TT Electronics plc (LON:TTG), a global provider of engineered electronics for performance critical applications, published today an update given the current and rapidly changing developments regarding COVID-19.
Our employees, customers and business operations
The safety and well-being of our people, our wider communities, our customers and our partners remains our primary concern. We are following the advice of local authorities around the world as the situation develops whilst adopting the most stringent of safety standards to minimise the risk from the virus.
Across all of the Group’s facilities we have implemented personal protection measures, including additional hygiene and social distancing, building on the lessons learned in our two Chinese facilities through January and February. Our operations continue to design and manufacture products to meet the critical needs of our customers in medical, aerospace and defence markets including requirements for equipment to support front line medical operations.
To date, disruption to the Group’s trading performance from COVID-19 has been relatively modest. Our operations in China have quickly returned to full capacity with the supply chain supporting the return to this level of activity. At this time nearly all of our facilities remain open save for three small facilities in Malaysia, Tunisia, and Barbados.
Given the uncertainty and the unknown duration of the COVID-19 pandemic and the reduced outlook for economic and industrial output globally, we have taken actions already to reduce costs and protect our cash flows. These actions include reductions to capital expenditure, other than for health, safety and environmental matters or to maintain production, a temporary hiring freeze and the curtailment of all discretionary expenditure. The members of the Board have agreed a 20% salary reduction, effective 1 April 2020, for a minimum of three months.
The Group entered this period of uncertainty in a strong financial position. As at 31 December 2019 it had:
- Net debt excluding lease liabilities of £51.5 million
- Net debt to EBITDA (pre-IFRS 16) of 0.9 times compared to a covenant maximum of 3.0 times
- Interest cover (pre-IFRS 16) of 15.7 times compared to a covenant minimum of 4.0 times
- £60.2 million of cash and £66.8 million of undrawn headroom on the Group’s £180 million committed RCF facility. The Group’s RCF matures in November 2023.
Despite the Group’s balance sheet strength and liquidity position, given the exceptional levels of uncertainty, and recognising the other mitigating actions the company is taking the Board considers it prudent to conserve cash and withdraw the recommendation to pay the proposed 2019 final dividend, thereby retaining £8.0m of cash in the business. We will review the decision in relation to the 2019 final dividend in the second half of this year once the outlook is clearer.
Today TT Electronics also announced the appointment with immediate effect of Warren Tucker as a Non-executive director and Chairman elect. The appointment follows Neil Carson’s previously announced intention to step down, having led the Board through a period of significant change. Neil will continue as Chairman until the conclusion of the Annual General Meeting on 6 May 2020. Further, TT also announces that Stephen King will be stepping down from the Board in September 2020 after nine years of service.
Warren today becomes Chairman of the Board’s Nomination Committee and a member of the Remuneration Committee, and he will become Chairman of the Board at the conclusion of the Annual General Meeting, scheduled for 6 May 2020. Neil Carson will continue as Chairman until this time, at which point he will step down from the Board.
Warren is currently a non-executive director of Reckitt Benckiser Group plc (since 2010), Tate & Lyle PLC (since 2018), where he is Chair of the Audit Committee, and the UK Government’s Foreign & Commonwealth Office (since 2015). As previously announced, he will step down from the board of Reckitt Benckiser in May 2020.
During his executive career, Warren was CFO of Cobham plc from 2003 to 2013. Prior to this he held senior finance roles at Cable & Wireless and British Airways.
TT Electronics also announced that Stephen King, Senior Independent Director, will be stepping down from the Board in September 2020, after nine years’ service. At the conclusion of the AGM, Jack Boyer will become Senior Independent Director with Anne Thorburn becoming Chair of the Audit Committee.
Stephen King, Senior Independent Director, said:
“I am delighted to welcome Warren to TT Electronics. He has a wealth of recent non-executive experience, as director and chairman, and he brings an in-depth knowledge of a number of our end-markets. He joins at an extraordinary time for us all and his experience will be invaluable, as we navigate through the current macro-issues, while continuing our transformation to become a sustainable, higher quality and a better-balanced business, with excellent growth prospects.”
“We are extemely grateful to Neil for his leadership, direction and insights through a period of great strategic and operational progress for TT Electronics and he leaves it a much stronger business. The Board wishes to thank him for his significant contribution throughout his time on the Board.”
Warren Tucker said:
“I am very excited to be joining TT Electronics as the business has developed differentiated capabilities and an ability to solve tough electronic challenges, together with a growing presence in attractive markets with long term structural growth characteristics. I look forward to leading the Board and supporting Richard Tyson and the executive team as they continue to execute the Group’s strategy.”
Outlook and guidance
Given the demand uncertainty in our markets and the potential for disruption caused by COVID-19, we are withdrawing guidance for 2020.
Commenting Richard Tyson, TT Electronics Chief Executive Officer said:
“We delivered a good performance in the first quarter whilst managing disruption in Asia. The period ahead is uncertain for everyone as the current global crisis develops and TT will not be immune, but our strategy has positioned TT well to deal with these challenges. I am very proud of the outstanding response of our teams across the globe to COVID-19 and this has allowed us to continue to support our customers in critical industries.”