Tt Electronics Regulatory News (TTG)

13 Sep 2005 07:01

TT electronics PLC13 September 2005 TT electronics plc TT electronics, a world leader in resistor and sensor technology, today announces its interim results for the six months ended 30 June 2005. KEY POINTS • Group sales were £297.3 million (2004: £299.1 million) generating an operating profit before exceptional items of £14.6 million (2004: £14.0 million). • Group profit before tax, including an exceptional gain of £5.0 million from the sale of the Gravesend site, was £16.4 million (2004: £11.1 million). • Electronic sector sales were £201.6 million (2004: £207.4 million) generating an operating profit of £10.3 million (2004: £11.8 million). • Electrical sector sales were £95.7 million (2004: £91.7 million) generating an operating profit of £4.3 million (2004: £2.2 million). • The strategic acquisition of Dage Limited in March is performing ahead of expectations and provides the group with the facilities to manufacture and source low cost components in China. • Earnings per share before exceptional profit is up by 18% to 5.2p (2004: 4.4p) • The interim dividend is maintained at 3.69p per share. John Newman, Executive Chairman, said today: "TT electronics has again returned a solid performance in less buoyant tradingconditions. "In the electronic sector we experienced a softening of demand in the Europeancomponent market and reduced vehicle production in North America. We expect boththese markets to recover. Our electrical sector improved strongly as a result ofmanagement action and increased demand for diesel generator sets manufactured inMexico. "We remain focussed on the development of our successful world class electronicsbusinesses which operate in long term growth markets. We continue to exitnon-core, loss making businesses and to relocate our manufacturing operations tolow cost areas." Enquiries: Biddicks Tel: 020 7448 1000Zoe Biddick Highlights Half year % Change Half year Full year 30 June 2005 30 June 2004 2004 £ million £ million £ million----------------------- ---------- ------- ---------- -------- Revenue 297.3 - 299.1 597.4----------------------- ---------- ------- ---------- --------Operating profit beforeexceptional items 14.6 +4% 14.0 33.0Exceptional items 5.0 - - ------------------------ ---------- ------- ---------- --------Operating profit 19.6 +40% 14.0 33.0----------------------- ---------- ------- ---------- --------Profit before tax 16.4 +48% 11.1 27.5----------------------- ---------- ------- ---------- -------- Earnings per share - basic 7.4p +68% 4.4p 11.9p - fully diluted 7.3p +66% 4.4p 11.8p----------------------- ---------- ------- ---------- --------Dividends per share to be paid 3.69p - 3.69p 10.05p----------------------- ---------- ------- ---------- -------- Chairman's statement TT electronics made good progress this half year with its programme of focussingon the core electronics business. The group achieved the profitable sale of theland at Gravesend following the closure of the power cables division and hasmade an important strategic expansion into China with the acquisition of DageLimited. The market conditions were not as buoyant as in the first half of 2004 and as aresult revenue is slightly down at £297.3 million (2004: £299.1 million).Operating profit before the exceptional items was £14.6 million (2004: £14.0million) including the initial contribution of £0.7 million from the DageLimited group of companies. Profit before taxation, including the exceptionalprofit of £5.0 million, was £16.4 million (2004: £11.1 million). The exceptionalprofit of £5.0 million arises from the disposal of the Gravesend site afterdeducting the costs of closing the power cables division on that site. It isanticipated that the group will benefit from further proceeds when the site isdeveloped. Basic earnings per share were 7.4p (2004: 4.4p). The electronic sector profits reduced to £10.3 million (2004: £11.8 million).While sales of sensors in Europe remained strong, sales to the North Americanautomotive industry were adversely affected by slowdown in demand as was theclimate control business. Further restructuring actions to reduce costs arebeing implemented. The UK printed circuit board business is uncompetitive withthe Far East and production will be significantly reduced before the end of theyear. Notwithstanding this, the group's major electronic businesses possess themanagement skills, product knowledge and manufacturing facilities to benefitfrom future growth in their markets. The Dage Limited subsidiaries, now trading as TT electronic integrated systems,were acquired in March this year and are performing ahead of expectations. Thisis an important acquisition and provides the group with the facilities in Chinato manufacture and source low cost components. It will improve TT electronics'competitive edge with its major OEM customers and expand the group's electronicsbusiness in the fast growing Asian market. The electrical sector profit increased to £4.3 million (2004: £2.2 million)benefiting from strong demand for standard diesel generating sets manufacturedby our subsidiary in Mexico and from the downsizing of the loss making cableoperations. The group recently sold Houchin Aerospace Limited, its standby powergeneration equipment company, for £8.0 million cash, being a premium to netassets. This sale continues TT electronics' strategy of disposing of non-coreelectrical operations at attractive prices and re-investing in its growthbusinesses. The group has again demonstrated its ability to generate cash through tightcontrol over working capital. This strong cash generation together with thestrength of the group's balance sheet underpins the group's dividend payments.The interim dividend will remain unchanged at 3.69 pence per share and will bepaid on 27 October 2005 to shareholders on the register on 21 October 2005. The group's £50 million five year bank loan facility expires in June 2006 and istherefore now classified as a short term borrowing on the balance sheet.Discussions with our bankers are at an advanced stage to refinance thisborrowing with a long term bank facility on terms more attractive than thosecurrently in place. These interim financial statements have been prepared under InternationalFinancial Reporting Standards. Shareholders are referred to my letter andaccompanying circular dated 22 July 2005 in which the main changes to theaccounts were explained. The group is focussing its management and financial resources more strongly onits world class electronics businesses which are in long term growth markets andwill provide a sound basis for future performance. John W NewmanExecutive Chairman13 September 2005 Chief Executive's review The group has achieved operating profit before exceptional items of £14.6million (2004: £14.0 million) on sales marginally below the first half of 2004. Trading conditions in the electronics sector were weaker than those in thestrong first half of last year but comparable with those in the second half. In the electrical sector there has been increased demand for household cables,offset by the turnover reduction in the power cable business following theclosure of manufacturing at Gravesend. On 9 September 2005 we announced a major reduction in the operations ofPrestwick Circuits Limited. This operation is loss making and the Board hastaken the view that in the face of competition in a market dominated by FarEastern supply profitability in the long term is unlikely. Electronic sector Sensors and electronic systems Sensor sales to European OEMs were strong but demand from the North Americanmarket for both sensors and climate control units was disappointing. Thisfollowed the reduction in vehicle production levels by major North AmericanOEMs. Recent initiatives by these vehicle manufacturers have boosted their salesand new products, including the Autopad(R), are due to commence manufacture inthe second half. These replace a number of programmes which ended in the firsthalf and therefore we expect improved demand by the end of this year. OurEuropean based climate control business has had a difficult first half. Thiswill be addressed by the transfer of manufacturing to our North American factoryand rationalisation of our European operations. Electronic components Sales in the first half of 2005 were £65.9 million (2004: £72.0 million). Demandfor components in North America and the Far East has remained good but in Europeit has declined. This reflects competition from Far Eastern sources and theexpected transition to lead-free components being led by the European market.This transition has led to a disruption to the market which we expect torecover. Specialist hybrid modules manufactured for the European automotivemarket are proving successful. Electronic manufacturing services Sales increased by 6 per cent to £38.3 million (2004: £36.1 million) includingthe effect of the acquisition of Dage Limited and its subsidiaries based inChina and the UK. The group's UK operations have been successful in further expanding the range ofcustomers particularly in the aerospace and defence markets and we look forwardto improved profitability following the reduction of losses incurred at our UKprinted circuit board business. Electrical sector Power systems Sales have remained stable at £25.0 million (2004: £25.4 million). The group'spower generator set operation in Mexico has maintained its success in sales toFar Eastern markets. Power and data transmission Sales were £70.7 million (2004: £66.3 million), reflecting the higher cost ofthe copper content in electrical cables offset by reduced sales of power cablesfollowing the closure of the Gravesend power cable business. Our cable accessoryoperations continued to achieve good profits at a consistent level of revenue. Outlook We continue to rationalise our business operations and to dispose of operationsoutside of our core focus which remains world class electronics manufacture. Our core businesses remain strong and the group's employees are committed tosuccess in the market place. The current trading conditions are not expected tochange significantly in the second half of 2005. Neil A RodgersChief Executive13 September 2005 Consolidated income statementfor the six months ended 30 June 2005 Note 2005 2004 2004 First half First half Full year £ million £ million £ million--------------------------- ----- --------- --------- --------- Revenue 2 297.3 299.1 597.4--------------------------- ----- --------- --------- ---------Operating profit before exceptionalitems 3 14.6 14.0 33.0Exceptional items 4 5.0 - ---------------------------- ----- --------- --------- ---------Operating profit 19.6 14.0 33.0Finance costs (net) 5 (3.2) (2.9) (5.5)--------------------------- ----- --------- --------- ---------Profit before taxation 16.4 11.1 27.5Taxation 6 (4.9) (4.1) (9.1)--------------------------- ----- --------- --------- ---------Profit for the period attributable toshareholders 11.5 7.0 18.4--------------------------- ----- --------- --------- ---------Earnings per share - basic 7 7.4p 4.4p 11.9p - fully diluted 7 7.3p 4.4p 11.8p--------------------------- ----- --------- --------- ---------Dividends per share to be paid 3.69p 3.69p 10.05p--------------------------- ----- --------- --------- --------- Consolidated balance sheetat 30 June 2005 2005 2004 2004 30 June 30 June 31 Dec £ million £ million £ million--------------------------- --------- --------- ---------ASSETSNon-current assetsProperty, plant and equipment 124.1 141.1 136.3Goodwill 50.8 44.7 42.4Other intangible assets 16.9 16.2 17.4Financial assets 1.0 2.1 1.0Deferred tax assets 23.0 20.8 23.2-------------------------- ---------- --------- ---------Total non-current assets 215.8 224.9 220.3-------------------------- ---------- --------- ---------Current assetsProperty - 0.7 0.1Inventories 100.2 105.6 99.6Trade and other receivables 115.7 108.1 103.8Financial assets - 1.0 0.3Cash and cash equivalents 18.0 7.0 5.5-------------------------- ---------- --------- ---------Total current assets 233.9 222.4 209.3-------------------------- ---------- --------- ---------Total assets 449.7 447.3 429.6-------------------------- ---------- --------- ---------LIABILITIESCurrent liabilitiesShort term borrowings 77.9 31.9 17.1Financial liabilities 0.3 0.1 -Trade and other payables 69.5 72.6 67.8Current tax payable 6.4 7.2 7.0Accruals and deferred income 31.1 28.9 24.4-------------------------- ---------- --------- ---------Total current liabilities 185.2 140.7 116.3-------------------------- ---------- --------- ---------Non-current liabilitiesLong term borrowings 5.6 55.9 55.7Deferred tax provision 8.6 9.5 8.7Pensions and other post employmentbenefits 70.4 61.9 70.9Other provisions 1.3 3.2 1.6Other non-current liabilities 8.4 7.3 9.7-------------------------- ---------- --------- ---------Total non-current liabilities 94.3 137.8 146.6-------------------------- ---------- --------- ---------Total liabilities 279.5 278.5 262.9-------------------------- ---------- --------- ---------Net assets 170.2 168.8 166.7-------------------------- ---------- --------- ---------EQUITYShare capital 38.7 38.7 38.7Share premium account 56.0 56.0 56.0Capital redemption reserve 4.4 4.4 4.4Merger reserve 23.0 23.0 23.0Share options 0.3 0.2 0.2Translation reserve (1.1) (2.8) (2.9)Retained earnings 46.0 46.4 44.4-------------------------- ---------- --------- --------- 167.3 165.9 163.8Minority interests 2.9 2.9 2.9-------------------------- ---------- --------- ---------Total equity 170.2 168.8 166.7-------------------------- ---------- --------- --------- Consolidated cash flow statementfor the six months ended 30 June 2005 Note 2005 2004 2004 First half First half Full year £ million £ million £ million--------------------------- ----- --------- --------- --------- Cash flows from operating activitiesOperating profit 19.6 14.0 33.0Adjustments forDepreciation and amortisation 17.2 19.6 38.7Other non cash items (8.0) 2.1 0.1Movement in working capital (1.8) 0.2 2.8Additional payments to pension funds (1.9) (1.4) (3.1)Exchange differences 1.6 (1.7) (1.8)Tax paid (5.8) (9.7) (15.8)------------------------- ------ ---------- --------- ---------Net cash from operating activities 20.9 23.1 53.9------------------------- ------ ---------- --------- --------- Cash flows from investing activitiesPurchase of property, plant and equipment (6.8) (14.3) (24.6)Proceeds from sale of property, plantand equipment and grants received 17.4 4.7 8.2Development expenditure (5.2) (5.3) (10.8)Acquisition of subsidiary net of cashacquired (8.8) (1.6) (1.3)Loan repayment - 6.0 6.0------------------------- ------ ---------- --------- ---------Net cash used in investing activities (3.4) (10.5) (22.5)------------------------- ------ ---------- --------- --------- Cash flows from financing activitiesInterest paid (net) (1.8) (1.8) (3.5)Change in loans and finance leaseliabilities (1.5) 2.3 4.2Dividends paid (9.8) (9.8) (15.6)------------------------- ------ ---------- --------- ---------Net cash used in financing activities (13.1) (9.3) (14.9)------------------------- ------ ---------- --------- --------- Net increase in cash 9 4.4 3.3 16.5Cash and bank overdrafts at beginningof period (9.6) (27.1) (27.1)Exchange difference (1.4) 0.5 1.0------------------------- ------ ---------- --------- ---------Cash and bank overdrafts at end ofperiod (6.6) (23.3) (9.6)------------------------- ------ ---------- --------- --------- Cash and bank overdrafts compriseCash and cash equivalents 18.0 7.0 5.5Bank overdrafts (24.6) (30.3) (15.1)------------------------- ------ ---------- --------- --------- 9 (6.6) (23.3) (9.6)------------------------- ------ ---------- --------- --------- Consolidated statement of recognised income and expensefor the six months ended 30 June 2005 2005 2004 2004 First half First half Full year £ million £ million £ million------------------------------ -------- --------- ---------- Profit for the period 11.5 7.0 18.4Exchange differences on net foreigncurrency investments 1.8 (2.8) (2.9)Actuarial loss (net) on defined benefit pension schemes - - (7.7)------------------------------ -------- --------- ----------Total recognised income andexpense for the period 13.3 4.2 7.8------------------------------ -------- --------- ---------- Summary of movements in shareholders' equityfor the six months ended 30 June 2005 2005 2004 2004 First half First half Full year £ million £ million £ million------------------------------ -------- --------- ---------- Opening shareholders' equity 166.7 174.4 174.4Profit for the period 11.5 7.0 18.4Exchange differences on net foreigncurrency investments 1.8 (2.8) (2.9)Actuarial loss (net) on defined benefit pension schemes - - (7.7)Dividends paid (9.9) (9.9) (15.6)Share options - value of employee services 0.1 0.1 0.1------------------------------ -------- --------- ----------Closing shareholders' equity 170.2 168.8 166.7------------------------------ -------- --------- ---------- Notes to the financial statements 1. Basis of accounting The interim financial statements and all the comparative information areunaudited and have been prepared under International Financial ReportingStandards (IFRS). The restatement of 2004 financial information from UKGenerally Accepted Accounting Principles (UK GAAP) to IFRS and the accountingpolicies of the group under IFRS which apply to all three periods were issued toshareholders on 22 July 2005 and are available on the group's website. These interim statements have been prepared in accordance with IAS 34 'InterimFinancial Reporting' and the requirements of IFRS1 'First-time Adoption ofInternational Financial Reporting Standards' relevant to interim reports andwere approved by the Directors on 13 September 2005. 2. Analysis of revenue 2005 2004 2004 First half First half Full year £ million £ million £ million---------------------- ---------- ----------- ---------- By business sectorElectronic - Sensors and electronic systems 97.4 99.3 191.5 - Electronic components 65.9 72.0 137.1 - Electronic manufacturing services 38.3 36.1 75.0-------------------- ---------- ----------- ----------Total electronic 201.6 207.4 403.6-------------------- ---------- ----------- ----------Electrical - Power systems 25.0 25.4 56.0 - Power and data transmission 70.7 66.3 137.8-------------------- ---------- ----------- ----------Total electrical 95.7 91.7 193.8-------------------- ---------- ----------- ----------Total revenue 297.3 299.1 597.4-------------------- ---------- ----------- ---------- By destinationUnited Kingdom 83.1 85.9 179.9Rest of Europe 113.1 118.2 227.5North America 56.0 61.2 117.7Rest of the World 45.1 33.8 72.3-------------------- ---------- ----------- ----------Total revenue 297.3 299.1 597.4-------------------- ---------- ----------- ---------- By originUnited Kingdom 133.8 140.6 281.8Rest of Europe 75.3 76.3 149.1North America 66.4 66.0 133.8Rest of the World 21.8 16.2 32.7-------------------- ---------- ----------- ----------Total revenue 297.3 299.1 597.4-------------------- ---------- ----------- ---------- The interim results for 2005 include the initial contribution of the TTelectronic integrated systems companies (formerly the Dage Limited group ofcompanies) acquired on 10 March 2005, see note 8. The group's primary reporting format is by business segments and its secondaryformat is by geographical segments. 3. Analysis of operating profit before exceptional items 2005 2004 2004 First half First half Full year £ million £ million £ million---------------------- ---------- ----------- ---------- By business sectorElectronic - Sensors and electronic systems 5.3 9.3 18.2 - Electronic components 5.1 3.3 8.1 - Electronic manufacturing services (0.1) (0.8) (0.1)---------------------- ---------- ----------- ----------Total electronic 10.3 11.8 26.2---------------------- ---------- ----------- ----------Electrical - Power systems 1.8 1.4 3.8 - Power and data transmission 2.5 0.8 3.0---------------------- ---------- ----------- ----------Total electrical 4.3 2.2 6.8---------------------- ---------- ----------- ----------Operating profit before exceptional items 14.6 14.0 33.0---------------------- ---------- ----------- ----------By originUnited Kingdom 1.8 0.5 2.0Rest of Europe 5.1 8.0 17.2North America 5.7 3.8 10.9Rest of the World 2.0 1.7 2.9---------------------- ---------- ----------- ----------Operating profit before exceptional items 14.6 14.0 33.0---------------------- ---------- ----------- ---------- 4. Exceptional items 2005 2004 2004 First half First half Full year £ million £ million £ million---------------------- ---------- ---------- ---------- Profit on sale of Gravesend site 7.8 - -Closure costs for Cables Division,Gravesend (2.8) - ----------------------- ---------- ---------- ---------- 5.0 - ----------------------- ---------- ---------- ---------- The profit on sale of Gravesend site has been calculated based on sales proceedsof £12.5 million. Further proceeds may be received based on the development ofthe site. 5. Finance costs 2005 2004 2004 First half First half Full year £ million £ million £ million---------------------- ---------- ----------- ---------- Interest payable (2.1) (1.8) (3.4)Unwinding of the discount on pensionscheme liabilities (7.7) (7.1) (14.1)---------------------- ---------- ----------- ---------- (9.8) (8.9) (17.5)---------------------- ---------- ----------- ----------Interest receivable 0.2 0.1 0.2Expected return on pension scheme assets 6.4 5.9 11.8---------------------- ---------- ----------- ---------- 6.6 6.0 12.0---------------------- ---------- ----------- ----------Finance costs (3.2) (2.9) (5.5)---------------------- ---------- ----------- ---------- 6. Taxation Taxation on the profit for the half year to 30 June 2005 has been based on theestimated effective rate for the full year ending 31 December 2005. 7. Earnings per share 2005 2004 2004 First half First half Full year pence per share pence per share pence per share--------------------- ----------- ----------- ----------- Earnings per shareBasic 7.4 4.4 11.9Fully diluted 7.3 4.4 11.8--------------------- ----------- ----------- ----------- Earnings per share has been calculated by dividing the profit attributable toshareholders by the weighted average number of shares in issue during theperiod. The numbers used in calculating basic and fully diluted earnings pershare are reconciled below. 2005 2004 2004 First half First half Full year £ million £ million £ million--------------------- ----------- ----------- ----------- Profit for the period attributable toshareholders: --------------------- ----------- ----------- -----------Earnings basic and fully diluted 11.5 7.0 18.4--------------------- ----------- ----------- -----------Weighted average number of shares in million million millionissue:Basic 154.8 154.8 154.8Adjustment for share options 1.9 1.5 1.5--------------------- ----------- ----------- -----------Fully diluted 156.7 156.3 156.3--------------------- ----------- ----------- ----------- 8. Acquisition On 10 March 2005 the group acquired the entire share capital of Dage Limited andits subsidiaries, an electronic manufacturing services business located in theUK and China. The purchase consideration was £10.3 million, of which £8.0million was paid at completion. The book values of the net assets of DageLimited and its subsidiaries on acquisition were £5.9 million and have beenprovisionally fair valued at £5.5 million. Turnover and operating profit of thecompanies acquired for the post acquisition period were £7.6 million and £0.7million respectively. 9. Reconciliation of net cash flow to movement in net debt Net overdraft Loans and Net debt £ million finance leases £million £ million---------------------- ---------- ----------- ---------- Balance at 31 December 2003 (27.1) (56.0) (83.1)Cash flow 3.3 (2.3) 1.0Exchange differences 0.5 0.8 1.3---------------------- ---------- ----------- ----------Balance at 30 June 2004 (23.3) (57.5) (80.8)Cash flow 13.2 (1.9) 11.3Exchange differences 0.5 1.7 2.2---------------------- ---------- ----------- ----------Balance at 31 December 2004 (9.6) (57.7) (67.3)Cash flow 4.4 1.5 5.9Exchange differences (1.4) (2.7) (4.1)---------------------- ---------- ----------- ----------Balance at 30 June 2005 (6.6) (58.9) (65.5)---------------------- ---------- ----------- ---------- Net overdraft represents bank overdrafts less cash and cash equivalents. 10. Reconciliation of equity under UK GAAP to equity under IFRS at 30 June 2004 £ million----------------------------------------- -------- Shareholders' equity at 30 June 2004 under UK GAAP 199.2Recognition of pensions obligation (net of deferred tax) (40.9)Development costs, previously written off now capitalised asintangible assets 8.8Interim dividend for 2004, recognised when declared and notprovided for at 30 June 5.7Other changes (net), relating to goodwill amortisation, leases,financial instruments, share options, deferred tax and fair valuations (4.0)----------------------------------------- --------Shareholders' equity at 30 June 2004 under IFRS 168.8----------------------------------------- -------- Equivalent information for 31 December 2003 and 2004 is included in the circularissued to shareholders on 22 July 2005 and is available on the group's website. 11. Reconciliation of profit under UK GAAP to profit under IFRS for the six months to 30 June 2004 £ million--------------------------------------- --------- Profit attributable to shareholders under UK GAAP 8.7Goodwill amortisation, no longer charged 1.3Financial instruments, marked to market (2.7)Other changes (net), relating to development costs, pensions,leases and share options (0.3)--------------------------------------- ----------Profit attributable to shareholders under IFRS 7.0--------------------------------------- ---------- 12. Post balance sheet event On 1 August 2005 the group announced the disposal of Houchin Aerospace Limited,a supplier of standby power generation equipment, for £8.0 million cash, subjectto finalisation of completion accounts, being a premium to net assets. 13. Statutory accounts These financial statements do not constitute statutory accounts. All theinformation is unaudited. The comparative figures for the year ended 31 December2004 which are now presented under IFRS are not the statutory accounts for thatyear. The statutory accounts for the year ended 31 December 2004 were preparedunder UK GAAP, contained an unqualified audit report and are filed with theRegistrar of Companies. The interim report will be sent to all shareholders on the register. Copies areavailable 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