The short-term picture for TT Electronics (TTG) does not appear entirely straightforward. The electronics engineer thinks that coronavirus could hit its underlying operating profit for 2020 by up to £3m, as two Chinese manufacturing facilities in Suzhou and Dongguan, along with two support sites in Shenzhen and Hong Kong, accounted for a quarter of 2019 turnover. Both manufacturing sites have been subject to closures although Suzhou, in Jiangsu province, secured government permission to operate at 20 per cent capacity during widespread shutdowns, somewhat limiting the impact upon TT’s production. Both facilities now run at around 95 per cent capacity.
TT Electronics’ Chinese exposure also left it vulnerable to macroeconomic challenges last year. Yet the group’s rebalancing towards aerospace, defence and medical revenue helped TT weather these storms, with growth of more than a fifth in these segments resulting in them accounting for 47 per cent of group turnover. Cash conversion of 98 per cent helped to bring down TT’s net debt to £69.1m, ahead of some analysts' expectations, while a completed actuarial valuation showed its UK defined benefit pension scheme to be in surplus.
New self-help measures, which will involve capital expenditure and restructuring costs of around £14m, are intended to bring benefits of between £5m and £6m in 2022. TT hopes these will lift the operating profit margin from 2019’s 8.4 per cent level up to a double-digit figure.
Numis forecasts full-year 2020 pre-tax profits and earnings per share of £34.5m and 17.3p respectively, rising to £40.4m and 19.9p in 2021.
TT ELECTRONICS (TTG) | ||||
| ORD PRICE: | 197p | MARKET VALUE: | £ 323m | |
| TOUCH: | 196-201p | 12-MONTH HIGH: | 268p | LOW: 179p |
| DIVIDEND YIELD: | 3.6% | PE RATIO: | 23 | |
| NET ASSET VALUE: | 163p* | NET DEBT: | 26%** | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 510 | 13.8 | 6.5 | 5.5 |
| 2016 | 333 | 14.3 | 7.3 | 5.6 |
| 2017 | 361 | 17.7 | 9.7 | 5.8 |
| 2018 | 430 | 14.6 | 8.0 | 6.5 |
| 2019 | 478 | 15 | 8.5 | 7.0 |
| % change | +11 | +3 | +6 | +8 |
| Ex-div: | 23 Apr | |||
| Payment: | 15 May | |||
| *Includes intangible assets of £187m, or 114p a share **Includes lease liabilities of £17.6m | ||||
