Interim Results

TT electronics PLC 08 September 2003 TT electronics plc Interim Results for the half year ended 30 June 2003 TT electronics, a world leader in resistor and sensor technology today announces its interim results. KEY POINTS •Group turnover on continuing activities grew by 4 per cent to £270.4 million (2002: £261.2 million). •Profit before tax, goodwill amortisation and exceptional items was £9.1 million (2002: £11.3 million). •The interim dividend is maintained at 3.69p per share. •Operations continue to generate cash and gearing remains low at 27 per cent. •Sales to the automotive market grew by 11 per cent including a contribution from our French subsidiary acquired in March 2003. •The strength of the balance sheet positions the group to finance both acquisition opportunities and future growth. •Neil Rodgers has been appointed to the Board ahead of the retirement of Sheridan Comonte in April 2004. John Newman, Executive Chairman said today: 'The results we have announced today reflect the strength of our automotive operations while some of our other markets continue to experience weakness. We have continued to implement measures to ensure our resources are aligned to likely future demand. As one of the world's leading producers of customer specific resistive products, we believe that we are well placed to benefit when markets recover. The 11 per cent increase in sales to the automotive market in the face of declining vehicle production underlines the inherent strength of our technologies. TT electronics continues successfully to design high quality new products to satisfy the needs of manufacturers who are committed to increasing the electronic content of motor vehicles. The automotive sensors and systems businesses remain on track to achieve internal forecasts of 25 per cent sales growth between 2002 and 2005.' 8th September 2003 Enquiries: TT electronics plc John W Newman, Executive Chairman Tel: 01932 856 647 Biddicks Zoe Biddick Tel: 020 7448 1000 Group Financial Highlights --------------------------- ------------ ------------ ----------- Half year Half year Full year 30 June 2003 30 June 2002 2002 £ million £ million £ million --------------------------- ------------ ------------ ----------- 270.4 261.2 512.5 Turnover - continuing activities - discontinued activities 3.3 4.1 7.8 --------------------------- ------------ ------------ ----------- 273.7 265.3 520.3 --------------------------- ------------ ------------ ----------- Operating profit before impairment provisions and goodwill amortisation - continuing activities 10.4 14.0 24.0 - discontinued activities (0.3) (0.9) (1.6) --------------------------- ------------ ------------ ----------- 10.1 13.1 22.4 --------------------------- ------------ ------------ ----------- Profit on ordinary activities before tax, impairment provisions, goodwill amortisation and exceptional items 9.1 11.3 19.2 --------------------------- ------------ ------------ ----------- (Loss)/earnings per share - (4.9p) 4.8p 3.6p basic and fully diluted Earnings per share - before 4.6p 5.5p 10.1p impairment provisions, ------------ ------------ ----------- goodwill amortisation and exceptional items --------------------------- Dividends per share 3.69p 3.69p 10.05p --------------------------- ------------ ------------ ----------- Chairman's Statement In the first half of this year turnover on continuing activities has improved from £261.2 million to £270.4 million, a growth of 4 per cent. Profit before tax excluding amortisation of goodwill and exceptional items was £9.1 million compared with £11.3 million in the first half of 2002. Operating profit was £9.2 million (2002 - £12.0 million). The group incurred a charge for goodwill amortisation of £0.9 million (2002 - £1.1 million) and a taxation charge of £1.6 million being at an overall rate of 27 per cent (2002 - 27 per cent). Earnings per share before goodwill amortisation and exceptional items were 4.6p compared with 5.5p in 2002. The Electronic sector, with sales of £180.0 million (2002 - £172.3 million) has benefited from sales to the automotive market growing by 11 per cent. This includes a contribution from the business of Demo Tableaux de Commande SA, our acquisition in March 2003, without which the growth is 7 per cent. Given the decline in vehicle production this is a particularly good performance. The continuing lower demand for electronics from the telecom industry has resulted in a decline in our overall Electronic sector profitability. Accordingly we continue to align our manufacturing capacity to the lower demands of the marketplace. The Electrical sector sales improved to £90.4 million (2002 - £88.9 million) but profits have suffered from the adverse manufacturing variances incurred in producing our first very large sub-sea cable for an offshore windfarm and a major generator for the petroleum industry. TT electronics has taken a total charge for exceptional items of £14.2 million (2002 - £nil million) which includes £10.9 million in respect of goodwill which had previously been written off to reserves. Under accounting standard FRS 2, goodwill arising at the time of the acquisition of a business which is then subsequently discontinued must be credited back to reserves and written off through the profit and loss account. There is no overall effect on reserves. As set out in my previous Chairman's statement, your Board has kept under review the future of the magnetics businesses and has taken the decision to discontinue the laminations business. In addition we have closed our USA ferrite manufacturing operation, moving some manufacturing to India. Reorganisation and closure costs of £3.0 million and goodwill of £10.1 million have been charged as exceptional items in these accounts. TT electronics continues to dispose of businesses which do not form part of our long term plans. The plant and machinery and stock of Air Transport Avionics Limited which provides repair facilities for aircraft cockpit electrical equipment have been sold for £1.1 million. This resulted in an exceptional loss of £1.1 million including £0.8 million in respect of goodwill transferred from reserves. The group had total net indebtedness of £56.1 million at 30 June 2003 after paying the final dividend for 2002 of £9.9 million in May. Total net indebtedness at 30 June 2002 was £65.3 million and £55.8 million at 31 December 2002. Rigorous control over cash resources has been a key part of the group's policies during the current manufacturing recession in Europe and North America. The strong balance sheet enables the group to be in a good position to finance both acquisitions and growth when the recovery occurs. I am pleased to announce the appointment of Neil Rodgers to the Board of TT electronics. Neil is a qualified accountant who has been with the group since 1992. He joined as a divisional finance director and two years later became managing director of our UK based automotive climate control business. In 1996 Neil was appointed as divisional chief executive with prime responsibility for our global automotive activities. Group sales to the automotive market have risen from £89.0 million in 1996 to £139.0 million in 2002 during which time the operating profit grew at an annual compound rate of more than 12 per cent. Neil Rodgers will assume the position of Chief Executive on 5 April 2004 following Sheridan Comonte's retirement at the age of sixty-five. The interim dividend will remain unchanged at 3.69p per share, the same as last year and will be payable to shareholders on the register on 17 October 2003 and will be paid on 30 October 2003. Whilst current trading is still difficult, TT electronics' strength in supplying electronic components to the automotive market and the growth this will provide enables the group to look positively to the future. John W Newman Executive Chairman 8 September 2003 Chief Executive's review The year started on an improving trend but the global economic problems, which were exacerbated by the SARS virus and the Iraq war reversed this improvement. Given this background and the reduction in the number of vehicles produced in Europe and North America, we were still able to grow Electronic sector sales by 4 per cent. The Electrical sector whilst showing sales growth suffered cost overruns on a major export power generator project and incurred technical difficulties in manufacturing our first windfarm sub-sea cable. We respond actively to the dynamics of the world's changing requirement for electronic components and have undertaken a review of our total magnetics operations. As a result manufacture of ferrites in the UK and USA will be transferred to our low cost manufacturing operation in India and the laminations business is discontinued. Product cost reductions are a key driver to enable us to maintain margins and remain competitive. We strive to improve productivity at all levels and have reduced headcount by a further 3 per cent in this first half year. TT electronics is continuing its strategy of being a key supplier of customer specific products to our main automotive, telecom, computer and general industrial markets. Electronic sector Automotive market - represents 63 per cent of the electronic sector turnover Despite a downturn of 3 per cent in the number of cars and sports utility vehicles produced in Europe and North America during the first half of 2003, the group increased its automotive sales by 11 per cent. The market growth in automotive electronics is estimated to be 6 per cent per annum. The group's strong performance is due to success in winning a number of new 'design-ins' in recent years based on our range of sensor and system technologies. The automotive sensors and systems businesses remain on track to achieve internal forecasts of 25 per cent growth in sales between 2002 and 2005. Our German factories produce a range of automotive sensors for powertrain applications including camshaft and crankshaft and ABS sensors as well as our award winning drive-by-wire accelerator pedal sensor modules which are now fitted to all BMW and Mercedes Benz cars. We are working closely on both European and North American development programmes with major Tier 1 suppliers for our steer-by-wire sensor technology and expect substantial new orders which will maintain our lead in this sector. Our range of resistors and trimmer components, hybrids and printed circuit boards continue to win additional programmes giving overall growth in our automotive component products. The strategic aim of the purchase of the business of Demo Tableaux de Commande SA in March was to enhance our UK based climate control business building on the successful expansion into the USA. Demo is based in France and provides an entry into the french market. Since acquiring Demo we have already won new business worth £12 million over the life of the new vehicle programmes. Telecom and computer markets - represent 15 per cent of the electronic sector turnover There are no signs of a revival in the telecom market and our sales continue to fall albeit at a slower pace than over the last two years. Despite the uncertain marketplace we continue to develop new telecom products which we anticipate will benefit the group in the future. We have set up a manufacturing base in Southern China for our inductive products. This addresses the move of manufacture of computers and other electronic assemblies to China from Europe, USA and other Far Eastern countries which continues to accelerate and has meant more competition from local sources. We are also actively pursuing investment opportunities in China to expand our manufacturing base and enable us to service the growing number of customers who have established factories in the country. Industrial market - represents 22 per cent of the electronic sector turnover In order to replace the reduced telecom demand additional technical sales and engineering resources have been focused on the more diverse markets of aerospace, defence, medical and control instrumentation. A number of new programmes have been won in all these market areas. Electrical sector Power generation - represents 29 per cent of the electrical sector turnover Demand for power generator sets in the Far East and in particular China is now largely being satisfied by local manufacture with diminishing demand for imported sets. In an effort to broaden our customer base, last year we won a large contract for generator sets for a petroleum installation in North Africa. This project is now completed but made no contribution to profits due to an exacting technical specification. The three year contract for harsh environmental connectors for a defence contract continues to perform well and we anticipate further orders. Power transmission - represents 71 per cent of the electrical sector turnover The general cable market remains flat and competitive but we have recently won a contract worth approximately £3 million for specialist cables for naval vessels with expectations of more work to follow. We manufactured the majority of our first windfarm cable worth £3.2 million during this half year. Teething problems were experienced, this cable, however, has now been successfully shipped on time. A second windfarm sub-sea cable worth £2 million is now in production. Outlook The second half of 2003 is likely to be just as demanding as the first half. The group will benefit from the reorganisation of the magnetics businesses and will continue to ensure that costs and headcount are tightly controlled. Sheridan W A Comonte Chief Executive 8 September 2003 Consolidated profit and loss account For the six months ended 30 June 2003 --------------------------- ----- ----------- ----------- ---------- Note 2003 2002 2002 First half First half Full year £ million £ million £ million --------------------------- ----- ----------- ----------- ---------- Turnover - continuing 270.4 261.2 512.5 activities - discontinued activities 3.3 4.1 7.8 --------------------------- ----- ----------- ----------- ---------- 2 273.7 265.3 520.3 --------------------------- ----- ----------- ----------- ---------- Operating profit before 10.1 13.1 22.4 impairment provisions and goodwill amortisation Impairment provisions - - (10.4) Goodwill amortisation (0.9) (1.1) (2.1) --------------------------- ----- ----------- ----------- ---------- Operating profit 9.2 12.0 9.9 --------------------------- ----- ----------- ----------- ---------- Operating profit/(loss) - 9.5 12.9 14.5 continuing activities - discontinued activities (0.3) (0.9) (4.6) --------------------------- ----- ----------- ----------- ---------- Operating profit 3 9.2 12.0 9.9 Cost of reorganisation - 4 (13.1) - - magnetics Loss on sale of business 4 (1.1) - - Profit on sale of fixed 4 - - 1.2 asset investment --------------------------- ----- ----------- ----------- ---------- (Loss)/profit on ordinary (5.0) 12.0 11.1 activities before interest Interest (1.0) (1.8) (3.2) --------------------------- ----- ----------- ----------- ---------- (Loss)/profit on ordinary (6.0) 10.2 7.9 activities before taxation Taxation 5 (1.6) (2.7) (2.1) --------------------------- ----- ----------- ----------- ---------- (Loss)/profit on ordinary (7.6) 7.5 5.8 activities after taxation Minority interests - - (0.2) --------------------------- ----- ----------- ----------- ---------- (Loss)/profit for the (7.6) 7.5 5.6 period Dividends (5.7) (5.7) (15.6) --------------------------- ----- ----------- ----------- ---------- Retained (loss)/profit (13.3) 1.8 (10.0) --------------------------- ----- ----------- ----------- ---------- (Loss)/earnings per share - 6 (4.9p) 4.8p 3.6p basic and fully diluted Earnings per share - before 6 4.6p 5.5p 10.1p impairment provisions, goodwill amortisation and exceptional items Dividends per share 3.69p 3.69p 10.05p Consolidated balance sheet At 30 June 2003 ------------------------- ----- ---------- ---------- ---------- Note 2003 2002 2002 30 June 30 June 31 Dec £ million £ million £ million ------------------------- ----- ---------- ---------- ---------- Fixed assets Intangible assets 28.1 35.3 30.2 Tangible assets 140.5 151.6 142.1 Investments 5.3 12.6 5.1 ------------------------- ----- ---------- ---------- ---------- 173.9 199.5 177.4 ------------------------- ----- ---------- ---------- ---------- Current assets Property 2.0 3.2 2.0 Stocks 101.5 101.0 98.2 Debtors 105.7 110.8 109.7 Quoted investments 0.1 0.1 0.1 Cash 7.9 9.7 5.1 ------------------------- ----- ---------- ---------- ---------- 217.2 224.8 215.1 Creditors: falling due (116.7) (134.0) (121.0) within one year ------------------------- ----- ---------- ---------- ---------- Net current assets 100.5 90.8 94.1 ------------------------- ----- ---------- ---------- ---------- Total assets less current 274.4 290.3 271.5 liabilities Creditors: falling due (61.3) (58.8) (57.2) after more than one year Provisions for (5.9) (6.3) (5.8) liabilities and charges Minority interests (2.8) (2.6) (2.8) ------------------------- ----- ---------- ---------- ---------- Total net assets 204.4 222.6 205.7 ------------------------- ----- ---------- ---------- ---------- Capital and reserves Share capital 38.7 38.7 38.7 Reserves 165.7 183.9 167.0 ------------------------- ----- ---------- ---------- ---------- Equity shareholders' 8 204.4 222.6 205.7 funds ------------------------- ----- ---------- ---------- ---------- Consolidated cash flow statement For the six months ended 30 June 2003 ------------------------ ----- ----------- ----------- ---------- Note 2003 2002 2002 First half First half Full year £ million £ million £ million ------------------------ ----- ----------- ----------- ---------- Net cash inflow from operations Operating profit 9.2 12.0 9.9 Non-cash items - 13.2 14.8 28.1 Depreciation and amortisation - Charge for - - 10.4 impairment - Other (0.1) (2.5) (6.9) Cost of reorganisation (0.2) - - Movement in working 0.9 (1.3) 1.1 capital ------------------------ ----- ----------- ----------- ---------- Net cash inflow from 23.0 23.0 42.6 operating activities Net interest paid (1.0) (1.7) (3.2) Taxation (2.6) 0.5 (2.9) Capital expenditure and financial investment Purchase of fixed (11.5) (12.9) (26.5) assets Sale of fixed asset - - 10.6 investment Purchase of fixed asset (0.2) (1.9) (4.0) investments Sale of fixed assets and 0.8 0.5 2.2 grants received Acquisition of (0.8) - - business Sale of business 1.0 - - Ordinary dividends (9.8) (9.8) (15.6) paid ------------------------ ----- ----------- ----------- ---------- Net cash flow before use of liquid resources and (1.1) (2.3) 3.2 financing Financing and management of liquid resources Movement of loans and 4.8 (1.6) 0.3 finance leases ------------------------ ----- ----------- ----------- ---------- Increase/(decrease) in 9 3.7 (3.9) 3.5 cash ------------------------ ----- ----------- ----------- ---------- Notes to the financial statements 1. Basis of accounting The interim financial statements for the half year to 30 June 2003 are unaudited and have been prepared in accordance with the accounting policies detailed in the annual report for the year ended 31 December 2002. The statements were approved by the Directors on 8 September 2003. The figures for the year ended 31 December 2002 have been extracted from the statutory accounts, filed with the Registrar of Companies on which the auditors gave an unqualified report. 2. Analysis of turnover ----------------------------- ----------- ----------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million ----------------------------- ----------- ----------- ---------- By sector Electronic 180.0 172.3 341.2 Electrical 90.4 88.9 171.3 ----------------------------- ----------- ----------- ---------- Continuing activities 270.4 261.2 512.5 Discontinued activities 3.3 4.1 7.8 ----------------------------- ----------- ----------- ---------- 273.7 265.3 520.3 ----------------------------- ----------- ----------- ---------- ----------------------------- ----------- ----------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million ----------------------------- ----------- ----------- ---------- By origin United Kingdom 136.1 130.1 263.1 Rest of Europe 70.3 55.4 112.9 United States and Canada 41.8 48.1 87.7 Mexico and Central America 6.8 8.5 18.6 Rest of the World 15.4 19.1 30.2 ----------------------------- ----------- ----------- ---------- Continuing activities 270.4 261.2 512.5 Discontinued activities 3.3 4.1 7.8 ----------------------------- ----------- ----------- ---------- 273.7 265.3 520.3 ----------------------------- ----------- ----------- ---------- 2. Analysis of turnover continued ----------------------------- ----------- ----------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million ----------------------------- ----------- ----------- ---------- By destination United Kingdom 78.2 77.4 156.3 Rest of Europe 106.7 90.5 179.9 United States and Canada 41.9 45.3 90.7 Mexico and Central America 6.1 8.1 17.4 Rest of the World 37.5 39.9 68.2 ----------------------------- ----------- ----------- ---------- Continuing activities 270.4 261.2 512.5 Discontinued activities 3.3 4.1 7.8 ----------------------------- ----------- ----------- ---------- 273.7 265.3 520.3 ----------------------------- ----------- ----------- ---------- The group has carried out a major reorganisation of its magnetics businesses. Discontinued activities arose from the discontinuance of the laminations business which was based in the United Kingdom, see note 4. The remaining magnetics businesses are included in continuing activities. The results of Air Transport Avionics Limited up to its disposal and of the business of Demo Tableaux de Commande SA from its date of acquisition are reported as continuing activities. Neither of which are considered material. 3. Analysis of operating profit ------------------------------ ----------- ---------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million ------------------------------ ----------- ---------- ---------- By sector Electronic 8.3 10.3 17.3 Electrical 2.1 3.7 6.7 ------------------------------ ----------- ---------- ---------- 10.4 14.0 24.0 Impairment provisions and (0.9) (1.1) (9.5) goodwill amortisation ------------------------------ ----------- ---------- ---------- Continuing activities 9.5 12.9 14.5 Discontinued activities before (0.3) (0.9) (1.6) impairment provisions Impairment provisions - - - (3.0) discontinued activities ------------------------------ ----------- ---------- ---------- 9.2 12.0 9.9 ------------------------------ ----------- ---------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million By origin United Kingdom 0.1 2.1 0.7 Rest of Europe 7.6 5.3 12.5 United States and Canada 0.5 3.2 3.2 Mexico and Central America 0.9 1.3 2.4 Rest of the World 1.3 2.1 5.2 ------------------------------ ----------- ---------- ---------- 10.4 14.0 24.0 Impairment provisions and (0.9) (1.1) (9.5) goodwill amortisation ------------------------------ ----------- ---------- ---------- Continuing activities 9.5 12.9 14.5 Discontinued activities before (0.3) (0.9) (1.6) impairment provisions Impairment provisions - - - (3.0) discontinued activities ------------------------------ ----------- ---------- ---------- 9.2 12.0 9.9 ------------------------------ ----------- ---------- ---------- 4. Exceptional items ------------------------------ ----------- ---------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million ------------------------------ ----------- ---------- ---------- Cost of reorganisation - (13.1) - - magnetics (i) Loss on sale of business (ii) (1.1) - - Profit on sale of entire - - 1.2 holding in Johnston Group PLC ------------------------------ ----------- ---------- ---------- (14.2) - 1.2 ------------------------------ ----------- ---------- ---------- (i) The group has carried out a major reorganisation of its magnetics businesses. The manufacture of ferrites in the USA has ceased and some production of ferrites has been transferred to the group's factory in India. The laminations business has been discontinued. Reorganisation costs comprise redundancy and other costs of £2.8million, plant write offs of £0.2million and goodwill relating to laminations, previously written off to reserves, of £10.1million. (ii) On 11 June 2003 the group disposed of the business of Air Transport Avionics Limited for a cash consideration of £1.1million. The loss on disposal includes £0.8million of goodwill previously written off to reserves. 5. Taxation Taxation on profit on ordinary activities has been based on the estimated effective rate for the full year ending 31 December 2003. The tax charge includes a credit of £0.4million (2002 - £nil) in respect of exceptional items. 6. Earnings per share Basic loss per share of 4.9p (2002 - earnings of 4.8p) is calculated on a loss of £7.6million (2002 - earnings of £7.5million) and on 154,798,103 shares (2002 - 154,798,103 shares) being the weighted average number of shares in issue during the period. The calculation of fully diluted earnings per share assumes the exercise of dilutive share options equivalent to 526,246 shares (2002 - 622,226 shares). Earnings per share before impairment provisions, goodwill amortisation and exceptional items are calculated on earnings of £7.1million (2002 - £8.6million) and the weighted average number of shares in issue during the period. 7. Acquisition On 14 March 2003 the group acquired the business of Demo Tableaux de Commande SA, a manufacturer of automotive climate control units. The purchase consideration was £2.5million, subject to completion accounts. Demo's turnover from the date of acquisition was £3.2million and its operating profit was £nil million. 8. Reconciliation of movements in shareholders' funds ------------------------------ ----------- ---------- ---------- 2003 2002 2002 First half First half Full year £ million £ million £ million ------------------------------ ----------- ---------- ---------- (Loss)/profit for the period (7.6) 7.5 5.6 Exchange differences on net foreign currency investments 1.1 (1.3) (6.4) ------------------------------ ----------- ---------- ---------- Total recognised gains and (6.5) 6.2 (0.8) losses Dividends (5.7) (5.7) (15.6) Goodwill charged to exceptional 10.9 - - items ------------------------------ ----------- ---------- ---------- Net change in shareholders' (1.3) 0.5 (16.4) funds Opening shareholders' funds 205.7 222.1 222.1 ------------------------------ ----------- ---------- ---------- Closing shareholders' funds 204.4 222.6 205.7 ------------------------------ ----------- ---------- ---------- 9. Reconciliation of net cash flow to movement in net debt --------------------- --------- --------- -------- -------- Loans and finance Net overdraft Short term lease investments obligations Net debt £ million £ million £ million £ million --------------------- --------- --------- -------- -------- Balance at 31 (11.6) 0.1 (52.0) (63.5) December 2001 Cash flow (3.9) - 1.6 (2.3) Exchange 0.7 - (0.2) 0.5 differences --------------------- --------- --------- -------- -------- Balance at 30 June (14.8) 0.1 (50.6) (65.3) 2002 Cash flow 7.4 - (1.9) 5.5 Exchange (0.2) - 4.2 4.0 differences --------------------- --------- --------- -------- -------- Balance at 31 (7.6) 0.1 (48.3) (55.8) December 2002 Cash flow 3.7 - (4.8) (1.1) Acquisition - - (0.6) (0.6) Exchange difference (0.1) - 1.5 1.4 --------------------- --------- --------- -------- -------- Balance at 30 June (4.0) 0.1 (52.2) (56.1) 2003 --------------------- --------- --------- -------- -------- The interim report will be sent to all shareholders on the register. Copies are available at the Company's Registered Office, Clive House, 12-18 Queens Road, Weybridge, Surrey, KT13 9XB. This information is provided by RNS The company news service from the London Stock Exchange

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