Slide 1: Full Year 2018 Results
Engineering smarter solutions together TT Electronics Full Year 2018 Results 6 March 2019 © TT Electronics 1
Slide 2: 2018 overview
2018 overview • Excellent year for TT • Strong growth in revenue and profitability • Margin growth driven by self-help and operational leverage • Investing for growth • Substantial number of new customer and contract wins • R&D investment up 37% to £12.6m • 28 new custom products launched in key foc
Slide 3: Strategy execution driving strong growth
Strategy execution driving strong growth Positioned in the right markets Industrial • “Electronics everywhere” 48% • Investing for growth in medical and aerospace and defence markets Working with the right customers Medical • Invested in business development tools and training 21% • Global Manufactu
Slide 4: Strong profit growth and margin enhancement
Strong profit growth and margin enhancement • Operational leverage and business development success Growth • New products and customisation • Self-help actions driving margin enhancement Efficiency • UK operational improvement in Global Manufacturing Solutions • H2 improvements in Power and Connecti
Slide 5: Stadium acquisition performing well
Stadium acquisition performing well • Business performance ahead of expectations; 10.0% margin • Integration complete • Synergy a year ahead and site rationalisation underway £m 2.0 Original synergy plan New synergy plan 1.0 0.0 2018 2019 2020 • Investing for growth with exciting opportunity pipelin
Slide 6: Adding other significant new capabilities in 2018
Adding other significant new capabilities in 2018 Precision • Precision performing well; operating profit margin of 10.8% • Integration running to plan; electromagnetic footprint optimisation • Cross selling opportunities identified UniRoyal joint venture • Long-term manufacturing partner for sensin
Slide 7: Financial review
Financial review Mark Hoad, CFO © TT Electronics 7
Slide 8: 2018 financial overview
2018 financial overview 6% 7.8% 54% Organic revenue Underlying operating Increase in EPS growth margins, up 110 bps 88% 90bps 12% Cash conversion Improvement in ROIC Increase in the to 11.5% dividend to 6.5p © TT Electronics 8
Slide 9: Group financial performance
Group financial performance Strong performance across all financial metrics 2018 2017^ Change Change £m (except where stated) constant fx Revenue 429.5 361.1 19% 21% • Revenue up 6% organically Operating profit* 33.4 24.3 37% 42% • Operating profit up 42% Operating profit margin* 7.8% 6.7% 110bps 12
Slide 10: Sensors and Specialist Components
Sensors and Specialist Components Strong growth and margin improvement Change • Revenue up 8% organically constant • Growth from increased volumes 2018 2017 Change fx • Particular strength in optical sensing and power management product lines Revenue (£m) 149.8 142.3 5% 8% • Operating profit up 16%
Slide 11: Power and Connectivity
Power and Connectivity Growth and margins restored in H2; accretive acquisitions Change • Organic revenue down 4% as expected constant • LTB impact in H1; 4% organic growth in H2 2018 2017 Change fx • £36.4m from Stadium and Precision • Continued benefit from outsourcing in Revenue (£m) 97.9 64.5 52
Slide 12: Global Manufacturing Solutions
Global Manufacturing Solutions Growth and self-help driving margins Change • Revenue up 8% organically constant • Growth driven by Asia for Asia sales 2018 2017 Change fx • Strong growth with medical customers • Stadium contributed £16.6m Revenue (£m) 181.8 154.3 18% 19% • Operating profit up 77% •
Slide 13: Group financial performance: organic improvement and accretive acquisitions
Group financial performance Organic improvement and accretive acquisitions (2018 vs 2017), £m 6.7% (0.1)% 6.6% 1.1% (0.3)% 0.4% 7.8% 5.4 33.4 5.4 (1.0) 24.3 (0.7) 23.6 2017 FX 2017 like-for- Operational R&D/BD Acquisitions 2018 like leverage and investments self-help actions © TT Electronics 13
Slide 14: Free cashflow and net funds
Free cashflow and net funds £m 2018 2017 Underlying EBITDA 47.0 37.1 • Continuing to invest to support growth Net capital expenditure & capitalised development (18.9) (14.7) • Strong working capital performance Working capital (2.1) (1.9) despite growth and pressure on inventory Cash flow from disco
Slide 15: Pensions guidance
Pensions guidance Valuation and deficit contributions Stadium scheme merger • TT contribution £5.1m in 2019, £0.2m increase p.a. • Merging Stadium scheme into TT scheme with effect • Triennial valuation as at 5 April 2019 from 29 March • Improved governance, risk management and cost efficiency • Acc
Slide 16: Other financial matters / guidance for 2019
Other financial matters / guidance for 2019 Restructuring costs M&A • c. £5m on acquisition related footprint changes • Investment in joint venture $4.5m Capital and development expenditure • Precision earn-out payment $1.1m • Capex and devex circa £20m (1.3x DA) Tax Working capital • Effective rate
Slide 17: Significant financial transformation over 3 years
Significant financial transformation over 3 years 2015 2018 Organic revenue (3)% 6% • Good growth growth Operating profit £21.7m £33.4m • Improved profitability Underlying operating 4.3% 7.8% • Margin strongly ahead profit margin ROIC 9.0% 11.5% • Value-creative return on invested capital • Stronger
Slide 18: Strategy and outlook
Strategy and outlook Richard Tyson, CEO © TT Electronics 18
Slide 19: Transformation of TT
Transformation of TT Enhanced portfolio Structural growth markets Materially reduced automotive exposure “Electronics everywhere” Better geographic balance Proprietary technology Growth in Asia, now c.£100m revenue Increasingly technology-rich offerings to our customers Improved footprint Strengthen
Slide 20: Focusing on markets with structural growth drivers
Focusing on markets with structural growth drivers Revenue by market (FY15) Revenue by market (FY18) • Sale of Transportation business • Focus on medical and aerospace and defence growth Industrial 30% Industrial 48% Medical 13% Medical 21% Aerospace and defence 12% Aerospace and defence 19% Transpo
Slide 21: Geographic balance with increased exposure to Asia
Geographic balance with increased exposure to growing Asian markets Revenue by geography (FY15) Revenue by geography (FY18) • Better balanced business • Increased exposure to fast growing Asian market • Reduced European exposure UK 16% UK 29% North America 20% North America 28% Asia and Rest of Worl
Slide 22: Drivers of margin enhancement
Drivers of margin enhancement The track record The opportunity 2015-2018 2015 2019-2022+ 2018 4.3% 7.8% Cost actions Disposal • Self-help operational excellence • Disposal of Transportation division • Footprint rationalisation Growth actions Cost actions • Operational leverage • Self-help operationa
Slide 23: TT is a global provider of engineered electronics for performance critical applications
TT is a global provider of engineered electronics for performance critical applications Sensing Power Connectivity © TT Electronics 23
Slide 24: Our focus in 2019
Our focus in 2019 Sensors and Specialist Components • UniRoyal JV – manufacturing up and running • Increased focus on custom products • Development of broader and deeper relationships with key customers Power and Connectivity • Securing opportunities from North American aerospace and defence primes
Slide 25: Strong performance on all key metrics
Strong performance on all key metrics Organic growth ahead of the market +6% organic revenue R&D investment to support growth +37% to £12.6m Operating margin progression Up 120 bps to 7.8% Cash conversion of 80%+ 88% Improving ROIC Up 90bps to 11.5% Targeted, complementary acquisitions 2 acquisition
Slide 26: Appendix
ema ners Appendix ©TT Electronics 26
Slide 27: Appendix: The TT Electronics business
Appendix: The TT Electronics business Revenue (FY18) Underlying operating profit (FY18) Sensors and Specialist Components 35% Sensors and Specialist Components 64% Power and Connectivity 23% Power and Connectivity 25% Global Manufacturing Solutions 42% Global Manufacturing Solutions 34% Central cost
Slide 28: Appendix: Impact of FX
Appendix: Impact of FX Sensors and Global Specialist Power and Manufacturing Sales (£m) Components Connectivity Solutions Corporate Group 2018 149.8 97.9 181.8 429.5 2017 at 2018 rates 138.7 64.1 152.4 355.2 FX impact (3.6) (0.4) (1.9) (5.9) 2017 as published* 142.3 64.5 154.3 361.1 Operating Profit
Slide 29: Appendix: Cash conversion
Appendix: Cash conversion Cash Conversion (£m) FY2018 FY2017 Underlying EBITDA (continuing operations) 47.0 37.1 Net capital expenditure (15.2) (13.1) Capitalised development expenditure (3.7) (1.6) Working capital (2.1) (1.9) Other 3.5 3.4 Underlying Operating Cash Flow 29.5 23.9 Underlying operati
Slide 30: Appendix: Cash conversion
Appendix: Cash conversion Cash Conversion (£m) FY2018 FY2017 Underlying EBITDA (continuing operations) 47.0 37.1 Net capital expenditure (15.2) (13.1) Capitalised development expenditure (3.7) (1.6) Working capital (2.1) (1.9) Other 3.5 3.4 Underlying Operating Cash Flow 29.5 23.9 Underlying operati
Slide 31: Appendix: IFRS 16
Appendix: IFRS 16 • New accounting standard for leases effective 1 January 2019 • Requires operating leases to be recognised as finance leases on the balance sheet • No restatement of comparatives • No net cash flow or bank covenant impact – bank covenants continue to be calculated according to the
Slide 32: We are a global provider of engineered electronics for performance critical applications
WHO WE ARE We are a global provider of engineered electronics for performance critical applications. We design and manufacture electronics that sense, manage power and connect to other things – and often these products are mission-critical, operating in harsh environments. © TT Electronics 32
Slide 33: Our purpose
SENSING OUR PURPOSE To solve our customers’ toughest POWER electronics challenges by engineering smarter solutions together. Our design and manufacturing engineers are experts in their field. Whether you need engineered solutions for electronic component CONNECTIVITY design, power management, IoT co
Slide 34: Appendix: Extensive leadership experience; a team to be proud of
Appendix: Extensive leadership experience; a team to be proud of Richard Tyson Mark Hoad Tim Roberts Tom Garvey Charlie Peppiatt Michael Leahan Chief Executive Officer Chief Financial Officer EVP Sensors and EVP Power Electronics EVP IoT Solutions EVP Global Manufacturing Specialist Components Solut
Slide 35: Appendix: Our strategy is delivering
Appendix: Our strategy is delivering Reshaped portfolio 1 Positioned in structural growth markets 7.8% margin, up from 4.3% 3 years ago ...and we have 2 Create differentiated capabilities We are growing at 6% organically set TT up to deliver more… 3 Work with our customers to solve their toughest Cl
Slide 36: Appendix: Market growth driving demand for our solutions
Appendix: Market growth driving demand for our solutions Structural growth drivers leading to increasing ales for our sensing, power management and connectivity capabilities % revenues Example end application Key macro trend as at FY18 • Automation and control • Robotics and industrial automation 48
Slide 37: Appendix: Aligning R&D to structural growth markets
Appendix: Aligning R&D to structural growth markets • c.6% CAGR in automation and control to 2023 Market: Industrial • Over 20 years experience in industrial automation; over 10 million units shipped • High resolution sensor optimises robot performance • Next platform development underway; 2019 laun
Slide 38: Appendix: Scalable platform approach for revenue growth across multiple markets
Appendix: Scalable platform approach for revenue growth across multiple markets • Launched a major new platform for signal conditioning in Market: Industrial 2015 following 2 years of development • New technology delivering • Extreme precision • Leading moisture resilience • Technology for aerospace
Slide 39: Appendix: Industrial connectivity in action
Appendix: Industrial connectivity in action What Managed cloud service • Developing a connectivity solution for preventative maintenance in a paper mill • Ability to monitor filtration cylinders for blockages Gateway hub Gateway hub (S-Track) (S-Track) How • Custom connectivity device can be linked
Slide 40: Appendix: Positive market fundamentals in industrial IoT
Appendix: Positive market fundamentals in industrial IoT • Large, established market; adoption underway and accelerating • Exponential growth; appetite to monitor and manage data to improve efficiency Berg Insight Research © TT Electronics 40
Slide 41: Appendix: Electrification of aircraft means growing demand
Appendix: Electrification of aircraft means growing demand Step change in electronic generating • Hydraulics and pneumatics capacity in successive platforms replaced with electrical Usage of electrical power for aircraft systems systems 1600 1400 B787 • Electrification increasing Electrical generati
Slide 42: Appendix: Moving up the value chain
Appendix: Moving up the value chain Component heritage TT Designed Prototypes Power and Control Microcircuit Transformer Rectifier Unit ATRU (Auto Transformer Rectifier Unit) Flyback Value Added Products Transformer Ruggedised Power Module Manufacturing and system design Wound Components support Pow