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TT Electronics expecting growth in all business lines

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TT Electronics LON:TTG, the Woking-based manufacturer of electronic components, published its half year results yesterday (4th August), announcing it had: “continued strong order intake and organic growth, with full year outlook unchanged.”

Richard Tyson, chief executive said: “The business is going great guns at 10% growth rate. Our order book has grown to the highest levels we’ve seen, with GBP660m booked – a 55% increase year-on-year – and our outlook points to sustained organic growth.”

The company reported an increase in revenue of 10% from the previous year, with 8% of revenue growth on an organic basis. This was on the back of twenty-three new significant project wins. The company had a record order intake with a book to bill of 144%, and its order book has bounced back since the Covid-19 pandemic, reporting orders of more than double pre-pandemic levels, and up 55% year-on-year.

Strategic positioning

“We’re in a good place,” said Tyson, “structurally we’re expecting growth in all business lines. Our automation and electrification business is strategically positioned to take advantage of ongoing global thematics, including the energy transition and greater manufacturing automation. Defence spending in NATO and other Western democracies is set to rise to unprecedented levels this century, and investment and trading in other global sectors are starting to return to pre-pandemic levels.”

The pandemic did affect TT Electronics’ business; however the company is powering through the recovery. “In the short-term we expect a strong surge in investment across the sectors we operate in – as spending increases to balance out under-investment during the pandemic – which should lead to more orders incoming for the company. Once spending returns to normality, we still expect significant growth in our business lines over the medium- to longer-term.”

The company reported adjusted operating profit increases of 5% year-on-year and had moved quickly to initiate pricing action to offset inflationary pressures. Tyson said that the company has been building up its inventory over the last 12-months to support increased customer demand, extended material lead times and shipment delays impacting cash flow and leverage.

However, the company reported its statutory operating profit has fallen by 4% to GBP8.9m, leading to statutory basic earnings-per-share of 2.3p.

Veritable history

The company originally listed on the London Stock Exchange in 1948 as Tyzack Turner Group, a Sheffield-based engineer but changed its name in 1988 to TT Group Plc. The 1990s and 2000s saw a slew of strategic acquisitions and the company changed name again in 2000 to TT Electronics Plc.

The company closed trading on 4th August at 178.2p, offering a year-to-date return of -28.64%, and a one-year return of -31.92%. The shares have ranged between 162.75p and 296.50p over 52-weeks and the company had a market capitalisation of GBR314.3m.

The company operates four divisions: Healthcare, which contributed 25% of revenue; Aerospace and Defence, which contributed 18% of revenue; Automation and Electrification, which contributed 39%; and Distribution.

TT Electronics is covered by nine analysts. HSBC rate the company as a ‘Buy’ with a Target Price of 280p; Peel Hunt rate the company as a ‘Buy’ with a Target Price of 280p; Numis follows the consensus of the other two analysts.

Harry Philips of Peel Hunt said: “Inflation is disguising the delivery of the 10% operating margin in 2023, so this should not detract from achieving operational efficiencies and a continued flow of infill M&A…the debate we now have with investors, factors in the robustness and the growth profile of the existing business, and focuses on the potential catalysts to take the company onto the next stage.”

Philips continued: “The upside is reflected in our still conservative target price of 280p. We reiterate a ‘Buy’.”

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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