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TT leaps on profits surge

Electronic components supplier TT Electronics swung to an underlying half-year pre-tax profit of £9.3m to beat analysts' expectations, and has resumed paying dividend ahead of schedule, forcing the shares up 12 per cent on results day to a two-year high.

Underlying revenue jumped 27 per cent and operating margins trebled from 1.3 per cent last financial year to 4 per cent in the six-month period. TT is targeting 8-10 per cent margins over the next couple of years, which would underline its transformation from an electrical manufacturer to an electronics specialist willing to follow clients across the globe. Fast-growing markets such as aerospace, power and medical are presenting exciting opportunities in areas such as alternative energy and secure power, where the company serves the growing uninterruptible power supply market.

TT continues to cut its reliance on highly-cyclical vehicle manufacturing, although close to £100m of first-half revenue stemmed from car makers. The company believes expansion in Asia and Latin America will offset the drain from a possible European car sales slowdown ahead.

Evolution Securities has upped its full-year EPS estimate from 6.5p to over 8p (1.3p in 2009).

TT ELECTRONICS (TTG)

ORD PRICE:129pMARKET VALUE:£200m
TOUCH:128.75-130p12-MONTH HIGH:132p35p
DIVIDEND YIELD:0.6%PE RATIO:33
NET ASSET VALUE:103p*NET DEBT:28%

Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2009**228-14.4-9.9nil
201028113.86.60.8
% change+23---

Ex-div: 13 Oct

Payment: 28 Oct

*Includes intangible assets of £84.6m, or 55p a share **2009 figures restated

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More analysis of company results

IC View

The shares trade on 15 times earnings estimates, but this could drop to around 12 times next year if TT hits margin targets. Add to this a return to the dividend list and the share price recovery has further to go. Good value.

Last IC view: Fairly priced, 85p, 16 Mar 2010

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