million (2022: £61.3 million) comprises cash at bank and
in hand of £74.1 million (2022: £65.0 million), overdrafts of £1.2 million
(2022: £3.7 million) and cash within assets held for sale of £3.6 million.
£million Net cash Lease liabilities Borrowings Net debt
At 1 January 2022 67.2 (22.6) (147.1) (102.5)
Cash flow (9.2) - - (9.2)
Businesses acquired - (0.2) - (0.2)
Repayment of borrowings - - 149.3 149.3
Proceeds from borrowings - - (174.3) (174.3)
Payment of lease liabilities - 4.3 - 4.3
New leases - (2.3) - (2.3)
Net movement in loan arrangement fees - - 0.7 0.7
Exchange differences 3.3 (2.3) (5.2) (4.2)
At 31 December 2022 61.3 (23.1) (176.6) (138.4)
Cash flow 19.3 - - 19.3
Transferred to held for sale (3.6) 2.6 - (1.0)
Repayment of borrowings - - 26.1 26.1
Proceeds from borrowings - - (32.7) (32.7)
Payment of lease liabilities - 4.4 - 4.4
New leases - (3.4) - (3.4)
Net movement in loan arrangement fees - - (0.1) (0.1)
Exchange differences (4.1) 1.3 1.4 (1.4)
At 31 December 2023 72.9 (18.2) (181.9) (127.2)
Included within assets classified as held for sale and associated liabilities 3.6 (2.6) - 1.0
At 31 December 2023 76.5 (20.8) (181.9) (126.2)
The Group's primary source of finance is the £162.4 million committed
revolving credit facility (RCF), and an uncommitted accordion facility of
£17.6 million, which was signed in June 2022. The Group's RCF is payable on a
floating rate basis above GBP SONIA or USD depending on the currency of the
loan and will mature in June 2027. As at 31 December 2023, £108.8 million (31
December 2022: £103.6 million) of the facility was drawn down. Arrangement
fees with amortised cost of £1.9 million (2022: £2.0 million) have been
netted off against these borrowings.
The interest margin payable on the facility is based on the Group's compliance
with financial covenants, net debt / adjusted EBITDA (bank covenant) and is
payable on a floating basis above GBP SONIA, or USD SOFR depending on the
currency of denomination of the loan.
In December 2021 the Group issued £75.0 million of unsecured loan notes with
£37.5 million maturing in seven years and £37.5 million maturing in 10 years
respectively to a collection of three counterparties. The average interest
rate on the loan notes is 2.9 per cent.
TT Electronics Plc
Results for the year ended 31 December 2023
12 Retirement benefit schemes
Defined contribution schemes
The Group operates 401(k) plans in North America and defined contribution
arrangements in the rest of the world. The assets of these schemes are held
independently of the Group and are not on its balance sheet. The total
contributions charged by the Group in respect of defined contribution schemes
were £3.5 million (2022: £3.2 million).
Defined benefit schemes
At 31 December 2023 the Group operated one defined benefit schemes in the UK
(the TT Group (1993) Pension Scheme) and one overseas defined benefit scheme
in the USA. These schemes are closed to new members and the UK scheme is
closed to future accrual.
The TT Group scheme commenced in 1993 and increased in size in 2006, 2007 and
2019 through the mergers of former UK schemes following a number of
acquisitions. The parent company is the sponsoring employer in the TT Group
scheme. The TT Group scheme is governed by TTG Pension Trustees Limited (the
"Trustee") that has control over the operation, funding and investment
strategy in consultation with the Group.
In November 2022, the Trustees of the TT Group Scheme entered into a bulk
annuity insurance contract with an insurer in respect of the liabilities of
the defined benefit scheme ('buy-in'). The insurer will pay into the Scheme
cash matching the benefits due to members. The Trustee is of the opinion that
this investment decision is appropriate, reduces the risks in the Scheme and
provides additional security for the benefits due to members of the Scheme.
The Trustee continues to be responsible for running the Scheme and retains the
legal obligation for the benefits provided under the Scheme.
As the buy-in policy is a qualifying insurance asset, the fair value of the
insurance policy is deemed to be the present value of the obligations that
have been insured. The policy secured matches the benefits due to Scheme
members under the Scheme's Trust Deed and Rules.
Since the assets of the Scheme were greater than the premium required to
secure the liabilities through the buy-in, the Scheme Is in a net asset
position at 31 December 2023 of £25.3 million. A 'true-up premium/refund'
may be payable to/from the insurer during 2024, subject to a data cleanse
exercise to formally agree the final benefits that are covered by the buy-in
contract.
Prior to the buy-in, the TT Group scheme exposed the Group to a number of
actuarial risks such as longevity risk, currency risk, inflation risk,
interest rate risk and market (investment) risk. The buy-in mitigates the
majority of these risks and the principal risk remaining is the credit risk
associated with the insurer, which is assessed to be very low.
UK legislation requires the Trustee to carry out a statutory funding valuation
at least every three years and to target full funding against a basis that
prudently reflects the TT Group scheme's risk exposure. The last triennial
valuation of the TT Group scheme as at April 2022 showed a net surplus of
£45.4 million against the Trustee's statutory funding objective.
The Trustee, in conjunction with the Group, has a duty to ensure that the TT
Group scheme has an appropriate funding strategy in place that meets any local
statutory requirements. The objective, which has been negotiated and agreed
between the Group and the Trustee, is that the TT Group scheme should target
and then maintain 100% funding on a basis that should ensure benefits can be
paid as they fall due. Any shortfall in the assets relative to the funding
target will be financed over a period that ensures the contributions are
reasonably affordable to the Group.
Due to the favourable funding position the Trustee and Company have agreed
that there was no requirement for any further funding contributions to the TT
Group scheme. In December 2023 an initial £5.0 million refund of the
surplus was paid to the group out of scheme assets by the Trustee (£3.2
million after tax suffered by the scheme).
An analysis of the pension surplus/(deficit) by scheme is shown below:
£million At 31 December 2023 At 31 December 2022
TT Group (1993) 25.3 31.3
USA schemes (3.1) (2.9)
Net surplus 22.2 28.4
Amounts recognised in the consolidated income statement are:
£million 2023 2022
Scheme administration costs (1.9) (1.2)
Net loss on pension projects (excluded from adjusted operating profit) (1.3) (13.8)
Net interest credit 1.4 2.1
TT Electronics Plc
Results for the year ended 31 December 2023
13 Share capital
Share capital
£million 2023 2022
Issued and fully paid
177,371,049 (2022: 176,486,627) ordinary shares of 25p each 44.3 44.1
During the period the Company issued 884,422 ordinary shares as a result of
share options being exercised under the Sharesave scheme and Share Purchase
plans.
The performance conditions of the Restricted Share Plan awards issued in 2020,
2021 and 2022 were met and shares were allocated to award holders from
existing shares held by an Employee Benefit Trust for £nil consideration. The
performance conditions of the Long-term Incentive Plan awards issued in 2020
were not met and therefore no new shares were issued to award holders.
The aggregate consideration received for all share issues during the year was
£1.3 million which was represented by a £0.2 million increase in share
capital and a £1.1 million increase in share premium.
14 Related party transactions
Transactions between the Company and its subsidiaries have been eliminated on
consolidation and are not disclosed in this note.
No related party transactions have taken place in 2022 or 2021 that have
affected the financial position or performance of the Group.
15 Subsequent events
On 4 March 2024 the Group announced the agreement to sell three business
operating units within the Global Manufacturing Solutions and Power and
Connectivity segments to the Cicor Group for a cash consideration of £20.8
million on a cash and debt free basis subject to normal working capital
adjustments. The assets and related liabilities of the disposal group are
shown as being held for sale as at 31 December 2023 as detailed in note 4.
Principal risk and uncertainties
The Group continues to be exposed to operational and financial risks and has
an established, structured approach to identifying,
assessing, and managing those risks. These risks relate to the following
areas: general revenue reduction; contractual risks;
research and development; people and capability; supplier resilience; IT
systems and information; M&A and integration; sustainability, climate
change and the environment; health and safety; legal and regulatory compliance
and geopolitical risks.
TT Electronics Plc
Results for the year ended 31 December 2023
Reconciliation of KPIs and non IFRS measures
In accordance with the Guidelines on APMs issued by the European Securities
and Markets Authority (ESMA), additional information is provided on the APMs
used by the Group below.
To assist with the understanding of earnings trends, the Group has included
within its financial statements APMs adjusted operating profit and other
adjusted profit measures. The APMs used are not defined terms under IFRS and
therefore may not be comparable to similar measures used by other companies.
They are not intended to be a substitute for, or superior to, GAAP measures.
Management uses adjusted measures to assess the operating performance of the
Group, having adjusted for specific items as detailed in note 7. They form the
basis of internal management accounts and are used for decision making,
including capital allocation, with a subset also forming the basis of internal
incentive arrangements. By using adjusted measures in segmental reporting,
this enables readers of the financial statements to recognise how incentive
performance is targeted. Adjusted measures are also presented in this
announcement because the Directors believe they provide additional useful
information to shareholders on comparable trends over time. Finally, this
presentation allows for separate disclosure and specific narrative to be
included concerning the adjusting items; this helps to ensure performance in
any one year can be more clearly understood by the user of the financial
statements.
Income statement measures:
Alternative Performance Measure Closest equivalent statutory measure Note reference to reconciliation to statutory measure Definition and purpose
Adjusted operating Operating profit Adjusting items as disclosed in note 7 Adjusted operating profit has been defined as operating profit from continuing
operations excluding the impacts of significant restructuring programmes,
profit significant one-off items including property disposals, impairment charges
significant in nature and/or value, business acquisition, integration, and
divestment related activity; and the amortisation of intangible assets
recognised on acquisition. Acquisition and disposal related items include the
writing off of the pre-acquisition profit element of inventory written up on
acquisition, other direct costs associated with business combinations and
adjustments to contingent consideration related to acquired businesses.
Restructuring includes significant changes in footprint (including movement of
production facilities) and significant costs of management changes.
To provide a measure of the operating profits excluding the impacts of
significant items such as restructuring or acquisition related activity and
other items such as amortisation of intangibles which may not be present in
peer companies which have grown organically.
Adjusted operating Operating profit margin Adjusting items as disclosed in note 7 Adjusted operating profit as a percentage of revenue.
margin To provide a measure of the operating profits excluding the impacts of
significant items such as restructuring or acquisition related activity and
other items such as amortisation of intangibles which may not be present in
peer companies which have grown organically.
Adjusted earnings Earnings per share See note 10 for the reconciliation and calculation of adjusted earnings per The profit for the year attributable to the owners of the Group adjusted to
share exclude the items not included within adjusted operating profit divided by the
per share weighted average number of shares in issue during the year.
To provide a measure of Earnings per Share excluding the impacts of
significant items such as restructuring or acquisition related activity and
other items such as amortisation of intangibles which may not be present in
peer companies which have grown organically.
TT Electronics Plc
Results for the year ended 31 December 2023
Income statement measures continued:
Alternative Performance Measure Closest equivalent statutory measure Note reference to reconciliation to statutory measure Definition and purpose
Adjusted Diluted earnings See note 10 for the reconciliation and calculation of adjusted diluted The profit for the year attributable to the owners of the Group adjusted to
earnings per share exclude the items not included within adjusted operating profit divided by the
diluted per share weighted average number of shares in issue during the year, adjusted for the
effects of any potentially dilutive options.
earnings
To provide a measure of Earnings per Share excluding the impacts of
per share significant items such as restructuring or acquisition related activity and
other items such as amortisation of intangibles which may not be present in
peer companies which have grown organically.
Organic Revenue See note APM 1 This is the percentage change in revenue from continuing operations in the
current year compared to the prior year, excluding the effects of currency
revenue movements, acquisitions and disposals. This measures the underlying growth or
decline of the business.
To provide a comparable view of the revenue growth of the business from period
to period excluding acquisition and foreign exchange impacts.
Adjusted Effective tax charge See note APM 2 Tax charge adjusted to exclude tax on items not included within adjusted
operating profit divided by adjusted profit before tax, which is also adjusted
effective tax charge to exclude the items not included within adjusted operating profit.
To provide a tax rate which excludes the impact of adjusting items such as
restructuring or acquisition related activity and other items such as
amortisation of intangibles which may not be present in peer companies which
have grown organically.
Return on invested None See note APM 3 Adjusted operating profit for the year divided by average invested capital for
the year. Average invested capital excludes pensions, provisions, tax
capital balances, derivative financial assets and liabilities, cash and borrowings and
is calculated at average rates taking twelve monthly balances.
This measures how efficiently assets are utilised to generate returns with the
target of exceeding the cost to hold the assets.
TT Electronics Plc
Results for the year ended 31 December 2023
Statement of financial position measures:
Alternative Performance Measure Closest equivalent statutory measure Note reference to reconciliation to statutory measure Definition and purpose
Net debt Cash and cash equivalents less borrowings and lease liabilities Reconciliation of net cash flow to movement in net debt (note 11) Net debt comprises cash and cash equivalents and borrowings including lease
liabilities.
This is additional information provided which may be helpful to the user in
understanding the liquidity and financial structure of the business.
Leverage (bank covenant) None See note APM 11 Leverage is the net debt defined as per the banking covenants (net debt
(excluding lease liabilities) adjusted for certain terms as per the bank
covenants) divided by EBITDA excluding items removed from adjusted profit and
further adjusted for certain terms as per the bank covenants.
Provides additional information over the Group's financial covenants to assist
with assessing solvency and liquidity.
Net capital and development expenditure None See note APM 4 Purchase of property, plant and equipment net of government grants (excluding
property disposals), purchase of intangibles (excluding acquisition
(net capex) intangibles) and capitalised development.
A measure of the Group's investments in capex and development to support
longer term growth.
Dividend per share Dividend per share Not applicable Amounts payable by dividend in terms of pence per share.
Provides the dividend return per share to shareholders.
TT Electronics Plc
Results for the year ended 31 December 2023
Statement of cash flows measures:
Alternative Performance Measure Closest equivalent statutory measure Note reference to reconciliation to statutory measure Definition and purpose
Adjusted operating Operating cash flow See note APM 5 Adjusted operating profit, excluding depreciation of property, plant and
equipment (depreciation of right-of-use assets is not excluded) and
cash flow amortisation of intangible assets (amortisation of acquisition intangibles is
not excluded) less working capital and other non-cash movements.
An additional measure to help understand the Group's operating cash
generation.
Adjusted operating Operating cash flow See note APM 6 Adjusted operating cash flow less net capital and development expenditure.
cash flow An additional measure to help understand the Group's operating cash generation
after the deduction of capex.
post capex
Working Cashflow - inventories payables, provisions and receivables See note APM 7 Working capital comprises of three statutory cashflow figures:
(increase)/decrease in inventories, increase/(decrease) in payables and
capital provisions, and (increase)/decrease in receivables.
cashflow To provide users a measure of how effectively the group is managing its
working capital and the resultant impact on liquidity.
Free cash Net increase/ decrease in cash and cash equivalents See note APM 8 Free cash flow represents cash generated from trading after all costs
including restructuring, pension contributions, tax and interest payments.
flow Cashflows to settle share based payment schemes are excluded.
Free cash flow provides a measure of how successful the company is in creating
cash during the period which is then able to be used by the Group at its
discretion.
Cash None See note APM 9 Adjusted operating cash flow post capex (less any property disposals which
were part of restructuring programmes) divided by adjusted operating profit.
conversion
Cash conversion measures how effectively we convert profit into cash and
tracks the management of our working capital and capital expenditure.
R&D cash spend as a percentage of revenue None See note APM 10 R&D cash spend and R&D investment as a percentage of revenue excludes
Global Manufacturing Solutions which is a manufacturing services business and
therefore has no R&D.
To provide a measure of the company's expenditure on R&D relative to its
overall size which may be helpful in considering the Group's longer term
investment in future product pipeline.
TT Electronics Plc
Results for the year ended 31 December 2023
Non-financial measures:
Alternative Performance Measure Closest equivalent statutory measure Note reference to reconciliation to statutory measure Definition
Employee engagement Not applicable Not applicable We use our employee survey to measure how our employees feel about working in
TT using a scale of 1 (low) to 7 (high) against eight factors (as surveyed by
Best Companies Ltd). A company is awarded between zero and three stars based
on the employee feedback.
Provides a measure of employee sentiment and engagement.
Safety performance Not applicable Not applicable Safety performance is defined as the number of occupational injuries resulting
in three or more days' absence per 1,000 employees. This KPI allows us to
compare our performance with that of our peers. We use a UK benchmark
published by the Health and Safety Executive and apply this to all our
facilities worldwide, reflecting our commitment to raising standards globally.
Provides users additional information about the Group's commitment and
achievements in the area of health and safety.
APM 1 - Organic revenue:
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total
2023 revenue 169.7 299.2 145.0 613.9
2022 revenue 154.2 323.0 139.8 617.0
Foreign exchange impact (0.4) (10.9) - (11.3)
2022 revenue at 2023 exchange rates 153.8 312.1 139.8 605.7
Organic revenue increase (%) 10% -4% 4% 1%
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total
2022 revenue 154.2 323.0 139.8 617.0
Acquisitions 7.9 - - 7.9
2022 revenue (excluding acquisitions) 146.3 323.0 139.8 609.1
2021 revenue 140.2 220.1 115.9 476.2
Foreign exchange impact 7.2 15.4 8.9 31.5
2021 revenue at 2022 exchange rates 147.4 235.5 124.8 507.7
Organic revenue increase (%) (1%) 37% 12% 20%
TT Electronics Plc
Results for the year ended 31 December 2023
APM 2 - Effective tax charge:
£million 2023 2022
Adjusted operating profit 52.8 47.1
Net interest (9.8) (6.7)
Adjusted profit before tax 43.0 40.4
Adjusted tax (9.2) (8.4)
Adjusted effective tax rate 21.4% 20.8%
APM 3 - Return on invested capital:
£million 2023 2022
Adjusted operating profit 52.8 47.1
Average invested capital 440.0 448.6
Return on invested capital 12.0% 10.5%
APM 4 - Net capital and development expenditure (net capex):
£million 2023 2022
Purchase of property, plant and equipment (22.3) (11.4)
Proceeds from sale of investment property, plant and equipment and capital 0.5 0.3
grants received
Capitalised development expenditure (1.6) (2.3)
Purchase of other intangibles (0.6) (0.6)
Net capital and development expenditure (24.0) (14.0)
TT Electronics Plc
Results for the year ended 31 December 2023
APM 5 - Adjusted operating cash flow:
£million 2023 2022
Adjusted operating profit 52.8 47.1
Adjustments for:
Depreciation 14.0 13.9
Amortisation of intangible assets 2.5 2.2
Share based payment expense 3.1 4.8
Reimbursement of pension surplus 1.6 -
Other items (0.7) 0.5
Decrease/(increase) in inventories 4.5 (40.4)
Decrease/(increase) in receivables 10.5 (26.3)
(Decrease)/increase in payables and provisions (15.5) 27.9
Adjusted operating cash flow 72.8 29.7
Special payments to pension funds 3.2 -
Restructuring and acquisition related costs (4.0) (11.1)
Net cash generated from operations 72.0 18.6
Net income taxes paid (9.1) (5.9)
Net cash flow from operating activities 62.9 12.7
APM 6 - Adjusted operating cash flow post capex:
£million 2023 2022
Adjusted operating cash flow 72.8 29.7
Purchase of property, plant and equipment (22.3) (11.4)
Proceeds from sale of property, plant and equipment and government grants 0.5 0.3
received
Capitalised development expenditure (1.6) (2.3)
Purchase of other intangibles (0.6) (0.6)
Adjusted operating cash flow post capex 48.8 15.7
APM 7 - Working capital cashflow:
£million 2023 2022
(Increase)/decrease in inventories 4.5 (40.4)
(Increase)/decrease in receivables 10.5 (26.3)
Increase/(decrease) in payables and provisions (15.5) 27.9
Working capital cashflow (0.5) (38.8)
TT Electronics Plc
Results for the year ended 31 December 2023
APM 8 - Free cash flow:
£million 2023 2022
Net cash flow from operating activities 62.9 12.7
Net cash flow from investing activities (24.0) (22.3)
Add back: Acquisition of business - 8.3
Payment of lease liabilities (4.4) (4.3)
Interest paid (10.6) (7.5)
Free cash flow 23.9 (13.1)
APM 9 - Cash conversion:
£million 2023 2022
Adjusted operating profit 52.8 47.1
Adjusted operating cash flow post capex 48.8 15.7
Cash conversion 92% 33%
APM 10 - R&D cash spend as a percentage of revenue:
£million 2023 2022
Revenue (excluding GMS) 314.7 294.0
R&D cash spend 10.8 11.0
R&D cash spend as a percentage of revenue 3.4% 3.7%
APM 11 - Leverage:
£million 2023 2022
Adjusted operating profit 52.8 47.1
Depreciation 14.0 13.9
Amortisation 2.5 2.2
EBITDA 69.3 63.2
Adjustment to align with covenants (5.3) (5.1)
EBITDA (covenants) 64.0 58.1
Net debt as per note 26 126.2 138.4
Less: leases 20.8 23.1
Net debt excluding leases 105.4 115.3
Adjustment to align with covenants 1.2 (0.1)
Net debt (covenants) 106.6 115.2
Leverage (1.7) (2.0)
1 Includes £1 million of net funds within assets held for sale
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