Slide 1: TT Electronics Half Year 2019 Results
Engineering smarter solutions together TT Electronics Half Year 2019 Results 7 August 2019 © TT Electronics 1
Slide 2: HY 2019 overview
HY 2019 overview • Strong growth; 8% organic • New customer wins • Growth with existing customers • Increased cross-selling opportunities • Significant customer wins for recurring multi-million pound revenues • Business quality enhanced • Aerospace, defence and medical up 27% organically; now 45% of
Slide 3: Financial review
Financial review Mark Hoad, CFO © TT Electronics 3
Slide 4: HY 2019 financial overview
HY 2019 financial overview 8% 8.1% 22% Organic revenue Underlying Increase in EPS growth operating margins, up 50 bps 28% 11.3% 8% Cash conversion ROIC, LFL 20 bps Increase in the improvement dividend to 2.1p © TT Electronics 4
Slide 5: Group financial performance
Group financial performance Strong revenue growth and profit improvement HY 2019 HY 2018 Change Change £m (except where stated) constant fx Revenue 238.2 194.2 23% 20% • Revenue up 8% organically Operating profit* 19.2 14.6 32% 27% • Operating profit up 27% 8.1% 7.5% 60bps 50bps • Operating margins
Slide 6: Sensors and Specialist Components: Market softening after two years of strong demand
Sensors and Specialist Components Market softening after two years of strong demand • Revenue down 2% organically Change • Softer demand follows very strong financial HY 2019 HY 2018ᴧ Change constant fx performance over last two years Revenue (£m) 64.1 62.4 3% (2)% • Inventory de-stocking across the
Slide 7: Power and Connectivity: Good growth and strong margin progression
Power and Connectivity Good growth and strong margin progression • Organic revenue up 4% Change • Good growth from defence and civil HY 2019 HY 2018ᴧ Change constant fx programmes, satellite and space Revenue (£m) 67.6 47.6 42% 40% • Sales wins in medical market • Operating profit up 80% Underlying
Slide 8: Global Manufacturing Solutions: Strong growth from higher value-added revenues
Global Manufacturing Solutions Strong growth from higher value-added revenues • Revenue up 17% organically Change • Growth in all regions HY 2019 HY 2018 Change constant fx • Record order book; increased 2020 visibility Revenue (£m) 106.5 84.2 26% 25% • Operating profit up 33% • Operational leverage
Slide 9: Group financial performance: Driving improvement in operating profit
Group financial performance Driving improvement in operating profit (H1 2019 vs H1 2018), £m 7.5% 0.1% 7.6% 0.5% - 8.1% 1.6 19.2 2.5 15.1 0.5 14.6 H1 2018 FX H1 2018 like- Operational Acquisitions H1 2019 for-like leverage and self-help actions © TT Electronics 9
Slide 10: Free cash flow and net debt
Free cash flow and net debt £m HY 2019 HY 2018 Underlying EBITDA 28.2 21.0 • Working capital outflow reflects strong Net capital expenditure & capitalised development (9.3) (6.7) revenue and order book growth Working capital (15.1) (0.5) • Seasonality impact will normalise in H2 Exceptional items (3
Slide 11: Our record
Our record Growing revenue and profit – transforming the quality of the business Revenue by market H1 Organic revenue growth Operating margin 2015 – H1 2019 H1 2015 – H1 2019 H1 2015 vs H1 2019 100% 9% 90% 10% 8% 80% 70% 8% 7% 60% 6% 6% 50% 5% 40% 4% 30% 4% 2% 20% 3% 10% 0% 2% 0% H1 2015 H1 2016 H1
Slide 12: Strategy and outlook
Strategy and outlook Richard Tyson, CEO © TT Electronics 12
Slide 13: Our strategy delivered through...
Driving organic growth and future margin improvement Our strategy… …delivered through… Targeted business development Positioned in structural growth markets R&D investment Create differentiated capabilities Operational excellence Value-enhancing acquisitions Work with our customers to solve their to
Slide 14: Why we're winning - our business development approach
Why we’re winning - our business development approach New multi-million pound customer Initial growth phase with a Growth with customer in structural win customer primed to ramp up growth market US aerospace and defence prime UK aerospace and defence Tier 1 Chinese rail infrastructure • Identified a
Slide 15: R&D to fuel future growth
R&D to fuel future growth – positioned with primes on multiple technology demonstrator programmes £7.1m (5.4% of revenues) invested in R&D New power conversion unit • Core focus areas: • New prototype launched at Paris Air Show following • Power solutions for aerospace and medical applications inves
Slide 16: Self-help actions as a driver of margin enhancement
Self-help actions as a driver of margin enhancement The opportunity 2019-2022+ HY 2018 • Operational excellence 7.5% • 2018 focus on South Wales and North Devon facility drove margin improvement • Customer recognition awards HY 2019 • Footprint rationalisation 8.1% • Closure of five facilities under
Slide 17: Adding value through successful acquisitions
Adding value through successful acquisitions Integration Synergy • All completed on or ahead of plan • Overhead reduction • Management discipline • Footprint rationalisation • Process, controls and systems • Scale in procurement and supply • Back-office efficiency chain Enhanced capabilities Growth
Slide 18: TT Electronics today
TT Electronics today Strong 8% organic revenue growth; Another period of strong profit growth, ahead of market up 27%; margins 8.1% Better quality business; 45% of Acquisition integration success; revenues in aerospace, defence and medical synergy and revenue opportunities Our first half performance
Slide 19: Appendix
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Slide 20: Appendix: Other financial matters / guidance for 2019
Appendix: Other financial matters / guidance for 2019 Restructuring costs M&A • c. £5-6m on footprint changes to deliver synergy • Investment in joint venture c. $4m plans and operational efficiency • Precision earn-out payment $1.1m Capital and development expenditure Tax • Capex and devex circa £2
Slide 21: Appendix: The TT Electronics business
Appendix: The TT Electronics business Revenue (HY19) Underlying operating profit (HY19) Sensors and Specialist Components 27% Sensors and Specialist Components 39% Power and Connectivity 28% Power and Connectivity 38% Global Manufacturing Solutions 45% Global Manufacturing Solutions 41% Central cost
Slide 22: Appendix: Impact of FX
Appendix: Impact of FX Sensors and Global Specialist Power and Manufacturing Sales (£m) Components Connectivity Solutions Corporate Group HY 2019 64.1 67.6 106.5 - 238.2 HY 2018 at 2019 rates 65.1 48.2 85.4 - 198.7 FX impact 2.7 0.6 1.2 - 4.5 HY 2018 as published* 62.4 47.6 84.2 - 194.2 Operating Pr
Slide 23: Appendix: Change to reporting segments
Appendix: Change to reporting segments Sensors and Global Specialist Power and Manufacturing Six months ended 30 June 2018 (£m) Components Connectivity Solutions Corporate Group Revenue 62.4 47.6 84.2 - 194.2 Underlying operating 8.6 3.8 5.9 (3.7) 14.6 profit Margin 13.8% 8.0% 7.0% - 7.5% Year ended
Slide 24: Appendix: Cash conversion
Appendix: Cash conversion Cash Conversion (£m) HY 2019 HY 2018 Underlying EBITDA (continuing operations) 28.2 21.0 Net capital expenditure (7.4) (5.1) Capitalised development expenditure (1.9) (1.6) Working capital (15.1) (0.5) Other 1.6 1.5 Underlying Operating Cash Flow 5.4 15.3 Underlying operati
Slide 25: 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 26: Our purpose
OUR PURPOSE SENSING To solve our customers’ toughest electronics challenges by engineering smarter solutions together. POWER We design and manufacture electronics that sense, manage power and connect to other things. Our products are: • Mission-critical • Highly-engineered CONNECTIVITY • IP rich pro
Slide 27: TT touch points across our world
TT touch points across our world We help solve our customers’ toughest electronic challenges Supporting growth of the aviation Bringing tomorrow’s medical Improving factory efficiency and sector by increasing flight safety and technologies to life, for advanced automation for a more productive envir
Slide 28: Materially reduced automotive exposure to c.4% total sales
Focusing on markets with structural growth drivers Revenue by market (FY15) Revenue by market (HY19) • Sale of Transportation business • Focus on medical and aerospace & defence growth Industrial 30% Industrial 44% Medical 13% Medical 25% Aerospace and defence 12% Aerospace and defence 20% Transport
Slide 29: Geographic balance with increased exposure to growing Asian markets
Geographic balance with increased exposure to growing Asian markets Revenue by geography (FY15) Revenue by geography (HY19) • Better balanced business • Increased exposure to fast growing Asian market • Reduced European exposure UK 16% UK 30% North America 20% North America 28% Asia and Rest of Worl
Slide 30: 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 31: 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 32: 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 33: 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 HY19 • Automation and control • Robotics and industrial automation 44
Slide 34: Appendix: What we do by division
Appendix: What we do by division Potential across all our divisions Sensors and Specialist Components Power and Connectivity Global Manufacturing Solutions Capability Sensing Power Power Connectivity Manufacturing Components and higher level Components, higher level assemblies Engineering services a
Slide 35: 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 36: 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 37: 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 How (S-Track) (S-Track) • Custom connectivity device can be linked
Slide 38: 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 38
Slide 39: Appendix: Electrification of aircraft means growing demand
Appendix: Electrification of aircraft means growing demand • Hydraulics and pneumatics Step change in electronic generating replaced with electrical systems capacity in successive platforms Usage of electrical power for aircraft systems • Electrification increasing 1600 exponentially B787 1400 • 1%