Electronic components and sensors group TT Electronics (TTG) made a slow start to the year and defence sales were poor, although things improved during the second quarter and that momentum has spilled over into the current period. New orders are exceeding sales, and restructuring also promises big benefits, which should offset ongoing weakness at the components division.
Operating profit before restructuring costs sank 9 per cent to £12.7m, hit by a slump in demand for connectors used on military fighting vehicles. With destocking hurting sales of high-end resistors, profits at TT's components unit slumped by two-thirds to just £1m. Shutting down its facility in Malaysia offset higher volumes at TT's integrated manufacturing services division, reducing margins and leaving profit flat at £2.8m. Thankfully, business was much better at the newly-formed sensors unit, where profit jumped by a tenth to £8.9m. Cars are using more gadgets than ever, and the German car manufacturers love TT's parts.
Crucially, management repeated its target to grow group margin from 4.9 per cent to between 8 and 10 per cent by 2015. A clamp down on costs, including a shift in manufacturing to Romania, India, China and Mexico, is already under way and should save £8m a year from 2015.
Broker Numis Securities expects full-year adjusted pre-tax profit of £28.2m, giving adjusted EPS of 13.4p (from £25.3m and 11.9p in 2012).
TT ELECTRONICS (TTG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 179p | MARKET VALUE: | £283.2m | |
| TOUCH: | 178-179p | 12-MONTH HIGH: | 193p | Low: 108p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 130p* | NET CASH: | £9m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 247 | 11.0 | 5.1 | 1.5 |
| 2013 | 261 | 8.90 | 4.1 | 1.6 |
| % change | +6 | -19 | -20 | +7 |
Ex-div: 16 Oct Payment: 31 Oct *Includes intangible assets of £85.4m, or 54p a share | ||||
