REG - TT Electronics PLC - Half-year Results
03/08/2023 07:00
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RNS Number : 1309I TT Electronics PLC 03 August 2023
TT Electronics plc
Results for the half-year ended 30 June 2023
For further information, please contact:
TT Electronics
Richard Tyson, Chief Executive Officer
Mark Hoad, Chief Financial Officer
Kate Moy, Investor Relations
Tel: +44 (0)1932 827 779
MHP Communications
Tim Rowntree / Ollie Hoare
Tel:
+44 (0)20 3128 8276
A management presentation for analysts and investors will be held today at
09.30 and can be accessed on
https://stream.brrmedia.co.uk/broadcast/6489c7dba4eaa3202590592d
(https://stream.brrmedia.co.uk/broadcast/6489c7dba4eaa3202590592d)
A recording of the presentation and Q&A session will be available on the
website later in the day.
A PDF of this half year announcement is available for download from
https://www.ttelectronics.com/investors/results-reports-presentations/
(https://www.ttelectronics.com/investors/results-reports-presentations/) .
Interim Results for the half-year ended 30 June 2023
Delivering improved margins and cash generation; increased confidence in full
year outlook
£ million (unless otherwise stated) Adjusted Results(1) Statutory Results
H1 2023 H1 2022 Change Change H1 2023 H1 2022
Constant fx
Revenue 309.1 269.2 15% 12% 309.1 269.2
Operating profit 25.6 18.3 40% 34% 20.9 8.9
Operating profit margin 8.3% 6.8% 150bps 140bps 6.8% 3.3%
Profit before tax 20.7 15.0 38% 33% 16.0 5.6
Basic earnings per share 8.8p 6.6p 33% 28% 6.8p 2.3p
Return on invested capital (2022(2)) 12.0(3)% 10.5% 150bps
Cash conversion 74% (55)%
Free cash flow(1) 6.9 (23.5)
Net debt (2022(2)) (1) 138.8 138.4
Leverage (2022(2))(1) 1.8x 2.0x
Dividend per share 2.15p 2.00p
Financial highlights
· Revenue up 12% on a constant currency basis
· Adjusted operating profit up 34% at constant currency
· Adjusted operating margin, at constant currency, up 140 bps to 8.3%
· Statutory operating profit 120% up at £20.9m, statutory basic EPS of
6.8p
· Inflection in cash generation: free cash flow of £6.9m and cash
conversion of 74%
· Continued deleveraging with net debt to adjusted EBITDA of 1.8x
· Interim dividend increased 8% to 2.15p per share reflecting
confidence in full year outlook and future prospects
Operational highlights
· Order intake remains robust and is normalising as expected, 15 new
significant contract wins in the half delivering over £150m of potential
lifetime revenues
· Significant recovery in P&C performance, with continued momentum
in GMS and S&SC
· Order book provides visibility for balance of 2023 revenues with
cover building for 2024
· Expansion of facilities in Kuantan, Malaysia and now in Mexicali,
Mexico increases our geographic diversification and facilitates re-shoring
opportunities with customers
· Appointment of Peter France as CEO to succeed Richard Tyson on 2
October 2023
Richard Tyson, Chief Executive Officer, said:
"We are really pleased with a great performance by the team to achieve these
results, delivering strong organic growth in revenue and profit. Adjusted
operating margin is up by 140 basis points at constant currency. Leverage has
reduced on the back of the inflection in cash generation and increased
adjusted EBITDA.
The business is clearly demonstrating the benefit of the work to re-position
in the right markets, with the right customers and from the right operational
footprint. More new customer wins together with the ramp-up of previously
awarded contracts continue to provide multi-year revenue visibility and the
new business pipeline remains strong, supported by new re-shoring
opportunities.
The Group's order book underpins our full year anticipated revenue
projections, and we remain focused on executing on the order book, delivering
continued strong profit growth and driving a material step up in free cashflow
and further reducing leverage by the year end. While mindful of the
macroeconomic backdrop, our performance in the first half, alongside continued
strong momentum in the business provides the Board with increased confidence
in delivering its full year expectations. "
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, automation and electrification. 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 in note 2c on page 25. The adjusted measures used are set out in
the reconciliation of KPIs and non IFRS measures on pages 35 to 41.
2. As at December 2022
3. Calculated for the 12 months to June 2023
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
We have delivered a much-improved performance in the first half with further
good revenue growth. Constant currency revenue increased by 12 per cent in the
half. As expected, order intake has started to normalise, but has still
broadly tracked our revenue growth in the first half. Our visibility covers
our anticipated 2023 revenues and extends into 2024, reflecting both our
success with customers and the structural growth in the end markets in which
we operate. Our visibility remains materially ahead of pre-COVID levels.
Our Power and Connectivity (P&C) division has, as expected, delivered a
much improved first half performance and is firmly on track back to double
digit margins. Global Manufacturing Solutions (GMS) is a business fully
transformed and has continued to build on the significant momentum of 2022.
Sensors and Specialist Components (S&SC) delivered a robust performance
against an exceptionally strong comparator. We have a clear line of sight to
deliver a good second half performance across all divisions as we continue to
execute on our order book.
Demand from our customers remains robust as our focus on building close,
long-term relationships further up the value chain and collaborating on
design-led solutions often leads to us being designed in for the life of the
product. This is evidenced by new business, with 15 significant new wins in
the half delivering over £150 million of potential lifetime revenues and
further key customer growth from pipeline opportunities.
We believe our collaborative approach to deliver solutions based on our
technical expertise has been a key factor in winning new orders. We are
focused on leveraging expertise across the Group to pursue cross selling
opportunities. Furthermore, we believe we are well placed, with locations in
the United States, Mexico and Malaysia to collaborate with our customers on
their re-shoring activities.
We have always believed strongly that high levels of employee engagement would
enable excellent execution of strategy. We are delighted to have attained a
2023 employee engagement score in line with the three star "world class
companies to work for" Best Companies Ltd benchmark.
With the spend on our self-help programme now complete, our focus turns to
achieving further efficiencies from process improvements, including benefits
from the consolidation of the Covina site into the Torotel site at Kansas
City. Our facility in Plano, Texas completed the qualification of its
high-volume products in late 2022 and is now focused on delivering operational
efficiencies.
Plans are well advanced for the move of the Ferranti Power and Control
(Ferranti) business into a new facility in Greater Manchester which is
expected in the second half. Following the success of GMS' expansion into
Malaysia, we are now following the same, low capital intensity model and
establishing GMS capabilities within our existing facility in Mexicali, Mexico
from where we expect to be able to commence customer deliveries in H1 2024.
Results and operations
Group revenue for the period was £309.1 million, up 12 per cent on a constant
currency basis. The Group's adjusted operating profit for the period was
£25.6 million, 34 per cent higher than the prior period on a constant
currency basis.
Our results in the first half reflect good revenue growth across all our
businesses, complemented by the incremental benefits of our self-help
programme. Cost inflation continues to be largely mitigated through price
increases.
The adjusted operating margin in the first half was 8.3 per cent (H1 2022: 6.8
per cent), up 140 basis points on a constant currency basis, and we expect to
deliver further margin improvement in the second half. After the impact of
adjusting items, including restructuring and acquisition related costs, the
Group's half year statutory operating profit was £20.9 million (H1 2022:
£8.9 million) and operating margin was 6.8 per cent (H1 2022: 3.3 per cent).
Cash conversion was significantly ahead of prior year at 74 per cent (H1 2022:
minus 55 per cent) even with a modest working capital outflow of £6.9 million
(H1 2022: £33.0 million outflow), reflecting normal H1 seasonality. Free
cash flow has reached an inflection point, with an inflow of £6.9 million in
the period (H1 2022: £23.5 million outflow). Adjusted operating cash inflow
post capital expenditure during the period was £19.0 million (H1 2022: £10.0
million outflow). On a statutory basis, cash flow from operating activity was
an inflow of £24.4 million (H1 2022: £12.3 million outflow).
Following the buy-in of the UK defined benefit scheme in November 2022, the
scheme is de-risked and had a surplus of £29.2 million at 30 June 2023. The
scheme liabilities are now matched by the buy-in insurance policy. The surplus
in excess of these liabilities is largely invested in short-term money market
funds. No contributions were made to the scheme in the period (H1 2022:
£nil). The net surplus across all schemes was £26.3 million (H1 2022: £91.6
million).
At 30 June 2023 net debt was £138.8 million, (31 December 2022: £138.4
million), including IFRS 16 lease liabilities of £20.2 million (31 December
2022: £23.1 million), and as previously indicated leverage reduced to 1.8x
(31 December 2022: 2.0x). We expect leverage to reduce further by December
2023.
Momentum across the Group remains good with the order book for 2023 covering
expected revenues and we now have good visibility of revenues for 2024. As
pass-through revenues reduce on a comparative basis in the second half of 2023
and more significantly in 2024, this will create a headwind to headline
organic growth, but on an underlying basis the Group is well positioned to
deliver growth in 2023 and beyond.
Dividend
The performance in the first half and size of our order book strengthens our
confidence in our expectations for the full year and the Group's future
prospects. As a result, the Board is declaring an interim dividend of 2.15
pence per share, an increase of 8 per cent. The total cost of this dividend
will be approximately £3.8 million. Payment of the dividend will be made on
12 October 2023, to shareholders on the register at 15 September 2023.
OUR STRATEGY
Creating value through technology investment
We prioritise organic investment in the business, investing in R&D and
capital equipment to drive differentiation in our offer to customers,
resulting in us becoming firmly embedded as valued partners. This expenditure
totalled £22.7 million in 2022 and in the first half of 2023 we invested
£15.3 million, including £6.0 million (H1 2022: £5.4 million) in R&D
spend, representing 3.8 per cent (H1 2022: 4.0 per cent) of the aggregate
revenue of our product businesses.
Our focus on R&D and investment in equipment and facilities has been
integral to our dialogue with our customers. This has resulted in us becoming
firmly embedded with them, enabling us to stay ahead of their needs and meet
the challenges they set us. Evidence of the value customers place on this can
be seen in our organic sales growth.
In the second half of 2023 we will relocate our acquired 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.
Creating value through margin enhancement
We are focused on activities which will enable the Group consistently to
achieve double-digit operating margins. The operational leverage on organic
revenue growth and the results of our restructuring and footprint
rationalisation will also contribute to further margin improvement.
We have increased Group margins in the first half of 2023 by 140 basis points
(on a constant currency basis) to 8.3 per cent (H1 2022: 6.8 per cent) as our
Power and Connectivity business delivered a much-improved performance and we
remain focused on continued margin growth in the second half. Margins are
currently being impacted by pass-through revenue, primarily in our GMS
division, which inflates revenue with no profit benefit. Pass-through revenues
in the first half were approximately £12 million (H1 2022: c. £10 million)
and are expected to gradually reduce by the end of 2024. Excluding pass
through revenues, adjusted operating margins would have been 8.6% (H1 2022:
7.1%).
We remain focused on continuing to enhance our margins, in part through
operational leverage from revenue growth, our focus on costs and pricing
discipline and the continued benefits of our strategic repositioning to build
closer, more embedded customer relationships. Delivery of our 10 per cent
adjusted operating margin milestone is within reach.
Creating value from mergers and acquisitions
M&A remains an important part of our growth proposition as we look to add
higher margin businesses that enhance TT's capability in our key markets.
While leverage has reduced and is expected to continue to fall, our near-term
focus is on free cash flow generation and leverage reduction to generate
capacity for M&A. We continue to monitor an active pipeline of
opportunities.
Environmental, social and governance (ESG)
Not only do we design, develop, and manufacture products that enable reduced
environmental impacts for our customers, but we are also optimising our own
operations to reduce our impact on the environment.
We have made great progress in reducing our carbon emissions to achieve our
target to be Net Zero by 2035, for our Scope 1 & 2 emissions. In 2022 we
delivered a 54 per cent reduction in our Scope 1 & 2 carbon emissions from
our baseline set in 2019, achieving our short-term target of delivering a 50
per cent reduction a year ahead of plan. Earlier this year we commissioned our
first solar project at our site in Kuantan, Malaysia. Further reductions in
our carbon emissions will require additional such investment in solar power,
acquiring alternative sources of renewable power within deregulated markets
and progress in the supply of renewables in regulated Asian markets.
For our Scope 3 emissions we have commenced measurement and internal reporting
of the six most relevant/measurable categories.
Employee engagement
We're delighted to have delivered a 2023 employee engagement score in line
with the three star "world class companies to work for" Best Companies Ltd
benchmark. The three star rating is the highest level achievable and
demonstrates a year-on-year improvement on our two star (outstanding) rating
in 2021 and one star (very good) result in 2020. Focus was directed on
participation in 2023, encouraging our employees to have their say and make
their voice heard, concluding with a record high of 91% of employees globally
completing the survey, up from 86% in both 2021 and 2020.
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.
H1 2023 H1 2022 Change Change constant fx(1)
Revenue £79.9m £68.8m 16% 13%
Adjusted operating profit(1) £5.9m £2.1m 181% 168%
Adjusted operating margin(1) 7.4% 3.1% 430bps 430bps
( )
(1 )See note 2c on page 25 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 note 4 on
page 29 of this document.
Revenue increased by £11.1 million to £79.9 million (H1 2022: £68.8
million). Organic revenue was 13 per cent higher against a comparative period
which was impacted by the timing of programme revenues and the closure and
transfer of production from the Lutterworth facility.
Adjusted operating profit increased by £3.8 million to £5.9 million (H1
2022: £2.1 million) given healthy levels of operational leverage on the
organic growth and benefits from the self-help programme. Adjusted operating
margin more than doubled to 7.4 per cent (H1 2022: 3.1 per cent). There was a
£0.1 million foreign exchange benefit.
Overall order intake remains good and revenues from commercial aerospace are
recovering. As we look into the second half, we expect a further step-up in
margin performance.
Contract awards and growth drivers during the period, giving us confidence as
we look forward, include:
· Within our healthcare end market, we have secured two major
manufacturing wins in the period with total annual revenues of c£4.5 million
for a top tier medtech company for high voltage transformers for use in
surgical navigation and for implantables. We have also won ten new development
wins including two new clinical applications in the surgical navigation space.
· Our Abercynon team has successfully secured work for a new customer
to develop a custom connector solution incorporated in our manufactured cable
assemblies for the Jubilee Line on the London Underground.
· In aerospace and defence, we have won work with a world leader in
in-flight entertainment and communications solutions for its latest
on-the-ground technology Astrova, designed initially for installation on the
737 and A321 platforms. We will be providing inductors and transformers for
the system.
· Our work on the Boxer programme (the main UK army vehicle programme)
continues to expand with significant recent additional contract wins. This
expands our position on the programme which includes a cross sell of our
expertise into GMS to design and manufacture printed circuit board assemblies.
These are complex, high reliability power electronics assemblies and we will
lead the design, production and delivery of the battery control and command
display units providing signalling and communications functionality on every
Boxer vehicle.
· We have recently been awarded a contract supporting feasibility
studies relating to the technology development on the BAE Tempest programme.
Harnessing our extensive engineering expertise, we will develop electrical
power solutions in support of this crucial next generation combat air
platform. Team Tempest is composed of the UK Ministry of Defence and industry
partners BAE Systems, Rolls-Royce, Leonardo UK, and MBDA, which are all
working together to deliver world firsts in advanced technical capabilities.
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.
H1 2023 H1 2022 Change Change constant fx(1)
Revenue £153.8m £135.3m 14% 12%
Adjusted operating profit(1) £13.8m £9.4m 47% 44%
Adjusted operating margin(1) 9.0% 6.9% 210 bps 200 bps
(1 )See note 2c on page 25 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 note 4 on
page 29 of this document.
Revenue grew by £18.5 million to £153.8 million (H1 2022: £135.3 million).
We have delivered organic growth of 12 per cent, reflecting partnerships with
our key long term relationship customers and recent project wins. Pass-through
revenue was around £12 million in the first half, around £2 million higher
than in the first half of last year; this continues to create a technical head
wind to margin progression.
The GMS division is fully booked for the remainder of the year. The order book
has been underpinned by several multi-million pound wins, a number of which
extend beyond 12 months.
Adjusted operating profit increased by £4.4 million to £13.8 million (H1
2022: £9.4 million) including a £0.2 million foreign exchange benefit. The
adjusted operating profit margin was 9.0 per cent (H1 2022: 6.9 per cent)
reflecting operational leverage on growth as well as the benefit of pricing
actions. Excluding pass-through revenues adjusted operating margin was 9.7
per cent (H1 2022: 7.5 per cent).
The considerable sales momentum has resulted in customer awards across our key
markets from new and existing customers. Notable wins and growth drivers
include the following:
· In the UK we have secured an £8 million win for cable harnesses for
a market-leading safety and mission-critical solutions provider in the UK
defence market. TT has supported this customer on the Joint Strike Fighter
(JSF) programme for several years and this contract runs through to 2025.
· Our Suzhou facility has secured a £6 million contract for a global
leader in patient-focused innovations for structural heart disease and
critical care monitoring. This is our first win for the Japanese division of
this key customer, and we will provide electronics assembly and box-build
solutions for vacuum pumps used in semi-conductor equipment. Furthermore, we
will incorporate value added services such as product life cycle management
and NPI to accelerate time to market.
· We have recently expanded our relationship geographically with a key
leading industrial customer to include our Kuantan facility in Malaysia, to
support its expansion in Singapore. This follows on from our award of a 'best
in class' supplier award and our work on high level assemblies (HLA) for a new
programme for semiconductors. The customer has chosen TT on the back of the
proven partnership and confidence in our global teams. Our vertical
integration strategy and HLA capabilities are key to winning with this
customer.
Overall, the GMS division delivers best in class margins with a 24% ROIC.
Order visibility remains strong, and our enhanced customer relationships and
business development initiatives positions us for medium term sustainable
revenue 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.
H1 2023 H1 2022 Change Change constant fx(1)
Revenue £75.4m £65.1m 16% 11%
Adjusted operating profit(1) £9.8m £10.6m (8)% (12)%
Adjusted operating margin(1) 13.0% 16.3% (330) bps (330) bps
( )
(1 )See note 2c on page 25 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 note 4 on
page 29 of this document.
Revenue increased by £10.3 million to £75.4 million (H1 2022: £65.1
million). Organic revenue was 11 per cent higher even with some output
shifting from the first half into the second half, due to a machinery
breakdown in June. We are broadly covered for the balance of this year's
revenue and are starting to build the order book for 2024, even as order
intake normalises as anticipated. This is significantly better than the 8-12
weeks visibility we typically had in the past.
Adjusted operating profit reduced slightly by £0.8 million to £9.8 million
(H1 2022: £10.6 million) including a £0.5 million foreign exchange benefit.
The adjusted operating profit margin reduced to 13.0 per cent (H1 2022: 16.3
per cent) impacted by the output shift noted above. Prior period margins were
strong, boosted by an attractive drop through on volume growth and favourable
product mix. Second half margins are expected to return to prior levels.
There have been a number of key developments during the first half of the year
including:
· In the US we provided two custom high reliability hermetically
packaged optical sensors for a global security and aerospace company's Stinger
Missile Program. We were able quickly to provide products with the necessary
level of screening to meet the application requirements. These are
high-reliability sensors used for the Stinger's fuse warhead body assembly.
Our team worked closely with the company's engineers from the very beginning
to fully understand the requirements and develop the right sensor to meet the
harsh environment demands.
· We have had a long-standing relationship with Delta Electronics.
Delta trusts our team to provide excellent sales and engineering support,
which helped us to win a 5 year opportunity (worth over £7 million over the
life of the contract) providing resistors for use in Delta's compact,
high-density, high-power, power supply for an ICT (Information and
Communication Technologies) data centre. Our product's technical capabilities
and our ability to deliver the product 40% ahead of our published leadtime
secured us this win. The ICTBG (Information and Communication Technologies
Business Group) division of Delta is new to TT and could provide future
cross-selling opportunities.
· In India we won a further opportunity for a custom electric power
steering sensor to a long-standing customer, Rane Madras, for use in one of
India's largest heavy commercial vehicle manufacturer's 4 wheeler commercial
electric vehicle. TT Electronics has a great relationship with the customer
and is positioned as a single source of supply for all its electronics power
assisted steering projects.
· S&SC has provided an optical sensor to be used in the Centre
Information Display of electric vehicles manufactured by Foxconn/Fisker. Our
sensor will be used to detect the CID in either horizontal or vertical
position. This opportunity began during COVID, where our prompt communication
and excellent commercial and technical support from the Asia team set us apart
from the competition. We won this opportunity with great support from our
local distributor, Arrow.
Outlook
We are really pleased with a great performance by the team to achieve these
results, with strong organic growth in revenue and profit. Adjusted operating
margin is up by 140 basis points on a constant currency basis. Leverage has
reduced on the back of the inflection in cash generation and increased
adjusted EBITDA.
The business is clearly demonstrating the benefit of the work to re-position
in the right markets, with the right customers and from the right operational
footprint. More new customer wins together with the ramp-up of previously
awarded contracts continue to provide multi-year revenue visibility and the
new business pipeline remains strong, supported by new re-shoring
opportunities.
The Group's order book underpins our full year anticipated revenue
projections, and we remain focused on executing on the order book, delivering
continued strong profit growth and driving a material step up in free cashflow
and further reducing leverage by the year end. While mindful of the
macroeconomic backdrop, our performance in the first half, alongside continued
strong momentum in the business provides the Board with increased confidence
in delivering its full year expectations.
OTHER FINANCIAL INFORMATION
Group revenue was £309.1 million (H1 2022: £269.2 million). Group revenue
was 12 per cent higher than in the same period last year on a constant
currency basis. Sales volumes in all key markets, including more recently the
bounce back in commercial aerospace, are buoyant and the order book and
forward pipeline of new business opportunities gives us confidence that this
momentum will continue.
The Group reported an adjusted operating profit of £25.6 million (H1 2022:
£18.3 million) with the improvement driven by revenue growth. Statutory
operating profit for the period was £20.9 million (H1 2022: £8.9 million)
after a charge of £4.7 million (H1 2021: £9.4 million) for items excluded
from adjusted operating profit including:
· Acquisition and disposal related costs of £3.5 million (H1 2022:
£3.9 million), comprising £2.7 million of amortisation of acquired
intangible assets, £0.4 million of integration costs relating to the
acquisition of Ferranti and £0.4 million of Torotel integration costs.
· Restructuring and other costs of £1.2 million (H1 2022: £5.5
million), comprising pension project costs of £0.9 million (£0.7 million in
respect of the buy-in of the UK pension scheme and a settlement charge of
£0.2 million in respect of the partial buy out of the US scheme) and £0.3
million (H1 2022: £0.7 million) comprises £0.2 million relating to the
relocation of production facilities from Covina, USA to Kansas and £0.1
million relating to clean up operations.
The Group generated an adjusted operating margin of 8.3 per cent (H1 2022: 6.8
per cent) with the increase a result of operational leverage on growth,
supplemented by the benefits of our self-help programme.
The net finance cost was higher at £4.9 million (H1 2022: £3.3 million) due
to a higher level of borrowing over the half year and sharply higher interest
rates. The comparative period included a non-cash accelerated amortisation of
fees of £0.6 million, associated with the previous RCF. The Group's overall
tax charge was £4.1 million (H1 2022: £1.5 million). The tax charge on
adjusted profit before tax was £5.2 million (H1 2022: £3.4 million),
resulting in an effective adjusted tax rate of 25.2 per cent (H1 2022: 22.8
per cent) with the increase due to the increase in the UK corporation tax
rate.
Basic earnings per share (EPS) increased to 6.8 pence (H1 2022: 2.3 pence).
Adjusted EPS increased to 8.8 pence (H1 2022: 6.6 pence), reflecting the
improvement in adjusted operating profit partly offset by a higher interest
and tax charge.
Adjusted operating cash flow post capital expenditure was higher with a £19.0
million inflow (H1 2022: £10.0 million outflow) which was primarily due to a
much improved £6.9 million working capital outflow (H1 2022: £33.0 million
outflow), reflecting normal seasonality. This resulted in operating cash
conversion of 74 per cent (H1 2022: minus 55 per cent). On a statutory basis,
cash flow from operating activity was an inflow of £24.4 million (H1 2022:
£12.3 million outflow).
There was a free cash inflow of £6.9 million (H1 2022: £23.5 million
outflow), including £1.0 million of restructuring and acquisition related
payments (H1 2022: £7.0 million).
As at 30 June 2023 the Group's net debt was £138.8 million (31 December 2022:
£138.4 million), including £20.2 million of lease liabilities (31 December
2022: £23.1 million). Leverage, consistent with the bank covenants, was 1.8
times at 30 June 2023 (31 December 2022: 2.0 times).
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 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.
Following the buy-in of the UK defined benefit scheme in November 2022, the
scheme is de-risked and had a surplus of £29.2 million at 30 June 2023. No
contributions were made to the scheme in the period (H1 2022: £nil) and none
are expected going forwards. The scheme data is now being adopted by Legal and
General and a decision on moving to buy-out is expected be made by the end of
the year.
Summary of Adjusted results
To assist with the understanding of earnings trends, the Group has included
within its 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 35 to 41.
A summary of the Group's adjusted results, and a reconciliation of statutory
to adjusted profit numbers are set out below:
£ million H1 2023 H1 2022
Revenue 309.1 269.2
Adjusted Operating profit 25.6 18.3
Adjusted Operating margin 8.3% 6.8%
Net finance expense (4.9) (3.3)
Profit before tax 20.7 15.0
Tax (5.2) (3.4)
Tax rate 25.2% 22.8%
Profit after tax 15.5 11.6
Weighted average number of shares 176.0 million 175.7 million
EPS 8.8p 6.6p
Reconciliation of Adjusted results
£ million Note H1 2023 H1 2022
Operating profit 20.9 8.9
Adjusted to exclude:
Restructuring and other items
Pension restructuring costs 1 (0.9) (1.0)
Restructuring 2 (0.3) (4.5)
(1.2) (5.5)
Acquisition related costs 3
Amortisation of intangible assets arising on business combinations (2.7) (3.1)
Torotel integration costs (0.4) (0.1)
Ferranti integration costs (0.4) (0.6)
Other acquisition related costs - (0.1)
(3.5) (3.9)
Total operating reconciling items (4.7) (9.4)
Adjusted operating profit 25.6 18.3
Profit before tax 16.0 5.6
Total operating reconciling items (as above) 4.7 9.4
Adjusted profit before tax 20.7 15.0
Taxation charge on adjusted profit (5.2) (3.4)
Adjusted profit after taxation 15.5 11.6
Note 1: Pension restructuring costs of £0.9 million (2022: £1.0 million)
comprise £0.7 million relating to costs associated with liability management
exercises and cleansing of scheme data and £0.2 million as a settlement cost
upon completion of the buyout of our US pension scheme.
Note 2: Restructuring costs charged in the period of £0.3 million (H1 2022:
£4.5 million) relates to the relocation of production facilities from Covina,
USA to Kansas and £0.1 million relating to clean up operations. Prior year
restructuring costs also included £2.6 million relating to the restructure of
the North America Resistors business, which includes pre-production costs at
our new Plano facility; £1.0 million relating to closure of our site in
Lutterworth, UK, and £0.2 million relating to the relocation of production
facilities from Medina, USA to Minnesota, USA.
Note 3: Acquisition related costs of £3.5 million (H1 2022: £3.9 million)
comprise £2.7 million (H1 2022: £3.1 million) of amortisation of acquisition
intangibles, £0.4 million (H1 2022: £0.1 million) of integration costs
relating to the acquisition of Torotel, Inc and £0.4 million (H1 2022: £0.4
million integration costs and £0.2 million acquisition costs) of integration
costs relating to the acquisition of the Power and Control business of
Ferranti Technologies Ltd. based in Oldham.
Cash flow, net debt and leverage
The table below sets out Group cash flows and net debt movement:
£ million H1 2023 H1 2022
Adjusted operating profit 25.6 18.3
Depreciation and amortisation 8.6 7.9
Working capital movement (6.9) (33.0)
Net capital expenditure (9.3) (5.0)
Capitalised development expenditure (0.9) (1.0)
Other 1.9 2.8
Adjusted Operating Cash Flow post Capex 19.0 (10.0)
Restructuring and acquisition costs (1.0) (7.0)
Net interest and tax (8.8) (4.6)
Lease payments (2.3) (1.9)
Free Cash Flow 6.9 (23.5)
Dividends (7.5) (6.7)
Lease payments 2.3 1.9
Equity issued 0.1 0.2
Acquisitions & disposals - (8.3)
Other - (0.2)
Net debt impacting cashflow 1.8 (36.6)
Opening net debt (138.4) (102.5)
Other non-cash (new leases and lease reassessments) (0.5) (1.1)
FX (1.7) (1.8)
Closing net debt (138.8) (142.0)
At 30 June 2023 the Group's net debt was £138.8 million (31 December 2022:
£138.4 million). Included within net debt was £20.2 million of lease
liabilities (31 December 2022: £23.1 million).
Consistent with the Group's borrowing agreements, which exclude the impact of
IFRS 16 leases, leverage ratio was 1.8 times at 30 June 2023 (31 December
2022: 2.0 times). Net interest cover was 7.0 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.
Principal risks and uncertainties
The Group has an established, structured approach to identifying and assessing
the impact of financial and operational risks on its business, which is
reviewed and updated quarterly. The principal risks and uncertainties for the
remainder of the financial year are not expected to change materially from
those included on pages 69 to 72 of the Annual Report and Accounts 2022. The
risks identified relate to the following areas: general revenue reduction due
to geopolitical instability or economic downturn; 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 and legal and regulatory compliance. Further
information in relation to the Group's financial position and going concern is
included on page 17.
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.
TT Electronics plc
Interim Results for the half-year ended 30 June 2023
Going Concern
The Group has experienced continued improvement in trading momentum and strong
growth from 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 stable, on 30 June 2023 it had £289.8
million of total borrowing facilities available (comprising committed
facilities of £258.6 million, of which £190.6 million is drawn, and
uncommitted facilities of £31.2 million representing overdraft lines and an
undrawn 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 30 June 2023 £115.6 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, TT completed a debut issue of £75 million of private
placement 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.
The Group had a leverage ratio of 1.8 times on 30 June 2023 compared to an RCF
covenant maximum of 3.0 times and interest cover (pre-IFRS 16 and excluding
pension interest) of 7.0 times compared to an RCF 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 interim
results, considering the Group's current financial position and the potential
impact of our principal risks on divisional performance.
Under the Group's base case financial projections, the Group retains
significant liquidity and covenant headroom, with both metrics improving from
the position as at 30 June 2023.
The Group's downside stress test scenario has been sensitised for supply chain
challenges, interest rate risks, general economic downturn and people and
capability challenges which show a reduction in revenue and operating profit
compared to the latest forecast. Despite this further reduction these
projections show that the Group should remain well within its facilities
headroom and within bank covenants during 2023 and 2024. 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 reverse stress test
scenario is deemed to have a remote likelihood and helped 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 these interim financial statements. Accordingly, the
financial statements have been prepared on a going concern basis.
Responsibility statement of the Directors
We confirm that to the best of our knowledge:
· The 2023 annual financial statements of TT Electronics plc will
be prepared in accordance with United Kingdom adopted International Accounting
Standards. The condensed set of financial statements included in this half
yearly financial report has been prepared in accordance with United Kingdom
adopted International Accounting Standard 34 'Interim Financial Reporting';
· the interim management report includes a fair review of the
information required by DTR 4.2.7R:
(i) an indication of important events that have
occurred during the first six months of the financial year, and their impact
on the condensed set of financial statements; and
(ii) a description of the principal risks and
uncertainties for the remaining six months of the year.
· the interim management report includes a fair review of the
information required by DTR 4.2.8R:
(i) related party transactions that have taken place in
the first six months of the current financial year and that have materially
affected the financial position or performance of the Group in that period;
and
(ii) any changes in the related parties transactions
described in the 2022 Annual Report that could have a material effect on the
financial position or performance of the Group in the current period.
By order of the Board
Richard
Tyson
Mark Hoad
Chief Executive
Officer
Chief Financial Officer
2 August
2023
2 August 2023
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.
Independent review report to TT Electronics plc
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 which comprises of the condensed consolidated income statement, the
condensed consolidated statement of financial position, the condensed
consolidated statement of changes in equity, the condensed consolidated cash
flow statement and related notes 1 to 13.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2023 is not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council for use in the United Kingdom (ISRE (UK) 2410). A review of interim
financial information consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with United
Kingdom adopted International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This Conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410; however future events
or conditions may cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the group a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our conclusion, including our
conclusion relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
Our work has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company, for our review work,
for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
2 August 2023
TT Electronics plc
Interim results for the half-year ended 30 June 2023
Condensed consolidated income statement (unaudited)
for the six months ended 30 June 2023
£million (unless otherwise stated) Note Six months ended 30 June 2023 Six months ended Year ended
30 June 2022
31 December 2022 (audited)
Revenue 3 309.1 269.2 617.0
Cost of sales (235.6) (206.8) (481.5)
Gross profit 73.5 62.4 135.5
Distribution costs (14.8) (15.0) (29.6)
Administrative expenses (37.8) (38.5) (109.3)
Operating profit/(loss) 20.9 8.9 (3.4)
Analysed as:
Adjusted operating profit 3 25.6 18.3 47.1
Restructuring and other 4 (1.2) (5.5) (20.2)
Asset impairments 4 - - (23.1)
Acquisition and disposal related costs 4 (3.5) (3.9) (7.2)
Finance income 0.8 0.8 2.3
Finance costs (5.7) (4.1) (9.0)
Profit/(loss) before taxation 16.0 5.6 (10.1)
Taxation 5 (4.1) (1.5) (3.1)
Profit/(loss) for the period attributable to the owners of the Company 11.9 4.1 (13.2)
EPS/(LPS) attributable to owners of the Company (pence)
Basic 6 6.8 2.3 (7.5)
Diluted 6 6.7 2.3 (7.5)
TT Electronics plc
Interim results for the half-year ended 30 June 2023
Condensed consolidated statement of comprehensive income (unaudited)
for the six months ended 30 June 2023
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022 (audited)
Profit/(loss) for the period 11.9 4.1 (13.2)
Other comprehensive income/(loss) for the period after tax
Items that are or may be reclassified subsequently to the income statement:
Exchange differences on translation of foreign operations (18.1) 26.6 26.9
Tax on exchange differences - - (1.6)
Gain/(loss) on hedge of net investment in foreign operations 1.9 (3.0) (3.4)
Gain/(loss) on cash flow hedges taken to equity less amounts recycled to the 3.2 (4.8) (2.9)
income statement
Deferred tax loss on movements in cash flow hedge reserves (0.5) (0.8) (0.4)
Items that will never be reclassified to the income statement:
Remeasurement of defined benefit pension schemes (1.4) 16.8 (35.9)
Tax on remeasurement of defined benefit pension schemes 0.5 (4.4) 6.5
Total comprehensive income/(loss) for the period attributable to the owners of (2.5) 34.5 (24.0)
the Company
TT Electronics plc
Interim results for the half-year ended 30 June 2023
Condensed consolidated statement of financial position (unaudited)
£million Note 30 June 2023 30 June 2022 31 December 2022 (audited)
ASSETS
Non-current assets
Right-of-use assets 17.4 19.8 19.6
Property, plant and equipment 56.5 54.7 54.8
Goodwill 149.7 171.6 155.1
Other intangible assets 49.9 56.2 53.7
Deferred tax assets 12.6 9.1 13.2
Derivative financial instruments 2.0 0.9 0.8
Pensions 9 29.2 95.0 31.3
Total non-current assets 317.3 407.3 328.5
Current assets
Inventories 181.4 193.7 189.2
Trade and other receivables 107.6 102.5 120.3
Income taxes receivable 0.3 0.7 1.1
Derivative financial instruments 5.9 1.9 3.1
Cash and cash equivalents 10 75.4 76.3 65.0
Total current assets 370.6 375.1 378.7
Total assets 687.9 782.4 707.2
LIABILITIES
Current liabilities
Borrowings 10 5.6 12.6 3.7
Lease liabilities 4.0 4.5 4.4
Derivative financial instruments 3.7 4.0 3.6
Trade and other payables 153.0 160.3 173.2
Income taxes payable 9.0 6.6 9.6
Provisions 3.2 4.7 3.5
Total current liabilities 178.5 192.7 198.0
Non-current liabilities
Borrowings 10 188.4 182.3 176.6
Lease liabilities 16.2 18.9 18.7
Derivative financial instruments 1.2 1.2 0.8
Deferred tax liability 12.5 23.5 12.4
Pensions 9 2.9 3.4 2.9
Provisions and other non-current liabilities 1.1 0.9 0.8
Total non-current liabilities 222.3 230.2 212.2
Total liabilities 400.8 422.9 410.2
Net assets 287.1 359.5 297.0
EQUITY
Share capital 11 44.1 44.1 44.1
Share premium 11 23.0 22.8 22.9
Translation reserve 38.9 56.8 55.1
Other reserves 10.0 3.0 7.3
Retained earnings 171.1 230.8 167.6
Equity attributable to owners of the Company 287.1 357.5 297.0
Non-controlling interests - 2.0 -
Total equity 287.1 359.5 297.0
Approved by the Board of Directors on 2 August 2023 and signed on their behalf
by:
Richard Tyson Mark Hoad
Director
Director
TT Electronics plc
Interim results for the half-year ended 30 June 2023
Condensed consolidated statement of changes in equity (unaudited)
for the six months ended 30 June 2023
£million Share capital Share premium Translation Reserve Other reserves Retained earnings Sub NCI ( 1 ) Total
total
At 31 December 2021 (audited) 44.1 22.6 33.2 7.1 221.0 328.0 2.0 330.0
Profit for the period - - - - 4.1 4.1 - 4.1
Other comprehensive income
Exchange differences on translation of foreign operations - - 26.6 - - 26.6 - 26.6
Loss on hedge of net investment in foreign operations - - (3.0) - - (3.0) - (3.0)
Loss on cash flow hedges taken to equity less amounts recycled to the income - - - (4.8) - (4.8) - (4.8)
statement
Deferred tax on movement in cash flow hedge reserves - - - (0.8) - (0.8) - (0.8)
Remeasurement of defined benefit pension schemes - - - - 16.8 16.8 - 16.8
Tax on remeasurement of defined benefit pension schemes - - - - (4.4) (4.4) - (4.4)
Total comprehensive income - - 23.6 (5.6) 16.5 34.5 - 34.5
Transactions with owners recorded directly in equity
Equity dividends paid by the Company - - - - (6.7) (6.7) - (6.7)
Share based payments - - - 2.3 - 2.3 - 2.3
Deferred tax on share-based payments - - - (0.8) - (0.8) - (0.8)
New shares issued - 0.2 - - - 0.2 - 0.2
At 30 June 2022 44.1 22.8 56.8 3.0 230.8 357.5 2.0 359.5
At 31 December 2022 (audited) 44.1 22.9 55.1 7.3 167.6 297.0 - 297.0
Profit for the period - - - - 11.9 11.9 - 11.9
Other comprehensive income
Exchange differences on translation of foreign operations - - (18.1) - - (18.1) - (18.1)
Gain on hedge of net investment in foreign operations - - 1.9 - - 1.9 - 1.9
Gain on cash flow hedges taken to equity less amounts recycled to the income - - - 3.2 - 3.2 - 3.2
statement
Deferred tax loss on movements in cash flow hedge reserves - - - (0.5) - (0.5) - (0.5)
Remeasurement of defined benefit pension schemes - - - - (1.4) (1.4) - (1.4)
Tax on remeasurement of defined benefit pension schemes - - - - 0.5 0.5 - 0.5
Total comprehensive (loss)/income - - (16.2) 2.7 11.0 (2.5) - (2.5)
Transactions with owners recorded directly in equity
Equity dividends paid by the Company - - - - (7.5) (7.5) - (7.5)
Share-based payments - - - 0.2 - 0.2 - 0.2
Deferred tax on share-based payments - - - (0.2) - (0.2) - (0.2)
New shares issued - 0.1 - - - 0.1 - 0.1
At 30 June 2023 44.1 23.0 38.9 10.0 171.1 287.1 - 287.1
1. Non-controlling interests ('NCI') were eliminated in the second half of
2022.
TT Electronics plc
Interim results for the half-year ended 30 June 2023
Condensed consolidated cash flow statement (unaudited)
for the six months ended 30 June 2023
£million Note Six months ended 30 June 2023 Six months ending 30 June 2022 Year ended 31 December 2022 (audited)
Cash flows from operating activities
Profit for the year 11.9 4.1 (13.2)
Taxation 4.1 1.5 3.1
Net finance costs 4.9 3.3 6.7
Restructuring and other 1.2 5.5 43.3
Acquisition related costs 3.5 3.9 7.2
Adjusted operating profit 25.6 18.3 47.1
Adjustments for:
Depreciation 7.3 6.8 13.9
Amortisation of intangible assets 1.3 1.1 2.2
Share based payment expense 1.5 2.5 4.8
Other items 0.4 0.3 0.5
Increase in inventories (2.6) (39.1) (40.4)
Decrease/(increase) in receivables 7.3 (8.4) (26.3)
(Decrease)/increase in payables and provisions (11.6) 14.5 27.9
Adjusted operating cash flow 29.2 (4.0) 29.7
Restructuring and acquisition related costs (1.0) (7.0) (11.1)
Net cash generated from / (used in) operations 28.2 (11.0) 18.6
Net income taxes paid (3.8) (1.3) (5.9)
Net cash generated from / (used in) operating activities 24.4 (12.3) 12.7
Cash flows from investing activities
Purchase of property, plant and equipment (9.0) (5.1) (11.4)
Proceeds from sale of property, plant and equipment and government grants 0.1 0.2 0.3
received
Capitalised development expenditure (0.9) (1.0) (2.3)
Purchase of other intangibles (0.4) (0.1) (0.6)
Acquisitions of businesses - (8.3) (8.3)
Net cash flow used in investing activities (10.2) (14.3) (22.3)
Cash flows from financing activities
Issue of share capital 0.1 0.2 0.4
Interest paid (5.0) (3.3) (7.5)
Repayment of borrowings (4.0) (109.5) (149.3)
Proceeds from borrowings 17.5 141.3 174.3
Payment of lease liabilities (2.3) (1.9) (4.3)
Other items - (0.2) (1.0)
Dividends paid to minority shareholders - - (2.0)
Dividends paid by the Company (7.5) (6.7) (10.2)
Net cash flow (used in) / generated from financing activities (1.2) 19.9 0.4
Net change in cash and cash equivalents 13.0 (6.7) (9.2)
Cash and cash equivalents at beginning of year 10 61.3 67.2 67.2
Exchange differences 10 (4.5) 3.2 3.3
Cash and cash equivalents at end of year 10 69.8 63.7 61.3
Cash and cash equivalents comprise:
Cash at bank and in hand 75.4 76.3 65.0
Bank overdrafts (5.6) (12.6) (3.7)
69.8 63.7 61.3
TT Electronics plc
Interim results for the half-year ended 30 June 2023
Notes to the condensed consolidated financial statements (unaudited)
1. General information
The condensed consolidated financial statements for the six months ended 30
June 2023 are unaudited and were authorised for issue in accordance with a
resolution of the Board of Directors. The information for the six months
ended 30 June 2023 does not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. Comparative information for the year
ended 31 December 2022 has been taken from the published statutory accounts, a
copy of which has been delivered to the Registrar of Companies. The auditors
reported on those accounts: their report was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a statement
under section 498(2) or (3) of the Companies Act 2006.
2. Basis of preparation
a) Condensed consolidated half-year financial statements
The 2023 annual financial statements of TT Electronics plc will be prepared in
accordance with United Kingdom adopted International Accounting Standards. The
condensed set of financial statements included in this half yearly financial
report has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34 'Interim Financial Reporting'. These
condensed consolidated half-year financial statements do not include all the
information and disclosures required in the annual financial statements and
should be read in conjunction with the 2022 Annual Report.
b) Basis of accounting
The accounting policies adopted are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2022.
c) Alternative performance measures
The Group presents Alternative Performance Measures ("APMs") in addition to
the statutory results of the Group.
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, certain one-off pension costs, 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.
Costs associated with restructuring, acquisitions and disposals are uncertain
with regard to their timing and size and therefore their inclusion within
adjusted operating profit could mislead the reader of the accounts.
These interim results include alternative performance measures that are not
prepared in accordance with IFRS. These alternative performance measures 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,
when all businesses are held for a complete reporting period.
These alternative performance measures exclude certain significant
non-recurring, infrequent or non-cash items that the Directors do not believe
are indicative of the underlying operating performance of the Group (that are
otherwise included when preparing financial measures under IFRS).
Adjusted profit is not a defined term under IFRS and may not be comparable
with similarly titled profit measures reported by other companies. It is not
intended to be a substitute for, or superior to, GAAP measures. All APMs
relate to the current year results and comparable periods where provided.
The Directors consider there to be four main alternative performance measures:
adjusted operating profit, free cash flow, adjusted EPS and adjusted effective
tax rate.
All alternative performance measures are presented within the section titled
'Reconciliation of KPIs and non IFRS Measures' and are reconciled to their
equivalent statutory measures where this is appropriate.
d) Estimates and judgements
The preparation of condensed consolidated financial statements requires
management to make judgements, estimates and assumptions which affect the
application of accounting policies and the reported amounts of assets,
liabilities, income and expense. Actual results may differ from these
estimates.
Significant judgements relate to the determination of items of income and
expense excluded from operating profit to arrive at adjusted operating profit.
Judgements are required as to whether items are disclosed as adjusting with
consideration given to both quantitative and qualitative factors. Further
information about the determination of adjusting items is included in note 1c
of the 2022 Annual Report.
Significant estimates relate to uncertain tax provisions and goodwill.
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 30 June 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).
There is a significant estimate over the carrying value of the goodwill
attributable to the IoT Solutions cash generating unit ('CGU'). The goodwill
was impaired in 2022 so therefore the headroom as at 31 December 2022 was
limited. The raising of interest rates by the Bank of England in 2023 has
caused the discount factor which is used in assessing the headroom to rise.
The rise in rates and the fact that the goodwill was impaired in 2022 is an
indicator of impairment. On 30 June 2023 an impairment analysis was performed
and headroom was determined to be £0.9 million. Sensitivity analysis has been
performed and indicates that a change in the pre-tax discount rate and
long-term growth rate from 15.6% to 15.9% or from 1.8% to 1.3% respectively
would reduce headroom to £nil. A reduction in the terminal value of operating
profit by 3.7% would also reduce the headroom to £nil.
e) Going concern
After making appropriate enquiries, the Directors have a reasonable
expectation that the Company has adequate resources and financial headroom to
continue in operational existence for at least twelve months from the date of
signing these interim results. Therefore, they continue to adopt the going
concern basis of accounting in preparing the condensed consolidated half-year
financial statements. Page 17 outlines the going concern assessment.
Given the financial resources available, together with long term partnerships
with multiple key customers and suppliers across different geographic areas
and industries, the Directors believe that the Group is well placed to manage
its business risks successfully.
The Group continues to manage foreign currency risk at a transactional level
through the use of hedges which are monitored by the Group Treasury Committee.
The Group Treasury Committee regularly reviews counterparty credit risk and
ensures cash balances are held with carefully assessed counterparties with
strong credit ratings.
Pages 69 to 72 of the 2022 Annual Report provide details of the Group's policy
on managing its operational and financial risks.
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 in accordance with IFRS 8 'Operating segments'
and there is no aggregation of segments. The chief operating decision maker
is the Board of Directors. The operating segments are:
· 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;
· 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
Measures' for a definition of adjusted operating 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 adjusted 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. Adjusting items are not allocated
to divisions for reporting purposes. For further discussion of these items
see note 4.
The accounting policies of the reportable segments are the same as the Group's
accounting policies.
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 within the
segment of which it is a part.
Six months ended 30 June 2023
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total Operating Segments Corporate Total
Sales to external customers 79.9 153.8 75.4 309.1 - 309.1
Adjusted operating profit 5.9 13.8 9.8 29.5 (3.9) 25.6
Add back: adjustments made to operating profit (note 4) (4.7)
Operating profit 20.9
Net finance costs (4.9)
Profit before taxation 16.0
Six months ended 30 June 2022
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total Operating Segments Corporate Total
Sales to external customers 68.8 135.3 65.1 269.2 - 269.2
Adjusted operating profit 2.1 9.4 10.6 22.1 (3.8) 18.3
Add back: adjustments made to operating profit (note 4) (9.4)
Operating profit 8.9
Net finance costs (3.3)
Profit before taxation 5.6
Year ended 31 December 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 4) (50.5)
Operating loss (3.4)
Net finance costs (6.7)
Loss before taxation (10.1)
There is no significant intergroup trading between segments.
The tables below show the geographies and markets in which the Group's
revenues arose during the period.
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
United Kingdom 70.3 59.4 130.0
Rest of Europe 51.4 44.1 104.3
North America 111.9 102.7 236.6
Central and South America 0.5 0.6 1.5
Asia 74.2 61.9 143.2
Rest of the World 0.8 0.5 1.4
309.1 269.2 617.0
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Healthcare 79.1 70.7 172.0
Aerospace and defence 51.2 38.8 91.7
Automation and electrification 112.9 105.6 229.6
Distribution 65.9 54.1 123.7
309.1 269.2 617.0
4. Adjusting items
Restructuring costs charged in the period of £0.3 million comprises £0.2
million (2022: £0.7 million) relating to the relocation of production
facilities from Covina, USA to Kansas and £0.1 million (2022: £nil) relating
to clean up operations. Prior year restructuring costs also included £2.6
million relating to the restructure of the North America Resistors business,
which includes pre-production costs at our new Plano, USA facility; £1.0
million relating to closure of our site in Lutterworth, UK, and £0.2 million
relating to the relocation of production facilities from Medina, USA to
Minnesota, USA.
Pension restructuring costs of £0.9 million (2022: £1.0 million) comprise
£0.7 million relating to costs associated with liability management exercises
and cleansing of scheme data and £0.2 million as a settlement cost upon
completion of the buyout of our US pension scheme.
Acquisition related costs of £3.5 million (2022: £3.9 million) comprise
£2.7 million (2022: £3.1 million) of amortisation of acquisition
intangibles, £0.4 million (2022: £0.1 million) of integration costs relating
to the acquisition of Torotel, Inc and £0.4 million (2022: £0.4 million
integration costs and £0.2m acquisition costs) of integration costs relating
to the acquisition of the Power and Control business of Ferranti Technologies
Ltd. based in Oldham, UK.
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
£million Operating profit Tax Operating profit Tax Operating profit Tax
As reported 20.9 (4.1) 8.9 (1.5) (3.4) (3.1)
Restructuring and other
Restructuring (0.3) 0.1 (4.5) 0.9 (6.4) 1.2
Pension restructuring costs (0.9) 0.2 (1.0) 0.2 (2.0) 0.4
Pension enhanced transfer value exercise - - - - (11.8) 2.2
(1.2) 0.3 (5.5) 1.1 (20.2) 3.8
Asset impairments
Goodwill impairment - - - - (17.7) -
Other impairments - - - - (5.4) 1.0
- - - - (23.1) 1.0
Acquisition and disposal related costs
Amortisation of intangible assets arising on business combinations (2.7) 0.6 (3.1) 0.6 (6.0) 0.3
Torotel integration and acquisition costs (0.4) 0.1 (0.1) - (0.1) -
Ferranti Power and Control acquisition and integration costs (0.4) 0.1 (0.6) 0.2 (1.1) 0.2
Other acquisition related costs - - (0.1) - - -
(3.5) 0.8 (3.9) 0.8 (7.2) 0.5
Total items excluded from adjusted measure (4.7) 1.1 (9.4) 1.9 (50.5) 5.3
Adjusted measure 25.6 (5.2) 18.3 (3.4) 47.1 (8.4)
5. Taxation
The half-year tax charge of £4.1 million (2022: £1.5 million) is based on a
forecast effective tax rate of 25.2 per cent (2022: 22.8 per cent) on adjusted
profit and a £1.1 million (2022: £1.9 million) credit on restructuring,
asset impairments and acquisition related costs.
The enacted UK tax rate applicable since 1 April 2017 to 31 March 2023 was 19
per cent. From 1 April 2023 the UK tax rate increased to 25 per cent meaning
the current year blended rate is 23.5 per cent.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
the owners of the Company by the weighted average number of shares in issue
during the period. The weighted average number of shares in issue is 176.0
million (30 June 2022: 175.7 million, 31 December 2022: 175.8 million). The
calculation of the diluted earnings per share excludes 3,666,008 (30 June
2022: 2,175,908) share options whose effect would have been anti-dilutive.
Adjusted earnings per share is based on the adjusted profit after interest and
tax.
Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Earnings (millions)
Profit for the period attributable to owners of the Company 11.9 4.1 (13.2)
Adjusted earnings 15.5 11.6 32.0
Earnings / (loss) per share (pence)
Basic (pence) 6.8 2.3 (7.5)
Diluted (pence) 6.7 2.3 (7.5)
The numbers used in calculating statutory and adjusted earnings per share are
shown below:
£million (unless otherwise stated) Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Profit for the period attributable to owners of the Company 11.9 4.1 (13.2)
Restructuring and other 1.2 5.5 20.2
Asset impairments - - 23.1
Acquisition and disposal related costs 3.5 3.9 7.2
Tax effect of above items (see note 4) (1.1) (1.9) (5.3)
Adjusted earnings 15.5 11.6 32.0
Adjusted earnings per share (pence) 8.8 6.6 18.2
Adjusted diluted earnings per share (pence) 8.7 6.5 18.0
The weighted average number of shares used to calculate statutory and adjusted
earnings per share are disclosed below:
Million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Basic 176.0 175.7 175.8
Adjustment for share awards 2.2 2.8 2.0
Diluted 178.2 178.5 177.8
7. 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 have declared an interim dividend of 2.15 pence per share which
will be paid on 12 October 2023 to shareholders on the register on 15
September 2023. Shares will become ex-dividend on 14 September 2023.
8. Fair value of financial instruments
IFRS 13 "Fair Value Measurement" requires an analysis of those financial
instruments that are measured at fair value at the end of the period in a fair
value hierarchy. In addition, IFRS 13 requires financial instruments not
measured at fair value but for which fair value is disclosed to be analysed in
the same fair value hierarchy:
• Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities;
• Level 2 - inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices); and
Level 3 - inputs for the asset or liability that are not based on observable
market data (i.e. unobservable inputs).
30 June 2023 30 June 2022 31 December 2022
£million Fair value hierarchy Carrying Fair value Carrying Fair value Carrying Fair value
value
value
value
Held at amortised cost
Cash and cash equivalents n/a 75.4 75.4 76.3 76.3 65.0 65.0
Trade and other receivables n/a 84.0 84.0 87.0 87.0 101.3 101.3
Trade and other payables n/a (118.2) (118.2) (123.9) (123.9) (135.1) (135.1)
Borrowings (excluding unsecured loan notes) 2 (119.0) (119.0) (119.9) (119.9) (105.3) (105.3)
Unsecured loan notes 3 (75.0) (54.1) (75.0) (57.8) (75.0) (55.1)
Held at fair value
Derivative financial instruments (assets) 2 7.9 7.9 2.8 2.8 3.9 3.9
Derivative financial instruments (liabilities) 2 (4.9) (4.9) (5.2) (5.2) (4.4) (4.4)
Held at depreciated cost
Investment properties 3 - 0.7 - 0.7 - 0.7
The fair value of the financial assets and liabilities are included at the
amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. The
following methods and assumptions were used to estimate the fair values:
• cash and cash equivalents, trade and other receivables and trade and
other payables approximate to their carrying amounts largely due to the
short-term maturities of these instruments;
• the fair value of borrowings is estimated by discounting future cash
flows using rates currently available for debt and remaining maturities (level
2);
• the fair value of unsecured loan notes has been derived from available
market data for borrowings of similar terms and maturity period (level 3);
• The fair value of derivative financial instrument assets (£7.9 million)
and liabilities (£4.9 million) are estimated by discounting expected future
cash flows using current market indices such as yield curves and forward
exchange rates over the remaining term of the instrument (level 2);
• the fair value of investment properties are based on market valuations
obtained through third party valuations (level 3).
9. Retirement benefit schemes
At 30 June 2023 the Group operated one defined benefit scheme in the UK (the
TT Group (1993) scheme) and overseas defined benefit schemes in the USA.
These schemes are closed to new members and the UK scheme is closed to future
accrual. Given the nature of the Company's control of the plan under the
Scheme's rules, a pension surplus has been recognised under IFRIC 14.
In the period ended 30 June 2023 the Trustees of the BI Technologies
Corporation Retirement Plan, one of the US defined benefit schemes in the USA,
completed a partial buy-out, extinguishing gross liabilities of £3.9m, with
effect from March 2023. A settlement cost of £0.2 million was recognised
within items excluded from adjusted operating profit as a result of this
exercise.
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 (also known as a 'buy-in'). Following the buy-in
the Trustees and Company agreed that there was no requirement for any further
contributions to be paid to the Scheme.
In October 2022, the Trustees of the Southern & Redfern Ltd Retirement
Benefits Scheme completed a buy-out of the scheme with a leading insurer.
The amounts recognised in the condensed consolidated statement of financial
position are:
£million 30 June 2023 30 June 2022 31 December 2022
TT Group (1993) 29.2 95.0 31.3
Southern & Redfern - - -
USA schemes (2.9) (3.4) (2.9)
Net surplus 26.3 91.6 28.4
£million 30 June 2023 30 June 2022 31 December 2022
Fair value of assets 349.9 521.3 396.8
Defined benefit obligation (323.6) (429.7) (368.4)
Net surplus recognised in the statement of financial position 26.3 91.6 28.4
Represented by
Schemes in net surplus 29.2 95.0 31.3
Schemes in net deficit (2.9) (3.4) (2.9)
26.3 91.6 28.4
The costs recognised in the condensed consolidated income statement are:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Scheme administration costs 0.5 0.5 1.2
Net cost on pension projects (excluded from adjusted operating profit) 0.9 1.0 13.8
Net interest credit (0.7) (0.7) (2.1)
Amounts recognised in the consolidated statement of comprehensive income are a
loss of £1.4 million (2022: gain of £16.8 million) which comprises a £40.4
million loss on schemes' assets of £349.9 million (2022: loss of £126.4
million) and a £39.0 million gain on the remeasurement of the schemes'
obligations of £323.6 million (2022: gain of £143.2 million). Following the
buy-in of the UK pension scheme in 2022, all actuarial remeasurements on the
UK scheme liabilities are fully offset by movements in the value of the buy-in
contract.
The decrease in the scheme obligation is due to increases in yields on
corporate bonds and experience losses in the half year.
The triennial valuation of the TT Group scheme as at April 2022 showed a net
surplus of £45.4 million against the Trustee's funding objective compared
with a surplus of £0.3 million at April 2019.
10. Reconciliation of net cash flow to movement in net debt
£million Net cash Lease liabilities Borrowings Net debt
As at 1 January 2022 67.2 (22.6) (147.1) (102.5)
Cash flow (6.7) - - (6.7)
Businesses acquired - (0.2) - (0.2)
Repayment of borrowings - - 109.5 109.5
Proceeds from borrowings excluding capitalised loan arrangement fees - - (142.2) (142.2)
Capitalised loan arrangement fees - - 0.9 0.9
Amortisation of loan arrangement fees - - (0.8) (0.8)
Payment of lease liabilities - 1.9 - 1.9
New leases - (0.6) - (0.6)
Exchange differences 3.2 (1.9) (2.6) (1.3)
As at 30 June 2022 63.7 (23.4) (182.3) (142.0)
Cash flow (2.5) - - (2.5)
Repayment of borrowings - - 39.8 39.8
Proceeds from borrowings excluding capitalised loan arrangement fees - - (33.8) (33.8)
Capitalised loan arrangement fees - - 0.8 0.8
Amortisation of loan arrangement fees - - (0.2) (0.2)
Payment of lease liabilities - 2.4 - 2.4
New leases - (1.7) - (1.7)
Exchange differences 0.1 (0.4) (0.9) (1.2)
At 1 January 2023 61.3 (23.1) (176.6) (138.4)
Cash flow 13.0 - - 13.0
Repayment of borrowings - - 4.0 4.0
Proceeds from borrowings excluding capitalised loan arrangement fees - - (17.9) (17.9)
Capitalised loan arrangement fees - - 0.4 0.4
Amortisation of loan arrangement fees - - (0.2) (0.2)
Payment of lease liabilities - 2.3 - 2.3
New leases and reassessment of lease liabilities - (0.5) - (0.5)
Exchange differences (4.5) 1.1 1.9 (1.5)
At 30 June 2023 69.8 (20.2) (188.4) (138.8)
Net cash comprises:
Cash at bank and in hand 75.4 - - 75.4
Bank overdrafts (5.6) - - (5.6)
Net cash at end of period 69.8 - - 69.8
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 existing uncommitted accordion facilities
in February 2023. At 30 June 2023 £115.6 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, TT completed a debut issue of £75 million of private
placement 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.
11. Share capital
During the period the Company issued 92,555 ordinary shares (2022: 134,804) as
a result of share options being exercised under the Sharesave scheme and Share
Purchase plans. The aggregate consideration received in respect of all new
issues of shares was £0.1 million (2022: £0.2 million), which was
represented by a £0.1 million (2022: £0.2 million) increase in share
premium.
During the period grants of awards were made under the LTIP for the issue of
shares in 2026. An award is a contingent right to receive shares in the
future, subject to continued employment and the achievement of predetermined
performance criteria. During the period grants of awards were made under the
2023 LTIP scheme for the issue of up to 1,680,053 shares in 2026.
12. 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 during the six months ended 30 June 2023 that
have materially affected the financial position or performance of the Group.
13. Subsequent events
There were no subsequent events to report between the balance sheet date of 30
June 2023 and the date of issue of these financial statements.
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 4. 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 4 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 4 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 6 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.
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 6 for the reconciliation and calculation of adjusted diluted earnings The profit for the year attributable to the owners of the Group adjusted to
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
per share
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.
Prior year revenue and adjusted operating profit at constant currency Revenue and operating profit See note APM 1 Revenue and adjusted operating profit for the prior year retranslated at the
current year's foreign exchange rates.
Organic Revenue See note APM 2 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 impacts.
Adjusted effective tax charge Effective tax charge See note APM 3 Tax charge adjusted to exclude tax on items not included within adjusted
operating profit divided by adjusted profit before tax, which is also adjusted
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 4 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 12 monthly balances.
This measures how efficiently assets are utilised to generate returns with the
target of exceeding the cost to hold the assets.
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)/ funds (note 10) 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) Cash and cash equivalents less borrowings N/A 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 5 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.
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 6 Adjusted operating profit, excluding depreciation of property, plant and
equipment and amortisation of intangible assets less working capital and other
cash flow non-cash movements.
An additional measure to help understand the Group's operating cash
generation.
Adjusted operating Operating cash flow See note APM 7 Adjusted operating cash flow less net capital and development expenditure.
cash flow
post capex An additional measure to help understand the Group's operating cash generation
after the deduction of capex.
Working Cashflow - inventories payables, provisions and receivables See note APM 8 Working capital comprises of three statutory cashflow figures:
(increase)/decrease in inventories, increase/(decrease) in payables and
capital provisions, and (increase)/decrease in receivables. This definition includes
the movement of any provisions over trade 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 9 Free cash flow represents cash generated from trading after all costs
including restructuring, pension contributions, tax and interest payments.
flow Cashflows to settle LTIP 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 10 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 11 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.
APM 1 - Prior year revenue and adjusted operating profit at constant currency:
Six months ended 30 June 2022
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total
2022 revenue 68.8 135.3 65.1 269.2
Foreign exchange impact 2.2 2.2 3.0 7.4
2022 revenue at 2023 exchange rates 71.0 137.5 68.1 276.6
Six months ended 30 June 2022
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total Operating Segments Corporate Total
2022 adjusted operating profit 2.1 9.4 10.6 22.1 (3.8) 18.3
Foreign exchange impact 0.1 0.2 0.5 0.8 - 0.8
2022 adjusted operating profit at 2023 exchange rates 2.2 9.6 11.1 22.9 (3.8) 19.1
APM 2 - Organic revenue:
Six months ended 30 June
£million Power and Connectivity Global Manufacturing Solutions Sensors and Specialist Components Total
2023 revenue 79.9 153.8 75.4 309.1
2022 revenue 68.8 135.3 65.1 269.2
Foreign exchange impact 2.2 2.2 3.0 7.4
2022 revenue at 2023 exchange rates 71.0 137.5 68.1 276.6
Organic revenue increase (%) 13% 12% 11% 12%
APM 3 - Effective tax charge:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Adjusted operating profit 25.6 18.3 47.1
Net interest (4.9) (3.3) (6.7)
Adjusted profit before tax 20.7 15.0 40.4
Adjusted tax (5.2) (3.4) (8.4)
Adjusted effective tax rate 25.2% 22.8% 20.8%
APM 4 - Return on invested capital:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Adjusted operating profit 25.6 18.3 47.1
Adjusted operating profit H2 prior year (adjustment required for half year 28.8 18.9 -
only)
Average invested capital 452.0 415.7 448.6
Return on invested capital 12.0% 8.9% 10.5%
APM 5 - Net capital and development expenditure (net capex):
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Purchase of property, plant and equipment (9.0) (5.1) (11.4)
Proceeds from sale of investment property, plant and equipment and capital 0.1 0.2 0.3
grants received
Capitalised development expenditure (0.9) (1.0) (2.3)
Purchase of other intangibles (0.4) (0.1) (0.6)
Net capital and development expenditure (10.2) (6.0) (14.0)
APM 6 - Adjusted operating cash flow:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Adjusted operating profit 25.6 18.3 47.1
Adjustments for:
Depreciation 7.3 6.8 13.9
Amortisation of intangible assets 1.3 1.1 2.2
Share based payment expense 1.5 2.5 4.8
Other items 0.4 0.3 0.5
Increase in inventories (2.6) (39.1) (40.4)
Decrease/(increase) in receivables 7.3 (8.4) (26.3)
(Decrease)/increase in payables and provisions (11.6) 14.5 27.9
Adjusted operating cash flow 29.2 (4.0) 29.7
Restructuring and acquisition related costs (1.0) (7.0) (11.1)
Net cash generated from / (used in) operations 28.2 (11.0) 18.6
Net income taxes paid (3.8) (1.3) (5.9)
Net cash flow from operating activities 24.4 (12.3) 12.7
APM 7 - Adjusted operating cash flow post capex:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Adjusted operating cash flow 29.2 (4.0) 29.7
Purchase of property, plant and equipment (9.0) (5.1) (11.4)
Proceeds from sale of property, plant and equipment and government grants 0.1 0.2 0.3
received
Capitalised development expenditure (0.9) (1.0) (2.3)
Purchase of other intangibles (0.4) (0.1) (0.6)
Adjusted operating cash flow post capex 19.0 (10.0) 15.7
APM 8 - Working capital cashflow:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Increase in inventories (2.6) (39.1) (40.4)
Decrease/(increase) in receivables 7.3 (8.4) (26.3)
(Decrease)/increase in payables and provisions (11.6) 14.5 27.9
Working capital cashflow (6.9) (33.0) (38.8)
APM 9 - Free cash flow:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Net cash flow from operating activities 24.4 (12.3) 12.7
Net cash flow from investing activities (10.2) (14.3) (22.3)
Add back: Acquisition of business - 8.3 8.3
Payment of lease liabilities (2.3) (1.9) (4.3)
Interest paid (5.0) (3.3) (7.5)
Free cash flow 6.9 (23.5) (13.1)
APM 10 - Cash conversion:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Adjusted operating profit 25.6 18.3 47.1
Adjusted operating cash flow post capex 19.0 (10.0) 15.7
Cash conversion 74% -55% 33%
APM 11 - R&D cash spend as a percentage of revenue:
£million Six months ended 30 June 2023 Six months ended 30 June 2022 Year ended 31 December 2022
Revenue (excluding GMS) 155.3 133.9 294.0
R&D cash spend 6.0 5.4 11.0
R&D cash spend as a percentage of revenue 3.9% 4.0% 3.7%
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