TT Electronics Q&A: Strong prospects for 2020 & beyond (LON:TTG)

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TT Electronics plc (LON:TTG) Chief Executive Officer Richard Tyson and Chief Financial Officer Mark Hoad caught up with DirectorsTalk for an exclusive interview to discuss their final results, the drivers behind the growth and what excites them about the group’s prospects.

Q1: Final results for the year ended 31 December 2019, Mark can you tell us about your 2019 progress?

A1: I think we’ve delivered a really strong performance in 2019 and we’re seeing the benefits of the strategy come through in growth and improved margin.

Revenue grew by 4% organically, in particular that was driven by improvements in aerospace, defence and medical markets which grew by 22%.

Operating margin increased by another 60 basis so it’s now up to 8.4%, we’ve doubled margins over the last 4 years.

We also delivered really strong cash conversation of 98% and ended the year with a balance sheet of less than 1 times lowered so we’ve got really good flexibility and we’ve got good capacity for organic and acquisitive growth.

That’s all just really great evidence that TT Electronics is a high quality business today.

Q2: Richard, what are the drivers of the company’s growth?

A2: I guess the first thing to say is one of the strong drivers for future growth for the company is all about sustainability actually in the environment. When we link that our customers, markets and products, it’s all about developing cleaner, smarter products and supporting improved wellbeing and that manifests itself for us in things like aircraft electrification, smart infrastructure and improved medical diagnostics.

Our strategy is all about focussing on the right markets, the right sub-segments that have got long term future growth dynamic and the right customers in those markets that give us the best opportunity for growth that really are a good fit for TT and its business, its capabilities and that they really think about us as being a trusted strategic partner for the future.

The fact that we’re focussing on these market areas that are driven by sustainability, we’re into aircraft, aerospace, medical and productivity in industrial markets, that’s leading for us to multi-million pound customers with multi-year revenues and a strengthening order book. In fact, our order book now has got improved visibility in it for the third year in a row and we sit here today with a good strong order book for the future giving us a feeling of strong prospects for 2020 and beyond.

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Q3: Talking about prospects, what excites you about TT Electronics’ prospects?

A3: Fundamentally, it’s Mark said, 2019 was a really strong performance, really good evidence of the strategy in action and the results really coming through from that strategy in the numbers.

For me, it gives us a great platform to look forward through 2020/21/22, we’ve got real confidence we’re investing in the right markets and we have got a suite of customers that we’re extending so 7 new customers in the year with multi-year multi-million pound revenue potential as we look forward into 21/22.

We’ve got a strong order book for 2020 and throughout all of this, we’ve got opportunities to enhance our margin from driving growth linking to operational leverage benefits. We’ve got a series of self-help actions happening across the group through our operations which has been improving margins, they’ve doubled now to 8.4% at the end of 2019, and we see opportunity to enhance that further. In fact, today we announced a new self-help programme that will deliver £5-6 million worth of run-rate benefit in 2022 from a £14 million investment so really strong payback but more importantly, that’s absolutely underpinning our journey to 10% margins by the time we get to 2022.

As Mark said, we’ve exited 2019 with, again, a very strong balance sheet having had another year of good cash conversion which puts us in great shape to make more acquisitions going forward and just support the momentum of this strategy for the company.,

So, we’re in great shape, track record is clear and the path forward is really exciting for the group.

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