Tt Electronics Regulatory News (TTG)

8 June 2020

TT Electronics plc

Trading Update

TT Electronics plc ("TT", "the Group"), a global provider of engineered electronics for performance critical applications, publishes the following Trading Update on the Group's performance in the five months to May 2020.

Our employees and business operations

Through this period of unprecedented uncertainty, TT has executed the plans and actions set out in the announcement of 3 April 2020 to protect the safety and wellbeing2 of our people and wider communities, as well as our customers and partners, at the same time as reducing our costs and protecting our cash flows.

As anticipated in the 3 April 2020 announcement, "essential" business status has enabled TT to remain largely operational through the period and delivering to customer requirements. However, the Group has operated at lower capacity in April and May as a result of both the temporary closure of sites in Mexico, Malaysia, Barbados and Tunisia, in compliance with local government requirements, and employee shielding and self-isolation. The overall situation is now improving as government restrictions ease, with all TT facilities open, and the number of employees in self-isolation reducing.

Trading performance

Group revenues in the first quarter were 11% lower than the prior year on an organic3 basis and for the five months to May were 14% lower organically, reflecting both reduced economic and industrial output globally and the direct impact of COVID-19 related restrictions. The peak of the disruption was experienced in April (21% organic reduction) and some sequential recovery in revenue was already evident in May. The order book at the end of May remained broadly in line with the prior year on a like-for-like basis.

The organic revenue reduction within the Sensors and Specialist Components and Power and Connectivity divisions in the year-to-date has been slightly higher than the Group average due to the impact of demand and site closures primarily affecting these divisions. Performance in Global Manufacturing Solutions has been better than the Group average, in part helped by the ramp up of some new contracts that were won in 2019.

Mitigating actions and financial position

TT entered this unprecedented period with a strong balance sheet and significant liquidity. The Group has preserved this position with actions in the past two months to reduce costs and protect cash flows. We are now progressing the self-help projects announced at our full year results in March 2020 and have expanded them to take account of the reduction in demand. In total the cash cost of these projects is expected to be circa £18 million, comprising restructuring costs and capital expenditure, of which approximately half is expected to be spent in 2020. Full year run rate benefits from these projects will be £11-12 million in 2023, with initial benefits in 2020 and 2021 helping to mitigate the demand slowdown in certain end markets and protect the Group's margin improvement plans.

Acquisition integration and strategy

The integration of the newly acquired power supply business in Covina, California into TT Power Solutions North America has now been completed. The Covina business is performing well and already winning new business under TT's ownership. In addition, Power Solutions North America has also won a significant new multi-year order from a US defence prime, and it is being actively considered for other new projects, giving confidence that this strategy is working well. The Group is continuing to develop its acquisition pipeline, and is reviewing opportunities that will add complementary capabilities, customers and market access.

Commenting Richard Tyson, Chief Executive Officer said:

"TT has responded quickly and effectively to manage the COVID-related disruption to our business and continue supplying our customers.

Our strategy to reposition the Group over the last five years has improved the Group's resilience. This, coupled with our early action on costs and cash flow, has enabled us to retain a strong financial position, and to progress our self-help projects which will improve efficiency, reduce costs and help protect our margin improvement plans.

TT is in robust shape and well placed to pursue the opportunities that are presenting themselves and to create value for all of our stakeholders."

Notes: 

1. TT will announce its interim results on 6 August 2020.

2. TT's COVID Secure Work Principles and Risk Management Plan are available for viewing on www.ttelectronics.com/coronavirus.

3. Organic growth is stated at constant currency and is calculated by comparing current year actual results to prior year results retranslated at current year actual exchange rates. Organic revenue excludes the impact of acquisitions and disposals.

About TT Electronics

TT Electronics is a global provider of engineered electronics for performance critical applications.

The company operates in industries where there are structural growth drivers, working with market-leading customers primarily in the industrial, medical, aerospace and defence sectors. Products designed and manufactured include sensors, power management devices and connectivity solutions. TT has design and manufacturing facilities in the UK, US, Sweden and Asia.

The company has three divisions. The Power and Connectivity division designs and manufactures power application products and connectivity devices which enable the capture and wireless transfer of data. We collaborate with our customers to develop innovative solutions to optimise their electronic systems. The Global Manufacturing Solutions division provides manufacturing services and engineering solutions for our product divisions and to customers that often require a lower volume and higher mix of different products. We manufacture complex integrated product assemblies for our customers and provide engineering services including designing testing solutions and value-engineering. The Sensors and Specialist Components division works with customers to develop standard and customised solutions including sensors and power management devices. Our solutions improve the precision, speed and reliability of critical aspects of our customers' applications.

Cautionary statement

This update contains forward-looking statements. These have been made by the directors in good faith based on the information available to them up to the time of their approval of this update. The directors can give no assurance that these expectations will prove to have been correct. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The directors undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.