TT Electronics expects growth in all its business segments thanks to a strong order book


TT electronics [LON:TTG]the Woking-based electronics component maker, released its half-year results yesterday (4e August), announcing that it had: “continued strong order intake and organic growth, with an unchanged outlook for the full year”.

Richard Tyson, Managing Director, said: “The business is doing well with a 10% growth rate. Our order book reached the highest levels we have seen, with £660m recorded, a 55% year-on-year increase, and our outlook points to continued organic growth.

The company reported a 10% revenue increase over the prior year, with revenue growth of 8% on an organic basis. This was on the heels of twenty-three major new projects being won. The company reported record order intake with an order book of 144%, and its order book has rebounded since the Covid-19 pandemic, reporting orders more than double pre-pandemic levels, and up by 55% year over year. .

Strategic positioning

“We’re in a good position,” Tyson said, “structurally, we expect growth across all lines of business. Our automation and electrification business is strategically positioned to take advantage of ongoing global themes, including energy transition and greater manufacturing automation. Defense spending by NATO and other Western democracies is expected to reach unprecedented levels this century, and investment and trade in other global sectors are beginning to return to pre-pandemic levels.

The pandemic has affected the activities of TT Electronics; however, the company is accelerating the recovery. “In the near term, we expect a sharp increase in investment across all sectors in which we operate – as spending increases to offset underinvestment during the pandemic – which should lead to more incoming orders for the business. Once expenses return to normal, we still expect significant growth in our businesses over the medium to long term.

The company announced a 5% year-over-year increase in adjusted operating profit and moved quickly to initiate pricing action to offset inflationary pressures. Tyson said the company has been building inventory over the past 12 months to meet increased customer demand, longer material delivery times and shipping delays impacting cash flow and leverage.

However, the company announced that its statutory operating profit fell 4% to £8.9m, resulting in statutory basic earnings per share of 2.3p.

real story

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

The company closed its doors on 4e August at 178.2p, offering a year-to-date return of -28.64% and a year-to-date return of -31.92%. Shares have hovered between 162.75p and 296.50p over 52 weeks and the company had a market capitalization of GBR 314.3 million.

The company operates four divisions: Healthcare, which contributed 25% of revenue; Aeronautics and Defense, which contributed 18% of revenue; automation and electrification, which contributed 39%; and Broadcast.

TT Electronics is covered by three analysts. HSBC rates the company as a ‘buy’ with a target price of 280 pence; Peel Hunt rates the company as a ‘buy’ with a target price of 280 pence; Numis follows the consensus of the other two analysts.

Harry Phillips of Peel Hunt said, “Inflation masks operating margin achievement of 10% in 2023, so it shouldn’t hurt the achievement of operating efficiencies and a continued stream of infill M&A… the debate that we now have with investors, factors of the strength and growth profile of the existing business and focuses on potential catalysts to take the business to the next stage. »

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

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