19th Mar 2007 07:01
TT electronics PLC19 March 2007 TTG.L TT ELECTRONICS' NEW PRODUCTS DRIVING FUTURE GROWTH TT electronics is a world leader in sensor and electronic components technology and today announces its preliminary results for the year to 31 December 2006. KEY POINTS • Group revenue on continuing activities of £600.3 million (2005: £565.3 million). • Operating profit before exceptional items up by 21 per cent to £36.2 million (2005: £29.9 million). • Earnings per share from trading increased by 32 per cent to 14.1p (2005: 10.7p). • The Board is recommending a maintained final dividend of 6.36p per share bringing the total for the year to 10.05p (2005: 10.05p). • The acquisition of Apsco Holdings Inc in November 2006 established a global footprint for our electronic manufacturing services business. • With a strong foundation of new product introductions, the group is poised for further growth, especially in the expanding markets in China and India. John Newman, Executive Chairman, said today: "TT electronics has a leading position in the expanding automotive sensormarket. The production of vehicles incorporating our Autopad(R) range of inductivesensors will begin this year and it is anticipated that volumes will increase asthese sensors are built into further ranges of new vehicles. The group expectssignificant growth in 2007 from our electronic manufacturing services businesswhich is benefiting from the recent acquisition of Apsco. "TT electronics' strong performance is due to improved market conditions, thebenefits arising from the rationalisation of loss-making businesses and anincreased pace of new product introduction which will generate further growth.The group continues to drive margin improvement through the progressive transferof manufacturing to low labour cost economies, where 39 per cent of our totalglobal workforce is now based. "These successes, together with further acquisitions, will enable the group tobe well positioned for future growth." Enquiries: TT electronics plc Tel: 01932 856647John W Newman, Executive Chairman Biddicks Tel: 020 7448 1000Zoe Biddick Chairman's statement 2006 has been a successful year for TT electronics plc. Revenue has increased by6 per cent to £600.3 million from £565.3 million in the previous year. Operatingprofit before exceptional items improved by 21 per cent to £36.2 millioncompared to £29.9 million in the previous year. Finance costs (net) were £5.7million (2005: £6.1 million) comprising £3.8 million of bank and finance leaseinterest and £1.9 million relating to pension fund accounting. Profit before taxand exceptional items was £30.5 million compared with £24.7 million in 2005, anincrease of 23 per cent. Taxation charge excluding the charge on exceptionalitems was £8.7 million compared with £8.1 million in 2005 at an effective rateof 29 per cent (2005: 29 per cent). Basic earnings per share from continuingoperations and before exceptional items were 14.1p (2005: 10.7p), an increase of32 per cent. Basic earnings per share were 18.1p (2005: 8.4p). The exceptional item in 2006 was a profit of £8.8 million resulting from acurtailment in future benefits due to the three year freeze on pensionablesalaries. This is part of the major reorganisation of pension arrangements whichtakes effect in 2007. The exceptional item in 2005 was a profit of £2.1 millionfrom the gain on sale of land, disposal of a business less closure costs of twobusinesses. We expanded our electronic manufacturing services (ems) activities with theacquisition of Apsco Holdings, Inc in November 2006 for £15.2 million. Apsco isbased in Cleveland, USA and reported pre-tax profits of £1.9 million on revenueof £28.5 million for the year to 30 December 2005. Apsco will complement thegroup's existing ems activities in the UK, Malaysia and China and will be ableto make use of low cost manufacturing in our Malaysian and Chinese factories tomeet its American customers' requirements. During the year we closed our loss-making ems factory near Newcastle. Thebusiness was transferred to our South Wales factory and to our Malaysianproduction unit. With the elimination of these losses and the acquisition ofApsco, the group expects a significant growth in 2007 profits from the emsbusinesses. Automotive sales represent 37 per cent of TT electronics' revenue. The recentintention of the European Commission to force carmakers to increase the fuelefficiency of new cars by 18 per cent by 2012 indicates that the strong demandfor our electronic sensor products will continue. In December 2006, the groupsigned an agreement to form a joint venture with an established supplier to theautomotive industry in India. The company will sell the group's range of sensorsand systems to the Indian automotive market, which offers considerable growthpotential. At 31 December 2006, the group's indebtedness was £71.0 million compared to£47.1 million in 2005. The increase was due to the acquisition of Apsco for£15.2 million in November 2006, special cash contributions to the pensionschemes and the substantial increase in the cost of copper which has impactedinventories and receivables. We merged six of the group's nine principal UK pension schemes into one duringthe year and this and the remaining three schemes will merge with effect fromApril 2007. The group has continued to make special contributions and ordinarypayments into the schemes. These totalled £11.4 million in 2006. These payments,the upward movement in the stock market, the increase in the discount rate, thecurtailment and changes in mortality assumptions have overall reduced thedeficit of the pension funds to £72.6 million compared to £90.2 million in theprevious year. The Board of TT electronics plc recommends a final dividend of 6.36p per sharewhich, following the 3.69p per share interim dividend, makes a total for theyear of 10.05p, the same as last year. My thanks to all the employees of TT electronics for contributing to theimproved performance of the group and for their continued efforts in the future. Martin Leigh, the Company Secretary for many years, retired at the end of 2006.I should like to thank him for his contribution to the group and wish him wellfor the future. Wendy Sharp has been appointed as Company Secretary. TT electronics has profited from both product innovation and the move ofmanufacturing to low labour cost countries. These successes together withfurther acquisitions will enable the group to be well positioned for futuregrowth. John W NewmanExecutive Chairman16 March 2007 Business review Highlights - Growth in operating profit before exceptional items to £36.2 million from £29.9 million- Acquisition of Apsco strategically enhances global electronic manufacturing services operations- Employees in low cost manufacturing operations are now 39 per cent of the total workforce- Continued success from Autopad(R) - new contracts won in 2006. TT electronics designs, manufactures and sells electronic and electricalproducts worldwide. The electronic products concentrate on sensors, automotiveelectronic systems, components based on resistive and optoelectronic technologyand outsourced contract electronic assembly manufacture. The electrical productsare electricity generating sets, uninterruptible power supplies, electricalcables and cable accessories. The main markets served are automotive, telecomsand computer and industrial. TT electronics' strategy is to provide specialist innovative products withsuperior product quality and reliability over those of our competitors. Themarkets in which we operate are global and there is considerable price pressureparticularly in the automotive market which represents 37 per cent of grouprevenue. The continuing introduction of new products which have betterfunctionality or are more cost effective is an important element in the shortand long term strategy of the group. The summary of key financial performance indicators and a review of theperformance for the group overall as well as for each sector of the group'soperations are set out below. Overview of group performance 2006 2005 £million £million----------------------------------------- -------- -------Revenue sensors and electronic systems 184.8 195.0 electronic components 139.9 129.6 electronic manufacturing services 72.1 60.3----------------------------------------- -------- ------- Electronic sector 396.8 384.9----------------------------------------- -------- ------- power systems 63.1 50.4 power transmission 140.4 130.0----------------------------------------- -------- ------- Electrical sector 203.5 180.4----------------------------------------- -------- ------- Group total 600.3 565.3----------------------------------------- -------- -------Operating profit(1) sensors and electronic systems 11.6 9.1 electronic components 11.4 8.7 electronic manufacturing services 1.3 2.0----------------------------------------- -------- ------- Electronic sector 24.3 19.8----------------------------------------- -------- ------- power systems 5.4 4.6 power transmission 6.5 5.5----------------------------------------- -------- ------- Electrical sector 11.9 10.1----------------------------------------- -------- ------- Group total 36.2 29.9----------------------------------------- -------- -------Capital employed 286.8 272.5----------------------------------------- -------- -------Return on capital employed 13% 11%----------------------------------------- -------- -------Number of employees 7,940 8,430----------------------------------------- -------- -------(1) Throughout this review operating profit is stated before exceptional itemsof profit of £8.8 million (2005: £2.1 million). TT electronics has achieved an operating profit before exceptional items of£36.2 million, which is a growth of 21 per cent over the prior year of £29.9million. This growth is built on improved market conditions and the rationalisation ofoperations in the UK and France during 2005. The increase in return on capital employed to 13 per cent (2005: 11 per cent)has been diluted due to the increased investment in working capital resultingfrom the higher cost of copper metal used in the electrical sector. The rationalisation of our high volume electronic manufacturing services unitbased in the North East of England was completed during the year. We announced in November 2006 our plans to establish a controlling interest in ajoint venture company based in Delhi, India, to serve the Indian automotivemarket. It is intended that our sensor technology combined with our partner'scustomer contacts will enable us to sell into this rapidly expanding market. Theprogressive adoption by the Indian government of European emission controlstandards for automotive products will provide our joint venture with excellentmarket opportunities. Our companies have grown due to demand generally strengthening across many ofour business units. The North American automotive market is an exception anddemand here has continued to decline; however, our exposure to this marketdownturn is relatively small being less than 7 per cent of TT electronics' totalrevenue and many of our new products have been on newly launched vehicles wherevolumes in the initial stages of production have been healthy. Our new range ofinductive sensors is anticipated to be incorporated into several new series ofvehicles thereby generating growth when production of these vehicles starts inlate 2007 with volumes accelerating through 2009. The development of new products is an essential part of the successful future ofTT electronics. We have increased the pace of new product introduction in boththe electronic and electrical sectors. This will provide a strong platform forfuture growth. Sensors and electronic systemsOur product range includes: electronic sensors which measure pressure,temperature, angle and rotational speed for applications such as enginemanagement, accelerator pedals, suspension movement and engine speed; climatecontrol systems used in vehicle heating and ventilation units; optoelectronicsensors which detect both visible and infrared light beams. 2006 2005 £million £million----------------------------------------- -------- -------Revenue 184.8 195.0Operating profit 11.6 9.1Capital employed 87.4 89.1----------------------------------------- -------- -------Return on capital employed 13% 10%----------------------------------------- -------- -------Number of employees 2,601 2,804----------------------------------------- -------- ------- The development of the Autopad(R) sensor product range has continued and duringthe year we have won new business. These sensors will be used in anglemeasurement applications. The Hall effect non-contacting sensors are moresuitable for measuring speed such as engine crankshaft or road wheel rotationspeeds. These are also progressing well and particularly pleasing is thedevelopment of our Hall effect torque and digital angular position sensor usedin steering technology. This has been developed alongside our Autopad(R) systemand provides an alternative contactless sensor technology. We also produce asuccessful range of contacting sensors. We are expanding our operation based near Dresden, Germany where our success indeveloping new products for pressure and temperature sensing applications hascontinued. The manufacture of the first of our newly developed range of combinedpressure and temperature sensors started in late 2006. The reorganisation of our electronic systems business on to a single site in theUK was completed in mid 2006. New climate control business has been won fromNorth American OEMs. This will be manufactured in a newly established Chinesefactory by mid 2007. We had high hopes of growth from our discrete visible optoelectronic productrange launched in late 2005. However, interruption in the supply of componentshas delayed this growth. We have established a new, more reliable source ofcomponents and the product was re-launched in December 2006. The overall revenue of this sector has declined by £10.2 million resulting fromthe closure of our loss-making business in France which had revenue of £11.3million in 2005. Price competition is fierce. New product development is the key strength for thegroup's sensor and system operations by which we maintain our position as one ofthe world leaders producing excellent specialised products which fulfil ourcustomers' technically demanding expectations. Electronic componentsWe sell a broad range of electronic components largely based on our extensiveelectronic resistive technologies. These components range from very complexindividual microcircuits to complex hybrid power control circuits used inadvanced aerospace and automotive applications. New products have been a featureof this year's sales efforts in our global operations. An example is our AnothermTM product which has been developed to provideefficient heat management of bright visible light emitting diode (VLED)assemblies. This has achieved success with the award of two contracts forapplications in the flat screen television market. Further developments of thissubstrate technology have attracted much interest in both automotive andindustrial markets and we anticipate that these will provide further growth inthe future. 2006 2005 £million £million----------------------------------------- -------- -------Revenue 139.9 129.6Operating profit 11.4 8.7Capital employed 95.9 101.4----------------------------------------- -------- -------Return on capital employed 12% 9%----------------------------------------- -------- -------Number of employees 2,598 2,597----------------------------------------- -------- ------- Our specialist automotive electronic control module business based in Austriasupplying the German automotive market has had an exceptional year. Additionalmanufacturing capacity is now planned to support a range of new products - suchas VLED vehicle lighting assemblies and power control modules. TT electronics manufactures specialist thin film resistive products for highfrequency applications. High demand has required our Texas based factory to workseven days a week to meet customer requirements. We are confident of this demandcontinuing and investment in additional production capacity has been authorisedwhich will be completed during 2007. It is central to our marketing strategy to supply technically advanced productsfor specialist applications. These attract higher margins than commodityproducts but only the development of new products maintains our competitiveadvantage. Electronic manufacturing servicesOur electronic manufacturing services businesses provide high quality resourcesfor the assembly of both complete products as well as the manufacture of printedcircuit assemblies. The group has factories in the UK from where the morespecialised, lower volume defence and aerospace markets are served and in Chinaand Malaysia where typically lower margin, high volume telecom products areassembled. 2006 2005 £million £million----------------------------------------- -------- -------Revenue 72.1 60.3Operating profit 1.3 2.0Capital employed 31.4 15.6----------------------------------------- -------- -------Return on capital employed 4% 13%----------------------------------------- -------- -------Number of employees 888 739----------------------------------------- -------- ------- In November we acquired Apsco, a high margin, low volume electronicmanufacturing services business based in Cleveland, USA. Apsco specialises inproviding complex power solutions to a number of long standing customers. Weanticipate that this business will require a low cost manufacturing capabilityto enhance its existing business and also to enable it to grow from theexcellent opportunities with existing and new customers. Our Chinese operations have recently been expanded to 15,000 square metres offloor area in six factories. China will be able to provide the infrastructureand support platforms for the group's future growth. The UK business has been rationalised and low margin, high volume business hasbeen transferred to our Malaysian plant which has been expanded to cope withthis additional demand. Other more specialist customers are being resourced fromour factory in Wales. All our electronic manufacturing services businesses now operate under a singlemanagement structure as a global supplier, targeting high margin, low volumebusiness in niche markets. This strategy is expected to generate good returnsand provide a basis for future profit growth. ElectricalThe electrical power systems businesses provide solutions which ensure thatelectrical power is reliably delivered to customers. The markets served aresupermarkets, banks, hospitals and telecom where an uninterruptible service iskey. The power transmission operations manufacture and sell electrical cablefrom domestic sizes to 11KV, along with connection systems, cable accessoriesand fuse gear. The end markets for the cable products are mainly building infrastructure, masstransit rail projects, naval and ground based defence systems. 2006 2005 £million £million----------------------------------------- -------- -------Revenuepower systems 63.1 50.4power transmission 140.4 130.0----------------------------------------- -------- ------- 203.5 180.4----------------------------------------- -------- -------Operating profitpower systems 5.4 4.6power transmission 6.5 5.5----------------------------------------- -------- ------- 11.9 10.1----------------------------------------- -------- -------Capital employed 72.1 66.4----------------------------------------- -------- -------Return on capital employed 17% 15%----------------------------------------- -------- -------Number of employees 1,853 2,033----------------------------------------- -------- ------- Our electrical businesses have produced excellent profits during the year andare concentrating on expanding existing and new specialist high margin productsinto niche markets. The major contract to provide generator sets to Central America was completedvery successfully by our Mexican business which also experienced very stronggrowth in revenue and profit from the demand for reliable electrical powerwithin its domestic market. Our UK based electrical connection system operation has also been particularlysuccessful; it is further expanding its product range and will benefit from thenewly established cable harness facility based in China. New defence and masstransit contracts have fuelled strong profit generation. Our cable accessories business surpassed expectations with new business won inthe UK export markets. Manufacture of some fuse gear products is now starting atour Chinese operation and we expect improved profit from the benefit of theselow cost supplies. The cable manufacturing operation based in the United Kingdom had an acceptableyear but pricing in this highly competitive commodity market remains difficult. Overall the market conditions for our electrical businesses were favourable,with growing demand for diesel powered electricity generators to both act asstandby units in the event of overall power failures and also to produce lowercost electricity at times of peak pricing. The military demand for bothconnection systems and specialist cable has boosted this year's profit. Exceptional itemsThe pensionable salaries in the major UK pension schemes have been frozen forthree years. This means that the final pensionable salaries which are typicallyanticipated to increase at a rate slightly above inflation will be unchanged forthis period and therefore the future liability for pension payments is reduced.The effect of this is a reduction in liabilities of £8.8 million which istreated as a curtailment under the requirements of IAS 19 Employee Benefits andreported as a profit through the consolidated income statement. The exceptionalitem in 2005 related to the gain on sale of land, profit on disposal of abusiness and the closure costs of two operations. Dividends and earnings per shareThe final dividend is proposed to be 6.36p per share and would result in a totalunchanged dividend of 10.05p per share for the year. This dividend is covered1.4 times by earnings before exceptional items. Earnings per share excluding exceptional items are 14.1p (2005: 10.7p pershare). Basic earnings per share from continuing activities are 18.1p per share(2005: 11.8 p per share). TaxationThe overall rate of tax is 29 per cent (2005: 29 per cent). Profits are mostlyearned in jurisdictions with a higher rate of tax than the UK but certainincentives for investment in locations such as China enable the overall rate tobe held below the standard rate for the UK. There are unrelieved tax lossescarried forward in the UK arising from the additional special cash contributionspaid to pension schemes. Treasury and borrowings 2006 2005 £million £million----------------------------------------- -------- -------Net borrowings 71.0 47.1Cash generated from operations 32.1 58.3Capital expenditure 20.6 15.6----------------------------------------- -------- ------- Days Days----------------------------------------- -------- -------Debtors 53 50Creditors 43 44Inventory 72 74----------------------------------------- -------- ------- The group borrowing facilities are mainly provided by a £70 million committedunsecured multi-currency facility which expires in 2011; there are alsounsecured overdraft facilities provided in the UK, USA and Germany by majorclearing banks. The borrowing facilities available to the group amounted to£175.5 million (2005: £168.9 million). The policy of the group is to minimise in a cost effective manner the risks ofpotentially adverse changes in exchange rates, interest rates, the cost ofcopper and other key raw materials. These risks are managed by the use offorward contracts, swaps or other derivative instruments. The major currencies to which the group is exposed other than its reportingcurrency are the US dollar, the euro and the Chinese yuan. The multi-currencyfacility provided borrowings of US$124 million at the end of December 2006 andis the basis of the hedge against differences arising from the translation ofoverseas assets denominated in US dollars. There are also euro borrowings in thelocal operating companies which provide a natural hedge against the eurodenominated assets. The net effect of changes since 2005 in foreign currencyexchange rates used to translate operating profit and revenue were an increaseof £0.3 million and a reduction of £5.1 million respectively. The total net borrowings at the end of 2006 were £71.0 million (2005: £47.1million). The increase in borrowings is set out in detail in the consolidatedcash flow statement. The major factors were the acquisition of Apsco in November2006, special cash contributions to the pension schemes, the need for increasedworking capital for growth in revenue and the increase in the value of stocks ofcopper metal held to cover the transitional arrangements between suppliers. There has been no major change in the credit terms with respect to eitherdebtors or creditors. At the end of December the group's net gearing was 45 per cent (2005: 31 percent). AcquisitionOn 6 November we announced the acquisition of Apsco. The consideration was £15.2million, the costs of acquisition were £0.1 million and the fair value of assetsamounted to £8.8 million including intangible assets other than goodwill of £1.1million. The revenue for the two months since acquisition was £5.0 million andthe operating profit was £0.4 million. PensionsThe group operated nine significant defined benefit pension schemes in the UKand two overseas. During the year six of the schemes in the UK merged into oneand this and the remaining three schemes will merge in April 2007. From this date the employee contributions will increase or accrual rates willreduce. Pensionable salaries in these schemes have also been frozen for threeyears. These changes will reduce the future ongoing service and administrationcosts. The curtailment in future benefits resulting from the freeze inpensionable salaries amounting to £8.8 million has been treated as anexceptional item in the group income statement. As part of the agreement to these changes the Company has committed to eliminatethe IAS19 deficit as re-measured each year over the next eight years and to anadditional special contribution of £5.5 million. Payments of cash into the fundstotalled £11.4 million (2005: £14.1 million). The present value of liabilities has reduced by £8.8 million. The market valueof assets of the pension schemes have increased by £26.4 million which is £9.4million better than actuarial expectations. Mainly as a result of these changesand cash contributions, the deficit of the pension schemes has reduced from£90.2 million at December 2005 to £72.6 million at the end of 2006. OutlookOur established markets are stable and the group is poised for further growth inthe expanding markets in China and India with a strong foundation of new productintroductions. The continued transfer of manufacturing to low labour cost areasis achieving further improvement in profitability. The acquisition of Apsco in 2006 completes the transformation of our electronicmanufacturing services business into a global player. We remain confident about the future growth in revenue for 2007 and beyond. Neil A Rodgers Roderick W WeaverChief Executive Finance Director16 March 2007 16 March 2007 Consolidated income statementfor the year ended 31 December 2006 Note 2006 2005 £million £million------------------------- ------ -------- --------Continuing operationsRevenue 2 600.3 565.3Cost of sales (485.5) (460.3)------------------------- ------ -------- --------Gross profit 114.8 105.0Distribution costs (38.8) (40.5)Administrative expenses (40.8) (35.2)Other operating expenses (0.1) (1.0)Other operating income 1.1 1.6------------------------- ------ -------- --------Operating profit before exceptional items 3 36.2 29.9Exceptional items 4 8.8 2.1------------------------- ------ -------- --------Operating profit 45.0 32.0Finance income 5 15.3 12.0Finance costs 5 (21.0) (17.2)------------------------- ------ -------- --------Profit before taxation 3 39.3 26.8Taxation (11.3) (8.5)------------------------- ------ -------- --------Profit for the year from continuing activities 3 28.0 18.3------------------------- ------ -------- -------- Discontinued operationLoss for the year from discontinued operation - (5.3)------------------------- ------ -------- --------Profit for the year attributable to shareholders 28.0 13.0------------------------- ------ -------- -------- Earnings per share 7From continuing and discontinued operations- basic 18.1p 8.4p- diluted 17.9p 8.3p From continuing operations- basic 18.1p 11.8p- diluted 17.9p 11.7p------------------------- ------ -------- -------- Consolidated balance sheetat 31 December 2006 Note 2006 2005 £million £million------------------------------------ ------ -------- --------AssetsNon-current assetsProperty, plant and equipment 108.6 118.0Goodwill 53.1 52.5Other intangible assets 16.0 15.7Deferred tax assets 21.0 30.0------------------------------------ ------ -------- --------Total non-current assets 198.7 216.2------------------------------------ ------ -------- --------Current assetsInventories 99.8 93.9Trade and other receivables 104.6 95.1Financial derivatives 0.6 -Cash and cash equivalents 9.5 24.0------------------------------------ ------ -------- --------Total current assets 214.5 213.0------------------------------------ ------ -------- --------Total assets 413.2 429.2------------------------------------ ------ -------- --------LiabilitiesCurrent liabilitiesShort term borrowings 11.5 4.0Financial derivatives - 0.4Trade and other payables 87.3 94.8Current tax payable 1.3 4.9Provisions for liabilities 0.9 1.6------------------------------------ ------ -------- --------Total current liabilities 101.0 105.7------------------------------------ ------ -------- --------Non-current liabilitiesLong term borrowings 69.0 67.1Deferred tax provision 5.4 6.1Pensions and other post employment benefits 10 72.6 90.2Provisions for liabilities 0.7 1.0Other non-current liabilities 7.5 7.4------------------------------------ ------ -------- --------Total non-current liabilities 155.2 171.8------------------------------------ ------ -------- --------Total liabilities 256.2 277.5------------------------------------ ------ -------- --------Net assets 157.0 151.7------------------------------------ ------ -------- --------EquityShare capital 38.7 38.7Share options reserve 0.8 0.5Hedging and translation reserve (6.1) 3.5Retained earnings 121.6 107.0Minority interests 2.0 2.0------------------------------------ ------ -------- --------Total equity 8 157.0 151.7------------------------------------ ------ -------- -------- Consolidated cash flow statementfor the year ended 31 December 2006 Note 2006 2005 £million £million------------------------------------ ------ -------- --------Operating activitiesProfit for the year 28.0 13.0Adjustments for:Finance costs 5.7 6.1Taxation 11.3 5.2Depreciation of property, plant and equipment 23.2 26.8Amortisation of intangible assets 9.1 10.4Share based payment expense 0.3 0.3Gain on disposal of property, plant and equipment (2.0) (12.0)Gain on disposal of subsidiary - (4.1)Exceptional pension curtailment gain 4 (8.8) -Other non cash items 0.1 (0.2)Additional payments to pension funds (7.0) (9.3)------------------------------------ ------ -------- --------Operating cash flow before movementsin working capital 59.9 36.2Decrease in property assets - 0.1(Increase)/decrease in financial derivatives (1.0) 0.7(Increase)/decrease in inventories (0.8) 5.1(Increase)/decrease in receivables (5.6) 12.1(Decrease)/increase in payables (14.0) 0.1Exchange differences (6.4) 4.0------------------------------------ ------ -------- --------Cash generated from operations 32.1 58.3Tax paid (7.0) (8.7)------------------------------------ ------ -------- --------Net cash from operating activities 25.1 49.6------------------------------------ ------ -------- --------Cash flows from investing activities:Purchase of property, plant and equipment (20.6) (15.6)Proceeds from sale of property, plant and equipment and grants received 7.1 21.3Development expenditure (8.6) (8.7)Acquisition of subsidiary net of cash acquired 9 (14.7) (10.1)Net cash proceeds from sale of subsidiaries - 7.8------------------------------------ ------ -------- --------Net cash used in investing activities (36.8) (5.3)------------------------------------ ------ -------- --------Cash flows from financing activities:Interest paid (net) (3.8) (3.4)Net changes in long-term borrowings and finance lease liabilities 10.0 7.2Dividends paid (15.6) (15.6)------------------------------------ ------ -------- --------Net cash used in financing activities (9.4) (11.8)------------------------------------ ------ -------- --------Net (decrease)/increase in cash and cash equivalents (21.1) 32.5Cash and cash equivalents at beginning of period 22.3 (9.6)Exchange difference (0.5) (0.6)------------------------------------ ------ -------- --------Cash and cash equivalents at end of period 0.7 22.3------------------------------------ ------ -------- --------Cash and cash equivalents comprise:Cash and cash equivalents 9.5 24.0Bank overdrafts (8.8) (1.7)------------------------------------ ------ -------- -------- 0.7 22.3------------------------------------ ------ -------- -------- Consolidated statement of recognised income and expensefor the year ended 31 December 2006 2006 2005 £million £million----------------------------------------- -------- -------Profit for the year 28.0 13.0Exchange differences on net foreign currencyinvestments (9.6) 5.7Income tax on foreign currency exchange differences - 0.7Actuarial net gain/(loss) on defined benefitpension schemes 3.2 (26.0)Deferred tax on actuarial gain or loss (1.0) 7.8----------------------------------------- -------- -------Total recognised income and expense for the yearattributable to shareholders 20.6 1.2----------------------------------------- -------- ------- Notes to the financial statements 1. Basis of accounting The consolidated financial statements have been prepared under InternationalFinancial Reporting Standards (IFRS) as adopted by the European Union. The information set out below, which does not constitute full financialstatements within the meaning of S240 CA, 1985 is extracted from the auditedfinancial statements of the group for the year ended 31 December 2006 which: - were approved by the Directors on 16 March 2007- carry an unqualified audit report, which did not contain statements under S237 CA, 1985- will be posted to shareholders and available to the public in April 2007- will be filed with the Registrar of Companies following the Annual General Meeting on 16 May 2007 2. Revenue By sector 2006 2005 £million £million-------------------------------------- -------- -------Electronic- sensors and electronic systems 184.8 195.0- electronic components 139.9 129.6- electronic manufacturing services 72.1 60.3-------------------------------------- -------- -------Total electronic 396.8 384.9-------------------------------------- -------- -------Electrical- power systems 63.1 50.4- power transmission 140.4 130.0-------------------------------------- -------- -------Total electrical 203.5 180.4-------------------------------------- -------- -------Total 600.3 565.3-------------------------------------- -------- ------- By destination 2006 2005 £million £million-------------------------------------- -------- -------United Kingdom 159.7 161.1Rest of Europe 203.9 199.9North America 148.0 131.7Rest of the World 88.7 72.6-------------------------------------- -------- -------Total 600.3 565.3-------------------------------------- -------- ------- 3. Profit by sector 2006 2005 £million £million------------------------------------- -------- --------Electronic- sensors and electronic systems 11.6 9.1- electronic components 11.4 8.7- electronic manufacturing services 1.3 2.0------------------------------------- -------- --------Total electronic 24.3 19.8------------------------------------- -------- --------Electrical- power systems 5.4 4.6- power transmission 6.5 5.5------------------------------------- -------- --------Total electrical 11.9 10.1------------------------------------- -------- --------Operating profit before exceptional items 36.2 29.9Exceptional operating items (note 4) 8.8 2.1------------------------------------- -------- --------Operating profit 45.0 32.0Finance income 15.3 12.0Finance costs (21.0) (17.2)------------------------------------- -------- --------Profit before tax 39.3 26.8Taxation (11.3) (8.5)------------------------------------- -------- --------Profit for the year from continuing operations 28.0 18.3------------------------------------- -------- -------- 4. Exceptional items 2006 2005 £million £million------------------------------------- -------- --------Curtailment of pension scheme benefits 8.8 -Net gain on sale of land and closure of Gravesendcables operation - 4.7Profit on sale of Houchin Aerospace Limited - 4.1Closure costs of AB Automotive (France) SAS - (6.7)------------------------------------- -------- -------- 8.8 2.1------------------------------------- -------- -------- The pensionable salaries of members of the UK defined benefit schemes have beenfrozen for three years. The consequent reduction in the liabilities of theschemes has been recognised in the actuarial valuations of the schemes at 31December 2006 and under the requirements of IAS19 is reported in operatingprofit. 5. Finance costs - net Continuing operations 2006 2005 £million £million------------------------------------- -------- --------Interest receivable 0.8 0.6Expected return on pension scheme assets 14.5 11.4------------------------------------- -------- --------Finance income 15.3 12.0------------------------------------- -------- --------Interest on bank overdrafts and loans 4.3 3.4Interest on finance leases 0.3 0.3Unwinding of the discount on pension scheme liabilities 16.4 13.5------------------------------------- -------- --------Finance costs 21.0 17.2------------------------------------- -------- --------Finance costs - net 5.7 5.2------------------------------------- -------- -------- In 2005 the loss for the discontinued operation included £0.9m of net financecosts. 6. Dividends The following dividends have been paid in the year: 2006 2006 2005 2005 pence per £million pence per £million share share ----------------------- --------- -------- -------- --------Final dividend forprior year 6.36 9.9 6.36 9.9Interim dividend forcurrent year 3.69 5.7 3.69 5.7----------------------- --------- -------- -------- -------- 10.05 15.6 10.05 15.6----------------------- --------- -------- -------- -------- The Directors propose that a final dividend of 6.36p will be paid on 25 May 2007to shareholders on the register on 18 May 2007. The ex-dividend date is 16 May2007. This dividend is subject to the approval of shareholders at the AnnualGeneral Meeting and has not been included as a liability in these accounts. Thetotal estimated cost of the dividend to be paid is £9.9 million. 7. Earnings per share From continuing and discontinued operations: 2006 2005 pence pence per share per share------------------------------------- -------- --------Basic 18.1 8.4Diluted 17.9 8.3------------------------------------- -------- -------- Earnings per share has been calculated by dividing the profit attributable toshareholders by the weighted average number of shares in issue during the year.The numbers used in calculating basic and fully diluted earnings per share arereconciled below: 2006 2005 £million £million------------------------------------- -------- --------Profit for the year attributable to shareholders:Earnings basic and diluted 28.0 13.0------------------------------------- -------- -------- Weighted average number of shares in issue 2006 2005 million million------------------------------------- -------- --------Basic 154.8 154.8Adjustment for share options 1.4 1.4------------------------------------- -------- --------Diluted 156.2 156.2------------------------------------- -------- -------- From continuing operations: 2006 2005 pence pence per share per share------------------------------------- -------- --------Basic 18.1 11.8Diluted 17.9 11.7------------------------------------- -------- -------- 2006 2005 £million £million------------------------------------- -------- --------Profit for the year attributable to shareholders 28.0 13.0Add loss for the year from discontinued operation - 5.3------------------------------------- -------- --------Earnings from continuing operations 28.0 18.3------------------------------------- -------- -------- The denominators are the same as shown above for both basic and diluted earningsper share. Earnings per share on continuing operations before exceptional items of 14.1p(2005 : 10.7p) is based on the profit for the year of £28.0 million (2005 :£18.3 million) adjusted for exceptional items of £8.8 million (2005 : £2.1million) less the associated tax of £2.6 million (2005 : £0.4 million). 8. Shareholders' equity £million------------------------------------- --------------At 1 January 2005 166.7Profit for the year 13.0Exchange differences on net foreign currency investments 5.7Income tax on foreign currency exchange differences 0.7Actuarial net loss on defined benefit pension schemes (26.0)Deferred tax on actuarial loss 7.8Dividends paid (15.6)Share based payments 0.3Distribution to minority interest (0.9)------------------------------------- --------------At 31 December 2005 151.7Profit for the year 28.0Exchange differences on net foreign currency investments (9.6)Actuarial net gain on defined benefit pension schemes 3.2Deferred tax on actuarial gain (1.0)Dividends paid (15.6)Share based payments 0.3------------------------------------- --------------At 31 December 2006 157.0------------------------------------- -------------- 9. Acquisition of subsidiary On 6 November 2006 the group announced the acquisition of Apsco Holdings, Incand its subsidiary which now trades as TT Apsco, Inc an electronic manufacturingservices business located in the USA. The purchase consideration was £15.2 million for net assets at fair value of£8.8 million. The net assets included cash of £0.6 million and, after costs of£0.1 million, there was a cash outflow of £14.7 million. 10. Defined benefit pension plans The group operates defined benefit pension plans mainly in the UK. The mostrecent actuarial valuations have been updated by the actuaries to assess theassets and liabilities of the plans at 31 December 2006. The principal assumptions used for the purpose of the actuarial valuations wereas follows: 2006 2005 % %----------------------------- ------------- ----------Discount rate 5.3 4.9Inflation rate 2.9 2.6Increases to pensions in payment 2.5-2.9 2.5-2.6Salary increases for 3 years - 3.2Salary increases thereafter 3.4 3.2----------------------------- ------------- ---------- The expected long-term rates of return on the main classes, net of expenses, setby management having regard to actuarial advice and relevant indices at 31December 2006 were: 2006 2005 % %----------------------------- ------------- ----------Equities 6.8 6.9Bonds 4.3 4.3Gilts and cash 3.8 3.6----------------------------- ------------- ---------- The mortality tables applied by the actuaries at 31 December 2006 were PA92 MC +two years. The amounts recognised on the group balance sheet are: 2006 2005 £million £million----------------------------- ------------- ----------Equities 187.8 170.5Bonds 10.9 2.9Gilts and cash 73.4 72.3----------------------------- ------------- ----------Fair value of assets 272.1 245.7Present value of funded obligation (344.7) (335.9)----------------------------- ------------- ----------Net liability recognised on the balance sheet (72.6) (90.2)----------------------------- ------------- ---------- Changes in the present value of the defined benefit obligation are: 2006 2005 £million £million----------------------------- ------------- ----------Opening defined benefit obligation 335.9 274.4Current service cost 4.4 4.8Interest on obligation 16.4 15.3Plan participant contributions 1.5 2.0Curtailment (see exceptional items note 4) (8.8) -Change in actuarial estimates and assumptions 6.2 47.6Exchange differences (0.8) 0.3Benefits paid (10.1) (8.5)----------------------------- ------------- ----------Closing defined benefit obligation 344.7 335.9----------------------------- ------------- ---------- Changes in the fair value of plan assets are: 2006 2005 £million £million----------------------------- ------------- ----------Opening fair value of plan assets 245.7 203.5Expected return on plan assets 14.5 12.8Excess of actual over expected returns 9.4 21.6Contributions by employer 11.4 14.1Contributions by employees 1.5 2.0Exchange differences (0.3) 0.2Benefits paid (10.1) (8.5)----------------------------- ------------- ----------Closing fair value of plan assets 272.1 245.7----------------------------- ------------- ---------- The experience adjustments arising on the plan assets and liabilities arereported in the Consolidated statement of recognised income and expense and areas follows: 2006 2005 £million £million----------------------------- ------------- ----------Experience adjustments on plan liabilities (6.2) (47.6)----------------------------- ------------- ----------Experience adjustments on plan assets 9.4 21.6----------------------------- ------------- ---------- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Tt Electronics