TT Electronics (LON: TTG), a global provider of engineered electronics for performance critical applications, has published a trading update to the end of October 2019.
We have delivered strong organic growth, with revenue 12% ahead of last year on a constant currency basis and 5% ahead on an organic basis¹. Organic growth continues to be driven by Power and Connectivity and Global Manufacturing Solutions whilst revenue in Sensors and Specialist Components has continued the weaker trend experienced in Q2, as expected, and this trend is now expected to continue into 2020.
The Group’s order book is ahead of the prior year with good visibility from significant customer wins for recurring multi-million pound revenues, primarily in aerospace and defence and medical markets. Global Manufacturing Solutions has continued to deliver strong growth with our large global medical customers and we are booking orders ahead of revenue. We continue to prepare for further revenue ramp-up in 2020 from our significant customer wins secured this year. In Power and Connectivity we continue to deliver good growth and margin progression with strong demand for our power solutions with aerospace and defence customers. We have extended actions to optimise the Group’s cost base, in light of the continued trends affecting Sensors and Specialist Components in particular, and as a result the Group’s 2019 cash restructuring costs will increase by circa £2 million.
The development of the Group’s portfolio continues, and we have agreed to acquire the aerospace and defence power supply business of Excelitas Technologies Corp based in Covina, California, for a total consideration of $17.7 million on a cash and debt free basis, subject to a normal post-completion working capital adjustment. This acquisition will enhance the Group’s presence in the large and growing US aerospace and defence market and extend our power electronics capabilities to include power convertors, moving TT up the value chain, in line with our strategy. This will also provide access to new growing defence programmes for TT, and new customer relationships with key US defence primes.
The business has strong margins and a robust growth profile driven by design-led solutions on major aerospace and defence platforms. Sales for the last 12 months to June 2019 were $9.3 million, and adjusted EBITDA was $1.7 million²–. We will be investing in the business to improve its growth prospects and to develop its engineering capability. We expect to meet our 12% pre-tax return on invested capital hurdle in the third year of our ownership. The acquisition is subject to regulatory approval and is expected to complete in Q1 2020.
Commenting Richard Tyson, TT Electronics Chief Executive Officer said:
“This update and the acquisition announced today show that TT is continuing to become a higher quality, better balanced Group with increasing exposure to the structural growth markets of aerospace, defence and medical. We are delighted to be adding the ability to engineer entire power convertors to our core power electronic capabilities in aerospace and defence with the acquisition. We look forward to welcoming the businesses’ employees and customers to TT early next year.
We continue to deliver good revenue growth and expect to make further progress in 2019 and beyond, despite a challenging macroeconomic backdrop.”
¹ Excluding the impact of exchange rates, acquisitions and disposals
² EBITDA adjusted to exclude costs allocated by the parent company