Engineering smarter solutions together TT Electronics plc 2018 Interim Results August 2018 1
H1 2018 overview • Strong financial results, ahead of expectations • Continued order book momentum Strong organic performance, enhanced by • R&D, sales success, operational excellence acquisitions • Margin progression, up 170bps to 7.5% • Investing more in the business for future growth • Strong balance sheet gives flexibility • Acquisitions of Stadium and Precision completed; integration progressing well • Dividend up 11%, H1 performance and confidence in outlook TT Electronics plc interim results 2018 2
Financial review Mark Hoad, CFO 3
H1 2018 overview Strong organic 5% 45% 60% performance, enhanced by acquisitions Underlying operating Like-for-like revenue Increase in EPS profit growth growth 7.5% 105% 11% Underlying operating Cash conversion Increase in the dividend margins, up 170 bps to 1.95p TT Electronics plc interim results 2018 4
Group financial performance Continuing operations Change HY 2018 HY 2017 Change £m (except where stated) constant fx • Revenue up 5% on a like- 180.5 8% 12% 194.2 Revenue for-like basis 14.6 10.9 34% 45% Operating profit* • Operating profit up by 45%; 7.5% 6.0% 150bps 170bps circa two thirds from the Operating profit margin* base business 14.0 9.5 47% 61% Profit before tax* • Operating profit margin up 4.6p 50% 60% 6.9p EPS* (pence) strongly to 7.5% Exceptionals & one-offs (6.9) (4.1) (68)% (68)% • Exceptionals: restructuring, M&A costs 1.95p 1.75p 11% Dividend (pence) • Cash conversion 105% 105% 128% Cash conversion ‡ (%) (41.2) 47.0ˆ • ROIC up to 11.2% Net (debt) /funds 1.0 n/a Leverage (times) * Underlying, before exceptional and 10.6%ˆ one-off costs 11.2% 60bps ROIC (%) ‡ See appendix ˆ Full year 2017 5 TT Electronics plc interim results 2018
Sensors and Specialist Components Strong growth and margin improvement • Organic revenue up 7% Change • Demand remaining positive constant • Operating profit up 24% H1 2018 H1 2017 Change fx • Drop through on increased volumes 71.3 71.0 0% 7% Revenue (£m) • Operational efficiency 9.9 8.6 15% 24% Underlying operating profit (£m) • 190bps margin improvement 13.9% 12.1% 180bps 190bps Underlying operating margin TT Electronics plc interim results 2018 6
Power and Connectivity Investing for growth and acquisitions contributing • Revenue up 18%, down 12% organically Change as expected constant • Organic decline largely relates to absence of H1 2018 H1 2017 Change fx one-off last time buy activity 38.7 33.2 17% 18% Revenue (£m) • Acquisitions contributed revenue growth of £9.9m 2.5 3.4 (26)% (22)% Underlying operating profit (£m) • Underlying operating profit down 22% 6.5% 10.2% (370)bps (330)bps Underlying operating margin • Adverse impact from lack of last-time buy; investment to support capacity increases • Profit from acquisitions £1.1m • 330bps margin impact TT Electronics plc interim results 2018 7
Global Manufacturing Solutions Growth continues and step-change in margins • Revenue up 13%, of which organic 6% Change • Growth in Asia and North America led by constant medical customers H1 2018 H1 2017 Change fx • Revenues from acquisitions £4.9m 84.2 76.3 10% 13% Revenue (£m) • Operating profit more than doubled 5.9 2.5 136% 136% Underlying operating profit (£m) • Continued progress in China, improvement in US, Europe returning to health 7.0% 3.3% 370bps 360bps Underlying operating margin • £0.5m FX benefit not expected to recur • Profit from acquisitions £0.3m • Operating margins up 360 bps – top-end of benchmark range TT Electronics plc interim results 2018 8
Group operating (H1 2018 vs H1 2017), £m profit bridge Operating margin, % Continuing operations 6.0% 7.5% 5.8% (0.2)% 2.0% (0.4)% - 0.1% Profit and margin 1.4 14.6 improvement from volume (0.6) 3.8 growth and operational (0.1) efficiency (0.8) 10.9 10.1 Power and Corporate H1 2017 Organic FX H1 2017 H1 2018 Acquisitions Connectivity like-for-like improvement costs investment 9 TT Electronics plc interim results 2018
Free cash flow and H1 2018 H1 2017 £m • Capital and Underlying EBITDA 21.0 17.5 net funds development Net capital expenditure & capitalised development (6.7) (6.9) expenditure at 1.0x DA Working capital (0.5) 2.0 Profit growth underpinned • Sustained working Cash flow from discontinued operations - 3.7 by strong cash conversion capital management in Exceptional items including property disposals (4.7) (4.1) growth environment; Net interest and tax (4.0) (4.4) receipt from AVX Pensions & other (1.0) (1.0) • Excellent cash Free Cash Flow 4.1 6.8 conversion of 105% Dividends (6.6) (6.3) • Acquisition of Stadium Acquisitions & disposals (78.0) (1.2) (£59.7m), Precision (7.7) 0.2 Other (£17.2m), outflow re Net Cash Flow (88.0) (0.5) TS&C disposal (£1.1m) Cash Conversion 105% 128% • Other includes £6.9m of cash settlement and H1 2018 YE 2017 tax on LTIP vests Net (Debt)/Funds (41.2) 47.0 Net Debt to EBITDA - reported 1.0x n/a • M&A capacity remains strong Net Debt to EBITDA – pro-forma 0.8x n/a TT Electronics plc interim results 2018 10
Other financial matters / guidance for FY 2018 Exceptional items Tax • Restructuring costs offset by property disposal • Effective rate remains at lower end of 20-22% guidance • Circa £7m of M&A related cash costs • Cash payments circa 90% of P&L charge Capital and development expenditure Pensions • Capex and devex circa £18m (1.2x DA) • TT scheme deficit contributions £4.9m in 2018, increasing £0.2m p.a. • Includes spend on Bedlington upgrade • Stadium scheme deficit contributions £0.6m p.a. Working capital Foreign exchange • Neutral to small outflow • USD 1 cent = circa £160k operating profit impact • RMB 0.1 = circa £100k operating profit impact • At current spot rates, FX impact in H2 is modest TT Electronics plc interim results 2018 11
Strategy and outlook Richard Tyson, CEO 12
Our strategy Clear market focus The right strategy to • We are focused on building leading positions in areas of the market where there deliver growth and value are structural growth drivers, and the proliferation of electronics is driving demand for our shareholders for our solutions Creating differentiated capabilities • We concentrate our time and resources on market areas where our industry expertise and R&D investment creates strong and differentiated capabilities valued by our customers Engineering smarter solutions with our customers • We are committed to solving our customers’ toughest electronics challenges by engineering smarter solutions together Aerospace Industrial Medical Transportation and Defence TT Electronics plc interim results 2018 13
Market growth Markets driving demand for our solutions Industrial Medical Structural growth drivers leading to increasing sales ‘Connected everything’ Increasing remote care Macro trends Robotic automation Increased investment in patient monitoring • • for sensing and power ‘smarter home’ and care • management products Industrial IoT • TT customer applications Circuit protection devices on Circuit protection devices on TT’s product capabilities portable defibrillators smart meters Works with associated Protects circuit from surges • • components to accurately set including lightning strikes 22% 12% the charge voltage Precision voltage monitoring Circuit protection components • Circuit protection components used in to ensure accurate billing industrial and medical applications Group revenue by market Group revenue by market TT Electronics plc interim results 2018 14
Market growth Markets driving demand for our solutions Aerospace and Transportation defence Structural growth drivers leading to increasing sales ‘The more electric aircraft’ Hybrid and electric vehicles Macro trends ‘Cleaner skies’ Increase power density • • for sensing and power Reduced size, weight and power consumption Improved battery capability and life • • management products TT customer applications Power management solutions in Power management solutions in TT’s product capabilities battery management systems flap actuator control on aircraft Supports dissipation of excess Supports dissipation of excess • • electrical energy and heat electrical energy and heat 22% 12% Helps protect battery during • Power management dynamic or regenerative Power load dump for lightweight braking of Group revenue by market Group revenue by market braking aircraft flight surface control TT Electronics plc interim results 2018 15
Successful execution of 10.0% strategy 194.2 9.0% 3 year record of revenue growth and margin 174.1 8.0% progression 7.5% 164.1 7.0% 5.8% 6.0% 5.5% 5.0% 120 4.0% HY 2016 HY 2017 HY 2018 Revenue at CC, excluding disposal of Transportation division £m Operating margin, % TT Electronics plc interim results 2018 16
Strategic business development R&D and value-added product solutions Strategic priorities Delivering future growth and margin progression Operational excellence Value-enhancing acquisitions TT Electronics plc interim results 2018 17
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