TIDMTTG
RNS Number : 8491U
TT Electronics PLC
04 August 2022
2022 Interim Results, 4 August 2022
TT Electronics plc
Results for the half-year ended 30 June 2022
For further information, please contact:
TT Electronics
Richard Tyson, Chief Executive Officer
Mark Hoad, Chief Financial Officer
Kate Moy, Investor Relations Tel: +44 (0)1932 827 779
MHP Communications
Tim Rowntree / Ollie Hoare / Pete Lambie Tel: +44 (0)20 3128 8276
A management presentation for analysts and investors will be
held today at 08.30 and can be accessed on
https://stream.brrmedia.co.uk/broadcast/62cea99d287bf548a3b8c93f
There will be a conference call and moderated Q&A session
following this and to participate you will need to dial +44 (0)330
165 4012, confirmation code 2205337.
A recording of the presentation and Q&A session will be
available on the website later in the day.
A PDF of this half year announcement is available for download
from
https://www.ttelectronics.com/investors/investor-highlights/reports-presentations-videos/
.
Interim Results for the half-year ended 30 June 2022
Continued strong order intake and organic growth, with full year
outlook unchanged
Highlights
-- Revenue up 10% on a constant currency basis, 8% on an organic
basis, reflects our successful positioning in structural growth
markets and new project wins
-- Book to bill of 144% and record order intake, with 23 new
significant contract wins in the half delivering over GBP60m of
multi-year revenues.
-- Order book more than double pre-pandemic levels and up 55% vs. prior year
-- Adjusted operating profit up 5% at constant currency
-- Pricing action offsetting inflationary pressures
-- Investment in inventory to support increased customer demand,
extended material lead times and shipment delays impacting cash
flow and leverage, as anticipated
-- Statutory operating profit down 4% at GBP8.9m, statutory basic EPS of 2.3p
-- Interim dividend increased 11% to 2.0p per share reflecting
confidence in full year outlook and future prospects
Outlook
-- Sales momentum strong and continuing;
-- 2022 expected revenues already fully covered and
-- orderbook creating a step-change in visibility of revenue for 2023
-- Clear line of sight to delivering our unchanged, full year
expectations with Group performance benefitting from an
acceleration in growth, pricing action and the completion of our
self-help programme
-- Improved H2 profit and cash generation supports expectations
that net debt to adjusted EBITDA will be within 1-2 times target
range at year-end
GBP million (unless otherwise
stated) Adjusted Results(1) Statutory Results
H1 2022 H1 2021 Change Change H1 2022 H1 2021
Constant
fx
Revenue 269.2 235.6 14% 10% 269.2 235.6
Operating profit 18.3 15.9 1 5 % 5% 8.9 9.3
Operating profit margin 6.8% 6.7% 10bps (30)bps 3.3% 3.9%
Profit before tax 15.0 14.1 6% (3)% 5.6 7.5
Basic earnings per share 6.6p 6.5p 2% (8)% 2.3p 3.3p
Return on invested capital 8.9(3)
(2021(2) ) % 9.1% (20)bps
Cash conversion (55)% (7)%
-------- -------- -------- ---------
Free cash flow(1) (23.5) (10.3)
Net debt (2021(2) ) (1) 142.0 102.5
Leverage (2021(2) )(1) 2.4x 1.7x
Dividend per share 2.0p 1.8p
--------- ---------
Richard Tyson, Chief Executive Officer, said:
"We have delivered strong growth in the first half, in a
challenging execution environment, reflecting our ability to win
new business and good demand in our target end markets. We have
secured a record order intake, with more customer wins and continue
to expand our pipeline of new business opportunities, many on long
term programmes.
Our order book fully covers the increased revenue expected in
the second half. This, coupled with pricing actions to recover
inflation and further benefits from our self-help programme, means
our outlook for the full year is unchanged. While conscious of the
wider macro environment, we are well positioned to deliver an
improved margin and cash performance in the second half, and
further growth in 2023."
About TT Electronics
TT Electronics is a global provider of engineered electronics
for performance critical applications.
TT solves technology challenges for a sustainable world. TT
benefits from enduring megatrends in structurally high-growth
markets including healthcare, aerospace, defence, automation and
electrification. TT invests in R&D to create designed-in
products where reliability is mission critical. Products designed
and manufactured include sensors, power management and connectivity
solutions. TT has design and manufacturing facilities in the UK,
North America, Sweden and Asia.
Notes
1. Throughout this announcement we refer to a number of
alternative performance measures which provide additional useful
information. The Directors have adopted these measures to provide
additional information on the underlying trends, performance and
position of the Group with further details set out on page 26. The
adjusted measures used are set out in the reconciliation of KPIs
and non IFRS measures on pages 37 to 43.
2. As at December 2021
3. Calculated for the 12 months to June 2022
CHIEF EXECUTIVE OFFICER'S REVIEW
Introduction
We have delivered a good performance in the first half with
strong revenue growth, as our teams continue to execute in a
challenging environment. Order demand has continued at record
levels with increased multi-year programme wins over recent
reporting periods. The Group's order book now stands at GBP666(1)
million, up 55 per cent at constant currency compared to a year
ago, and more than double pre-pandemic levels. This strength
reflects both our collaborative approach with customers and the
momentum in the end markets in which we operate, creating a
step-change in visibility and giving us confidence in further
attractive organic growth. Constant currency revenue growth was 10
per cent in the half, despite some programme timing, COVID-19 and
supply chain issues.
The Group's operating performance was led by outstanding results
from our Sensors and Specialist Components (S&SC) division
which is delivering strong top line growth and the benefits of
this, and our self-help actions, are evidenced by excellent profit
and margin growth. Global Manufacturing Solutions (GMS) delivered
strong growth which offset the impact of temporary headwinds. We
expect GMS margins to show improvement in the second half. The
first half Power and Connectivity (P&C) performance was, as
expected, impacted by timing of revenues; we have clear line of
sight to deliver an improved second half performance as these
effects reverse and we execute on our strong order book, and as
pricing actions continue to take effect.
Demand from our customers is strong as our focus on building
close, long-term relationships further up the value chain and
collaborating on design-led solutions delivers. This is evidenced
by new business, with 23 significant new wins in the half
delivering over GBP60 million of multi-year revenues, and the
ongoing growth and visibility in our order book.
We believe our collaborative approach to deliver solutions based
on our technical expertise has been a key factor in winning new
orders. With long lead times and an uncertain supply chain
situation, customers are looking to commit to us to lock in
capacity for the longer term. We are focused on leveraging
expertise across the Group to pursue cross selling opportunities.
Much of this effort is led by the GMS division which is integral to
converting these opportunities and increasingly GMS showcases the
capabilities of the P&C division.
Spend on our self-help programme will be complete this year; the
closure of six sites is already complete, and we are in the process
of consolidating the Covina site into the Torotel site at Kansas
City, which will create one power business in North America.
Production will cease in December 2022 and the full benefits of
these actions will be realised in 2023. The new facility in Plano,
Texas is now up and running and in the final phase of qualifying
products for customers. This process has taken a little longer than
planned due to the unprecedented levels of demand, which has
required the prioritisation of resources to support customers. We
still expect all qualification activities to complete in 2022.
We are delighted with the Ferranti Power and Control (Ferranti)
acquisition which completed in January 2022. The business is
performing in line with our expectations and has already secured
new orders under our ownership and is also set to benefit from the
extension of demand for programmes which had been expected to tail
off over the next few years.
(1) at current FX spot rates
Results and operations
Group revenue for the period was GBP269.2 million, up 10 per
cent on a constant currency basis and 8 per cent on an organic
basis. The Group's adjusted operating profit for the period was
GBP18.3 million, 5 per cent higher than the prior period on a
constant currency basis.
Our results in the first half reflect a strong revenue
performance in both our GMS and S&SC businesses. Revenue in our
P&C business was moderated by programme phasing and the
Lutterworth closure. Cost inflation has been largely mitigated
through price increases, including to the existing order book, and
operational efficiencies, enhanced through our self-help
programme.
The adjusted operating margin in the first half was 6.8 per cent
(H1 2021: 6.7 per cent) and we remain on track to deliver a second
half margin improvement. We have clear line of sight to an improved
P&C performance as some of the external factors which impacted
the first half are moderating, allowing us to execute on our strong
order book, and as pricing actions take effect. After the impact of
adjusting items, including restructuring and acquisition related
costs, the Group's half year statutory operating profit was GBP8.9
million (H1 2021: GBP9.3 million) and operating margin was 3.3 per
cent (H1 2021: 3.9 per cent).
Cash conversion was impacted by a working capital outflow
totalling GBP33.0 million, reflecting our decision to invest in
additional inventory to protect the rapidly growing order book,
thus supporting our customers and enhancing our relationships with
them. During the first half we have agreed improved terms with some
customers to mitigate the impact of the working capital investment
we have committed to support their orders. We expect to see
improved cash conversion in the second half of the year. Adjusted
operating cash outflow post capital expenditure during the period
was GBP10.0 million (H1 2021: GBP1.1 million outflow, excluding
property disposals). On a statutory basis, cash flow from operating
activity was an outflow of GBP12.3 million (H1 2021: GBP5.0 million
outflow).
At 30 June 2022 net debt was GBP142.0 million, (31 December
2021: GBP102.5 million), including IFRS 16 lease liabilities of
GBP23.4 million (31 December 2021: GBP22.6 million), and as
previously indicated leverage increased to 2.4x (31 December 2021:
1.7x). We expect leverage to reduce over the course of the second
half and to be within our target range of 1-2 times by December
2022.
In January 2022 we were delighted to complete the GBP8.3 million
acquisition of Ferranti, based in Greater Manchester, which designs
and manufactures mission-critical complex power and control
sub-assemblies for blue chip customers in high-reliability and
high-performance end markets, primarily aerospace and defence. One
of the principal benefits of the acquisition is that it brings
highly skilled employees who provide full-service capabilities from
design, assembly, manufacturing, and testing including
environmental stress screening and inspection through to
service.
Ferranti adds further technology capability and scale to our
Power business with valuable long-term customer relationships and
programmes with leading global aerospace, defence and industrial
OEMs operating in highly regulated markets with significant
barriers to entry through necessary industry accreditations and
customer approvals.
Momentum across the Group has been strong with the order book
for 2022 fully covering expected revenues and we now have
materially improved visibility of revenues for 2023 compared to the
same point last year.
Dividend
Strong trading momentum reinforces our confidence in full year
expectations and the Group's future prospects. As a result, the
Board is declaring an interim dividend of 2.0 pence per share, an
increase of 11 per cent. The total cost of this dividend will be
approximately GBP3.5 million. Payment of the dividend will be made
on 13 October 2022, to shareholders on the register at 23 September
2022.
DIVISIONAL REVIEW
POWER AND CONNECTIVITY
The Power and Connectivity division develops and manufactures
power application products and connectivity devices which enable
the capture and wireless transfer of data. We collaborate with our
customers to develop innovative solutions to optimise their
electronic systems.
H1 2022 H1 2021 Change Change constant
fx(1)
Revenue GBP68.8m GBP68.2m 1% (2)%
--------- --------- ---------- ----------------
Adjusted operating profit(1) GBP2.1m GBP3.6m (42)% (48)%
--------- --------- ---------- ----------------
Adjusted operating margin(1) 3.1% 5.3% (220) bps (260)bps
--------- --------- ---------- ----------------
(1) See note 1c on page 26 for an explanation of alternative
performance measures. Adjusting items are not allocated to
divisions for reporting purposes. For further discussion of these
items please refer to note 6 on page 31 of this document.
Revenue inc reased by GBP 0.6 million to GBP 68.8 million ( H1
2021 : GBP 68.2 million) and included a GBP 3.7 million
contribution from the acquisition of Ferranti, which has performed
well in its first few months with TT. O rganic revenue was 7 per
cent lower due to the timing of programme revenues and the closure
of the Lutterworth facility. A COVID-19 shutdown in Dongguan
delayed deliveries into the second half.
Adjusted operating profit reduced by GBP 1.5 million to GBP2.1
million ( H1 2021 : GBP 3.6 million) and the adjusted operating
margin was 3.1 per cent ( H1 2021 : 5.3 per cent after GBP2.9
million of Virolens start-up costs). There was a GBP0.4 million
foreign exchange benefit and the constant currency reduction in
operating profit was mainly driven by reduced revenues. As
previously noted, during the first half we experienced a COVID-19
shutdown, impacting our Dongguan facility for approximately 4-6
weeks and while the local teams were quick to re-establish
production levels once restrictions were lifted, congestion in the
local supply chains caused inefficiencies which impacted our
performance in the half.
Overall order intake remains good though revenues from
commercial aerospace are lumpy and taking longer to return, despite
a resumption in order intake, in part due to our wide body
weighting which is lagging the narrow body recovery.
As we look into the second half, we are confident of an improved
performance as we deliver on our strong order book, work through
the COVID-19 inefficiencies and realise the benefits of the pricing
initiatives from the first half.
There have been some significant awards during the period, which
gives us confidence as we look forward including:
-- A three year contract with a new customer for our Kansas
facility with an existing TT aerospace and defence customer for a
transformer for an Air and Missile Defence Radar (AMDR). This new
customer chose to work with us over the competition because of our
strong relationship, engineering expertise, product quality and
ability to meet schedule changes.
-- Following on from the power electronics assembly contract win
with a major defence prime, RBSL, for the main UK army vehicle
programme Boxer, we have been awarded a package of electrical cable
harnesses for the same Boxer programme. We have also had further
success with the award of a contract to design and develop
electrical cable harness systems for the Challenger 3 upgrade
project, a combat vehicle being upgraded as the British Army's new
main battle tank. TT will lead the design, development,
manufacturing, and initial fitment trials of the various cable
assemblies. This contract extends out to 2024.
-- Our recently acquired Ferranti business in Oldham has
successfully secured a design and development contract for power
converters for a new business jet. The seven-year contract (two
years of development and five years of production) worth over GBP6
million in sales, will see us supply Permanent Magnet Alternator
Converters (PMAC) with the potential for further orders dependent
on demand for the aircraft. The award builds on the existing
relationship between TT and this business jet OEM
GLOBAL MANUFACTURING SOLUTIONS
The Global Manufacturing Solutions division provides
manufacturing services and engineering solutions for our product
divisions and to customers that often require a lower volume and
higher mix of different products. We manufacture complex integrated
product assemblies for our customers and provide engineering
services including designing testing solutions and
value-engineering.
H1 2022 H1 2021 Change Change constant
fx(1)
Revenue GBP135.3m GBP109.6m 23% 17%
---------- ---------- -------- ----------------
Adjusted operating
profit(1) GBP9.4m GBP8.5m 11% 1%
---------- ---------- -------- ----------------
Adjusted operating
margin(1) 6.9% 7.8% (90)bps (120) bps
---------- ---------- -------- ----------------
(1) See note 1c on page 26 for an explanation of alternative
performance measures. Adjusting items are not allocated to
divisions for reporting purposes. For further discussion of these
items please refer to note 6 on page 31 of this document.
Revenue grew by GBP25.7 million to GBP135.3 million (H1 2021:
GBP109.6 million). We have delivered organic growth of 17 per cent,
reflecting partnerships with our key long term relationship
customers and recent project wins. Pass through revenue was around
GBP10 million in the first half which causes a technical head wind
to margin progression. We are currently anticipating a similar
level of pass through revenue in the second half.
All of our GMS sites are fully booked for the year and the order
book growth has been underpinned by several multi-million pound
wins, a number of which extend beyond 12 months. We continue to see
that our power customers require manufacturing capability and so
our GMS and P&C divisions are partnering to provide this
solution. We continue to improve our understanding of how to
leverage these opportunities from the customer perspective.
Adjusted operating profit increased by GBP0.9 million to GBP9.4
million (H1 2021: GBP8.5 million) including a GBP0.8 million
foreign exchange benefit. The adjusted operating profit margin was
6.9 per cent (H1 2021: 7.8 per cent) in part reflecting our
previous guidance that the higher than normal level of cost pass
through to customers would be a headwind to short term margin
progression. We expect to deliver an enhanced margin from the GMS
division in the second half of the year.
The considerable sales momentum has resulted in customer awards
across our key markets from new and existing customers. Notable
wins and growth areas include the following:
-- We have secured a sizeable contract win from a life sciences
lab equipment customer who needed a manufacturing partner for a
blood analyser. The contract is over a two-year period and is worth
over GBP2 million in sales. This is a relatively new customer to TT
that initially awarded us some low volume requirements in 2021,
allowing us to prove our capability and build trust. It was a win
for TT's North America site in Cleveland which has a strong
presence in medical and life science products. The site has the
medical ISO13485 accreditation and is FDA registered. Our S&SC
division also secured a small win with the same customer in
April.
-- Also in healthcare, our Suzhou facility has added a new
medical lab equipment customer. Our healthcare credentials,
especially in life sciences, and our ability to offer manufacturing
capacity in a low-cost region helped us to win the order. This is a
multi-year contract worth over GBP2.5 million in sales.
-- In the UK we have secured work for a new division of an
existing defence and security customer to provide solutions for
embedded encryption. The client needed a reliable manufacturing
partner for a new programme and the GBP2.5 million sales win
further strengthens our strategic partnership with this
long-standing customer.
-- Our Cleveland facility has received a new award with an
existing industrial customer for high level assemblies (HLA) on a
new programme for semiconductors. The customer was looking for the
right partner to help meet accelerating semi-conductor demand and
chose TT on the back of the proven partnership and confidence in
our team and Cleveland facility. Our vertical integration strategy
and HLA capabilities were key to winning this award.
Overall, the GMS division is in excellent shape, the order
pipeline is stronger than ever, and our enhanced customer
relationships and business development initiatives are delivering
revenue and order book growth.
SENSORS AND SPECIALIST COMPONENTS
The Sensors and Specialist Components division works with
customers to develop high specification, standard and customised
solutions, including sensors and power management devices. Our
solutions improve the precision, speed and reliability of critical
aspects of our customers' applications .
H1 2022 H1 2021 Change Change constant
fx(1)
Revenue GBP65.1m GBP57.8m 13% 8%
--------- --------- -------- ----------------
Adjusted operating profit(1) GBP10.6m GBP7.4m 43% 34%
--------- --------- -------- ----------------
Adjusted operating margin(1) 16.3% 12.8% 350 bps 320 bps
--------- --------- -------- ----------------
(1) See note 1c on page 26 for an explanation of alternative
performance measures. Adjusting items are not allocated to
divisions for reporting purposes. For further discussion of these
items please refer to note 5 on page 31 of this document.
Revenue increased by GBP7.3 million to GBP65.1 million (H1 2021:
GBP57.8 million). Organic revenue was 8 per cent higher. Despite
typically short order visibility in this division, we are already
covered for the balance of this year's revenue and are starting to
build the order book for 2023. We have been careful to adjust our
commercial terms, where possible, to orders that are
non-cancellable, non-refundable and in some cases,
non-reschedulable. We are seeing very strong demand from the
healthcare market and through the distributors.
Adjusted operating profit increased by GBP3.2 million to GBP10.6
million (H1 2021: GBP7.4 million) including a
GBP0.5 million foreign exchange benefit. The results of the
self-help programme continue to benefit the performance of the
division and this, together with an attractive drop through on
volume growth and favourable product mix, is reflected in a further
step up in adjusted operating profit margin to 16.3 per cent (H1
2021: 12.8 per cent).
Prices are under continuous review to ensure we recoup cost
inflation, including higher freight costs where there can be a
short-term lag in recovery, and we continue to win new orders at
the higher price points.
We constantly monitor inventory levels within the distributors,
the channel through which 67 per cent of our sales are sourced.
Distributor inventory levels for our products are currently 5 per
cent lower than at the start of 2020.
There have been a number of key developments during the first
half of the year including:
-- We have recently been awarded a contract to supply sensors
for an Electric Power Assisted Steering (EPAS) System for a leading
manufacturer of steering and suspension systems. This system will
be used in three and four-wheeler small commercial electric
vehicles. Our sales and engineering team worked closely with the
customer's engineering team from inception to ensure our sensors
accurately measured the torque applied by the driver on the
steering wheel.
-- Our Asia Pacific sales team won a three-year optoelectronics
contract with a new medical customer, for optical sensors to be
used in liquid level detection in a quantum fluorescence
immunoanalyser.
-- The U.S. team secured two different optical sensor
opportunities with a medical device company, for use in a blood
analyser. These sensors are used in the disposable test vessel
cartridges designed for the Werfen GEM 5000 blood gas analyser. The
sensors are critical to detect the proper loading of the cartridge
as its alignment with the analyser optics, for spectral
measurements, is essential for proper execution of the test.
OUR STRATEGY
Creating value through technology investment
Working in partnership with our customers to bring new,
innovative products to market that provide sustainable solutions is
key to driving future growth. Investment in R&D is therefore
one of our top capital allocation priorities. During the period we
invested GBP5.4 million (H1 2021: GBP5.8 million) in R&D spend,
representing 4.0 per cent (H1 2021: 4.6 per cent) of aggregate
revenue of our product businesses.
We are developing, with customers, a pipeline of new products to
bring to market. A selection of notable examples from H1
include:
-- A recent agreement with our long-term partner Honeywell
Aerospace was reached to proceed with the design of a new power
supply for next-generation inertial navigation units for its
aerospace and defence customers. This is a result of TT's strong
focus on innovation and our investment in engineering
capability.
-- TT continues to work with a world leader in aircraft
electrical systems on power supplies for electric and hybrid
electric aircraft. This is supported by grant funding from the
Aerospace Technology Institute and we have moved to the first stage
of hardware validation for a new, high efficiency DC-DC power
converter.
-- TT is partnering alongside medical device providers to expand
the use of electromagnetic tracking for new medical procedures.
Prototypes are being developed for use in cardiac procedures and we
are also involved in the design of robotically assisted endoscopy
using our sensor technology .
Creating value through margin enhancement
Margin enhancement continues to be a key focus. A number of
factors will drive margins higher in the future:
-- Operational leverage from organic revenue growth: the
benefits of our strategic repositioning to build closer, more
embedded customer relationships and completing more design led work
with a focus on cross selling is supporting strong growth
-- Reductions in overheads: the self-help programme which will
be completed this year and remains on track to generate full run
rate benefits of GBP13-14 million per annum from 2023 onwards
-- Acquisition-led enhancement of margin, through technology
offerings and market positions: the recent acquisition of the
Ferranti businesses is already making a healthy contribution to the
Group's margins and delivering absolute profit improvement.
A noticeable characteristic of the new orders we are winning is
the number from customers wanting more integrated, design led
solutions. In addition to winning new higher quality orders from
existing customers, we have also won work from eleven new customers
in the first half of the year.
We are well advanced through the various projects which make up
our self-help programme and cash spend will complete in this
calendar year. The physical transfer of manufacturing from the
Lutterworth site to Bedlington was completed during 2021 and we are
well advanced on the establishment of a new clean room and
qualification process. Our new facility in Plano, Texas houses the
former activities from Carrollton and Corpus Christi and is now
operational, though the qualification process has taken slightly
longer than expected. The integration of the Covina business into
the Torotel site in Kansas City is in progress as planned.
The cash cost of the Group self-help programme is now expected
to be circa GBP21 million, as a result of the longer Plano
qualification times. The project spend will be completed this year.
We remain on track to deliver GBP2 million of incremental benefits
in 2022 taking the annual run rate benefits in 2022 to GBP10
million and are confident of achieving the programme's GBP13-14
million of run-rate benefits in 2023.
Creating value from mergers and acquisitions
M&A is an important part of our growth proposition as we
look to add higher margin businesses that enhance TT's capability
in our key markets.
In January 2022 we completed the acquisition of Ferranti Power
and Control, based in Greater Manchester, which designs and
manufactures mission-critical complex power and control
sub-assemblies for blue chip customers in high-reliability and
high-performance aerospace and defence end markets. One of the
principal benefits of this acquisition is that it brings highly
skilled employees who provide full-service capabilities from
design, assembly, manufacturing and testing including environmental
stress screening and inspection through to service. The integration
of the Ferranti business into our P&C division is on track and
planning for the relocation of the business out of the Elbit
facility is underway. We were pleased to have recently secured a
win for a power electronic assembly contract for a new business
jet. Ferranti is also set to benefit from the extension of demand
for programmes which had been expected to tail off over the next
few years.
Environmental, social and governance (ESG)
Not only do we develop, design, engineer and manufacture
products that enable reduced environmental impacts for our
customers, but we are also optimising our own operations to reduce
our impact on the environment.
We have set ourselves a target to be Net Zero by 2035 for our
Scope 1 & 2 emissions and we are undertaking a range of actions
to deliver like-for-like reductions in our annual emissions, in
accordance with our carbon reduction roadmap. In the near term, we
have made a commitment to deliver a 50 per cent reduction in Scope
1 & 2 carbon emissions by the end of 2023, against our 2019
baseline.
As we look forward, further reductions in our carbon emissions
will require other measures such as infrastructure and process
projects to reduce electricity consumption and investment in solar
power or a change in the approach of local Governments to provide
renewables in Asia and Mexico. We are undertaking feasibility
studies for possible solar projects.
For our Scope 3 emissions we are assessing areas of materiality
for the Group. We believe our top four most significant, and
measurable categories are transportation (upstream and downstream),
purchased goods and services, and waste. Our corporate partnership
with the Carbon Disclosure Project (CDP) Supply Chain Management
team will help measure the supply chain element of our
emissions.
Outlook
Our order book fully covers the increased revenue expected in
the second half. This, coupled with pricing actions to recover
inflation and further benefits from our self-help programme, means
our outlook for the full year is unchanged. While conscious of the
wider macro environment, we are well positioned to deliver an
improved margin and cash performance in the second half, and
further growth in 2023.
OTHER FINANCIAL INFORMATION
Group revenue was GBP269.2 million (H1 2021: GBP235.6 million).
Group revenue was 10 per cent higher than in the same period last
year on a constant currency basis. Sales volumes in all key
markets, with the exception of commercial aerospace, are buoyant
and the order book and forward pipeline of new business
opportunities gives us confidence that this momentum will
continue.
The Group reported an adjusted operating profit of GBP18.3
million (H1 2021: GBP15.9 million) with the improvement driven by
revenue growth and benefits from the Group's self-help programme.
Statutory operating profit for the period was GBP8.9 million (H1
2021: GBP9.3 million) after a charge of GBP9.4 million (H1 2021:
GBP6.6 million) for items excluded from adjusted operating profit
including:
-- Restructuring and other costs of GBP5.5 million (H1 2021:
GBP2.6 million), comprising GBP4.5 million relating to the
self-help programme and pension project costs of GBP1.0 million
-- Acquisition and disposal related costs of GBP3.9 million (H1
2021: GBP4.0 million), comprising GBP3.1 million of amortisation of
acquired intangible assets; GBP0.2 million of acquisition costs and
GBP0.4 million of integration costs relating to the acquisition of
Ferranti; GBP0.1 million of integration costs of Torotel, Inc. and
GBP0.1 million of costs of terminated acquisitions.
The Group generated an adjusted operating margin of 6.8 per cent
(H1 2021: 6.7 per cent). This was delivered whilst dealing with
increased costs to execute on high levels of growth and increases
in input costs linked to supply chain constraints. We are having
considerable success at recovering the latter through price
increases.
The net finance cost was higher at GBP 3.3 million ( H1 2021 :
GBP 1.8 million) due to a higher level of borrowing over the half
year, increasing interest rates and non-cash accelerated
amortisation of fees, associated with the previous RCF. The Group's
overall tax charge was GBP1.5 million ( H1 2021: GBP 1.7 million).
The tax charge on adjusted profit before tax was GBP 3.4 million (
H1 2021: GBP 2.8 million), resulting in an effective adjusted tax
rate of 22.8 per cent ( H1 2021 : 19.6 per cent) with the increase
due to a higher proportion of profits coming from higher rate
jurisdictions.
Basic earnings per share (EPS) reduced to 2.3 pence ( H1 2021:
3.3 pence). Adjusted EPS increased to 6.6 pence ( H1 2021 : 6.5
pence), reflecting the improvement in adjusted operating profit
partly offset by a higher interest and tax charge.
Adjusted operating cash flow post capital expenditure was lower
with a GBP 10.0 million outflow ( H1 2021 : GBP 1.1 million outflow
excluding property disposals) which was primarily due to a GBP33.0
million working capital outflow ( H1 2021: GBP 18.9 million
outflow), reflecting further strong growth and the maintenance of
higher inventory levels in response to supply chain constraints.
This resulted in operating cash conversion of (55) per cent ( H1
2021 : (7) per cent). On a statutory basis, cash flow from o
perating activity was an outflow of GBP 12.3 million ( H1 2021: GBP
5.0 million outflow).
There was a free cash outflow of GBP 23.5 million ( H1 2021 :
GBP 10.3 million outflow), including GBP7.0 million of
restructuring and acquisition related payments (H1 2021: GBP0.6
million after GBP5.8 million proceeds of property disposals) .
There were no pension contribution payments in the period (H1 2021:
GBP2.7 million) while we finalise new escrow arrangements to avoid
the risk of a trapped surplus in the future. The total net
accounting surplus under the Group's defined benefit pension
schemes was GBP 91.6 million (31 December 2021: GBP74.5 million)
with the increase due to increases in yields on corporate bonds in
the half year causing the scheme obligation to decrease.
As at 3 0 June 202 2 the Group's net debt was GBP 142.0 million
( 31 December 20 21 : GBP 102.5 million), including GBP23.4 million
of lease liabilities (31 December 20 21 : GBP 22.6 million).
Leverage, consistent with the bank covenants, was 2.4 times at 3 0
June 202 2 ( 31 December 20 21 : 1.7 times).
The Group has recently re-financed its bank revolving credit
facility with a syndicate of five relationship banks at
commercially attractive rates. This GBP147.4 million facility has a
four-year tenor with one year extension option and complements last
year's debut issue of GBP75 million of private placement fixed rate
loan notes.
Summary of Adjusted results
To assist with the understanding of earnings trends, the Group
has included within its non-GAAP alternative performance measures
including adjusted operating profit and adjusted profit. Further
information is contained in the 'Reconciliation of KPIs and non
IFRS measures' on pages 37 to 43.
A summary of the Group's adjusted results, and a reconciliation
of statutory to adjusted profit numbers are set out below:
GBP million H1 2022 H1 2021
----------------------------------- -------------- --------------
Revenue 269.2 235.6
----------------------------------- -------------- --------------
Operating profit 18.3 15.9
Operating margin 6.8% 6.7%
Net finance expense (3.3) (1.8)
----------------------------------- -------------- --------------
Profit before tax 15.0 14.1
Tax (3.4) (2.8)
Tax rate 22.8% 19.6%
----------------------------------- -------------- --------------
Profit after tax 11.6 11.3
Weighted average number of shares 175.7 million 174.7 million
EPS 6.6p 6.5p
=================================== ============== ==============
Reconciliation of Adjusted results
GBP million Note H1 2022 H1 2021
--------------------------------------- ----- -------- -------------
Operating profit 8.9 9.3
Adjusted to exclude:
--------------------------------------- ----- -------- -------------
Restructuring and other items
Restructuring 1 (4.5) (3.3)
Property disposals 2 - 1.3
Pension restructuring costs 3 (1.0) (0.6)
--------------------------------------- ----- -------- -------------
(5.5) (2.6)
Acquisition related costs
Amortisation of intangible assets
arising on business combinations (3.1) (2.5)
Torotel acquisition and integration
costs (0.1) (0.9)
Ferranti acquisition and integration
costs 4 (0.6) -
Covina acquisition and integration
costs - (0.2)
Other acquisition related costs 5 (0.1) (0.4)
--------------------------------------- ----- -------- -------------
(3.9) (4.0)
--------------------------------------- ----- -------- -------------
Total operating reconciling items (9.4) (6.6)
--------------------------------------- ----- -------- -------------
Adjusted operating profit 18.3 15.9
======================================= ===== ======== =============
Profit / (loss) before tax 5.6 7.5
Total operating reconciling items
(as above) 9.4 6.6
--------------------------------------- ----- -------- -------------
Adjusted profit before tax 15.0 14.1
Taxation charge on adjusted profit (3.4) (2.8)
--------------------------------------- ----- -------- -------------
Adjusted profit after taxation 11.6 11.3
======================================= ===== ======== =============
Restructuring and other costs charged in the period
comprise:
Note 1: Restructuring costs charged in the period primarily
relate to costs arising on the restructuring of the Group's
footprint, product rationalisation and headcount reduction
programme to reduce the Group's fixed costs which was initiated in
2020. Restructuring costs of GBP4.5 million comprise GBP2.6 million
relating to the restructure of the North America Resistors
business; GBP1.0 million relating to closure of our site in
Lutterworth, UK, GBP0.7 million relating to the relocation of
production facilities from Covina, USA to Kansas, USA and GBP0.2
million relating to the relocation of production facilities from
Medina, USA to Minnesota, USA. Prior period costs of GBP3.3 million
comprise GBP2.0 million relating to the restructure of the North
America Resistors business; GBP0.8 million relating to closure of
our site in Lutterworth, UK and GBP0.5 million relating to the
closure of our site in Tunis, Tunisia.
Note 2: Gain on disposal of the Covina property
Note 3: Other pension costs relating to costs associated with
liability management exercises and cleansing of scheme data. Prior
period costs relate primarily to the equalisation of male and
female members' benefits in respect of guaranteed minimum
pensions.
Note 4: Comprises GBP0.2 million of acquisition costs and GBP0.4
million of integration costs relating to the acquisition of the
Power and Control business of Ferranti Technologies Ltd. based in
Oldham, UK.
Note 5: Costs of unannounced and terminated acquisitions
Cash flow, net debt and leverage
The table below sets out Group cash flows and net debt
movement:
GBP million H1 2022 H1 2021
Adjusted operating profit 18.3 15.9
-------- --------
Depreciation and amortisation 7.9 8.0
-------- --------
Working capital movement (33.0) (18.9)
-------- --------
Net capital expenditure (5.0) (6.2)
-------- --------
Capitalised development expenditure (1.0) (1.0)
-------- --------
Other 2.8 1.1
-------- --------
Adjusted Operating Cash Flow post capex
and excluding property disposals (10.0) (1.1)
-------- --------
Restructuring and acquisition costs(1) (7.0) (0.6)
-------- --------
Net interest and tax (4.6) (4.0)
-------- --------
Lease payments (1.9) (1.9)
-------- --------
Retirement benefit schemes - (2.7)
-------- --------
Free Cash Flow (23.5) (10.3)
-------- --------
Dividends (6.7) (8.2)
-------- --------
Lease payments 1.9 1.9
-------- --------
Equity issued 0.2 0.3
-------- --------
Acquisitions & disposals (8.3) (0.5)
-------- --------
Other (0.2) (0.1)
-------- --------
Increase in net debt (36.6) (16.9)
-------- --------
Opening net debt (102.5) (83.9)
-------- --------
Other non-cash (new leases and lease reassessments) (1.1) (7.1)
-------- --------
FX (1.8) 0.6
-------- --------
Closing net debt (142.0) (107.3)
-------- --------
(1) In the prior year, restructuring, acquisition and disposal
related costs includes the net proceeds of the Covina property sale
(GBP5.8 million).
At 30 June 2022 the Group's net debt was GBP142.0 million (31
December 2021: GBP102.5 million). Included within net debt was
GBP23.4 million of lease liabilities (31 December 2021: GBP22.6
million).
Consistent with the Group's borrowing agreements, which exclude
the impact of IFRS 16 leases, leverage ratio was 2.4 times at 30
June 2022 (31 December 2021: 1.7 times). Net interest cover was 9.4
times (31 December 2021: 13.5 times). The Group's debt covenants
state that the leverage ratio must not exceed 3.0 times and that
interest cover must be more than 4.0 times.
Principal risks and uncertainties
The Group has an established, structured approach to identifying
and assessing the impact of financial and operational risks on its
business, which is reviewed and updated quarterly. The principal
risks and uncertainties for the remainder of the financial year are
not expected to change materially from those included on pages 67
and 70 of the Annual Report and Accounts 2021. The risks identified
relate to the following areas: general revenue reduction due to
geopolitical instability and COVID-19, contractual risks; research
and development; people and capability; supplier resilience due to
increased lead times and COVID-19; IT systems and information;
M&A and integration, sustainability, climate change and the
environment, health and safety, legal and regulatory compliance.
Further information in relation to the Group's financial position
and going concern is included on page 18.
Cautionary statement
This report contains forward-looking statements. These have been
made by the Directors in good faith based on the information
available to them up to the time of their approval of this report.
The Directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors underlying such
forward-looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The Directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
TT Electronics plc
Interim Results for the half-year ended 30 June 2022
Going Concern
The Group has experienced continued improvement in trading
momentum and strong growth on our 2021 numbers. We continue to see
benefit from our strategic repositioning in our chosen structural
growth markets as well as our focus on building close relationships
with our clients and this can be seen in both the order book and
financial performance of the Group.
The Group's financial position remains stable, at 30 June 2022
it had:
-- GBP267.6 million of total borrowing facilities available
(comprising committed facilities of GBP226.1 million and
uncommitted facilities of GBP41.5 million representing overdraft
lines and an undrawn accordion facility of GBP32.6 million). The
Group's primary source of finance is the GBP147.4 million committed
revolving credit facility (RCF) which was signed in June 2022 to
replace the already existing RCF; at 30 June 2022 GBP109.5 million
of this facility had been drawn down. The Group's RCF is payable on
a floating rate basis above GBP SONIA, USD SOFR or EURIBOR
depending on the currency of the loan and will mature in June 2026
with a one year extension option which expires in May 2023. In
December 2021, TT completed a debut issue of GBP75 million of
private placement fixed rate loan notes with three institutional
investors; the issue is evenly split between 7 and 10 year
maturities with an average interest rate of 2.9% and covenants in
line with our bank facility. The private placement complements, at
an attractive rate, the Group's existing bank revolving credit
facility, diversifying our sources of debt funding and providing us
with a stable, long-term financing structure.
-- A leverage ratio of 2.4 times at 30 June 2022 compared to an
RCF covenant maximum of 3.0 times. Interest cover (pre-IFRS 16 and
excluding pension interest) of 9.4 times compared to an RCF
covenant minimum of 4.0 times.
The Group has prepared and reviewed cash flow forecasts across
the business over the twelve-month period from the date of the
approval of these interim results, considering the Group's current
financial position and the potential impact of our principal risks
on divisions.
Under the Group's base case financial projections, the Group
retains significant liquidity and covenant headroom, with both
metrics improving from the position as at 30 June 2022.
The Group's downside stress test scenario has been sensitised
for supply chain challenges, inflationary pressure and further
covid related disruption which show a reduction in revenue and
operating profit compared to the latest forecast. Despite this
further reduction these projections show that the Group should
remain well within its facilities headroom and within bank
covenants for 2022 and 2023. A 'reverse' stress-test was also
modelled to understand the conditions which could jeopardise the
ability of the Group to continue as a going concern including
assessing against covenant testing and facility headroom. The
reverse stress test scenario is deemed to have a remote likelihood
and help inform the Directors' assessment that there are no
material uncertainties in relation to going concern.
The Group's wide geographical and sector diversification helps
minimise the risk of serious business interruption or catastrophic
reputational damage. Furthermore, the business model is structured
so that the Group is not overly reliant on any single customer,
market or geography.
The Directors have assessed the future funding requirements of
the Group with due regard to the risks and uncertainties to which
the Group is exposed and compared them with the level of available
borrowing facilities and are satisfied that the Group has adequate
resources for at least twelve months from the date of signing.
Accordingly, the financial statements have been prepared on a going
concern basis.
Responsibility statement of the Directors
We confirm that to the best of our knowledge:
-- The 2022 annual financial statements of TT Electronics plc
will be prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34 'Interim Financial
Reporting';
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R:
(i) an indication of important events that have occurred during
the first six months of the financial year, and their impact on the
condensed set of financial statements; and
(ii) a description of the principal risks and uncertainties for
the remaining six months of the year
-- the interim management report includes a fair review of the
information required by DTR 4.2.8R:
(i) related party transactions that have taken place in the
first six months of the current financial year and that have
materially affected the financial position or performance of the
Group in that period; and
(ii) any changes in the related parties transactions described
in the 2021 Annual Report that could have a material effect on the
financial position or performance of the Group in the current
period.
By order of the Board
Richard Tyson Mark Hoad
Chief Executive Officer Chief Financial Officer
3 August 2022 3 August 2022
Cautionary statement
This report contains forward-looking statements. These have been
made by the directors in good faith based on the information
available to them up to the time of their approval of this report.
The directors can give no assurance that these expectations will
prove to have been correct. Due to the inherent uncertainties,
including both economic and business risk factors underlying such
forward looking information, actual results may differ materially
from those expressed or implied by these forward-looking
statements. The directors undertake no obligation to update any
forward-looking statements whether as a result of new information,
future events or otherwise.
Independent review report to TT Electronics plc
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the Condensed
consolidated income statement, the Condensed consolidated statement
of comprehensive income, the Condensed consolidated statement of
financial position, the Condensed consolidated statement of changes
in equity, and Condensed consolidated cash flow statement and
related notes 1 to 15.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with United Kingdom adopted International Accounting Standard 34
and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council for use in the
United Kingdom. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that
we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
International Financial Reporting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with United Kingdom adopted
International Accounting Standard 34, "Interim Financial
Reporting".
Conclusion relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on
the review procedures performed in accordance with this ISRE (UK),
however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority. In preparing the half-yearly financial report, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the group a conclusion on the
condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council. Our work
has been undertaken so that we might state to the company those
matters we are required to state to it in an independent review
report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Statutory Auditor
London, United Kingdom
3 August 2022
Condensed consolidated income statement (unaudited)
for the six months ended 30 June 2022
Six months Six months Year ended
ended 30 ended 31 December
June 2022 30 June 2021 (audited)
GBPmillion (unless otherwise stated) Note 2021
------------------------------------------- ----- ----------- ----------- ----------------
Revenue 3 269.2 235.6 476.2
Cost of sales (206.8) (178.8) (360.6)
------------------------------------------- ----- ----------- ----------- ----------------
Gross profit 62.4 56.8 115.6
Distribution costs (15.0) (12.9) (26.9)
Administrative expenses (38.5) (34.6) (69.4)
------------------------------------------- ----- ----------- ----------- ----------------
Operating profit 8.9 9.3 19.3
Analysed as:
Adjusted operating profit 3 18.3 15.9 34.8
Restructuring and other 6 (5.5) (2.6) (7.8)
Acquisition and disposal related costs 6 (3.9) (4.0) (7.7)
------------------------------------------- ----- ----------- ----------- ----------------
Finance income 0.8 0.4 1.1
Finance costs (4.1) (2.2) (4.4)
------------------------------------------- ----- ----------- ----------- ----------------
Profit before taxation 5.6 7.5 16.0
Taxation 7 (1.5) (1.7) (3.2)
------------------------------------------- ----- ----------- ----------- ----------------
Profit for the period attributable to
the owners of the Company 4.1 5.8 12.8
------------------------------------------- ----- ----------- ----------- ----------------
EPS attributable to owners of the Company
(pence)
Basic 8 2.3 3.3 7.3
Diluted 8 2.3 3.3 7.2
------------------------------------------- ----- ----------- ----------- ----------------
Condensed consolidated statement of comprehensive income
(unaudited)
for the six months ended 30 June 2022
GBPmillion Six months ended 30 June Six months ended 30 June Year ended 31 December
2022 2021 2021 (audited)
---------------------------- --------------------------- --------------------------- ---------------------------
Profit for the period 4.1 5.8 12.8
Other comprehensive
income/(loss) for the year
after tax
Items that are or may be
reclassified subsequently
to the income statement:
Exchange differences on
translation of foreign
operations 26.6 (1.8) 3.4
(Loss)/gain on hedge of net
investment in foreign
operations (3.0) 0.2 (0.2)
Loss on cash flow hedges
taken to equity less
amounts recycled to the
income statement (4.8) (1.4) (3.2)
Deferred tax (loss)/gain on
movements in cash flow
hedge reserves (0.8) - 0.5
Items that will never be
reclassified to the income
statement:
Remeasurement of defined
benefit pension schemes 16.8 27.6 35.8
Tax on remeasurement of
defined benefit pension
schemes (4.4) (9.2) (11.4)
----------------------------- --------------------------- --------------------------- ---------------------------
Total comprehensive income
for the period attributable
to the owners of the
Company 34.5 21.2 37.7
----------------------------- --------------------------- --------------------------- ---------------------------
Condensed consolidated statement of financial position
(unaudited)
GBPmillion Note 30 June 30 June 31 December
2022 2021 2021 (audited)
---------------------------------- ----- -------- -------- ----------------
ASSETS
Non-current assets
Right-of-use assets 19.8 17.8 19.6
Property, plant and equipment 54.7 48.6 50.4
Goodwill 5 171.6 154.6 156.5
Other intangible assets 56.2 54.3 51.7
Deferred tax assets 9.1 8.1 11.3
Derivative financial instruments 0.9 5.8 0.6
Pensions 11 95.0 65.4 78.4
---------------------------------- ----- -------- -------- ----------------
Total non-current assets 407.3 354.6 368.5
---------------------------------- ----- -------- -------- ----------------
Current assets
Inventories 193.7 106.8 141.8
Trade and other receivables 102.5 86.3 86.2
Income taxes receivable 0.7 2.7 2.6
Derivative financial instruments 1.9 0.8 4.0
Cash and cash equivalents 12 76.3 100.6 68.3
---------------------------------- ----- -------- -------- ----------------
Total current assets 375.1 297.2 302.9
---------------------------------- ----- -------- -------- ----------------
Total assets 782.4 651.8 671.4
---------------------------------- ----- -------- -------- ----------------
LIABILITIES
Current liabilities
Borrowings 12 12.6 35.8 1.1
Lease liabilities 4.5 3.4 4.1
Derivative financial instruments 4.0 1.9 1.3
Trade and other payables 160.3 95.2 133.9
Income taxes payable 6.6 7.3 7.1
Provisions 4.7 4.4 2.5
---------------------------------- ----- -------- -------- ----------------
Total current liabilities 192.7 148.0 150.0
---------------------------------- ----- -------- -------- ----------------
Non-current liabilities
Borrowings 12 182.3 151.2 147.1
Lease liabilities 18.9 17.5 18.5
Derivative financial instruments 1.2 0.4 0.7
Deferred tax liability 23.5 16.2 20.2
Pensions 11 3.4 4.2 3.9
Provisions and other non-current
liabilities 0.9 0.9 1.0
---------------------------------- ----- -------- -------- ----------------
Total non-current liabilities 230.2 190.4 191.4
---------------------------------- ----- -------- -------- ----------------
Total liabilities 422.9 338.4 341.4
---------------------------------- ----- -------- -------- ----------------
Net assets 359.5 313.4 330.0
---------------------------------- ----- -------- -------- ----------------
EQUITY
Share capital 13 44.1 43.7 44.1
Share premium 13 22.8 21.9 22.6
Translation reserve 56.8 28.4 33.2
Other reserves 3.0 6.2 7.1
Retained earnings 230.8 211.2 221.0
---------------------------------- ----- -------- -------- ----------------
Equity attributable to owners of
the Company 357.5 311.4 328.0
Non-controlling interests 2.0 2.0 2.0
---------------------------------- ----- -------- -------- ----------------
Total equity 359.5 313.4 330.0
---------------------------------- ----- -------- -------- ----------------
Approved by the Board of Directors on 3 August 2022 and signed
on their behalf by:
Richard Tyson Mark Hoad
Director Director
Condensed consolidated statement of changes in equity
(unaudited)
for the six months ended 30 June 2022
GBPmillion Share Share Translation Other Retained Sub NCI Total
capital premium Reserve reserves earnings total ([1])
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
At 31 December 2020 (audited) 43.6 21.7 30.0 5.5 195.2 296.0 2.0 298.0
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Profit for the period - - - - 5.8 5.8 - 5.8
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Other comprehensive income
Exchange differences on
translation
of foreign operations - - (1.8) - - (1.8) - (1.8)
Loss on hedge of net investment
in foreign operations - - 0.2 - - 0.2 - 0.2
Loss on cash flow hedges taken
to equity less amounts
recycled
to the income statement - - - (1.4) - (1.4) - (1.4)
Remeasurement of defined
benefit
pension schemes - - - - 27.6 27.6 - 27.6
Tax on remeasurement of defined
benefit pension schemes - - - - (9.2) (9.2) - (9.2)
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Total comprehensive income - - (1.6) (1.4) 24.2 21.2 - 21.2
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Transactions with owners
recorded
directly in equity
Equity dividends paid by the
Company - - - - (8.2) (8.2) - (8.2)
Share based payments - - - 1.8 - 1.8 - 1.8
Deferred tax on share-based
payments - - - 0.3 - 0.3 - 0.3
New shares issued 0.1 0.2 - - - 0.3 - 0.3
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
At 30 June 2021 43.7 21.9 28.4 6.2 211.2 311.4 2.0 313.4
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
At 31 December 2021 (audited) 44.1 22.6 33.2 7.1 221.0 328.0 2.0 330.0
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Profit for the period 4.1 4.1 - 4.1
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Other comprehensive income - - -
Exchange differences on
translation
of foreign operations - - 26.6 - - 26.6 - 26.6
Loss on hedge of net investment
in foreign operations - - (3.0) - - (3.0) - (3.0)
Loss on cash flow hedges taken
to equity less amounts
recycled
to income statement - - - (4.8) - (4.8) - (4.8)
Deferred tax gain on movements
in cash flow hedge reserves - - - (0.8) - (0.8) - (0.8)
Remeasurement of defined
benefit
pension schemes - - - - 16.8 16.8 - 16.8
Tax on remeasurement of defined
benefit pension schemes - - - - (4.4) (4.4) - (4.4)
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Total comprehensive income - - 23.6 (5.6) 16.5 34.5 - 34.5
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
Transactions with owners - - -
recorded
directly in equity
Equity dividends paid by the
Company - - - - (6.7) (6.7) - (6.7)
Share-based payments - - - 2.3 - 2.3 - 2.3
Deferred tax on share-based
payments - - - (0.8) - (0.8) - (0.8)
New shares issued - 0.2 - - - 0.2 - 0.2
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
At 30 June 2022 44.1 22.8 56.8 3.0 230.8 357.5 2.0 359.5
-------------------------------- --------- --------- ------------ ---------- ---------- ------- ------- ------
1. Non-controlling interests
Condensed consolidated cash flow statement (unaudited)
for the six months ended 30 June 2022
GBPmillion Note Six months Six months Year ended
ended 30 ending 31 December
June 2022 30 June 2021 (audited)
2021
---------------------------------------------- ----- ----------- ----------- ----------------
Cash flows from operating activities
Profit for the year 4.1 5.8 12.8
Taxation 1.5 1.7 3.2
Net finance costs 3.3 1.8 3.3
Restructuring and other 5.5 2.6 7.8
Acquisition related costs 3.9 4.0 7.7
Adjusted operating profit 18.3 15.9 34.8
Adjustments for:
Depreciation 6.8 6.7 13.6
Amortisation of intangible assets 1.1 1.3 2.5
Share based payment expense 2.5 1.5 3.8
Other items 0.3 1.2 1.1
Increase in inventories (39.1) (9.6) (42.6)
Increase in receivables (8.4) (17.5) (15.7)
Increase in payables and provisions 14.5 6.6 42.0
---------------------------------------------- ----- ----------- ----------- ----------------
Adjusted operating cash flow (4.0) 6.1 39.5
Special payments to pension funds - (2.7) (5.5)
Restructuring and acquisition related costs (7.0) (6.4) (15.0)
---------------------------------------------- ----- ----------- ----------- ----------------
Net cash (used in)/generated from operations (11.0) (3.0) 19.0
Net income taxes paid (1.3) (2.0) (4.7)
---------------------------------------------- ----- ----------- ----------- ----------------
Net cash (used in)/generated from operating
activities (12.3) (5.0) 14.3
---------------------------------------------- ----- ----------- ----------- ----------------
Cash flows from investing activities
Purchase of property, plant and equipment (5.1) (6.0) (14.6)
Proceeds from sale of property, plant and
equipment and government grants received 0.2 5.8 9.3
Capitalised development expenditure (1.0) (1.0) (1.9)
Purchase of other intangibles (0.1) (0.2) (0.5)
Acquisitions of businesses (8.3) (0.5) (0.5)
Net cash flow used in investing activities (14.3) (1.9) (8.2)
---------------------------------------------- ----- ----------- ----------- ----------------
Cash flows from financing activities
Issue of share capital 0.2 0.3 1.4
Interest paid (3.3) (2.0) (4.0)
Repayment of borrowings (109.5) (4.6) (86.9)
Proceeds from borrowings 141.3 18.8 96.4
Payment of lease liabilities (1.9) (1.9) (3.9)
Other items (0.2) (0.1) (0.5)
Dividends paid by the Company (6.7) (8.2) (11.4)
---------------------------------------------- ----- ----------- ----------- ----------------
Net cash flow from financing activities 19.9 2.3 (8.9)
---------------------------------------------- ----- ----------- ----------- ----------------
Net change in cash and cash equivalents (6.7) (4.6) (2.8)
Cash and cash equivalents at beginning
of year 12 67.2 69.0 69.0
Exchange differences 12 3.2 0.5 1.0
---------------------------------------------- ----- ----------- ----------- ----------------
Cash and cash equivalents at end of year 12 63.7 64.9 67.2
---------------------------------------------- ----- ----------- ----------- ----------------
Cash and cash equivalents comprise:
Cash at bank and in hand 76.3 100.6 68.3
Bank overdrafts (12.6) (35.7) (1.1)
---------------------------------------------- ----- ----------- ----------- ----------------
63.7 64.9 67.2
---------------------------------------------- ----- ----------- ----------- ----------------
Notes to the condensed consolidated financial statements
(unaudited)
1. General information
The condensed consolidated financial statements for the six
months ended 30 June 2022 are unaudited and were authorised for
issue in accordance with a resolution of the Board of Directors.
The information for the six months ended 30 June 2022 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. Comparative information for the year ended 31
December 2021 has been taken from the published statutory accounts,
a copy of which has been delivered to the Registrar of Companies.
The auditors reported on those accounts: their report was
unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498(2) or
(3) of the Companies Act 2006.
2. Basis of preparation
a) Condensed consolidated half-year financial statements
The 2022 annual financial statements of TT Electronics plc will
be prepared in accordance with United Kingdom adopted International
Financial Reporting Standards. The condensed set of financial
statements included in this half yearly financial report has been
prepared in accordance with United Kingdom adopted International
Accounting Standard 34 'Interim Financial Reporting'. These
condensed consolidated half-year financial statements do not
include all the information and disclosures required in the annual
financial statements and should be read in conjunction with the
2021 Annual Report.
b) Basis of accounting
The accounting policies adopted are consistent with those
followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2021.
Interest rate benchmark reform
Throughout 2021 the Group was exposed to the following interest
rate benchmarks within its hedge accounting relationships and
borrowings, which have been subject to interest rate benchmark
reform in 2022: GBP LIBOR and USD LIBOR ("IBORs"). The hedging
instruments are interest rate swaps and the hedged items are
Sterling and US Dollar floating rate debt. On 4 January 2022 the
Group transitioned away from GBP LIBOR and replaced this with GBP
SONIA. USD LIBOR remained available throughout 2022. There was no
impact of this transition. As described in note 12 the Group
underwent a refinancing exercise in June 2022 and is now exposed to
GBP SONIA, USD SOFR and EURIBOR.
c) Alternative performance measures
The Group presents Alternative Performance Measures ("APMs") in
addition to the statutory results of the Group.
Adjusted operating profit has been defined as operating profit
from continuing operations excluding the impacts of significant
restructuring programmes, significant one-off items including
property disposals, certain one off pension costs, business
acquisition, integration and divestment related activity; and the
amortisation of intangible assets recognised on acquisition.
Acquisition and disposal related items include the writing off of
the pre-acquisition profit element of inventory written up on
acquisition, other direct costs associated with business
combinations and adjustments to contingent consideration related to
acquired businesses. Restructuring includes significant changes in
footprint (including movement of production facilities) and
significant costs of management changes.
In addition to the items above, adjusting items impacting profit
after tax include:
-- The net effect on tax of significant restructuring from
strategy changes that are not considered by the Group to be part of
the normal operating costs of the business; and
-- The tax effects of adjustments to profit before tax.
Costs associated with restructuring, acquisitions and disposals
are uncertain with regard to their timing and size and therefore
their inclusion within adjusted operating profit could mislead the
reader of the accounts.
These interim results include alternative performance measures
that are not prepared in accordance with IFRS. These alternative
performance measures have been selected by the Directors to assist
them in making operating decisions because they represent the
underlying operating performance of the Group and facilitate
internal comparisons of performance over time.
The Directors consider the adjusted results to be an important
measure used to monitor how the businesses are performing as this
provides a meaningful reflection of how the businesses are managed
and measured on a day-to-day basis and achieves consistency and
comparability between reporting periods, when all businesses are
held for a complete reporting period.
These alternative performance measures exclude certain
significant non-recurring, infrequent or non-cash items that the
Directors do not believe are indicative of the underlying operating
performance of the Group (that are otherwise included when
preparing financial measures under IFRS).
Adjusted profit is not a defined term under IFRS and may not be
comparable with similarly titled profit measures reported by other
companies. It is not intended to be a substitute for, or superior
to, GAAP measures. All APMs relate to the current year results and
comparable periods where provided.
The Directors consider there to be four main alternative
performance measures: adjusted operating profit, free cash flow,
adjusted EPS and adjusted effective tax rate.
All alternative performance measures are presented within the
section titled 'Reconciliation of KPIs and non IFRS Measures' and
are reconciled to their equivalent statutory measures where this is
appropriate.
d) Estimates and judgements
The preparation of condensed consolidated financial statements
requires management to make judgements, estimates and assumptions
which affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expense. Actual
results may differ from these estimates.
In preparing the condensed consolidated financial statements,
the significant judgements and estimates made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were consistent with those applied to the
consolidated financial statements as at and for the year ended 31
December 2021, which can be found on pages 141 - 142 in the 2021
Annual Report. Significant judgements relate to the determination
of items of income and expense excluded from operating profit to
arrive at adjusted operating profit. Significant estimates relate
to taxation, impairment of goodwill, the recoverability of Virolens
related assets and defined benefit pension obligations.
The Group tests whether goodwill has suffered any impairment on
an annual basis or when there are triggers based on the value of
the discounted future cash flows allocated to the group of CGUs to
which it is allocated. The methodology and key assumptions used in
assessing the carrying value of goodwill are set out in note 13 of
the 2021 Annual Report. The key assumptions made for long term
projections, sales and costs growth rates and discount rate all
include an element of estimation that may give rise to a difference
between the value ascribed and the actual outcomes. A reasonably
possible change in these assumptions could lead to an impairment in
the carrying value of goodwill specifically within the IoT
Solutions CGU, where GBP27.7 million of goodwill is allocated,
within the next financial year. At 30 June 2022 and 31 December
2021, the Group recognised no impairment loss in respect of these
assets. Further details of the key assumptions used and the
sensitivity analysis in respect of the recoverable amount of
goodwill is disclosed in note 5.
The carrying amount of Virolens related assets at 30 June 2022
was GBP5.1 million (December 2021: GBP4.8 million). The assets
consist of inventory, property, plant and equipment, and
capitalised development expenditure. The value of these assets is
dependent upon the success of the Virolens product, requiring
management to estimate the future cash flows in a range of possible
outcomes. The key sources of estimation uncertainty are our
customers' ability to obtain regulatory approval and potential end
customers converting expressions of interest into firm funded
orders. Our customer continues to progress with regulatory
approvals and global interest continues given ongoing covid
prevalence, varying global responses and vaccine limitations
(efficacy and supply). If regulatory approval is not obtained it is
likely the assets related to Virolens will require impairment.
e) Going concern
After making appropriate enquiries, the Directors have a
reasonable expectation that the Company has adequate resources and
financial headroom to continue in operational existence for at
least twelve months from the date of signing these interim results.
Therefore, they continue to adopt the going concern basis of
accounting in preparing the condensed consolidated half-year
financial statements. Page 18 outlines the going concern
assessment.
Given the financial resources available, together with long term
partnerships with multiple key customers and suppliers across
different geographic areas and industries, the Directors believe
that the Group is well placed to manage its business risks
successfully.
The Group continues to manage foreign currency risk at a
transactional level through the use of hedges which are monitored
by the Group Treasury Committee.
The Treasury Committee regularly reviews counterparty credit
risk and ensures cash balances are held with carefully assessed
counterparties with strong credit ratings.
Pages 67 to 70 of the 2021 Annual Report provide details of the
Group's policy on managing its operational and financial risks.
3. Segmental reporting
The Group is organised into three divisions, as shown below,
according to the nature of the products and services provided. Each
of these divisions represents an operating segment in accordance
with IFRS 8 'Operating segments' and there is no aggregation of
segments. The chief operating decision maker is the Board of
Directors. The operating segments are:
-- Power and Connectivity - The Power and Connectivity division
develops and manufactures power application products and
connectivity devices which enable the capture and wireless transfer
of data. We collaborate with our customers to develop innovative
solutions to optimise their electronic systems;
-- Global Manufacturing Solutions - The Global Manufacturing
Solutions division provides manufacturing services and engineering
solutions for our product divisions and to customers that often
require a lower volume and higher mix of different products. We
manufacture complex integrated product assemblies for our customers
and provide engineering services including designing testing
solutions and value-engineering; and
-- Sensors and Specialist Components - The Sensors and
Specialist Components division works with customers to develop
standard and customised solutions, including sensors and power
management devices. Our solutions improve the precision, speed and
reliability of critical aspects of our customers' applications.
The key performance measure of the operating segments is
adjusted operating profit. Refer to the section titled
'Reconciliation of KPIs and non IFRS Measures' for a definition of
adjusted operating profit.
Corporate costs - Resources and costs of the head office managed
centrally but deployed in support of the operating units are
allocated to segments based on a combination of revenue and
adjusted operating profit.
Resources and costs of the head office which are not related to
the operating activities of the trading units are not allocated to
divisions and are separately disclosed, equivalent to the segment
disclosure information, so that reporting is consistent with the
format that is used for review by the chief operating decision
maker. This gives greater transparency of the adjusted operating
profits for each segment. Adjusting items are not allocated to
divisions for reporting purposes. For further discussion of these
items see note 6.
The accounting policies of the reportable segments are the same
as the Group's accounting policies.
Group financing (including finance costs and finance income) and
income taxes are managed on a Group basis and are not allocated to
operating segments. Goodwill is allocated to the individual cash
generating units within the segment of which it is a part.
Six months ended 30 June 2022
--------------------------------------------------------------------------------------
GBPmillion Power Global Sensors Total Corporate Total
and Connectivity Manufacturing and Specialist Operating
Solutions Components Segments
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Sales to external
customers 68.8 135.3 65.1 269.2 - 269.2
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Adjusted operating
profit 2.1 9.4 10.6 22.1 (3.8) 18.3
Add back: adjustments
made to operating profit
(note 6) (9.4)
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Operating profit 8.9
Net finance costs (3.3)
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Profit before taxation 5.6
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Six months ended 30 June 2021
--------------------------------------------------------------------------------------
GBPmillion Power Global Sensors Total Corporate Total
and Connectivity Manufacturing and Specialist Operating
Solutions Components Segments
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Sales to external
customers 68.2 109.6 57.8 235.6 235.6
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Adjusted operating
profit 3.6 8.5 7.4 19.5 (3.6) 15.9
Add back: adjustments
made to operating profit
(note 6) (6.6)
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Operating profit 9.3
Net finance costs (1.8)
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Profit before taxation 7.5
--------------------------- ------------------ --------------- ---------------- ----------- ---------- ------
Year ended 31 December 2021
---------------------------------------------------------------------------------------
GBPmillion Power Global Sensors Total Corporate Total
and Connectivity Manufacturing and Specialist Operating
Solutions Components Segments
--------------------------- ------------------ --------------- ---------------- ----------- ---------- -------
Sales to external
customers 140.2 220.1 115.9 476.2 - 476.2
--------------------------- ------------------ --------------- ---------------- ----------- ---------- -------
Adjusted operating
profit 7.8 18.3 16.4 42.5 (7.7) 34.8
Add back: adjustments
made to operating profit
(note 6) (15.5)
--------------------------- ------------------ --------------- ---------------- ----------- ---------- -------
Operating profit 19.3
Net finance costs (3.3)
--------------------------- ------------------ --------------- ---------------- ----------- ---------- -------
Profit before taxation 16.0
--------------------------- ------------------ --------------- ---------------- ----------- ---------- -------
There is no significant intergroup trading between segments.
The tables below show the geographies and markets in which the
Group's revenues arose during the period.
GBPmillion Six months Six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
--------------------------- ----------- ----------- -------------
United Kingdom 59.4 48.0 100.2
Rest of Europe 44.1 40.3 78.6
North America 102.7 90.2 182.7
Central and South America 0.6 0.6 0.9
Asia 61.9 55.6 112.4
Rest of the World 0.5 0.9 1.4
--------------------------- ----------- ----------- -------------
269.2 235.6 476.2
--------------------------- ----------- ----------- -------------
GBPmillion Six months Six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
-------------------------------- ----------- ----------- -------------
Healthcare 70.7 62.2 118.8
Aerospace and defence 38.8 43.4 85.5
Automation and electrification 105.6 85.1 186.3
Distribution 54.1 44.9 85.6
-------------------------------- ----------- ----------- -------------
269.2 235.6 476.2
-------------------------------- ----------- ----------- -------------
4. Acquisitions
On 7 January 2022 the Group acquired the Power and Control
business of Ferranti Technologies Ltd, from Elbit Systems UK Ltd.
Total cash consideration was GBP8.3 million comprising GBP10.0
million paid in January 2022 and a final GBP1.7 million working
capital adjustment received in April 2022.
Ferranti Power and Control, based in Oldham, Greater Manchester,
designs and manufactures mission-critical complex power and control
sub-assemblies for blue chip customers in high-reliability and
high-performance end markets, primarily aerospace and defence. The
acquisition brings highly skilled employees who provide
full-service capabilities from design, assembly, manufacturing, and
testing including environmental stress screening and inspection
through to service. Ferranti Power and Control adds further
technology capability, and scale to our Power business with
valuable long-term customer relationships and programmes with
leading global aerospace, defence and industrial OEMs operating in
highly regulated markets with significant barriers to entry through
necessary industry accreditations and customer approvals. The
goodwill recognised on acquisition represents the Group's view on
the future earnings growth potential and technical capabilities of
the acquired business. None of the goodwill recognised is expected
to be deductible for income tax purposes. Costs in relation to this
acquisition recognised in the statement of profit or loss amounted
to GBP0.2 million. If this business was acquired from the start of
the accounting period the revenue and operating profit of the Group
would not be materially different.
The fair valuation of acquired assets and liabilities is
provisional at the date of these financial statements and will be
finalised prior to the end of the 12 month measurement period.
The provisional fair values of the identifiable assets
(including goodwill) and liabilities are presented below.
The fair value of receivables of GBP2.2 million is not
materially different to the contractual cashflows. The amount
expected to not be collected is GBPnil.
Power and Control
business of Ferranti
Technologies Ltd
GBPmillion (provisional)
-------------------------------- ----------------------
Non-current assets
Right-of-use asset 0.2
Property, plant and equipment 0.4
Identifiable intangible
assets 5.3
Current assets / (liabilities)
Inventory 2.2
Trade and other receivables 2.2
Trade and other payables (2.5)
Provisions (2.6)
Lease liabilities (0.2)
Deferred tax liabilities (1.3)
---------------------------------- ----------------------
Net assets of acquiree 3.7
---------------------------------- ----------------------
Consideration paid
Cash consideration 8.3
---------------------------------- ----------------------
Goodwill 4.6
---------------------------------- ----------------------
5. Goodwill
At 30 June 2022 an indicator of impairment was identified in
respect of goodwill allocated to the IoT Solutions CGU; this
indicator was revenue being lower than anticipated in the first
half of 2022 as a result of short term supply chain challenges. As
a result, a review for impairment was performed using updated cash
flow forecasts derived from the five-year strategic growth plan
forecasts which are then projected into perpetuity using a long
term growth rate applicable to the market in which the CGU
operates. No impairment losses have been recognised in the current
or prior periods as recoverable amounts exceed the total carrying
value of assets for the IoT Solutions CGU. There were no indicators
of impairment identified in any other CGUs.
IoT Solutions CGU operates in markets with strong growth
fundamentals. These forecasts exclude any potential benefits from
the Virolens(R) rapid covid-19 screening device given operational
trials and validation testing are ongoing and the wide range of
possible outcomes.
IoT Solutions CGU shows headroom of GBP9.8 million above the
GBP62.7 million carrying amount, including GBP27.7 million of
goodwill. The growth rates assume that demand for our product
remains broadly in line with the expected growth rates in the
markets within which the business operates in the long-term future.
Taking into account our expectation of future market conditions, we
believe that the evolution of selling prices and cost measures put
into place will lead to a sustained improvement in profitability.
In accordance with IAS 36 'Impairment of Assets' the Group
performed sensitivity analysis on the estimates of recoverable
amounts and found that the excess of recoverable amount over the
carrying amount of the IoT Solutions CGU would be reduced to GBPnil
as a result of a reasonably possible change in assumptions.
Sensitivity analysis has been carried out and a reasonably possible
change in the discount rate and long-term growth rate from 13.0 per
cent to 14.6 per cent or from 1.5 per cent to -1.1 per cent
respectively would reduce headroom to GBPnil. A reduction in
terminal revenue of 19.3 per cent and terminal operating profit of
2.7 per cent would reduce headroom to GBPnil.
A reduction in operating cash flow of 13.0 per cent in all
forecast periods would also reduce headroom to GBPnil. Management
does not consider that the relevant change in these assumptions
would have a consequential effect on other key assumptions.
As described in note 4, on 7 January 2022 the Group acquired the
Power and Control business of Ferranti Technologies Ltd, from Elbit
System UK Ltd, resulting in goodwill recognised of GBP4.6 million.
The goodwill recognised on acquisition represents the Group's view
of the future earnings growth potential and the technical know-how
in the acquired businesses.
GBPmillion
Cost
------------------------- -----------
As at 31 December 2021 156.5
-------------------------- -----------
Additions 4.6
Net exchange adjustment 10.5
At 30 June 2022 171.6
-------------------------- -----------
6. Adjusting items
Restructuring costs charged in the period primarily relate to
costs arising as part of the Group's self-help programme which
began in 2020 and is expected to conclude in 2022.
Restructuring costs of GBP4.5 million comprise GBP2.6 million
relating to the restructure of the North America Resistors
business, which includes pre-production costs at our new Plano
facility; GBP1.0 million relating to closure of our site in
Lutterworth, UK, GBP0.7 million relating to the relocation of
production facilities from Covina, USA to Kansas, USA and GBP0.2
million relating to the relocation of production facilities from
Medina, USA to Minnesota, USA.
Prior period restructuring costs of GBP3.3 million comprise
GBP2.0 million relating to the restructure of the North America
Resistors business; GBP0.8 million relating to closure of our site
in Lutterworth, UK and GBP0.5 million relating to the closure of
our site in Tunis, Tunisia.
Pension costs of GBP1.0 million (2021: GBP0.6 million, relating
to costs incurred as a result from UK pensions schemes having to
equalise male and female members' benefits in respect of guaranteed
minimum pensions) relate to costs associated costs associated with
liability management exercises and cleansing of scheme data.with
preparing the pension scheme for a buy in.
The prior period property disposal income of GBP1.3 million
relates to the gain on the sale of property which was acquired
through the acquisition of the aerospace and defence power supply
business of Excelitas Technologies Corp based in Covina,
California.
Acquisition and disposal related costs charged in the period
comprise GBP3.1 million (2021: GBP2.5 million) of amortisation of
acquired intangible assets; GBP0.2 million of acquisition costs and
GBP0.4 million of integration costs relating to the acquisition of
the Power and Control business of Ferranti Technologies Ltd. based
in Oldham, UK; GBP0.1 million of integration costs of Torotel, Inc.
(2021: GBP0.9 million); and GBP0.1 million (2021: GBP0.4 million)
of costs of terminated acquisitions. The prior period also included
GBP0.2 million of integration costs of the aerospace and defence
power supply business of Excelitas Technologies Corp based in
Covina, California.
Period Period Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
---------- ------ ---------- ------ ------------- ------
GBPmillion Operating Tax Operating Tax Operating Tax
profit profit profit
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
As reported 8.9 (1.5) 9.3 (1.7) 19.3 (3.2)
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
Restructuring and other
Restructuring (4.5) 0.9 (3.3) 0.7 (9.7) 1.2
Property disposals - - 1.3 (0.3) 1.7 (0.2)
Pension restructuring costs (1.0) 0.2 (0.6) 0.1 (1.5) 0.2
Pension increase exchange exercise - - - - 1.8 (0.2)
Other items - - - - (0.1) -
(5.5) 1.1 (2.6) 0.5 (7.8) 1.0
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
Acquisition and disposal related
costs
Amortisation of intangible
assets arising on business
combinations (3.1) 0.6 (2.5) 0.4 (5.1) (0.3)
Torotel integration and acquisition
costs (0.1) - (0.9) 0.1 (1.5) 0.6
Covina integration and acquisition
costs - - (0.2) - (0.2) 0.1
Ferranti Power and Control
acquisition and integration
costs (0.6) 0.2 - - (0.5) 0.2
Tax losses related to the transportation
division - - - - - 1.3
Other acquisition related costs (0.1) - (0.4) 0.1 (0.4) 0.1
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
(3.9) 0.8 (4.0) 0.6 (7.7) 2.0
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
Total items excluded from
adjusted measure (9.4) 1.9 (6.6) 1.1 (15.5) 3.0
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
Adjusted measure 18.3 (3.4) 15.9 (2.8) 34.8 (6.2)
------------------------------------------ ---------- ------ ---------- ------ ------------- ------
7. Taxation
The half-year tax charge of GBP1.5 million (2021: GBP1.7
million) is based on a forecast effective tax rate of 22.8 per cent
(2021: 19.6 per cent) on adjusted profit and a GBP1.9 million
(2021: GBP1.1 million) credit on restructuring, asset impairments
and acquisition related costs.
The enacted UK tax rate applicable since 1 April 2017 to current
year profits is 19 per cent. On 24 May 2021 an increase in UK rate
was enacted to occur from 1 April 2023 to 25 per cent.
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the Company by the weighted average
number of shares in issue during the period. The weighted average
number of shares in issue is 175.7 million (30 June 2021: 174.7
million, 31 December 2021: 174.8 million). The calculation of the
diluted earnings per share excludes 2,175,908 (2021: 4,516,660)
share options whose effect would have been anti-dilutive. Adjusted
earnings per share is based on the adjusted profit after interest
and tax.
Pence Six months Six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
-------------------- ----------- ----------- -------------
Earnings per share
Basic 2.3 3.3 7.3
Diluted 2.3 3.3 7.2
-------------------- ----------- ----------- -------------
The numbers used in calculating adjusted earnings per share are
shown below:
GBPmillion Six months Six months Year ended
ended ended 31 December
30 June 30 June 2021
2022 2021
--------------------------------------------- ----------- ----------- -------------
Profit for the year attributable to owners
of the Company 4.1 5.8 12.8
Restructuring and other 5.5 2.6 7.8
Acquisition and disposal related costs 3.9 4.0 7.7
Tax effect of above items (see note 6) (1.9) (1.1) (3.0)
--------------------------------------------- ----------- ----------- -------------
Adjusted earnings 11.6 11.3 25.3
--------------------------------------------- ----------- ----------- -------------
Adjusted earnings per share (pence) 6.6 6.5 14.5
Adjusted diluted earnings per share (pence) 6.5 6.4 14.2
--------------------------------------------- ----------- ----------- -------------
9. Dividends
2022 2022 2021 2021
pence GBPmillion pence GBPmillion
per share per share
------------------------------- ----------- ------------ ----------- ------------
Final dividend paid for prior
year 3.80 6.7 4.70 8.2
Interim dividend declared for
current year - - 1.80 3.2
------------------------------- ----------- ------------ ----------- ------------
The Directors have declared an interim dividend of 2.0 pence per
share which will be paid on 13 October 2022 to shareholders on the
register on 23 September 2022. Shares will become ex-dividend on 22
September 2022.
10. Fair value of financial instruments
IFRS 13 "Fair Value Measurement" requires an analysis of those
financial instruments that are measured at fair value at the end of
the period in a fair value hierarchy. In addition, IFRS 13 requires
financial instruments not measured at fair value but for which fair
value is disclosed to be analysed in the same fair value
hierarchy:
-- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
-- Level 2 - inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices);
and
Level 3 - inputs for the asset or liability that are not based
on observable market data (i.e. unobservable inputs).
30 June 2022 30 June 2021 31 December
2021
--------- ------------- --------- ------------- --------- ---------------
GBPmillion Fair value Carrying Carrying Carrying
hierarchy value Fair value value Fair value value Fair value
---------------------- -------------- --------- ------------- --------- ------------- --------- ---------------
Held at amortised
cost
Cash and cash
equivalents n/a 76.3 76.3 100.6 100.6 68.3 68.3
Trade and other
receivables n/a 87.0 87.0 74.3 74.3 74.9 74.9
Trade and other
payables n/a (123.9) (123.9) (88.8) (88.8) (111.9) (111.9)
Borrowings (excluding
unsecured loan
notes) 2 (119.9) (119.9) (187.0) (187.0) (73.2) (73.2)
Unsecured loan notes 3 (75.0) (57.8) - - (75.0) (71.5)
Held at fair value -
Derivative financial
instruments (assets) 2 2.8 2.8 6.6 6.6 4.6 4.6
Derivative financial
instruments
(liabilities) 2 (5.2) (5.2) (2.3) (2.3) (2.0) (2.0)
Held at depreciated -
cost
Investment properties 3 - 0.7 1.1 1.8 - 0.7
---------------------- -------------- --------- ------------- --------- ------------- --------- ---------------
The fair value of the financial assets and liabilities are
included at the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a
forced or liquidation sale. The following methods and assumptions
were used to estimate the fair values:
-- cash and cash equivalents, trade and other receivables and
trade and other payables approximate to their carrying amounts
largely due to the short-term maturities of these instruments;
-- the fair value of borrowings is estimated by discounting
future cash flows using rates currently available for debt and
remaining maturities;
-- the fair value of unsecured loan notes has been derived from
available market data for borrowings of similar terms and maturity
period;
-- the fair value of derivative financial instrument assets
(GBP2.8 million) and liabilities (GBP5.2 million) are estimated by
discounting expected future cash flows using current market indices
such as yield curves and forward exchange rates over the remaining
term of the instrument (level 2);
-- the fair value of deferred consideration for the acquisition
of Power Partners Inc is based upon the estimated amount payable to
the seller as a result of the expected performance of Power
Partners Inc as forecast by the Group; and
-- the fair value of investment properties are based on market
valuations obtained through third party valuations (level 3).
11. Retirement benefit schemes
At 30 June 2022 the Group operated two defined benefit schemes
in the UK (the TT Group (1993) scheme and Southern & Redfern
Ltd Retirement Benefits Scheme) and overseas defined benefit
schemes in the USA. These schemes are closed to new members and the
UK scheme is closed to future accrual. Given the nature of the
Company's control of the plan under the Scheme's rules, a pension
surplus has been recognised under IFRIC 14.
The amounts recognised in the condensed consolidated statement
of financial position are:
GBPmillion 30 June 30 June 31 December
2022 2021 2021
-------------------- -------- -------- ------------
TT Group (1993) 95.0 65.4 78.4
Southern & Redfern - - -
USA schemes (3.4) (4.2) (3.9)
-------------------- -------- -------- ------------
Net surplus 91.6 61.2 74.5
30 June 30 June 31 December
GBPmillion 2022 2021 2021
----------------------------------------- -------- -------- ------------
Fair value of assets 521.3 630.8 651.9
Defined benefit obligation (429.7) (569.6) (577.4)
----------------------------------------- -------- -------- ------------
Net surplus recognised in the statement
of financial position 91.6 61.2 74.5
Represented by
Schemes in net surplus 95.0 65.4 78.4
Schemes in net deficit (3.4) (4.2) (3.9)
----------------------------------------- -------- -------- ------------
91.6 61.2 74.5
----------------------------------------- -------- -------- ------------
The costs recognised in the condensed consolidated income
statement are:
Six months Six months Year ended
ended 30 ended 30 31 December
GBPmillion June 2022 June 2021 2021
-------------------------------------------- ----------- ----------- -------------
Scheme administration costs 0.5 0.8 1.7
Past service cost/(net gain), settlements
and other restructuring
(excluded from adjusted operating profit) 1.0 0.6 (0.3)
Net interest credit (0.7) (0.2) (0.9)
-------------------------------------------- ----------- ----------- -------------
Amounts recognised in the consolidated statement of
comprehensive income are a gain of GBP16.8 million (2021: gain of
GBP27.6 million) which comprises a loss on schemes' assets of
GBP126.4 million (2021: loss of GBP14.7 million) and a gain on the
remeasurement of the schemes' obligations of GBP143.2 million
(2021: gain of GBP42.3 million).
The decrease in the scheme obligation is due to increases in
yields on corporate bonds in the half year, which also drove the
decrease in the value of the liability hedging assets included in
scheme assets.
The triennial valuation of the TT Group scheme as at April 2019
showed a net surplus of GBP0.3 million against the Trustee's
funding objective compared with a deficit of GBP46.0 million at
April 2016. We are currently awaiting the results of the April 2022
triennial valuation.
As the scheme was fully funded at the 2019 triennial valuation
date, there is no requirement for the Company to pay deficit repair
contributions. In addition to the statutory funding objective, the
Trustee and Company have agreed to move towards a
'self-sufficiency' funding target with the ultimate goal of moving
the scheme to buy-in. To support the scheme's long-term goal the
Company has agreed to pay additional fixed contributions of GBP5.5
million, GBP5.7 million and GBP4.4 million to be paid in the years
2022 and to 2023 respectively.
The Group has set aside GBP0.6 million (31 December 2021: GBP0.6
million) to be utilised in agreement with the Trustee for reducing
the long-term liabilities of the scheme. The total payments made in
period ended 30 June 2022 in respect of UK schemes was GBPnil
million (30 June 2021: GBP2.7 million).
12. Reconciliation of net cash flow to movement in net debt
GBPmillion Net Lease Borrowings Net
cash liabilities debt
---------------------------------- ------ ------------- ----------- --------
As at 1 January 2021 69.0 (15.9) (137.0) (83.9)
Cash flow (4.6) - - (4.6)
Repayment of borrowings - - 4.6 4.6
Proceeds from borrowings - - (18.8) (18.8)
Payment of lease liabilities - 1.9 - 1.9
New leases and reassessment of
lease liabilities (6.9) - (6.9)
Amortisation of loan arrangement
fees - - (0.2) (0.2)
Exchange differences 0.5 - 0.1 0.6
---------------------------------- ------ ------------- ----------- --------
As at 30 June 2021 64.9 (20.9) (151.3) (107.3)
Cash flow 1.8 - - 1.8
Repayment of borrowings - - 82.3 82.3
Proceeds from borrowings - - (77.6) (77.6)
Payment of lease liabilities - 2.0 - 2.0
New leases and reassessment of
lease liabilities - (3.9) - (3.9)
Net movement in loan arrangement
fees - - 0.4 0.4
Exchange differences 0.5 0.2 (0.9) (0.2)
---------------------------------- ------ ------------- ----------- --------
At 1 January 2022 67.2 (22.6) (147.1) (102.5)
Cash flow (6.7) - - (6.7)
Businesses acquired - (0.2) - (0.2)
Repayment of borrowings - - 109.5 109.5
Proceeds from borrowings - - (141.3) (141.3)
Payment of lease liabilities - 1.9 - 1.9
New leases and reassessment of
lease liabilities - (0.6) - (0.6)
Accrued loan arrangement fees - - 0.5 0.5
Accelerated amortisation of loan
arrangement fees - - (0.5) (0.5)
Amortisation of loan arrangement
fees - - (0.3) (0.3)
Exchange differences 3.2 (1.9) (3.1) (1.8)
---------------------------------- ------ ------------- ----------- --------
At 30 June 2022 63.7 (23.4) (182.3) (142.0)
In June 2022 the Group signed a four year GBP147.4 million
multi-currency revolving credit facility with a syndicate of banks
comprising Barclays Bank, Bank of Ireland, Comerica Bank, Fifth
Third Bank and National Westminster Bank to replace the existing
facility. The facility has the option of a one year extension which
expires in May 2023 and an uncommitted incremental accordion
facility of GBP32.6 million.
The interest margin on the facility is based on the Group's
compliance with financial covenants (net debt/EBITDA adjusted to
exclude the items not included within underlying profit) and is
payable on a variable floating rate basis above GBP SONIA, USD SOFR
or EURIBOR depending on the currency of the loan.
13. Share capital
During the period the Company issued 134,804 ordinary shares as
a result of share options being exercised under the Sharesave
scheme and Share Purchase plans. The aggregate consideration
received in respect of all new issues of shares was GBP0.2 million,
which was represented by a GBP0.2 million increase in share
premium.
During the period grants of awards were made under the LTIP for
the issue of shares in 2025. An award is a contingent right to
receive shares in the future, subject to continued employment and
the achievement of predetermined performance criteria. During the
period grants of awards were made under the 2022 LTIP scheme for
the issue of up to 1,709,577 shares in 2025.
14. Related party transactions
Transactions between the company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note. No
related party transactions have taken place during the six months
ended 30 June 2022 that have affected the financial position or
performance of the Group.
15. Subsequent events
There were no subsequent events to report between the balance
sheet date of 30 June 2022 and the date of issue of these financial
statements.
Reconciliation of KPIs and non IFRS Measures
In accordance with the Guidelines on APMs issued by the European
Securities and Markets Authority (ESMA), additional
information is provided on the APMs used by the Group below.
To assist with the understanding of earnings trends, the Group
has included within its financial statements APMs including
adjusted operating profit and adjusted profit. The APMs used are
not defined terms under IFRS and therefore may not be comparable to
similar measures used by other companies. They are not intended to
be a substitute for, or superior to, GAAP measures. Management uses
adjusted measures to assess the operating performance of the Group,
having adjusted for specific items as detailed in note 6. They form
the basis of internal management accounts and are used for decision
making, including capital allocation, with a subset also forming
the basis of internal incentive arrangements. By using adjusted
measures in segmental reporting, this enables readers of the
financial statements to recognise how incentive performance is
targeted. Adjusted measures are also presented in this announcement
because the Directors believe they provide additional useful
information to shareholders on comparable trends over time.
Finally, this presentation allows for separate disclosure and
specific narrative to be included concerning the adjusting items;
this helps to ensure performance in any one year can be more
clearly understood by the user of the financial statements.
Income statement measures:
Note reference
Alternative to reconciliation
Performance Closest equivalent to statutory
Measure statutory measure measure Definition and purpose
============ ================== ======================= =====================================================
Adjusted Operating profit Adjusting Operating profit from continuing operations
operating items as disclosed excluding the impacts of significant restructuring
profit in note 6 programmes; significant one-off items including
property disposals, certain one off pension
costs, business acquisition and divestment
related activity; and the amortisation
of intangible assets recognised on acquisition.
Business acquisition and divestment related
items include the writing off of the pre-acquisition
profit element of inventory written up
on acquisition, other direct costs associated
with business combinations and adjustments
to contingent consideration related to
acquired businesses. Costs arising from
significant changes in footprint (including
movement of production facilities) and
significant costs of management changes
are also excluded.
To provide a measure of the operating profits
excluding the impacts of significant items
such as restructuring or acquisition related
activity and other items such as amortisation
of intangibles which may not be present
in peer companies which have grown organically.
============ ================== ======================= =====================================================
Adjusted Operating profit Adjusting Adjusted operating profit as a percentage
operating margin items as disclosed of revenue.
margin in note 6 To provide a measure of the operating profits
excluding the impacts of significant items
such as restructuring or acquisition related
activity and other items such as amortisation
of intangibles which may not be present
in peer companies which have grown organically.
============ ================== ======================= =====================================================
Adjusted Earnings per See note 8 The profit for the year attributable to
earnings share for the reconciliation the owners of the Group adjusted to exclude
per share and calculation the items not included within adjusted
of adjusted operating profit divided by the weighted
earnings per average number of shares in issue during
share the year.
To provide a measure of earnings per share
excluding the impacts of significant items
such as restructuring or acquisition related
activity and other items such as amortisation
of intangibles which may not be present
in peer companies which have grown organically.
============ ================== ======================= =====================================================
Income statement measures continued:
Note reference
Alternative to reconciliation
Performance Closest equivalent to statutory
Measure statutory measure measure Definition and purpose
============= ================== ======================= ================================================
Adjusted Diluted earnings See note 8 The profit for the year attributable to
diluted per share for the reconciliation the owners of the Group adjusted to exclude
earnings and calculation the items not included within adjusted
per share of adjusted operating profit divided by the weighted
diluted earnings average number of shares in issue during
per share the year, adjusted for the effects of any
potentially dilutive options.
To provide a measure of earnings per share
excluding the impacts of significant items
such as restructuring or acquisition related
activity and other items such as amortisation
of intangibles which may not be present
in peer companies which have grown organically.
============= ================== ======================= ================================================
Prior year Revenue and See note APM Revenue and adjusted operating profit for
revenue operating profit 1 the prior year retranslated at the current
and adjusted year's foreign exchange rates.
operating
profit at
constant
currency
============= ================== ======================= ================================================
Organic Revenue See note APM This is the percentage change in revenue
revenue 2 from continuing operations in the current
year compared to the prior year, excluding
the effects of currency movements, acquisitions
and disposals. This measures the underlying
growth or decline of the business.
To provide a comparable view of the revenue
growth of the business from period to period
excluding acquisition impacts.
============= ================== ======================= ================================================
Adjusted Effective tax See note APM Tax charge adjusted to exclude tax on items
effective charge 3 not included within adjusted operating
tax charge profit divided by adjusted profit before
tax, which is also adjusted to exclude
the items not included within adjusted
operating profit.
To provide a tax rate which excludes the
impact of adjusting items such as restructuring
or acquisition related activity and other
items such as amortisation of intangibles
which may not be present in peer companies
which have grown organically.
============= ================== ======================= ================================================
Return on None See note APM Adjusted operating profit for the year
invested 4 divided by average invested capital for
capital the year. Average invested capital excludes
pensions, provisions, tax balances, derivative
financial assets and liabilities, cash
and borrowings and is calculated at average
rates taking 12 monthly balances.
This measures how efficiently assets are
utilised to generate returns with the target
of exceeding the cost to hold the assets
============= ================== ======================= ================================================
Statement of financial position measures:
Note reference
Alternative to reconciliation
Performance Closest equivalent to statutory
Measure statutory measure measure Definition and purpose
================ ====================== ================== ==================================================
Net debt Cash and cash Reconciliation Net debt comprises cash and cash equivalents
equivalents of net cash and borrowings including lease liabilities.
less borrowings flow to movement This is additional information provided
and lease liabilities in net debt which may be helpful to the user in understanding
(note 12) the liquidity and financial structure
of the business.
================ ====================== ================== ==================================================
Leverage Cash and cash N/A Leverage is the net debt defined as per
(bank covenant) equivalents the banking covenants (net debt (excluding
less borrowings lease liabilities) adjusted for certain
terms as per the bank covenants) divided
by EBITDA excluding items removed from
adjusted profit and further adjusted
for certain terms as per the bank covenants.
Provides additional information over
the Group's financial covenants to assist
with assessing solvency and liquidity.
================ ====================== ================== ==================================================
Net capital None See note APM Purchase of property, plant and equipment
and development 5 net of government grants (excluding property
expenditure disposals), purchase of intangibles (excluding
(net capex) acquisition intangibles) and capitalised
development.
A measure of the Group's investments
in capex and development to support longer
term growth.
================ ====================== ================== ==================================================
Dividend Dividend per Not applicable Amounts payable by dividend in terms
per share share of pence per share.
Provides the dividend return per share
to shareholders.
================ ====================== ================== ==================================================
Statement of cash flows measures:
Note reference
Alternative to reconciliation
Performance Closest equivalent to statutory
Measure statutory measure measure Definition and purpose
============= ===================== ================== ====================================================
Adjusted Operating cash See note APM Adjusted operating profit, excluding depreciation
operating flow 6 of property, plant and equipment and amortisation
cash flow of intangible assets less working capital
and other non-cash movements.
An additional measure to help understand
the Group's operating cash generation.
============= ===================== ================== ====================================================
Adjusted Operating cash See note APM Adjusted operating cash flow less net capital
operating flow 7 and development expenditure.
cash flow An additional measure to help understand
post capex the Group's operating cash generation after
the deduction of capex.
============= ===================== ================== ====================================================
Working Cashflow - See note APM Working capital comprises of three statutory
capital inventories 8 cashflow figures: (increase)/decrease in
cashflow payables, provisions inventories, increase/(decrease) in payables
and receivables and provisions, and (increase)/decrease
in receivables. This definition includes
the movement of any provisions over trade
receivables.
To provide users a measure of how effectively
the group is managing its working capital
and the resultant impact on liquidity.
============= ===================== ================== ====================================================
Free cash Net increase/ See note APM Free cash flow represents cash generated
flow decrease in 9 from trading after all costs including
cash and cash restructuring, pension contributions, tax
equivalents and interest payments. Cashflows to settle
LTIP schemes are excluded.
Free cash flow provides a measure of how
successful the company is in creating cash
during the period which is then able to
be used by the Group at its discretion.
============= ===================== ================== ====================================================
Cash None See note APM Adjusted operating cash flow post capex
conversion 10 (less any property disposals which were
part of restructuring programmes) divided
by adjusted operating profit
Cash conversion measures how effectively
we convert profit into cash and tracks
the management of our working capital and
capital expenditure.
============= ===================== ================== ====================================================
R&D cash None See note APM R&D cash spend and R&D investment as a
spend as 11 percentage of revenue excludes Global Manufacturing
a percentage Solutions which is a manufacturing services
of revenue business and therefore has no R&D.
To provide a measure of the company's expenditure
on R&D relative to its overall size which
may be helpful in considering the Group's
longer term investment in future product
pipeline.
============= ===================== ================== ====================================================
APM 1 - Prior year revenue and adjusted operating profit at
constant currency:
Six months ended 30 June 2021
-------------------------------------------------------------
Global Sensors
Power Manufacturing and Specialist
GBPmillion and Connectivity Solutions Components Total
------------------ ------------------ --------------- ------------------ --------------- ---------------- ------
2021 revenue 68.2 109.6 57.8 235.6
Foreign exchange
impact 2.0 5.7 2.4 10.1
2021 revenue at
2022
exchange rates 70.2 115.3 60.2 245.7
------------------ ------------------ --------------- ------------------ --------------- ---------------- ------
Six months ended 30 June 2021
--------------------------------------------------------------------------------------------------
Global Sensors Total Corporate Total
Power Manufacturing and Specialist Operating
GBPmillion and Connectivity Solutions Components Segments
------------------ ------------------ --------------- ------------------ --------------- ---------------- ------
2021 adjusted
operating
profit 3.6 8.5 7.4 19.5 (3.6) 15.9
Foreign exchange
impact 0.4 0.8 0.5 1.7 (0.1) 1.6
2021 adjusted
operating
profit at 2022
exchange
rates 4.0 9.3 7.9 21.2 (3.7) 17.5
------------------ ------------------ --------------- ------------------ --------------- ---------------- ------
APM 2 - Organic revenue:
Six months
ended
30 June
------------------ --------------- ---------------- -----------
Power Global Sensors
and Connectivity Manufacturing and Specialist
GBPmillion Solutions Components Total
-------------------------- ------------------ --------------- ---------------- -----------
2022 revenue 68.8 135.3 65.1 269.2
Acquisitions 3.7 - - 3.7
2022 revenue (excluding
acquisitions) 65.1 135.3 65.1 265.5
---------------------------- ------------------ --------------- ---------------- -----------
2021 revenue 68.2 109.6 57.8 235.6
Foreign exchange impact 2.0 5.7 2.4 10.1
2021 revenue at 2022
exchange rates 70.2 115.3 60.2 245.7
---------------------------- ------------------ --------------- ---------------- -----------
Organic revenue increase
(%) (7%) 17% 8% 8%
APM 3 - Effective tax charge:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
----------------------------- ----------- ----------- -------------
Adjusted operating profit 18.3 15.9 34.8
Net interest (3.3) (1.8) (3.3)
------------------------------ ----------- ----------- -------------
Adjusted profit before tax 15.0 14.1 31.5
Adjusted tax (3.4) (2.8) (6.2)
------------------------------ ----------- ----------- -------------
Adjusted effective tax rate 22.8% 19.6% 19.6%
------------------------------ ----------- ----------- -------------
APM 4 - Return on invested capital:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
---------------------------------- ----------- ----------- -------------
Adjusted operating profit 18.3 15.9 34.8
Adjusted operating profit H2
prior year (adjustment required
for half year only) 18.9 14.3 -
Average invested capital 415.7 364.4 382.4
----------------------------------- ----------- ----------- -------------
Return on invested capital 8.9% 8.3% 9.1%
----------------------------------- ----------- ----------- -------------
APM 5 - Net capital and development expenditure (net capex):
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
------------------------------------- ----------- ----------- -------------
Purchase of property, plant
and equipment (5.1) (6.0) (14.6)
Proceeds from sale of investment
property, plant and equipment
and capital grants received 0.2 5.8 9.3
Capitalised development expenditure (1.0) (1.0) (1.9)
Purchase of other intangibles (0.1) (0.2) (0.5)
-------------------------------------- ----------- ----------- -------------
Net capital and development
expenditure (6.0) (1.4) (7.7)
-------------------------------------- ----------- ----------- -------------
APM 6 - Adjusted operating cash flow:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
------------------------------------- ----------- ----------- -------------
Adjusted operating profit 18.3 15.9 34.8
Adjustments for:
Depreciation 6.8 6.7 13.6
Amortisation of intangible
assets 1.1 1.3 2.5
Share based payment expense 2.5 1.5 3.8
Other items 0.3 1.2 1.1
Increase in inventories (39.1) (9.6) (42.6)
Increase in receivables (8.4) (17.5) (15.7)
Increase in payables and provisions 14.5 6.6 42.0
-------------------------------------- ----------- ----------- -------------
Adjusted operating cash flow (4.0) 6.1 39.5
-------------------------------------- ----------- ----------- -------------
Special payments to pension
funds - (2.7) (5.5)
Restructuring and acquisition
related costs (7.0) (6.4) (15.0)
Net cash generated from operations (11.0) (3.0) 19.0
-------------------------------------- ----------- ----------- -------------
Net income taxes paid (1.3) (2.0) (4.7)
Net cash flow from operating
activities (12.3) (5.0) 14.3
-------------------------------------- ----------- ----------- -------------
APM 7 - Adjusted operating cash flow post capex:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
------------------------------------- ----------- ----------- -------------
Adjusted operating cash flow (4.0) 6.1 39.5
Purchase of property, plant
and equipment (5.1) (6.0) (14.6)
Proceeds from sale of property,
plant and equipment and government
grants received 0.2 5.8 9.3
Capitalised development expenditure (1.0) (1.0) (1.9)
Purchase of other intangibles (0.1) (0.2) (0.5)
Adjusted operating cash flow
post capex (10.0) 4.7 31.8
-------------------------------------- ----------- ----------- -------------
APM 8 - Working capital cashflow:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
------------------------------------- ----------- ----------- -------------
Increase in inventories (39.1) (9.6) (42.6)
Increase in receivables (8.4) (17.5) (15.7)
Increase in payables and provisions 14.5 6.6 42.0
Items reported within other
items in the statutory cashflow:
Increase in provisions over
trade receivables - 1.6 1.6
----------- ----------- -------------
Working capital cashflow (33.0) (18.9) (14.7)
-------------------------------------- ----------- ----------- -------------
APM 9 - Free cash flow:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
------------------------------------- ----------- ----------- -------------
Net cash flow from operating
activities (12.3) (5.0) 14.3
Net cash flow from investing
activities (14.3) (1.9) (8.2)
Add back: Acquisition of business 8.3 0.5 0.5
Payment of lease liabilities (1.9) (1.9) (3.9)
Interest paid (3.3) (2.0) (4.0)
-------------------------------------- ----------- ----------- -------------
Free cash flow (23.5) (10.3) (1.3)
-------------------------------------- ----------- ----------- -------------
APM 10 - Cash conversion:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
----------------------------------------- ----------- ----------- -------------
Adjusted operating profit 18.3 15.9 34.8
Adjusted operating cash flow
post capex (10.0) 4.7 31.8
Exclude: Property disposal proceeds
as part of restructuring programmes - (5.8) (9.1)
Adjusted operating cash flow post capex
and excluding property disposals (10.0) (1.1) 22.7
------------------------------------------ ----------- ----------- -------------
Cash conversion -55% -7% 65%
------------------------------------------ ----------- ----------- -------------
APM 11 - R&D cash spend as a percentage of revenue:
GBPmillion Six months Six months Year ended
ended 30 ended 30 31 December
June 2022 June 2021 2021
-------------------------------- ----------- ----------- -------------
Revenue (excluding GMS) 133.9 126.0 256.1
R&D cash spend 5.4 5.8 11.4
--------------------------------- ----------- ----------- -------------
R&D cash spend as a percentage
of revenue 4.0% 4.6% 4.5%
--------------------------------- ----------- ----------- -------------
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