Slide 1: Full Year 2019 Results
Engineering smarter solutions together TT Electronics Full Year 2019 Results 4 March 2020 © TT Electronics 1
Slide 2: 2019 overview
2019 overview • Strategy continues to promote growth, enhance margin and improve quality of TT business • Aerospace, defence and medical deliver 22% organic growth • New customer wins with multi-year recurring revenues • Improved order book visibility for the third year in succession • Extending cap
Slide 3: Track record of value creation
Track record of value creation • Significant portfolio reshaping; divestment of Transportation division • Six acquisitions completed since 2015 for total of £137m; built-up Power and Connectivity division • Aerospace, defence and medical markets now 47% of Group revenues and driving growth • Returne
Slide 4: Driving future performance
Driving future performance • Demand for sustainable solutions driving growth • New, recurring multi-million pound customers Organic growth • Growth with existing customers TT set up to deliver • Investment in new products • New self-help programme launched • Growth ahead of the market Margin • £14m
Slide 5: Financial review
Financial review Mark Hoad, CFO © TT Electronics 5
Slide 6: 2019 financial review
2019 financial review 4% 8.4% 13% Organic revenue Underlying operating Increase in underlying growth margins, up 60 bps EPS at constant fx 98% 11.3% 8% Cash conversion ROIC*, LFL 10 bps Increase in the improvement dividend to 7.0p * ROIC includes IFRS 16 impacts; 11.6% before IFRS 16 © TT Electronic
Slide 7: Group financial performance
Group financial performance Strong performance across all financial metrics 2019 2018 Change Change £m (except where stated) constant fx Revenue 478.2 429.5 11% 9% • Organic revenue increase - up 4% Operating profit* 40.0 33.4 20% 17% • Strong growth in operating profit; Operating profit margin* 8.4
Slide 8: Power and Connectivity: Good growth and significant margin enhancement
Power and Connectivity Good growth and significant margin enhancement • Revenues up 2% organically Change • 14% growth in aerospace, defence and medical customers, now over 50% of constant revenue 2019 2018 Change fx • Operating profit up 45% Revenue (£m) 138.2 115.5 20% 18% • Driven by revenue grow
Slide 9: Global Manufacturing Solutions: very strong revenue growth
Global Manufacturing Solutions A year of very strong revenue growth and improved order visibility Change • Revenues up 12% organically constant • Growth from customers in aerospace, defence and medical markets 2019 2018 Change fx • Operating profit up 34% Revenue (£m) 213.2 181.8 17% 16% • Driven by
Slide 10: Sensors and Specialist Components: proactive cost action
Sensors and Specialist Components Proactive cost action to address softer market conditions and inventory de-stocking Change • Revenues down 7% following very strong performance over last 2 years constant 2019 2018 Change fx • Decisive cost action taken to address the cost base – op. profit margin 1
Slide 11: Group financial performance: operating profit bridge
Group financial performance Driving improvement in operating profit (2019 vs 2018), £m 7.8% - 7.8% 0.6% - 8.4% 1.9 3.8 40.0 33.4 0.9 34.3 2018 FX 2018 like-for- Operational Acquisitions 2019 like leverage and self-help actions © TT Electronics 11
Slide 12: Free cashflow and net funds
Free cashflow and net funds £m 2019 2018 EBITDA 58.0 47.0 Net capital expenditure & capitalised (18.2) (18.9) development Working capital (3.1) (2.1) • Capex spend focused on growth areas Exceptional items including property disposals (9.2) (7.3) • Working capital normalised in H2, as Net interest a
Slide 13: Pensions guidance
Pensions guidance 2019 Triennial Valuation Future strategy and contributions • Triennial valuation as at 5 April 2019 including merged • Continue with existing deficit contribution plan - £5.3m Stadium scheme in 2020, increasing by £0.2m per annum • Scheme fully funded on an actuarial basis • On-goi
Slide 14: Guidance for 2020
Guidance for 2020 Markets Working capital • Industrial – inventory unwind to continue before market • Mid-single digit cash outflow recovers Pension • Aerospace, defence and medical - continuing growth from structural drivers • UK deficit contributions £5.3m, increasing £0.2m p.a. • Coronavirus – up
Slide 15: Our record - significantly improved trading and balance sheet
Our record - significantly improved trading and balance sheet 2015 2019 Organic revenue growth (3)% 4% • Good growth Operating profit £21.7m £40.0m • Improved profitability Underlying operating 4.3% 8.4% • Margin strongly ahead profit margin ROIC 9.0% 11.6%† • Value-creative return on invested capit
Slide 16: Strategy and outlook
Strategy and outlook Richard Tyson, CEO © TT Electronics 16
Slide 17: Driving future performance
Driving future performance Organic growth Margin enhancement Acquisitions © TT Electronics 17
Slide 18: Sustainability driving revenue growth
Sustainability driving revenue growth Organic growth Our Purpose: We solve electronics challenges for a sustainable world Our Sustainability Commitments: Cleaner Smarter Improved wellbeing • Aircraft electrification • Factory automation and • Laboratory analysis • Metro rail infrastructure productiv
Slide 19: Focusing on markets with structural growth drivers
Focusing on markets with structural growth drivers Organic growth • Transforming TT through business development, targeted R&D and M&A Industrial • Targeting customers and markets with growth potential • Seven new customers with potential for recurring multi- million pound revenues • Aerospace, defe
Slide 20: Investing for organic revenue growth – aerospace and defence
Investing for organic revenue growth – aerospace and defence Organic growth Market fundamentals Exposure to high growth platforms Growth rate: c.5% Market size: c.$30bn TT market penetration: <1% % of TT revenues: 23% A350 F-35 Mega trends driving sustainable growth • Demand for ‘greener’ A220 A320n
Slide 21: Investing for organic revenue growth - medical
Investing for organic revenue growth - medical Organic growth Market fundamentals Exposure to fast growing specialist market areas Laboratory analysis Growth rate: c.5% machine used for Market size: c.$425bn analysing blood and detecting diseases TT market penetration: <1% % of TT revenues: 24% Mega
Slide 22: Investing for organic revenue growth - industrial
Investing for organic revenue growth - industrial Organic growth Market fundamentals Exposure to market areas underpinned by long-term structural growth Growth rate: c.GDP+ TT market penetration: <1% % of TT revenues: 42% Mega trends driving sustainable growth Robotic automation used for Smart label
Slide 23: M&A – investing in growing markets
Acquisitions M&A – investing in growing markets Main focus areas for M&A • Aerospace, defence and medical exposure • Complementary products and technologies • Preference for US market exposure • 11.5% pre-tax hurdle rate in year 3 (inc. IFRS 16) Covina Power Supply Business Acquisition is value enha
Slide 24: Drivers of margin enhancement towards 10%+
Drivers of margin enhancement towards 10%+ Margin enhancement The track record The opportunity 2015-2019 2015 2020-2022+ 2019 4.3% 8.4% Growth actions Growth actions • Operational leverage • Operational leverage • New products and customisations • New products and customisations • Improved customer
Slide 25: Strong performance on all key metrics
Strong performance on all key metrics Organic growth ahead of the market +4% organic revenue R&D investment to support growth +6% to £13.5m* Operating margin progression Up 60 bps to 8.4% Cash conversion of 80%+ 98% Improving ROIC Up 10bps to 11.6%** Targeted, complementary 2 acquisitions announced
Slide 26: Appendix
Appendix © TT Electronics 26
Slide 27: Appendix: What we do by division
Appendix: What we do by division Good potential across all divisions Power and Connectivity Global Manufacturing Solutions Sensors & Specialist Components Capability Power Connectivity Manufacturing & engineering Sensing Power Components, higher level Components and higher level Offering Engineering
Slide 28: Appendix: The TT Electronics business
Appendix: The TT Electronics business Revenue (FY19) Underlying operating profit (FY19) Power and Connectivity 29% Power and Connectivity 41% Global Manufacturing Solutions 45% Global Manufacturing Solutions 39% Sensors and Specialist Components 26% Sensors and Specialist Components 38% Central cost
Slide 29: Appendix: Impact of FX translation
Appendix: Impact of FX translation Global Sensors and Power and Manufacturing Specialist Sales (£m) Connectivity Solutions Components Corporate Group 2019 138.2 213.2 126.8 - 478.2 2018 at 2019 rates 116.7 184.0 136.4 - 437.1 FX impact 1.2 2.2 4.2 - 7.6 2018 as published* 115.5 181.8 132.2 - 429.5 O
Slide 30: Appendix: IFRS 16, Leases
Appendix: IFRS 16, Leases • New accounting standard for leases effective 1 January 2019 • Operating leases are now largely recognised 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 prior sta
Slide 31: Appendix: Cash conversion
Appendix: Cash conversion Cash Conversion (£m) FY2019 FY2018 EBITDA (continuing operations) 58.0 47.0 Net capital expenditure (14.3) (15.2) Capitalised development expenditure (3.9) (3.7) Working capital (3.1) (2.1) Other 2.5 3.5 Underlying Operating Cash Flow 39.2 29.5 Underlying operating profit -
Slide 32: Appendix: Capital allocation priorities
Appendix: Capital allocation priorities • Maintain a strong financial position and provide flexibility of funding for growth 1. Maximise organic investment including R&D to support growth 2. Maintain our progressive dividend policy Free cash flow priorities 3. Continue to support our strategy with t
Slide 33: Cautionary statement
Cautionary statement For the purposes of the following disclaimers, references to this ‘document’ shall be deemed to include references to the presenters speeches, the question and answer session and any other related verbal or written communications. This document contains forward-looking statement