Interim Results

TT electronics PLC 16 September 2004 16 September 2004 TT electronics plc IMPROVED TRADING AND SUCCESSFUL ACQUISITION LEAD TO A 52% INCREASE IN PROFIT BEFORE TAX TT electronics, a world leader in resistor and sensor technology, today announces its interim results for the six months ended 30 June 2004. KEY POINTS Growth Turnover + 11% Operating Profit + 47% Profit before tax + 52% Earnings per share + 41% •Group turnover on continuing activities increased by 11% to £299.1 million (2003: £270.4 million). •Group profit before tax and goodwill amortisation increased by 52% to £13.8 million (2003: £9.1 million - before exceptional items). •Electronic sector sales increased to £207.4 million (2003: £180.0 million) and generated operating profit of £12.3 million (2003: £8.3 million). •Electrical sector sales increased to £91.7 million (2003: £90.4 million) and generated operating profit of £3.0 million (2003: £2.1 million). •Optek Technology, the North American sensor business acquired in December 2003, is exceeding initial expectations. •The acquisition of Sensopad Technologies in March provides the group with new inductive technology which is currently being designed into the next generation of automotive sensors. •The interim dividend is maintained at 3.69p per share. John Newman, Executive Chairman said today: 'This encouraging performance reflects the continuing strength of our automotive business, our drive for additional sales to the industrial market and the recovery of the worldwide telecom market. 'We have emerged, lean and efficient, from a three year period of difficult trading conditions during which we continued to generate cash and maintained the dividend. During this half year we invested further in advanced technologies to ensure that TT electronics remains a leading supplier in its global markets. 'The increased order intake to which I referred in my last statement has been maintained and we confidently expect profits in our second half to improve over the comparable period last year.' Enquiries: TT electronics plc Tel: 01932 856 647 John W Newman, Executive Chairman Biddicks Tel: 020 7448 1000 Zoe Biddick Highlights ------------------------ ---------- ------- ---------- -------- Half year % Change Half year Full year 30 June 2004 30 June 2003 2003 £ million £ million £ million Turnover - continuing 299.1 +11% 270.4 527.5 activities - discontinued activities - 3.3 6.4 ------------------------ ---------- ------- ---------- -------- 299.1 273.7 533.9 ------------------------ ---------- ------- ---------- -------- Operating profit before goodwill amortisation - continuing activities 15.3 +47% 10.4 22.6 - discontinued activities - (0.3) (0.5) ------------------------ ---------- ------- ---------- -------- 15.3 10.1 22.1 ------------------------ ---------- ------- ---------- -------- Profit on ordinary activities before tax, goodwill amortisation and exceptional items 13.8 +52% 9.1 20.0 ------------------------ ---------- ------- ---------- -------- Earnings per share - basic and fully diluted 5.6p (4.9)p (0.1)p - before goodwill amortisation and exceptional items 6.5p +41% 4.6p 10.4p ------------------------ ---------- ------- ---------- -------- Dividends per share 3.69p 3.69p 10.05p ------------------------ ---------- ------- ---------- -------- Chairman's statement I am pleased to report that the first half trading of 2004 is much improved. This follows the difficult global trading conditions of the past three years during which TT electronics performed well, generating strong cash flow and maintained its dividend. Turnover on continuing activities has increased from £270.4 million to £299.1 million, an increase of 11 per cent. Profit before tax, excluding amortisation of goodwill, has improved to £13.8 million compared with £9.1 million in the first half of 2003, a growth of 52 per cent. The group incurred a charge for goodwill amortisation of £1.3 million (2003- £0.9 million) and a taxation charge of £3.8 million at an overall tax rate of 27 per cent (2003-27 per cent). Earnings per share before goodwill amortisation were 6.5p compared to 4.6p in the prior period. Basic and fully diluted earnings per share were 5.6p compared to a loss of 4.9p in 2003. The growth in turnover has principally come from the electronic sector where sales have increased from £180.0 million to £207.4 million. The sector has benefited from the inclusion of last year's acquisitions of Optek Technology and the business of Demo Tableaux de Commande and has been affected by devaluation of the US dollar against sterling. The improvement in electronic sales has come from the continuing increased demand for electronic components in the automotive industry and an uplift in demand for our resistors, sensors and other electronic components, particularly from the telecom and computer and industrial markets. This increase in sales has been satisfied by better utilisation of our production facilities which, together with the benefit of last year's acquisitions, has resulted in the electronic sector profits increasing from £8.3 million to £12.3 million. Electrical sector turnover shows an increase from £90.4 million to £91.7 million and profitability has improved from £2.1 million to £3.0 million. This sector's turnover has increased due to the higher cost of raw materials, primarily copper, offset to a certain extent by the reduction in sales of generator sets as the result of the closure last year of the UK manufacturing facility. As reported in my last Chairman's statement TT electronics acquired, on 11 March 2004, Sensopad Technologies Ltd for a consideration of £1.4 million together with the payment of future royalties. This acquisition provides the group with inductive technology which is being designed into the next generation of automotive sensors and will be used in other sensor products manufactured by the group. TT electronics' tight control of its financial resources has been maintained. After payment in May 2004 of the £9.8 million final dividend in respect of 2003, the group's total net indebtedness has reduced from £78.2 million at 31 December 2003 to £75.9 million. The interim dividend will remain unchanged at 3.69p per share and will be paid on 28 October 2004 to shareholders on the register on 22 October 2004. In my Chairman's statement at the end of March 2004, I reported that we were experiencing an improvement in order intake which we believed would be maintained. This increase in order intake continues and is, in our view, sustainable for the foreseeable future. We are therefore confident of further growth and for profit performance of TT electronics to improve in the second half of the current financial year over the comparable period last year. John W Newman Executive Chairman 16 September 2004 Chief Executive's review Highlights TT electronics has achieved an excellent improvement in operating performance in the first half of 2004 with sales growth on continuing activities of 11 per cent generating a 47 per cent increase in operating profit before goodwill amortisation. Trading conditions in the electronic sector continued to improve during the period with order intake in the electronic components businesses being strong, particularly from North American and Far Eastern markets; sales to the automotive market have increased by 13 per cent to £127.0 million. The results of Optek Technology, acquired in December 2003, are exceeding our initial expectations. This acquisition has integrated well into the group and has contributed £17.4 million to this half year's turnover. The reorganisation of the magnetics and power generation activities has been successful. We continue to transfer labour intensive products to our low cost manufacturing facilities across the world. The benefits of these changes are reflected in the results for the period. Electronic sector Automotive Vehicle production levels in Europe and North America, our main markets, overall remained static in the first half of 2004. However, the increase in the application of new technology has driven our automotive sales to outperform the market with growth of 13 per cent to £127.0 million. The European initiative to improve fuel consumption and engine emissions relies upon highly accurate and reliable sensor technologies. Our Hall effect engine speed sensors have recently been designed into a range of successful German vehicles and volume production of these sensors started in this half year. New patented inductive sensor technology, which is more cost effective, is being designed into new products for vehicles due for production in 2007. Sales of our climate control units in North America have dipped before the planned introduction of a new range of units scheduled for later this year. TT electronics has won new programmes for electronically controlled power steering applications; the strong growth of this market is as a result of the increase in demand for power steering in small cars where the new electronic system is more appropriate. Telecom and computer Sales to this market increased by 24 per cent to £33.7 million assisted by the recovery of the worldwide telecom market. The reorganisation of our magnetic operations reported in 2003 was largely completed in the period. This included the move of some manufacturing capacity to a facility in Southern China and the expansion of the ferrite operations factory in India. Demand for our magnetic products, a market dominated by Far Eastern manufacturers, has increased in line with general market improvements. Industrial Following our previously reported additional marketing efforts sales to the industrial market grew by 16 per cent to £46.7 million. TT electronics' precision resistors, hybrids and magnetics are used in power supplies, gas controllers and test equipment which demand high reliability. Electrical sector Power generation The manufacture of power generator sets has now been transferred to our successful operation in Mexico. Demand from South East Asia has rapidly expanded in the first half of the year and the benefit of our low cost manufacturing facility, combined with strong relationships with diesel engine manufacturers, will achieve good growth this year. Our UK power generation businesses, now operating profitably, provide aircraft ground power units, uninterruptible power supply equipment and generator set service, installation and upgrade facilities. Power transmission The price of copper in world markets has brought opportunities and a short term increase in demand as distributors and wholesalers purchased inventory to avoid notified price rises. Additionally we have seen an element of price hardening in the UK market which is one of the lowest margin markets for cable products in the world. In May we announced our success in winning a contract for the Kentish Flats windfarm sub-sea cable, worth £4.2 million. Delivery of the cable is expected by the end of 2004. Cable accessories, combined with our compounding and electrical fusegear operations remain profitable. Outlook The group maintains its commitment to developing innovative new products, investing in people, technologies and the most appropriate manufacturing equipment to ensure we drive our businesses forward for greater success. Key to the future growth of TT electronics is the technologies the group develops and the relationships with customers across the world. The foundations laid down over the past three years, during which trading has been difficult, have given the base for profitable growth. TT electronics is lean and efficient, our people are committed to top class performance; the marketplace for our products has improved and the group is in good shape to react to the challenges of improving world markets. I am optimistic that current trading conditions will continue through the second half of 2004. Neil A Rodgers Chief Executive 16 September 2004 Consolidated profit and loss account for the six months ended 30 June 2004 --------------------------- ----- --------- --------- --------- Note 2004 2003 2003 First half First half Full year £ million £ million £ million --------------------------- ----- --------- --------- --------- Turnover 299.1 270.4 527.5 - continuing activities - discontinued activities - 3.3 6.4 --------------------------- ----- --------- --------- --------- 2 299.1 273.7 533.9 --------------------------- ----- --------- --------- --------- --------------------------- ----- --------- --------- --------- Operating profit before goodwill 15.3 10.1 22.1 amortisation Goodwill amortisation (1.3) (0.9) (1.8) --------------------------- ----- --------- --------- --------- Operating profit 14.0 9.2 20.3 --------------------------- ----- --------- --------- --------- Operating profit/(loss) 14.0 9.5 20.8 - continuing activities - discontinued activities - (0.3) (0.5) --------------------------- ----- --------- --------- --------- Operating profit 3 14.0 9.2 20.3 Exceptional items - 2003 4 - (14.2) (15.0) --------------------------- ----- --------- --------- --------- Profit/(loss) on ordinary activities 14.0 (5.0) 5.3 before interest Interest (1.5) (1.0) (2.1) --------------------------- ----- --------- --------- --------- Profit/(loss) on ordinary activities 12.5 (6.0) 3.2 before taxation Taxation 5 (3.8) (1.6) (3.2) --------------------------- ----- --------- --------- --------- Profit/(loss) on ordinary activities 8.7 (7.6) - after taxation Minority interests - - (0.1) --------------------------- ----- --------- --------- --------- Profit/(loss) for the 8.7 (7.6) (0.1) period Dividends (5.7) (5.7) (15.6) --------------------------- ----- --------- --------- --------- Retained profit/(loss) 3.0 (13.3) (15.7) --------------------------- ----- --------- --------- --------- Earnings per share 6 5.6p (4.9)p (0.1)p - basic and fully diluted - before goodwill amortisation and 6 6.5p 4.6p 10.4p exceptional items --------------------------- ----- --------- --------- --------- Dividends per share 3.69p 3.69p 10.05p --------------------------- ----- --------- --------- --------- Consolidated balance sheet at 30 June 2004 ------------------------ ----- --------- --------- --------- Note 2004 2003 2003 30 June 30 June 31 Dec £ million £ million £ million ------------------------ ----- --------- --------- --------- Fixed assets Intangible assets 46.3 28.1 44.9 Tangible assets 138.3 140.5 143.5 Investments 5.3 5.3 5.3 ------------------------ ----- --------- --------- --------- 189.9 173.9 193.7 ------------------------ ----- --------- --------- --------- Current assets Property 0.7 2.0 1.8 Stocks 105.6 101.5 98.5 Debtors 111.1 105.7 108.7 Quoted investments 0.1 0.1 0.1 Cash 6.9 7.9 8.5 ------------------------ ----- --------- --------- --------- 224.4 217.2 217.6 Creditors: falling due (146.1) (116.7) (147.2) within one year ------------------------ ----- --------- --------- --------- Net current assets 78.3 100.5 70.4 ------------------------ ----- --------- --------- --------- Total assets less current 268.2 274.4 264.1 liabilities Creditors: falling due after more than (64.0) (61.3) (60.9) one year Provisions for (5.0) (5.9) (4.2) liabilities and charges Minority interests (2.9) (2.8) (2.9) ------------------------ ----- --------- --------- --------- Total net assets 196.3 204.4 196.1 ------------------------ ----- --------- --------- --------- Capital and reserves Share capital 38.7 38.7 38.7 Reserves 157.6 165.7 157.4 ------------------------ ----- --------- --------- --------- Equity shareholders' 8 196.3 204.4 196.1 funds ------------------------ ----- --------- --------- --------- Consolidated cash flow statement for the six months ended 30 June 2004 ------------------------ ----- --------- --------- --------- Note 2004 2003 2003 First half First half Full year £ million £ million £ million ------------------------ ----- --------- --------- --------- Net cash inflow from operations Operating profit 14.0 9.2 20.3 Non-cash items - depreciation and 16.1 13.2 27.9 amortisation - other (2.1) (0.1) (3.5) Closure and other costs - (0.2) (1.5) Movement in working (0.8) 0.9 2.0 capital ------------------------ ----- --------- --------- --------- Net cash inflow from operating 27.2 23.0 45.2 activities Net interest paid (1.5) (1.0) (2.1) Taxation (9.7) (2.6) (2.9) Capital expenditure and financial investment Purchase of fixed assets (14.3) (11.5) (23.5) Purchase of fixed asset - (0.2) (0.2) investments Sale of fixed assets and grants 4.7 0.8 3.0 received Loan repayment 6.0 - - Acquisition of business (1.6) (0.8) (31.0) Sale of business - 1.0 1.1 Ordinary dividends paid (9.8) (9.8) (15.6) ------------------------ ----- --------- --------- --------- Net cash flow before use of liquid resources and financing 1.0 (1.1) (26.0) Financing and management of liquid resources Movement of loans and 2.3 4.8 6.3 finance leases ------------------------ ----- --------- --------- --------- Increase/(decrease) in 9 3.3 3.7 (19.7) cash ------------------------ ----- --------- --------- --------- Notes to the financial statements 1. Basis of accounting The interim financial statements for the half year to 30 June 2004 are unaudited and have been prepared in accordance with the accounting policies detailed in the annual report for the year ended 31 December 2003. The statements were approved by the Directors on 16 September 2004. The figures for the year ended 31 December 2003 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 ------------------------- --------- --------- --------- 2004 2003 2003 First half First half Full year £ million £ million £ million ------------------------- --------- --------- --------- By sector Electronic 207.4 180.0 349.3 Electrical 91.7 90.4 178.2 ------------------------- --------- --------- --------- Continuing activities 299.1 270.4 527.5 Discontinued activities - 3.3 6.4 ------------------------- --------- --------- --------- 299.1 273.7 533.9 ------------------------- --------- --------- --------- By origin United Kingdom 140.6 136.1 258.6 Rest of Europe 76.3 70.3 136.2 North America 66.0 48.6 102.0 Rest of the World 16.2 15.4 30.7 ------------------------- --------- --------- --------- Continuing activities 299.1 270.4 527.5 Discontinued activities - 3.3 6.4 ------------------------- --------- --------- --------- 299.1 273.7 533.9 ------------------------- --------- --------- --------- By destination United Kingdom 85.9 78.2 155.8 Rest of Europe 118.2 106.7 206.5 North America 61.2 48.0 101.5 Rest of the World 33.8 37.5 63.7 ------------------------- --------- --------- --------- Continuing activities 299.1 270.4 527.5 Discontinued activities - 3.3 6.4 ------------------------- --------- --------- --------- 299.1 273.7 533.9 ------------------------- --------- --------- --------- The half year results include the first full six months contribution from Optek Technology Inc, acquired on 3 December 2003. The results of TT electronics technology Limited (formerly Sensopad Technologies Ltd) acquired on 11 March 2004 are not considered to be material and are reported as continuing activities. Discontinued activities in 2003 were the results of the laminations business. 3. Analysis of operating profit ------------------------- --------- --------- --------- 2004 2003 2003 First half First half Full year £ million £ million £ million ------------------------- --------- --------- --------- By sector Electronic 12.3 8.3 16.9 Electrical 3.0 2.1 5.7 ------------------------- --------- --------- --------- Continuing activities 15.3 10.4 22.6 Discontinued activities - (0.3) (0.5) ------------------------- --------- --------- --------- Operating profit before goodwill 15.3 10.1 22.1 amortisation Goodwill amortisation (1.3) (0.9) (1.8) ------------------------- --------- --------- --------- 14.0 9.2 20.3 ------------------------- --------- --------- --------- By origin United Kingdom 2.0 0.1 2.0 Rest of Europe 7.6 7.6 14.2 North America 4.0 1.4 4.4 Rest of the World 1.7 1.3 2.0 ------------------------- --------- --------- --------- Continuing activities 15.3 10.4 22.6 Discontinued - (0.3) (0.5) ------------------------- --------- --------- --------- Operating profit before goodwill 15.3 10.1 22.1 amortisation Goodwill amortisation (1.3) (0.9) (1.8) ------------------------- --------- --------- --------- 14.0 9.2 20.3 ------------------------- --------- --------- --------- 4. Exceptional items - 2003 Exceptional items for 2003 consisted of reorganisation costs of £13.8 million for the magnetics businesses and the loss of £1.2 million on disposal of the business of Air Transport Avionics Limited. These items include £10.9 million 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 2004. 6. Earnings per share Basic earnings per share of 5.6p (2003 - loss of 4.9p) are calculated on earnings of £8.7 million (2003 - loss of £7.6 million) and on 154,798,103 shares (2003 - 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 1,473,089 shares (2003 - 526,246 shares). Earnings per share before goodwill amortisation and exceptional items are calculated on earnings of £10.0 million (2003 - £7.1 million) and the weighted average number of shares in issue during the period. 7. Acquisition On 11 March 2004 the group acquired Sensopad Technologies Ltd, a technology development company, which then changed its name to TT electronics technology Limited. The purchase consideration was £1.4 million cash and the payment of future royalties based on performance provisionally valued at £2.1 million. 8. Reconciliation of movements in shareholders' funds ------------------------- --------- --------- --------- 2004 2003 2003 First half First half Full year £ million £ million £ million ------------------------- --------- --------- --------- Profit/(loss) for the period 8.7 (7.6) (0.1) Exchange differences on net foreign currency investments (2.8) 1.1 (4.8) ------------------------- --------- --------- --------- Total recognised gains and 5.9 (6.5) (4.9) losses Dividends (5.7) (5.7) (15.6) Goodwill charged to exceptional - 10.9 10.9 items --------- --------- --------- ------------------------- Net change in shareholders' 0.2 (1.3) (9.6) funds Opening shareholders' funds 196.1 205.7 205.7 ------------------------- --------- --------- --------- Closing shareholders' funds 196.3 204.4 196.1 ------------------------- --------- --------- --------- 9. Reconciliation of net cash flow to movement in net debt --------------------- -------- --------- --------- ------- Net overdraft Short term Loans and Net debt investments finance leases £ million £ million £ million £ million --------------------- -------- --------- --------- ------- Balance at 31 December 2002 (7.6) 0.1 (48.3) (55.8) Cash flow 3.7 - (4.8) (1.1) Acquisition - - (0.6) (0.6) Exchange differences (0.1) - 1.5 1.4 --------------------- -------- --------- --------- ------- Balance at 30 June 2003 (4.0) 0.1 (52.2) (56.1) Cash flow (23.4) - (1.5) (24.9) Exchange differences 0.2 - 2.6 2.8 --------------------- -------- --------- --------- ------- Balance at 31 December 2003 (27.2) 0.1 (51.1) (78.2) Cash flow 3.3 - (2.3) 1.0 Exchange differences 0.5 - 0.8 1.3 --------------------- -------- --------- --------- ------- Balance at 30 June 2004 (23.4) 0.1 (52.6) (75.9) --------------------- -------- --------- --------- ------- The interim report will be sent to all shareholders on the register. Copies are available at the Company's Registered Office, Clive House, 12-18 Queens Road, Weybridge, Surrey, KT13 9XB or at www.ttelectronics.com. This information is provided by RNS The company news service from the London Stock Exchange

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