TT Electronics PLC (TTGPF) (H1 2026) Earnings Call Highlights: Profit Surges 37% as Strategic ...

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TT Electronics PLC (TTGPF) (H1 2026) Earnings Call Highlights: Profit Surges 37% as Strategic ... GuruFocus News Wed, September 2, 2026 at 11:00 AM EDT 8 min read TTG.L TTGPF This article first appeared on GuruFocus . Revenue: H1 revenue declined 2.7% at constant currency, impacted by one-off factors; absent these, sales grew around 4%. Adjusted Operating Profit: Up 37% to GBP18.5 million. Operating Margin: Expanded 230 basis points to 8.1%. Power Division Revenue: Flat year-over-year, with operating margin of 14%. EMS Division Revenue: Declined 8%, but grew around 7% excluding product transfers; operating margin improved to 8%. Components Division Revenue: Grew 6% despite a 5% impact from the Plano closure; returned to profitability. Order Book: Approximately GBP550 million at end of June, 20% higher than the same point last year. Free Cash Flow: Nil in H1, but positive on an LTM basis with an inflow of GBP23 million. Net Debt: GBP52 million excluding leases, with leverage at 1.1 times. Cost Reduction Programme: On track to deliver GBP3 million of net savings in 2026, with annualized benefits of more than GBP6 million from 2027 onwards. Warning! GuruFocus has detected 5 Warning Signs with TTGPF. Is TTGPF fairly valued? Test your thesis with our free DCF calculator. For the complete transcript of the earnings call, please refer to the full earnings call transcript . Adjusted operating profit surged 37% to GBP18.5 million, with operating margin expanding 230 basis points to 8.1%. Order book reached approximately GBP550 million at the end of June, 20% higher year-over-year, providing strong revenue visibility. The Cleveland EMS site turnaround was successful, delivering consistent profitability throughout the period. Components division returned to profitability, driven by underlying business improvement and the closure of the loss-making Plano site. Strategic initiatives, including divisional realignment and cost reduction, are on track, with expected annualized savings of over GBP6 million from 2027. Strong commercial momentum with new customer wins and a significant multi-year agreement with Rolls-Royce for life-of-type support. Board expects adjusted operating profit for the full year to be ahead of current market expectations. Group revenue declined 2.7% in H1, impacted by customer-driven delays in Power and product transfers in EMS. Power division operating margin slightly declined to 14% due to flat sales in the period. Free cash flow was nil in H1 due to a GBP13 million working capital outflow from inventory builds. The company does not expect to reinstate the dividend for the 2026 financial year. High effective tax rate due to inability to recognize deferred tax assets on US tax losses. EMS operating margin at 8% is still below desired levels, with more work needed to improve profitability. Q : Can you clarify the guidance for a return to organic growth in the second half, specifically regarding any lingering noise from the customer transfer to Kuantan or the Plano closure? A : Eric Lakin (CEO) confirmed that the customer transfer from Suzhou to Kuantan is complete, with production having ceased in China at the end of last year. The first half was impacted by the ramp-up phase against a high comparative period, but this noise is expected to be negligible in the second half. Ian Ashton (CFO) added that the underlying growth rate of roughly 4% seen in H1 is a reasonable steer for H2, and the company expects headline growth even without adjusting for the Plano closure. Q : Given the strategic review of the Components division, what are the synergies between the two remaining businesses, Power and EMS, and would it make sense for them to remain together? A : Eric Lakin (CEO) stated there is a strong synergy and fit between EMS and Power, which is different from Components. He highlighted material intercompany transfers, such as the Kansas Power site's largest supplier being the Cleveland EMS site. This vertical integration provides a real edge in design authority, speed to manufacture, and quality control, particularly in aerospace and defence with ITAR-compliant sites. The company is also seeing cross-selling opportunities where customers discover adjacent capabilities. Q : Regarding the new multi-year agreement with Rolls-Royce, was this a renewal of a previous arrangement, or does it represent a different way of doing business? A : Eric Lakin (CEO) explained that while the partnership spans four decades with rolling three-to-five-year contract renewals, this new agreement is different. Rolls-Royce, under new leadership, is seeking "life-of-type" arrangements with critical sole-source suppliers. This new contract formalizes a long-term relationship that could run for multiple decades, providing significant revenue visibility. It also opens the path to potential new business and products beyond current supply. Q : How much of the recent new business wins are attributable to the sales transformation initiatives versus simply benefiting from strong end-market conditions? A : Eric Lakin (CEO) said it is a combination of both. The company has deliberately invested in its business development team, adding dedicated resources in China and North America, which is generating tangible leads and order intake. However, this would be much harder in a difficult market. The improving market conditions, particularly in Components, combined with internal actions on pricing and marketing, have allowed the company to capture the benefits of the rising market. Q : Can you provide more detail on the material contract award for the Eurofighter Typhoon programme? Is it incremental in terms of products supplied or contract length? A : Eric Lakin (CEO) clarified that the award is an extension of existing contracts with Tier 1 suppliers like BAE Systems. While the airframe is similar, there are ongoing developments and enhancements in power electronics, such as improvements in weight, form factors, and efficiency. This effectively involves supplying new products, which allows the company to continue supporting the platform and keep competition at bay. Q : Can you provide more insight into the new win in the subsea oil and gas sector? A : Eric Lakin (CEO) highlighted this as a significant multi-million-dollar win for the magnetics business, demonstrating the diversity of end markets. The sophisticated sensors and controls needed for the subsea sector lend themselves well to the company's capabilities. He noted it is a good reference logo and that there are other customers in that sector the company is currently in discussions with. Q : What is the potential and opportunity for margin improvement in the EMS division, given its historical performance? A : Eric Lakin (CEO) explained that the EMS division is broadly the same as the former GMS, with sites in Suzhou, Kuantan, and Cleveland. While it will always be a lower-margin business than Power due to less design and engineering content, the company's high-mix, engineering-led flavour should allow for higher margins than more volume-oriented peers. Ian Ashton (CFO) added that there is margin opportunity driven by volume, as the sites have existing capacity to cope with substantially increased demand. Q : How should we think about the normalization of cash flow and cash conversion going forward? A : Ian Ashton (CFO) stated that a cash conversion rate of 70% to 80% is a sensible assumption for the medium term. As the business grows, it will drag a little bit of working capital along with it, but at that level, the company will be throwing off sustainable free cash flow, providing options for capital allocation. Q : Given the UK-centric nature of some recent A&D contract wins, is there an opportunity to access larger growth on the continent of Europe? A : Eric Lakin (CEO) acknowledged that the company has a UK- and US-centric proportion of A&D customers. Accessing European defence programmes can be challenging due to workshare arrangements, potentially requiring partnerships or a local footprint. He highlighted the recently announced letter of intent with MBDA as an example of how the company can access large future defence programmes in continental Europe without a physical manufacturing presence, and stated they are looking to do more of this. Q : How should we think about the delivery timeline of the strong order book? Is it elongated multi-year orders or more immediate conversion? A : Eric Lakin (CEO) explained that the order book covers a whole range of durations. Components have typical lead times of around 10 weeks, providing three months of visibility. For EMS and Power, lead times are more like six months, but can be longer for engineering-led products. He stated that the company has very good visibility of revenue coverage for the calendar year, with a tail of orders extending into next year and beyond. Q : How is the recruitment of talent going, particularly in engineering and sales, given the competitive landscape? A : Eric Lakin (CEO) said the company is making good progress in attracting talent, helped by improved results and a positive trajectory. The company's size is a selling pointbig enough to offer diverse, interesting programmes across multiple sectors with a global footprint, but small enough to be agile and responsive. He noted that people are joining from much larger companies, such as a recent BD hire in China from a top-three EMS company, who felt they could make more of a difference at TT.

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