TT Electronics (LON:TTG) said first-half adjusted operating profit rose 37% to £18.5 million as cost actions, an electronics manufacturing turnaround and the closure of an underperforming U.S. site lifted margins.
Adjusted operating margin increased by 230 basis points from a year earlier to 8.1%, while revenue declined 2.7% at constant currency. Chief Financial Officer Ian Ashton said revenue would have increased by about 4% excluding two previously flagged one-off factors: customer production transfers from Suzhou, China, to Kuantan, Malaysia, and the closure of the Plano site.
Orders and second-half outlook
TT Electronics reported a book-to-bill ratio of 112% and an order book of approximately £550 million at the end of June, up 20% from a year earlier. Lakin said the order growth was broad-based across the group’s Power, Electronics Manufacturing Services, or EMS, and Components divisions.
The company expects headline revenue to return to organic growth in the second half, including the effect of the Plano closure. Management said the customer transfer to Kuantan was complete, although production volumes will continue to ramp up during the second half. Ashton said the £14 million first-half effect from that transfer would be “significantly lower” in the second half.
Power revenue was flat in the first half, held back by customer-driven delays, although the company expects a stronger second half. Aerospace and defense account for around two-thirds of Power sales, while sales into industrial and healthcare markets increased during the period.
EMS revenue fell 8% on a reported basis because of the Suzhou-to-Kuantan transfer, but grew about 7% excluding that effect. The division’s operating margin rose to 8%, supported by the turnaround of an EMS site that was profitable throughout the half. Components revenue increased 6%, despite an approximately 5% impact from the Plano closure, and the division returned to profitability.
Cost program and cash flow
The company said its cost-reduction program was substantially completed in the first half. It recognized about £3 million of program costs within operating profit during the period, which management described as effectively self-funded. TT Electronics remains on track to deliver £3 million of net savings in 2026, with annualized benefits expected to exceed £6 million from 2027.
Lakin said the reductions were focused on administrative roles, while the group continued to invest in engineering, operations, supply chain capabilities and commercial talent.
Free cash flow was nil in the first half after a working-capital outflow of about £13 million. Ashton said the movement largely reflected higher inventory in Power ahead of delayed revenue and inventory building at Kuantan to support transferred customer production. The group also spent £3.8 million on restructuring and exceptional items, mainly related to the Plano closure and closure of a small EMS plant in Mexicali.
Management expects positive free cash flow in the second half and for the full year. On a last-12-month basis, cash conversion was 108% and free cash inflow totaled £23 million, Ashton said.
Net debt excluding leases stood at £52 million at the end of June, broadly unchanged from year-end, with leverage at 1.1 times. The company expects further deleveraging in the second half. Its £105 million revolving credit facility was almost fully undrawn and extends to June 2028.
Portfolio review and capital allocation
TT Electronics is evaluating a potential sale of its Components division after receiving what Lakin described as an encouraging number of indications of interest. He said a transaction remains subject to value and there is no certainty of an outcome.
The improved performance of Components, which returned to profit amid a recovering market, strengthens the company’s position regardless of whether it sells the unit, according to Lakin.
Ashton said the group intends to keep leverage below 1.5 times, absent a more transformational development. TT Electronics does not currently expect to reinstate its dividend for the 2026 financial year, although the board will continue to review the issue. Any future dividend would initially be set at a prudent level, he said.
Commercial agreements and defense pipeline
Following the period end, TT Electronics signed a multi-year agreement with Rolls-Royce to supply high-reliability power electronics and precision magnetics for its wide-body civil aircraft engines throughout their operational lifetime. Lakin said the agreement builds on a relationship spanning more than four decades and differs from previous rolling three- to five-year arrangements by providing life-of-type support.
The group also secured further contract awards on the Eurofighter Typhoon program, including upgraded power-electronics products. Elsewhere, it won two EMS customers in scientific and analytical instruments and a multimillion-dollar Power contract for subsea oil and gas applications.
Lakin said TT Electronics has signed a letter of intent with European defense company MBDA and is engaged on the Future Combat Air System, as well as Boxer and Challenger armored-vehicle programs through Rheinmetall BAE Systems. He said the company is seeking ways to expand its participation in continental European defense programs, potentially through commercial partnerships.
Management said investments in business-development personnel, particularly in North America and China, strategic selling, pricing discipline and pipeline management were contributing to stronger order intake and customer wins across its end markets.
About TT Electronics (LON:TTG)
TT Electronics is a global provider of engineered electronics for performance critical applications.
TT engineers and manufactures electronic solutions enabling a safer, healthier and more sustainable world. TT benefits from enduring megatrends in structurally high-growth markets including healthcare, aerospace, defence, automation and electrification. TT invests in R&D to create designed-in products where reliability is mission critical. Products designed and manufactured include sensors, power management and connectivity solutions.
