Interim Results

TT electronics PLC 10 September 2007 TTG.L TT ELECTRONICS PLC TT electronics is a world leader in sensor and electronic components technology and today announces its results for the six months to 30 June 2007. KEY POINTS New products to drive future growth • Group revenue from continuing operations of £270.5 million (2006: £272.3 million). • Operating profit from continuing operations was £18.9 million (2006: £18.2 million). • The disposal of the AEI Cables business increases the group's focus on being a supplier of higher margin, innovative components. • The group has acquired two new sensor technologies to broaden our product range in the automotive markets. • Earnings per share from trading were 7.4p (2006: 7.2p). • The interim dividend is maintained at 3.69p per share. Neil Rodgers, Chief Executive, said today: 'I am pleased to report on a good first half result from TT electronics. 'The disposal of AEI Cables is a further step in TT electronics' strategy to focus on its higher margin businesses, maximise the exploitation of existing technologies and invest in advanced technology development to drive product innovation. 'We continue to win orders for sensors from the automotive markets where we have established a leading market position, particularly in Europe. The new sensor technologies we have recently acquired will broaden our product range. The group is experiencing strong demand for its specialist thin film resistor product range and for electronic components incorporating microcircuit technology. 'Volume manufacture of several important new products is expected to commence during 2008. This, together with the further transfer of manufacturing to low labour cost economies, will continue to enhance margins and drive growth.' Enquiries: TT electronics plc Tel: 01932 841310 Neil Rodgers, Chief Executive Biddicks Tel: 020 7448 1000 Zoe Biddick Highlights Half year Half year Full year 30 June 2007 30 June 2006 2006 £million £million £million ---------- ----------- -------- Revenue 270.5 272.3 539.4 -------------------------- ---------- ----------- -------- Operating profit before exceptional item 18.9 18.2 36.5 -------------------------- ---------- ----------- -------- Profit before tax and exceptional item 16.0 15.8 31.2 Exceptional item - - 8.8 -------------------------- ---------- ----------- -------- Profit before tax 16.0 15.8 40.0 -------------------------- ---------- ----------- -------- Loss from discontinued operation (14.5) (0.3) - -------------------------- ---------- ----------- -------- Earnings per share from continuing operations - basic 7.4p 7.2p 18.1p - diluted 7.3p 7.1p 17.9p - basic before exceptional item 7.4p 7.2p 12.4p -------------------------- ---------- ----------- -------- Dividend per share to be paid 3.69p 3.69p 10.05p -------------------------- ---------- ----------- -------- Chairman's statement I am pleased to report that our trading results have improved compared with the first half of 2006 and this has been achieved after a reduction in revenue and operating profit of £9.7 million and £0.7 million respectively arising from the weakness in foreign currencies, principally the US dollar against sterling, compared with a year ago. In the first half of 2007 revenue from continuing operations was £270.5 million (2006: £272.3 million) and operating profit was £18.9 million (2006: £18.2 million), a growth in operating profit of 3.8 per cent; before the effect of the changes in translation the growth was 7.7 per cent. Basic earnings per share from continuing operations were 7.4p (2006: 7.2p). The interim dividend is unchanged at 3.69p per share and will be paid on 25 October 2007 to shareholders on the register on 19 October 2007. On 29 June 2007 the group announced its intention to exit from the AEI Cables business and this was sold on 3 September 2007, a further step in the strategy of transforming the group away from low margin, non-specialist products to a supplier of higher margin, innovative components. The consideration for the sale is £13.3 million, which is a discount of £13.2 million against the carrying value of the net assets sold. AEI Cables was incurring increasing levels of trading losses and these, together with the discount and other costs of sale, are reported as a discontinued operation. This disposal will virtually eliminate the group's exposure to the risk of volatile changes in the prices of commodities such as copper and was a lower cost alternative to closure. The merger of the principal UK pension schemes into one has now been completed; the pension scheme deficit has reduced, mainly through improved returns on assets and a higher discount rate. At 30 June 2007 the deficit was £33.0 million (June 2006: £65.3 million). Expenditure on property, plant and equipment has increased in the first half of the year to £15.0 million (2006: £9.2 million). This includes the expansion of our sensor factory in eastern Germany and our electronic component factory in Austria together with expenditure on new plant, including equipment for increasing the manufacture of Autopad(R) inductive sensors and for our expansion in China. This investment reflects the success of our electronic sensor and microcircuit products and will support the future growth of these businesses. Since the last Chairman's statement two non-executive Directors, Timothy Reed and Sir Laurence Magnus, have left the Board. On behalf of all colleagues, I thank them for their contributions to the group's success and welcome John Shakeshaft to the Board as an independent non-executive Director. I announced at the last Annual General Meeting that, whilst remaining Executive Chairman, I was reducing my involvement in the day to day running of the group. TT electronics has a strong management team at both Board and senior management levels. I am confident in their ability to move the group forward with its strategy. Our ongoing businesses are operating in markets which have been stable and current trading is in line with expectations. John W Newman Executive Chairman 7 September 2007 Business review The group has continued to focus on higher margin specialist electronic and electrical products with the planned exit from the commodity cables business. The sale of the AEI Cables business was completed on 3 September 2007. The group's revenue for the six months to June 2007 was £270.5 million (2006: £272.3 million) and operating profit was £18.9 million (2006: £18.2 million). The result of the cables business is reported as a discontinued operation and includes a provision of £13.7 million for the loss on sale. New product development and the identification of new technologies remain key to the success of the group. In the past six months we completed the acquisition of two new sensor technologies to supplement our growth in global automotive markets. Total group - sector analysis 2007 2006 2006 First half First half Full year £million £million £million -------- --------- ---------- Revenue sensors and electronic systems 90.7 99.0 184.8 electronic components 67.5 71.2 139.9 electronic manufacturing services 44.5 33.0 72.1 ------------------------------ -------- --------- ---------- Electronic sector 202.7 203.2 396.8 ------------------------------ -------- --------- ---------- power systems 26.2 29.0 63.1 power transmission 41.6 40.1 79.5 ------------------------------ -------- --------- ---------- Electrical sector 67.8 69.1 142.6 ------------------------------ -------- --------- ---------- Group total 270.5 272.3 539.4 ------------------------------ -------- --------- ---------- Discontinued operation 26.8 29.5 60.9 ------------------------------ -------- --------- ---------- Operating profit (1) sensors and electronic systems 5.5 5.7 11.6 electronic components 4.6 4.6 11.4 electronic manufacturing services 1.9 2.0 1.3 ------------------------------ -------- --------- ---------- Electronic sector 12.0 12.3 24.3 ------------------------------ -------- --------- ---------- power systems 1.8 2.0 5.4 power transmission 5.1 3.9 6.8 ------------------------------ -------- --------- ---------- Electrical sector 6.9 5.9 12.2 ------------------------------ -------- --------- ---------- Group total 18.9 18.2 36.5 ------------------------------ -------- --------- ---------- (1) Operating profit is for continuing operations and is stated before the exceptional item. Sensors and electronic systems 2007 2006 2006 First half First half Full year £million £million £million ------------------------------ -------- --------- ---------- Revenue 90.7 99.0 184.8 Operating profit 5.5 5.7 11.6 ------------------------------ -------- --------- ---------- Revenues were affected by the weakness of the USA automotive market and the cessation of our climate systems business in France during early 2006. However, demand for sensors from our European customers remained strong throughout the first half. Volume production on the first Autopad(R) inductive products does not commence until 2008. The programme has been affected by a delay to the completion of the ASIC (application specific integrated circuit). However this is now resolved. The first orders have been received from local Indian automotive manufacturers for sensors to be produced by our Indian joint venture. Electronic components 2007 2006 2006 First half First half Full year £million £million £million -------- --------- ---------- Revenue 67.5 71.2 139.9 Operating profit 4.6 4.6 11.4 ------------------------------ -------- --------- ---------- Revenue is down on the older resistive products particularly those used in the USA automotive market. The strong demand for our specialist tanfilm resistor product range has continued throughout this period and our operation in Corpus Christi, USA has been running at full capacity. New equipment is being installed later this year which will provide further capacity to satisfy this demand. Microcircuit revenues have increased mainly due to demand from the defence and aerospace markets. In the automotive sector a number of new products are being developed for launch in 2008 and beyond. Electronic manufacturing services 2007 2006 2006 First half First half Full year £million £million £million -------- --------- ---------- Revenue 44.5 33.0 72.1 Operating profit 1.9 2.0 1.3 ------------------------------ -------- --------- ---------- The integration of Apsco Inc (now renamed TT Apsco Inc) into the group has been successfully completed and new senior management appointed. Demand in North America has been weaker than expected and new programmes slower to start, leading to lower than anticipated profitability. The introduction of new product into our Malaysian facility, following the closure of the Blyth factory completed last year, has suffered initial problems. Additional costs such as premium prices for materials and airfreight have been incurred, depressing the margin. Production is now running smoothly and improved margins are expected to be achieved. The operation in China has continued to grow. Electrical 2007 2006 2006 First half First half Full year £million £million £million -------- --------- --------- Revenue power systems 26.2 29.0 63.1 power transmission 41.6 40.1 79.5 ------------------------------ -------- --------- ---------- 67.8 69.1 142.6 ------------------------------ -------- --------- ---------- Operating profit power systems 1.8 2.0 5.4 power transmission 5.1 3.9 6.8 ------------------------------ -------- --------- ---------- 6.9 5.9 12.2 ------------------------------ -------- --------- ---------- The power systems operation in Mexico continues to perform well in both the export and domestic Mexican markets. The electrical connections systems business has benefited from strong demand for specialist system assemblies for the defence market. New product ranges for military connectors are being introduced which are expected to generate further growth in 2008 and beyond. The electrical accessories operation had a slow start to the year following the factory move, production efficiency has now improved to normal levels. Discontinued operation The sale of the AEI Cables business was completed on 3 September 2007 and is reported as a discontinued operation. The carrying value of the net assets sold is estimated at £26.5 million, and the consideration £13.3 million. The loss on sale, together with other costs of sale and trading losses amount to £14.5 million. AEI Cables was the last significant business in the group producing a commodity product. Dividends and earnings per share The interim dividend is unchanged at 3.69p per share. Basic earnings per share from continuing operations has improved to 7.4p (2006: 7.2p). Treasury and borrowings There has been an increase in the requirement for working capital of £7.8 million (2006: £9.8 million). This was principally in inventory and debtors and was due in part to the cost of copper metal, which despite falling to £2,700 per ton in the first quarter, then increased to over £3,800 per ton at the end of June. This combined with the payment of the final dividend of £9.9 million and the special cash contribution of £5.5 million to the pension fund has resulted in net borrowings increasing to £83.5 million from £71.0 million at December 2006. Gearing at the end of June 2007 was 51 per cent (December 2006: 45 per cent). The net effect of changes in the exchange rates of foreign currencies used to translate the results is a reduction in revenue and operating profit of £9.7 million and £0.7 million respectively. This is mainly due to the weaker US dollar. Pensions The main pension schemes in the UK have now been merged. The deficit has reduced to £33.0 million from £72.6 million at the end of 2006. This reduction is primarily due to an increase in the discount rate to 5.9 per cent from 5.3 per cent, additional cash contributions of £5.5 million and better than expected returns on assets. Outlook The group's strategy is to develop our worldwide businesses to enhance our position as a supplier of specialist products. New technologies and products are key to TT electronics' future growth. The volume manufacture of new products for a number of new programmes will commence during 2008. The markets in which we operate are stable and therefore we anticipate little change to current trading conditions during the second half of 2007. Neil A Rodgers Roderick W Weaver Chief Executive Finance Director 7 September 2007 7 September 2007 Consolidated income statement for the six months ended 30 June 2007 2007 2006 2006 First half First half Full year Note £million £million £million ----- --------- --------- --------- Continuing operations Revenue 2 270.5 272.3 539.4 --------------------------- ----- --------- --------- --------- Operating profit before exceptional item 3 18.9 18.2 36.5 Exceptional item 4 - - 8.8 --------------------------- ----- --------- --------- --------- Operating profit 18.9 18.2 45.3 Finance income 5 8.1 7.2 14.0 Finance costs 5 (11.0) (9.6) (19.3) --------------------------- ----- --------- --------- --------- Profit before taxation 16.0 15.8 40.0 Taxation 6 (4.6) (4.7) (12.0) --------------------------- ----- --------- --------- --------- Profit for the period from continuing operations 11.4 11.1 28.0 --------------------------- ----- --------- --------- --------- Discontinued operation Loss for the period from discontinued operation 7 (14.5) (0.3) - --------------------------- ----- --------- --------- --------- Profit/(loss) for the period attributable to shareholders (3.1) 10.8 28.0 --------------------------- ----- --------- --------- --------- Earnings per share 8 From continuing and discontinued operations - basic (2.0)p 7.0p 18.1p - diluted (2.0)p 6.9p 17.9p From continuing operations - basic 7.4p 7.2p 18.1p - diluted 7.3p 7.1p 17.9p --------------------------- ----- --------- --------- --------- Dividend per share to be paid 3.69p 3.69p 10.05p --------------------------- ----- --------- --------- --------- Consolidated balance sheet at 30 June 2007 2007 2006 2006 30 June 30 June 31 December Note £million £million £million ------ ---------- --------- --------- ASSETS Non-current assets Property, plant and equipment 106.5 111.0 108.6 Goodwill 51.9 49.1 53.1 Other intangible assets 16.1 16.0 16.0 Deferred tax assets 8.6 22.6 21.0 ------------------------ ------ ----------- ---------- --------- Total non-current assets 183.1 198.7 198.7 ------------------------ ------ ----------- ---------- --------- Current assets Inventories 91.0 93.9 99.8 Trade and other receivables 95.8 107.9 104.6 Financial derivatives 0.1 0.4 0.6 Cash and cash equivalents 5.0 22.2 9.5 ------------------------ ------ ----------- ---------- --------- Total current assets 191.9 224.4 214.5 ------------------------ ------ ----------- ---------- --------- Assets of disposal group held for sale 7 20.6 - - ------------------------ ------ ----------- ---------- --------- Total assets 395.6 423.1 413.2 ------------------------ ------- ----------- ---------- --------- LIABILITIES Current liabilities Short-term borrowings 21.5 8.5 11.5 Financial derivatives 0.3 0.1 - Trade and other payables 89.4 99.0 87.3 Current tax payable 3.0 7.1 1.3 Provision for liabilities 0.4 1.2 0.9 ------------------------ ------- ----------- ---------- --------- Total current liabilities 114.6 115.9 101.0 ------------------------ ------- ----------- ---------- --------- Non-current liabilities Long-term borrowings 67.0 62.5 69.0 Deferred tax provision 5.3 5.8 5.4 Pensions and other post employment benefits 9 33.0 65.3 72.6 Other provisions 0.7 0.9 0.7 Other non-current liabilities 6.2 7.7 7.5 ------------------------ ------- ----------- ---------- --------- Total non-current liabilities 112.2 142.2 155.2 ------------------------ ------- ----------- ---------- --------- Liabilities of disposal group classified as held for sale 7 5.4 - - ------------------------ ------- ----------- ---------- --------- Total liabilities 232.2 258.1 256.2 ------------------------ ------- ----------- ---------- --------- Net assets 163.4 165.0 157.0 ------------------------ ------- ----------- ---------- --------- EQUITY Share capital 38.7 38.7 38.7 Share options 0.9 0.7 0.8 Hedging and translation reserve (7.4) (1.7) (6.1) Retained earnings 129.2 125.3 121.6 Minority interests 2.0 2.0 2.0 ---------------------- --------- ----------- ---------- --------- Total equity 11 163.4 165.0 157.0 ---------------------- --------- ----------- ---------- --------- Consolidated statement of recognised income and expense for the six months ended 30 June 2007 2007 2006 2006 First half First half Full year £million £million £million -------- --------- ---------- Profit/(loss) for the period (3.1) 10.8 28.0 Exchange differences on net foreign currency investments (1.2) (5.2) (9.6) Actuarial gain on defined benefit pension schemes 33.0 24.8 3.2 Deferred tax on pension deficit movement (12.5) (7.4) (1.0) ------------------------------ -------- --------- ---------- Total recognised income and expense for the period 16.2 23.0 20.6 ------------------------------ -------- --------- ---------- Consolidated cash flow statement for the six months ended 30 June 2007 2007 2006 2006 First half First half Full year Note £million £million £million ------ -------- --------- --------- Operating activities Profit/(loss) for the period attributable to shareholders (3.1) 10.8 28.0 Adjustments for Finance costs 3.1 2.5 5.7 Taxation 4.6 4.5 11.3 Depreciation and amortisation 15.6 16.0 32.3 Gain on disposal of property, plant and equipment (0.1) (2.0) (2.0) Provision against assets held for sale 7 13.5 - - Pension curtailment gain (1.1) - (8.8) Other non cash items (net) - (0.2) 0.4 Movement in working capital (7.8) (9.8) (21.4) Additional payments to pension funds (6.3) (0.8) (7.0) Exchange differences (1.0) (4.4) (6.4) ---------------------------- ------ -------- --------- --------- Cash generated from operations 17.4 16.6 32.1 Tax paid (2.9) (2.0) (7.0) ---------------------------- ------ -------- --------- --------- Net cash from operating activities 14.5 14.6 25.1 ---------------------------- ------ -------- --------- --------- Cash flows from investing activities Purchase of property, plant and equipment (15.0) (9.2) (20.6) Purchase of patents (0.6) - - Proceeds from sale of property, plant and equipment and grants received 3.3 4.4 7.1 Development expenditure (4.4) (4.9) (8.6) Acquisition of subsidiary net of cash acquired - - (14.7) ---------------------------- ------ -------- --------- --------- Net cash used in investing activities (16.7) (9.7) (36.8) ---------------------------- ------ -------- --------- --------- Cash flows from financing activities Net interest paid (2.0) (1.4) (3.8) Change in loans and finance lease liabilities (0.1) (0.1) 10.0 Dividends paid (9.9) (9.9) (15.6) ---------------------------- ------ -------- --------- --------- Net cash used in financing activities (12.0) (11.4) (9.4) ---------------------------- ------ -------- --------- --------- Net decrease in cash and cash equivalents 10 (14.2) (6.5) (21.1) Cash and cash equivalents at beginning of period 0.7 22.3 22.3 Exchange difference 0.1 0.2 (0.5) ---------------------------- ------ -------- --------- --------- Cash and cash equivalents at end of period 10 (13.4) 16.0 0.7 ---------------------------- ------ -------- --------- --------- Cash and cash equivalents comprise Cash and cash equivalents 5.0 22.2 9.5 Bank overdrafts (18.4) (6.2) (8.8) ---------------------------- ------ -------- --------- --------- 10 (13.4) 16.0 0.7 ---------------------------- ------ -------- --------- --------- Notes to the interim financial statements 1. Basis of accounting The interim financial statements for the half year to 30 June 2007 are unaudited. They have been prepared under International Financial Reporting Standards (IFRS), as adopted by the European Union, in accordance with the accounting policies set out in the Annual Report for 2006. On 29 June 2007 the group announced its intention to exit from the AEI Cables business. This business meets the criteria of IFRS 5 'Non-current assets held for sale and discontinued operations' requiring it to be classified as a discontinued operation. The full year figures in this report are derived from the statutory accounts, restated as appropriate to classify AEI Cables as a discontinued operation. The statutory accounts on which the auditors gave an unqualified report have been filed with the Registrar of Companies. These interim statements comply with IAS 34 'Interim Financial Reporting' and were approved by the Directors on 7 September 2007. 2. Analysis of revenue - continuing operations 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- By business sector Electronic - sensors and electronic systems 90.7 99.0 184.8 - electronic components 67.5 71.2 139.9 - electronic manufacturing services 44.5 33.0 72.1 ------------------------- ---------- ---------- ---------- Total electronic 202.7 203.2 396.8 ------------------------- ---------- ---------- ---------- Electrical - power systems 26.2 29.0 63.1 - power transmission 41.6 40.1 79.5 ------------------------- ---------- ---------- ---------- Total electrical 67.8 69.1 142.6 ------------------------- ---------- ---------- ---------- Total revenue 270.5 272.3 539.4 ------------------------- ---------- ---------- ---------- By destination United Kingdom 56.4 58.8 115.7 Rest of Europe 102.2 103.9 200.9 North America 72.6 70.6 145.6 Rest of the World 39.3 39.0 77.2 ------------------------- ---------- ---------- ---------- Total revenue 270.5 272.3 539.4 ------------------------- ---------- ---------- ---------- The group's primary reporting format is by business segments and its secondary format is by geographical segments. 3. Analysis of operating profit before exceptional item 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- By business sector Electronic - sensors and electronic systems 5.5 5.7 11.6 - electronic components 4.6 4.6 11.4 - electronic manufacturing services 1.9 2.0 1.3 ------------------------- ---------- ---------- ---------- Total electronic 12.0 12.3 24.3 ------------------------- ---------- ---------- ---------- Electrical - power systems 1.8 2.0 5.4 - power transmission 5.1 3.9 6.8 ------------------------- ---------- ---------- ---------- Total electrical 6.9 5.9 12.2 ------------------------- ---------- ---------- ---------- Operating profit before exceptional item 18.9 18.2 36.5 ------------------------- ---------- ---------- ---------- 4. Exceptional item 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- Curtailment of pension scheme benefits - - 8.8 --------------------------- --------- --------- --------- The pensionable salaries of members of the UK defined benefit schemes are frozen for three years. The consequent reduction in the liabilities of the schemes was recognised in the actuarial valuations of the schemes at 31 December 2006. 5. Finance costs - net 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- Continuing operations Interest payable (2.4) (2.1) (4.3) Unwinding of the discount on pension scheme liabilities (8.6) (7.5) (15.0) ---------------------------- --------- --------- --------- Finance costs (11.0) (9.6) (19.3) ---------------------------- --------- --------- --------- Interest receivable 0.3 0.6 0.8 Expected return on pension scheme assets 7.8 6.6 13.2 ---------------------------- --------- --------- --------- Finance income 8.1 7.2 14.0 ---------------------------- --------- --------- --------- Finance costs - net (2.9) (2.4) (5.3) ---------------------------- --------- --------- --------- 6. Taxation Taxation on the profit for the half year to 30 June 2007 has been based on an estimated effective rate of 29 per cent for the year ending 31 December 2007. 7. Discontinued operation On 29 June 2007 the group announced its intention to exit from the AEI Cables business. This business meets the criteria of IFRS 5 'Non-current assets held for sale and discontinued operations' as a disposal group held for sale and therefore the trading of AEI Cables has been reported as a discontinued operation in the consolidated income statement and its assets and liabilities have been classified as held for sale on the consolidated balance sheet. The sale was completed on 3 September 2007. At 30 June 2007 the amounts included in the financial statements in respect of AEI Cables are: 2007 2006 2006 First half First half Full year £million £million £million -------- --------- --------- Revenue 26.8 29.5 60.9 ---------------------------- -------- --------- --------- Operating loss (1.7) (0.4) (0.3) Finance income 0.5 0.6 1.3 Finance costs (0.7) (0.7) (1.7) ---------------------------- -------- --------- --------- Loss before taxation (1.9) (0.5) (0.7) Taxation - 0.2 0.7 ---------------------------- -------- --------- --------- Loss from trading after taxation (1.9) (0.3) - Pension curtailment arising from exit 1.1 - - Provision against assets (13.5) - - Other disposal costs (0.2) - - ---------------------------- -------- --------- --------- Loss for the period from discontinued operation (14.5) (0.3) - ---------------------------- -------- --------- --------- 2007 30 June £million -------- --------- --------- Assets of disposal group held for sale: Plant and equipment 1.5 Inventories 17.3 Trade and other receivables 15.3 ---------------------------- -------- --------- --------- 34.1 Provision against assets (13.5) ---------------------------- -------- --------- --------- Assets of disposal group held for sale 20.6 ---------------------------- -------- --------- --------- Liabilities of disposal group classified as held for sale: Trade and other payables 5.4 ---------------------------- -------- --------- --------- 2007 2006 2006 First half First half Full year £million £million £million Cash flows Net cash from operating activities 2.1 (3.0) (10.1) Net cash used in investing activities (0.3) 0.8 0.5 Net cash used in financing activities (0.1) (0.1) (0.3) ---------------------------- -------- --------- --------- 8. Earnings per share From continuing and discontinued operations: 2007 2006 2006 First half First half Full year pence pence pence Basic (2.0) 7.0 18.1 Diluted (2.0) 6.9 17.9 --------------------------- --------- --------- --------- Earnings per share has been calculated by dividing the profit attributable to shareholders by the weighted average number of shares in issue during the period. The numbers used in calculating basic and diluted earnings per share are shown below: 2007 2006 2006 First half First half Full Year £million £million £million -------- --------- --------- Profit/(loss) for the period attributable to shareholders: Earnings basic and diluted (3.1) 10.8 28.0 ---------------------------- -------- --------- --------- million million million Weighted average number of shares in issue: Basic 154.8 154.8 154.8 Adjustment for share options 1.7 1.5 1.4 ---------------------------- -------- --------- --------- Diluted 156.5 156.3 156.2 ---------------------------- -------- --------- --------- From continuing operations: 2007 2006 2006 First half First half Full year pence pence pence ---------------------------- -------- --------- --------- Basic 7.4 7.2 18.1 Diluted 7.3 7.1 17.9 ---------------------------- -------- --------- --------- £million £million £million Profit/(loss) for the period attributable to shareholders (3.1) 10.8 28.0 Add loss for the period from discontinued operation 14.5 0.3 - ---------------------------- -------- --------- --------- Earnings basic and diluted from continuing operations 11.4 11.1 28.0 ---------------------------- -------- --------- --------- The denominators are the same as shown above for basic and diluted earnings per share. 9. Retirement benefit plans Following scheme mergers in 2006 and 2007, the group now operates two defined benefit plans in the UK, both of which are closed to new members. It also operates defined benefit plans in the United States and Japan. Actuarial valuations of the plans were carried out by independent qualified actuaries between 2002 and 2005 principally using the projected unit credit method. These actuarial valuations have been updated by the actuaries to assess the assets and liabilities of the plans at 30 June 2007. Pension scheme assets are stated at market value. The principal assumptions used for the purpose of the actuarial valuations were as follows: 2007 2006 2006 30 June 30 June 31 December % % % --------- --------- --------- Discount rate 5.9 5.4 5.3 Inflation rate 3.2 2.7 2.9 Increases to pensions in payment 2.5-3.2 2.5-2.6 2.5-2.9 Salary increases for 3 years - 3.3 - Salary increases thereafter 3.7 3.3 3.4 ------------------------- --------- --------- --------- The expected long-term rates of return on the main asset classes, net of expenses, set by management having regard to actuarial advice and relevant indices at 30 June 2007 were: 2007 2006 2006 30 June 30 June 31 December % % % --------- --------- --------- Equities 7.0 6.6 6.8 Bonds 4.5 4.6 4.3 Gilts and cash 4.0 3.6 3.8 ------------------------- --------- --------- --------- The mortality tables applied by the actuaries at 30 June 2007 and 31 December 2006 were PA92MC + two years. On the above basis the amounts recognised on the consolidated balance sheet are: £million £million £million --------- --------- --------- Fair value of assets 286.9 251.8 272.1 Present value of funded obligation (319.9) (317.1) (344.7) ------------------------- --------- --------- --------- Net liability recognised on the balance sheet (33.0) (65.3) (72.6) ------------------------- --------- --------- --------- Costs recognised in the consolidated income statement are: 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- Current service cost 1.7 2.5 4.4 Interest on obligation 9.1 8.1 16.4 Expected return on plan assets (8.3) (7.2) (14.5) ------------------------- --------- --------- --------- Changes in the present value of the defined benefit obligation are: 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- Opening defined benefit obligation 344.7 335.9 335.9 Current service cost 1.7 2.5 4.4 Interest on obligation 9.1 8.1 16.4 Plan participant contributions 0.7 0.8 1.5 Curtailment (1.1) - (8.8) Change in actuarial estimates and assumptions (28.5) (24.8) 6.2 Exchange differences - (0.4) (0.8) Benefits paid (6.7) (5.0) (10.1) --------------------------- --------- --------- --------- Closing defined benefit obligation 319.9 317.1 344.7 --------------------------- --------- --------- --------- Changes in the fair value of plan assets are: 2007 2006 2006 First half First half Full year £million £million £million --------- --------- --------- Opening fair value of plan assets 272.1 245.7 245.7 Expected return on plan assets 8.3 7.2 14.5 Excess of actual over expected returns 4.5 - 9.4 Contributions by employer 8.0 3.3 11.4 Contributions by employees 0.7 0.8 1.5 Exchange differences - (0.2) (0.3) Benefits paid (6.7) (5.0) (10.1) ------------------------- --------- --------- --------- Closing fair value of plan assets 286.9 251.8 272.1 ------------------------- --------- --------- --------- The experience adjustments arising on the plan assets and liabilities are reported in the consolidated statement of recognised income and expense and are as follows: £million £million £million --------- --------- --------- Experience adjustments on plan liabilities 28.5 24.8 (6.2) Experience adjustments on plan assets 4.5 - 9.4 ------------------------- --------- --------- --------- Total actuarial gain 33.0 24.8 3.2 ------------------------- --------- --------- --------- 10. Reconciliation of net cash flow to movement in net debt Net cash/ Loans and (overdraft) finance leases Net debt £million £million £million --------- ---------- --------- Balance at 31 December 2005 22.3 (69.4) (47.1) Cash flow (6.5) 0.1 (6.4) Exchange differences 0.2 4.5 4.7 ------------------------- --------- ---------- --------- Balance at 30 June 2006 16.0 (64.8) (48.8) Cash flow (14.6) (10.1) (24.7) Exchange differences (0.7) 3.2 2.5 ------------------------- --------- ---------- --------- Balance at 31 December 2006 0.7 (71.7) (71.0) Cash flow (14.2) 0.1 (14.1) Exchange differences 0.1 1.5 1.6 ------------------------- --------- ---------- --------- Balance at 30 June 2007 (13.4) (70.1) (83.5) ------------------------- --------- ---------- --------- Net cash represents cash and cash equivalents less bank overdrafts. 11. Summary of movements in shareholders' equity 2007 2006 2006 First half First half Full year £million £million £million -------- ---------- --------- Opening shareholders' equity 157.0 151.7 151.7 Profit for the period (3.1) 10.8 28.0 Exchange differences on net foreign currency investments (1.2) (5.2) (9.6) Actuarial gain (net) on defined benefit pension schemes 33.0 24.8 3.2 Deferred tax on pension deficit movement (12.5) (7.4) (1.0) Dividends paid (9.9) (9.9) (15.6) Share based payment 0.1 0.2 0.3 ----------------------------- -------- ---------- --------- Closing shareholders' equity 163.4 165.0 157.0 ----------------------------- -------- ---------- --------- 12. Dividend payment The interim dividend of 3.69p per share will be paid on 25 October 2007 to shareholders on the register on 19 October 2007. Shares will be ex-dividend on 17 October 2007. 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.ttelectronicsplc.com. This information is provided by RNS The company news service from the London Stock Exchange

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