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TT electronics plc Annual Report 2009
Positioned for
sustainable
growth
TT electronics plc
Clive House
12 – 18 Queens Road
Weybridge
Surrey KT13 9XB
Reg No 87249
Tel +44(0) 1932 841310
Fax +44(0) 1932 836450
OVERVIEW
Who we are
TT electronics is a focused,
global electronics group
supplying leading
manufacturers in the
defence, aerospace, medical,
automotive and industrial
electronics markets.
Our development of new
technologies is based
on understanding our
customers’ needs and
providing innovative
solutions to meet them.
Designed and produced by Radley Yeldar (www.ry.com) using the paperless proofi ng system Wizardry.
TT electronics plc are committed to caring for the environment and looking for sustainable ways to minimise our impact on it.
We take care to minimise the impact on the environment in the paper we use. The paper we have chosen:
• contains material sourced from responsibly managed forests, certifi ed in accordance with the FSC (Forest Stewardship Council)
• is manufactured under strict environmental management systems, the international ISO 14001 standard, EMAS (Eco-Management & Audit Scheme) and the IPPC
(Integrated Pollution Prevention and Control) regulation.
FSC – Forest Stewardship Council. This ensures there is an audited chain of custody from the
tree in the well-managed forest through to the fi nished document in the printing factory.
ISO 14001 – A pattern of control for an environmental management system against which
an organisation can be credited by a third party.
1
TT electronics plc
Annual Report 2009
OVERVIEW
Our performance
Overview
Our performance
Chairman’s statement
How our Group is organised
Our Group at a glance
Our strategy in action
Measuring our performance
Overview of markets
Revenue
Underlying operating cash flow1
£499.6m
2008: £584.3m
£83.9m
2008: £50.1m
Business review
Business review
Principal risks and uncertainties
Corporate responsibility
Outlook for 2010
Chairman
1
2
5
6
8
10
12
20
28
30
31
31
Profit before taxation1
£0.8m
2008: £21.1m
Net debt
£56.9m
2008: £113.2m
Creditable performance in challenging market conditions
Group revenue was down 14.5% to £499.6 million (2008: £584.3 million).
Excluding the impact of foreign exchange, Group revenue was down
22%, refl ecting the severe economic downturn
The Group traded profi tably in the second half of 2009 and reported a
full year operating profi t before exceptional items of £6.5 million (2008:
£27.0 million). Profi t before tax and exceptional items was £0.8 million
(2008: £21.1 million)
Exceptional restructuring costs of £14.2 million were incurred during the
year and together with other measures implemented during 2008 and
2009 will have resulted in an annualised cost reduction of over £31 million
Signifi cant reduction in working capital of £47.2 million with underlying
operating cash fl ow of £83.9 million (2008: £50.1 million), resulting in a near
halving of net debt to £56.9 million (December 2008: £113.2 million)
Good progress in implementing the actions identifi ed in the Strategic
Review with the new organisation structure and leadership enabling a
clear focus on delivery and accountability
1 Reported before exceptional items in 2009 and 2008.
Cautionary statement on forward-looking statements and related information
This document contains a number of forward-looking statements relating to the Group/Company with respect to, amongst
others, the following: fi nancial conditions; results of operations; economic conditions in which the Group/Company operates;
the business of the Group/Company; and management plans and objectives. The Group/Company considers any statements
that are not historical facts as “forward-looking statements”. They relate to events and trends that are subject to risks and
uncertainties that could cause the actual results and fi nancial position of the Group/Company to diff er materially from the
information presented in the relevant forward-looking statement. When used in this document the words “estimate”, “project”,
“intend”, “aim”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to the Group/Company or the
management of it, are intended to identify such forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as at the date of this document. Neither the Group/Company
nor any member of the Group’s/Company’s Board or management undertake any obligation publicly to update or revise any
of the forward-looking statements, whether as a result of new information, future events or otherwise, save in respect of any
requirement under applicable laws, the Listing Rules, and other regulations.
Governance
Directors and Company Secretary
Directors’ report
Directors’ report on corporate governance
Directors’ remuneration report
32
33
37
42
47
48
49
Group accounts
Report of the Independent Auditors on the
consolidated fi nancial statements
Consolidated income statement
Consolidated balance sheet
Consolidated statement of
comprehensive income
50
Consolidated statement of changes in equity 50
Consolidated cash fl ow statement
51
Accounting policies for the consolidated
fi nancial statements
52
Notes to the consolidated fi nancial statements 55
Company accounts
Report of the Independent Auditors on the
Company fi nancial statements
Company balance sheet
Accounting policies for the Company
fi nancial statements
Notes to the Company fi nancial statements
Historical record
Shareholder information
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TT electronics plc
Annual Report 2009
OVERVIEW
Chairman’s statement
John W Newman
Chairman
TT electronics is pleased to be able to report a creditable
performance against the backdrop of the global economic
recession. For the year ended 31 December 2009, Group
revenue was £499.6 million (2008: £584.3 million), down
14.5 per cent, producing an operating profi t before exceptional
items of £6.5 million compared with £27.0 million in 2008.
This includes an operating loss of £2.9 million from AB
Automotive, the climate control business which was closed
during the year. Finance costs were £5.7 million net (2008:
£5.9 million) which comprised £3.4 million of banking and
fi nance interest (2008: £4.1 million) and £2.3 million relating
to pension fund accounting (2008: £1.8 million). Profi t before
tax and exceptional items was £0.8 million compared with
£21.1 million in 2008. The taxation charge was £2.4 million
(2008: £5.7 million). Exceptional charges relating to closure
costs and redundancies were £14.2 million (2008: £3.8 million).
In addition, the Group has recognised an impairment to the
goodwill relating to Optek Technology, Inc of £3.8 million.
Headline loss per share was 1.3 pence compared with 9.2 pence
of earnings in 2008. In line with the dividend policy set out in
January last year, the Board is not recommending the payment
of a dividend for 2009.
Given the weaker economic climate TT electronics has done
well, especially signifi cantly reducing net debt which at
31 December 2009 was £56.9 million compared with £113.2
million at the previous year end, a decrease of 49.7 per cent.
This was principally due to a reduction in working capital and
lower capital expenditure. Signifi cant time and resources were
committed to restructuring the businesses with costs incurred
relating to factory closures and redundancies, which regrettably
resulted in a reduction in the total number of our employees
by 19 per cent compared to June 2008.
3
TT electronics plc
Annual Report 2009
“ The Board would
like to express its
thanks to employees
worldwide who have
continued to support
the Group during a
challenging year.”
Despite the diffi cult market conditions, we have made good
progress against the strategic plan announced in January 2009.
We have taken signifi cant steps to improve the way in which we
service our major customers with the implementation of unifi ed
regional sales teams in the Components division and a continued
focus on our key account management programme. We have
also taken actions to focus the Group on those markets which
we believe will provide us with the opportunity for higher
growth and enhanced margins in the medium term.
In line with the Group’s strategy to manage the businesses within
the General Industrial division for value, on 17 February 2010, we
announced the conditional sale of Wire Systems Technology (Pty)
Ltd, our South African manufacturer of winding wire, electrical
motor components and electrical insulation products.
The consideration for the sale, payable in cash on completion,
is Rand 60 million (currently approximately £5.4 million) plus
an amount equal to the cash balances of the company on the
day preceding the completion date. This represents the most
signifi cant disposal from our General Industrial division, following
the sales of two smaller businesses during 2009.
The pension scheme trustees have benefi ted from the guidance
of their investment advisers. We believe the pension scheme has
performed well and, on an IAS19 basis, it is 88 per cent funded
(2008: 94 per cent).
The Board would like to express its thanks to employees
worldwide who have continued to support the Group during
a challenging year.
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TT electronics plc
Annual Report 2009
OVERVIEW
Chairman’s statement (continued)
On 26 January 2010 the Board of TT electronics appointed Tim
Roberts as Group Business Development Director. Tim has been
with the Group for two years, he is a solicitor and has played a
major part in formulating and implementing the new strategic
plan and I am confi dent that the Board will benefi t from his skills
and experience.
Now in my 65th year I have decided to retire as Chairman and
from the Board following the 2010 Annual General Meeting.
I was appointed Chief Executive of the Group in 1987 after a
company in which I was a major shareholder was acquired by
TT electronics plc (then called Tyzack Turner). In 1995 I became
executive Chairman before becoming non-executive Chairman
in September 2009. Sean Watson, who joined the Board as an
independent non-executive Director in 2007, will become non-
executive Chairman following the next Annual General Meeting
to be held in May. Last year the Group completed an in-depth
review and determined a new strategy and direction. I am
confi dent that Sean’s experience and knowledge of the business,
together with his strong relationships with the Directors and
executive management, will ensure that the Group continues
successfully to deliver on the strategy which we have laid out.
Sean is a corporate partner at CMS Cameron McKenna LLP,
a major City law fi rm.
We saw some improvement in trading conditions in the fi nal
quarter of 2009 which has continued in the fi rst two months of
this year. I am confi dent that the actions we have taken in 2009,
together with those underway, will enable TT electronics to
improve its performance.
John W Newman
Chairman
12 March 2010
5
TT electronics plc
Annual Report 2009
OVERVIEW
How our Group is organised
Our divisional structure
enables organic growth to
be delivered by bringing
together our strong
underlying businesses,
technologies and
customers.
Components
(see page 22)
Speciality and custom passive
components, optoelectronics,
microelectronic modules,
semiconductor products,
connectors and harnesses.
Sensors
(see page 23)
Highly engineered custom sensor
solutions for specifi c transportation
and industrial applications.
Integrated Manufacturing
Services (IMS) (see page 24)
Outsourced manufacturing
and supply chain solutions for
customers with lower volume,
complex build and assembly
electronic products.
Secure Power
(see page 25)
Secure power solutions including
generator sets, uninterruptible
power supplies and service
for customers’ critical power
requirements worldwide.
General Industrial
(see page 26)
Manufacturing and distribution
operations serving a range of
market sectors with a variety of
products and services.
The Group is segmented into fi ve business divisions, each
with a clear strategy and direction to achieve value for
our shareholders. We are focused on delivering technology,
products and services to markets where we see the greatest
opportunities for growth and profi t.
Markets where we see
the greatest opportunity are:
Defence and aerospace
These markets are growth opportunities
for the Components and IMS divisions,
which off er electronic components,
connectors and cable assemblies,
magnetics, microelectronic modules,
semiconductors, optoelectronics and
manufacturing services to original
equipment manufacturers (OEMs)
and their suppliers.
Medical
Although modest in terms of revenue
in 2009, the medical market is a growth
sector for the Components, Sensors
and IMS divisions which off er precision
resistors, optical and potentiometric
sensors, microcircuits and assembly
services to customers.
Automotive
The automotive market remains
important for the Components and
Sensors divisions with applications
including steering sensors, crank and
camshaft sensors, chassis height sensors,
electrical throttle control sensors and
temperature and pressure sensors.
Industrial
The Group sells into numerous diverse
segments within the industrial market
with a focus on specifi c applications
where our broad technology and
design capabilities enable us to
provide innovative solutions.
page
12
page
14
page
16
page
18
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TT electronics plc
Annual Report 2009
OVERVIEW
Our Group at a glance
TT electronics plc
is a focused, global
electronics company
supplying the
world’s leading
manufacturers in
markets including
defence and
aerospace, medical,
automotive and
industrial. We
operate from more
than 20 major
manufacturing
locations worldwide.
The Group consists
of fi ve divisions as
follows: Components,
Sensors, IMS, Secure
Power and General
Industrial. In 2009, total
revenues for the Group
were £499.6 million
with 6,302 people
employed worldwide.
Components
Sensors
Supported by a global network
of application sales engineers the
Components division provides
engineered component solutions
which include fi xed and variable
resistor products, optoelectronics,
power modules and control circuitry
for multiple applications, especially
where reliability, performance and
packaging considerations are critical
to the customer.
Key growth drivers are the increased
use of complex control electronics,
the need for electronics to operate in
harsh environments and the increase
in circuit speeds.
Supplies high performance custom
solutions to the automotive and
industrial markets. The business
has competitive positions in speed,
direction and position sensing
particularly in chassis, powertrain
and transmission applications, and
is developing a position in high
temperature, gas, fl uid quality and
low pressure sensing.
The division is focused on growing
in the more attractive broader
transportation, automotive emission
and safety and selective industrial
control segments.
Revenue
Operating profit
£190.8m
£5.9m
Revenue
Operating loss
£105.4m
£(3.9)m
Proportion of
Group revenue
Proportion of
Group revenue
38%
21%
Markets served
defence and aerospace,
industrial, medical,
automotive
Markets served
automotive,
industrial
Products
Products
Hybrid power module
for electric vehicle motor
control
38999 series III connectors
are the preferred connectors
for defence and aerospace
applications
Temperature sensor used
for treatment of exhaust gas
in trucks
Fully coated and freeze
protected sensor
U
For more information on our business,
please go to www.ttelectronics.com
For more information
please go to page 22
For more information
please go to page 23
7
TT electronics plc
Annual Report 2009
IMS
Secure Power
General Industrial
Specialises in providing high quality
electronic manufacturing services
to customers in the defence and
aerospace and premium industrial
sectors. The division off ers a broad
capability from board assembly to
full systems integration, design for
manufacturing and logistics support.
The business is focused on higher mix/
lower volume business with a strategy
to move towards more specialised
integrated assembly. IMS has a
substantial design engineering team
and supports the Group international
purchasing offi ce based in China.
Provides power protection solutions
including generating sets, uninterruptible
power supplies and customer support
from operations in the UK, Mexico, Brazil
and the Middle East.
Secure Power protects customers’ critical
power supplies with a reputation for
bespoke engineered solutions designed
for the most demanding applications in
the petrochemical, medical, utilities and
fi nancial services sectors.
Comprises manufacturing and
distribution operations serving a range
of market sectors with applications
including magnetics, electrical
fusegear, specialist compounds for the
cable and pipe markets and fastenings
for the industrial and automotive
sectors. General Industrial also included
the AB Automotive climate control
business, which was closed in 2009
and gave rise to an operating loss of
£2.9 million in the year on revenue
of £16.0 million.
Revenue
Operating profit
£75.1m
£2.4m
Revenue
Operating profit
£59.1m
£4.8m
Revenue
Operating loss
£69.2m
£(2.7)m
Proportion of
Group revenue
Proportion of
Group revenue
Proportion of
Group revenue
15%
12%
14%
Markets served
industrial,
defence and aerospace,
medical
Markets served
industrial
Markets served
industrial,
automotive
Services
Products
Products
The division provides outsourced manufacturing
solutions across the entire product lifecycle from design
to bespoke logistics
New E-Series UPS designed
to provide uninterruptible
power for high reliability
applications
New generating set range
primarily designed for the
rental market where space
and high power is a priority
High performance power
cable insulation compound
used in major infrastructure
projects
Weatherproof distribution
box used by major electricity
companies in overhead and
underground applications
For more information
please go to page 24
For more information
please go to page 25
For more information
please go to page 26
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TT electronics plc
Annual Report 2009
OVERVIEW
Our strategy in action
Our key goals:
Our core values:
Align the organisation
with the strategic
objectives of the Group,
recognising that our
employees are critical
to our success.
Achieve operational
excellence in the ways in
which we interface with
our customers, develop
and market our
technologies and
manufacture our
products.
Increase our presence in
higher growth and higher
margin markets.
Deliver a signifi cant
increase in shareholder
value through the further
development of our core
Components division.
Reposition the Sensors
division for growth in the
broader transportation
and industrial markets.
Develop the IMS and
Secure Power divisions
through increased
management focus and
investment.
Convert over 100%
of operating profi t to
operating cash fl ow after
capital expenditure.
Our values are key diff erentiators and the source
of our competitive advantage:
Customer Driven
We are in business to deliver
value to our customers. All that
we do is geared to providing
world-class products and
the best possible customer
experience.
Integrity
We will always be straightforward
and transparent in our dealings.
Upholding high ethical
standards and maintaining
integrity are cornerstones of our
business. We are committed to
our corporate and social
responsibilities.
Passion for
Excellence
We stretch ourselves to make
the diff erence and look for
continuous improvements
by constantly challenging
the status quo.
People Focused
Success for our business will
be determined by our people.
We aim to attract, retain and
develop high quality staff
and ensure that they are
fully committed and
positively engaged.
Innovative
Problem Solving
We pride ourselves on our
We pride ourselves on our
ability to solve our customers’
ability to solve our customers’
problems, focusing on
delivering innovative solutions
in a timely manner.
Teamwork
Teamwork underpins our
business. We encourage a
team-working environment,
constantly challenging each
other whilst maintaining
mutual respect and a clear
focus on the achievement
of common goals.
9
TT electronics plc
Annual Report 2009
Implementing our strategy:
Organisation development
In order to provide a clear focus on delivery
and accountability, new operational and
organisational structures were introduced
with eff ect from 1 January 2009.
The senior management team was
strengthened during the year with the
appointment of new leaders for the Sensors
and General Industrial divisions. We also
appointed a new Divisional Chief Executive
for the Components division in January 2010.
We recognise that our people form the
foundations for our future. In 2009, we
established core values for the Group.
These provide a set of guiding principles
and behaviours to ensure that all employees
are aligned to our strategic objectives, as
outlined opposite. During the fi nal quarter
of this year, we began the roll-out of a new
web-based performance management
system. This system is enabling us to assess
the managers across our businesses, identify
and address their development needs, and set
and track objectives, ensuring that these are
aligned with the Group’s key goals. Finally, a
revised management incentive plan has been
introduced with a focus on the achievement
of strategic objectives and cash generation,
as well as profi t.
Operational excellence
We continue to improve the way in which we
interface with our customers. For example, on
1 July 2009, we implemented a new unifi ed
sales structure across Europe in order to help
the businesses within the Components division
address specifi c markets and customers.
Following the success of this initiative, similar
regional sales structures were implemented in
the USA and Asia on 1 January 2010, in each
case creating a single route to market which
will allow us to better serve our customers.
A key account management programme,
focused primarily on the defence and aerospace
and medical markets, has been applied to 14
major customers, each of which now benefi ts
from a nominated key account manager with
global responsibility. In certain market areas,
we have established virtual teams to enable us
to bring together the full extent of the Group’s
world-class facilities, technologies and skills
in order to enhance our customer off ering.
In particular, we are seeing good progress by
the defence and aerospace team, with the
combined Group capabilities being presented
to key customers via an ongoing programme of
technical roadshows. Our connectors business
has secured a substantial new customer in
Smiths Detection in support of their chemical
detection products, and a number of other new
opportunities have been identifi ed with major
defence companies. The creation of the hybrid
vehicle electronics team has allowed us to map
our Group-wide capabilities against specifi c
applications including in the areas of battery
management and powertrain and we are
working on over 20 separate projects, including
a number with major car manufacturers.
Although slower to develop, the medical
electronics team is also now making good
progress in identifying opportunities that
can be better served on a co-ordinated
Group-wide basis.
The development and introduction of new
technologies and applications is key to the
Group’s continued success. During 2009,
the engineering teams in a number of our
businesses in the Components, Sensors and
Secure Power divisions began to work more
closely together. They are sharing technologies
and expertise across businesses within each
division, including within the framework of
the virtual market teams and we expect this
to continue through 2010.
Good progress was made in 2009 to reduce
inventories and increase manufacturing
effi ciency. During 2010, we will conduct an
assessment of 10 businesses within the
Components and Sensors divisions to
establish areas for further improvement.
Market focus
We have identifi ed a number of markets which
we believe will provide the Components and
Sensors divisions with the opportunity for
higher growth and margins. These include the
defence and aerospace and medical markets.
We have also identifi ed certain segments within
the automotive, broader transportation and
industrial markets, which we believe represent
attractive opportunities for us. Although our
revenue was adversely impacted during 2009
by the global economic downturn, we made
progress on developing our position in the
target segments. This was driven by the key
account management programme, the virtual
market teams and by specifi c actions on a
business-by-business basis. In addition, we have
de-emphasised a number of lower growth or
lower profi t market segments and completed
the withdrawal from the AB Automotive climate
control business.
Development of Components,
Sensors, IMS and Secure
Power divisions
The Strategic Review identifi ed clear priorities
for each of the divisions for 2009. Progress was
made during the year across all divisions and
this is set out in more detail on pages 22 to 26.
Cash fl ow generation
The Group generated an underlying operating
cash fl ow of £83.9 million during 2009,
principally due to a reduction in working capital.
As a result, Group net debt was nearly halved
to £56.9 million from an opening position of
£113.2 million, improving the Group’s ability
to fund programmes to develop the business
in line with its strategy.
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TT electronics plc
Annual Report 2009
OVERVIEW
Measuring our performance
Measuring our
performance is
integral to the
next phase of our
strategic growth.
We have carefully
selected the following
Key Performance
Indicators (KPIs)
to benchmark our
progress. In 2009, the
global recession has
impacted progress
against the KPIs.
Non-fi nancial KPIs
We recognise that our people are critical to the
success of our business. We are committed to
creating a safe working environment which
supports the development of our employees
and rewards them for their achievements.
We have taken a number of steps in this area
during 2009 including the introduction of
a clear set of core values for the Group and
the implementation of a new performance
management system. We will be introducing
a number of non-fi nancial KPIs during 2010 to
measure and report on progress.
Financial KPIs
Organic revenue growth
Defi nition
Organic revenue growth measures the change
in revenue in the current year compared
with the prior year, from continuing Group
operations. The eff ect of currency movements
and acquisitions made during the current or
prior fi nancial period have been removed.
We have chosen this specifi c KPI because our
strategy is to participate in markets which
have the ability to provide us with growth
opportunities.
Performance
Organic revenue growth was adversely
impacted by the downturn in the global
economy during 2009.
2009
Target
for next fi ve years
-24.3% Mid to high
single digits
Operating profi t margin
Defi nition
Operating profi t margin is defi ned as operating
profi t before exceptional items from continuing
operations expressed as a percentage of
revenue from continuing operations.
Performance
Profi tability was impacted in all divisions by a
reduction in revenue during the year.
This KPI is appropriate because we are focused
on increasing the proportion of revenue
from those markets where we can make
higher returns, in addition to delivering an
improvement in operational effi ciency.
2009
Group
1.3%
Target
in medium term
8-10%
2009
Components
3.1%
Target
in medium term
10%
2009
Secure Power
8.1%
Target
in short term
10%
2009
Sensors
-3.7%
Target
in longer term
10%
2009
IMS
3.2%
Target
in medium term
6-8%
11
TT electronics plc
Annual Report 2009
Operating cash conversion
Defi nition
Operating cash conversion is defi ned as
cash generated from continuing operations
after capital and development expenditure
expressed as a percentage of operating profi t
before exceptional items from continuing
operations. Cash conversion is an important
metric to track the management of our working
capital and capital expenditure programme.
Performance
Good cash fl ow was delivered in 2009 due
to actions taken to reduce working capital
across all divisions in response to the decline in
revenues, together with a lower level of capital
expenditure.
2009
Target
for next three years
1,040%
100%
Earnings Per Share (EPS) growth
Defi nition
EPS growth is calculated as profi t before
exceptional items attributable to the
shareholders divided by the weighted average
number of shares in issue during the year.
We have chosen EPS growth as a KPI as it is
a standard metric to determine corporate
profi tability for shareholders. In addition, it is
a measure used as one of the performance
conditions in the Group’s Long Term Incentive
Plan – see further detail on page 43.
Performance
EPS was negative during the year due to the
impact of the global economic downturn on
the Group’s results.
2009
Not meaningful
Target
Year on year
growth of ≥ 3%
in excess of RPI
Relative Total Shareholder
Return (TSR)
Defi nition
TSR is defi ned as capital growth plus dividends
paid, assuming dividends are re-invested over
the period using a three-month opening and
closing average.
Performance
There was a strong improvement in the Group’s
share price during 2009 resulting in a TSR of
62.7 per cent compared to the median of the
.
comparator group of 39.4 per cent
comparator group of 39.4
comparator group of 39.4 per cent
We believe that TSR is an important measure
of the delivery of shareholder value as well as
relative performance. In addition, it is a measure
used as one of the performance conditions
in the Group’s Long Term Incentive Plan – see
further detail on page 43.
2009
Between
median
and upper
quartile
Target
Above median
performance
against the FTSE
Small Cap (excluding
investment trusts)
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TT electronics plc
Annual Report 2009
OVERVIEW
Focused on
defence &
aerospace
We have extensive experience of working on complex
projects for major defence contractors supplying technical
solutions for critical applications operating in harsh
environments. The defence market is driven by US and
European government spending on long-term programmes
such as Eurofi ghter, the upgrade of communications networks
and new military vehicles for use in Iraq and Afghanistan.
As technology continues to develop, we are well positioned
to increase our supply of components for the increasingly
complex electronic systems that are being deployed on
the battlefi eld including those in land-based vehicles,
unmanned aerial vehicles and on personnel.
We expect the civil aviation market to continue to experience
demand in emerging economies and replacement activities in
mature markets, as aircraft become more effi cient. There is also
an increased demand for critical electronic components and
systems resulting from the ongoing move from hydraulic to
electrical systems to reduce weight and increase effi ciency.
Contract
The Components division is supporting
Thales UK on the integration of counter
measure and communication systems
on armoured vehicles being supplied
to the British Armed Forces to be
deployed in Afghanistan. The contract,
worth up to £2 million, involves the
supply of specialist connectors and
harnesses by AB Connectors Ltd and
New Chapel Electronics Ltd.
Image courtesy of ST Kinetics
Product
Working with Ultra Electronics Limited, we
have developed circuit protection for the
Wing Ice Protection System on the Boeing
787 Dreamliner with production starting
in 2010. This specialist software controlled
fuse is ideal for high reliability safety critical
systems and versions have also been
designed into military aircraft applications.
13
TT electronics plc
Annual Report 2009
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TT electronics plc
Annual Report 2009
15
TT electronics plc
Annual Report 2009
OVERVIEW
Contract
Our design engineering teams have
worked with a global healthcare
product leader to design a high voltage
optical isolator for use in medical
device applications where there is a
requirement to separate high voltage
and low voltage circuitry. Initially, the
product will be used in defi brillators
and electro scalpels.
Focused on
medical
We work with leading medical device manufacturers to
provide more reliable solutions to doctors and patients
worldwide in areas such as defi brillators and other patient
monitoring and diagnosis applications. The medical device
market continues to grow driven by an ageing population in
the US and Europe and by greater access to medical care in
developing economies. In 2009, we saw an increased
demand in a number of areas and a growing trend for
manufacturers to outsource the assembly of equipment,
which is expected to benefi t our IMS division.
We have invested in research and development and are
working closely with customers, enabling them to deliver
safer and more advanced solutions.
Product
Optek’s self-calibrating fl uid sensor is
capable of adapting itself to diff erent optical
densities. This delivers two benefi ts to
medical device customers: reduced design
time and consistent long-term reliability.
Outperforming more costly ultrasonic
solutions, the sensor is ideal for air or fl uid
detection in infusion and transfusion pumps.
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TT electronics plc
Annual Report 2009
OVERVIEW
Focused on
automotive
Our Components and Sensors divisions have many years’
experience delivering complex electronic solutions to
major automotive OEMs. Although little overall improvement
in volumes is expected in the short term, the increased
use of electronics and sensors will continue, driven by an
increase in safety features and a desire for more effi cient
and environmentally friendly vehicles. Evidence can be
seen in applications such as the development of stop/start
technologies, which require additional sensors and electronics.
Signifi cant electronics are also required for the control and
operation of hybrid and fully electric vehicles, although it will
be some years before these reach full volume production.
Contract
We are constantly working with our
customers on technology to reduce the
impact of vehicles on the environment.
2009 saw us win signifi cant business
with leading European truck
manufacturers including MAN, with
the design of a high temperature
sensor to monitor the eff ectiveness
of the cleaning process within the
exhaust system. The technology
ensures that all MAN trucks and buses
are compliant with environmental
legislation Euro 4 and Euro 5.
Product
The Sensors division was chosen by
BMW to supply a new range of speed
sensors for a stop/start application. Using
proprietary magnetic sensing technology,
we developed an application which will be
fi tted onto all BMW four and six-cylinder
engines, worldwide, starting in 2010.
17
TT electronics plc
Annual Report 2009
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TT electronics plc
Annual Report 2009
19
TT electronics plc
Annual Report 2009
OVERVIEW
Focused on
industrial
Our design engineering teams develop innovative
solutions for a wide range of industrial customers
worldwide. Product applications include industrial sensors
for manufacturing equipment and smart valve control,
electronic power and control modules for a variety of
applications including downhole drilling and discrete
electronic components for numerous applications.
We focus on identifying growth segments where we can
provide innovative solutions for critical applications based
on our broad technologies and design capabilities.
Contract
The Components division worked
with Xerox to help create a market-
leading digital colour printer.
Our high-accuracy refl ective sensor
is being used by Xerox to precisely
register multiple colour images on
top of each other to ensure a crisp
clear output.
Image courtesy of Xerox Corporation
Product
We are a market leader in the design
and manufacture of customised input
protection resistors for smart electricity
meters. The Components division has
contracts with global energy metering
companies, supplying a wide range of
resistors, including the Z Form (pictured),
capable of withstanding extreme
conditions including lightning strikes.
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TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Delivering our strategy
Overview of Group
performance
Announced in January 2009, the results
of our Strategic Review identifi ed our core
business as the design and development
of highly engineered, bespoke electronic
components for specialist growth markets,
addressed by the Components and Sensors
divisions. The IMS and Secure Power
divisions were identifi ed as representing
scalable strategic opportunities, with the
businesses within the General Industrial
division to be “run for value”. In addition,
we set out an objective to increase the
proportion of Group revenue from the
industrial (including medical) and the
defence and aerospace markets and to
reduce reliance on the automotive market
from 40 per cent of revenue in 2008 to a
targeted range of 25 to 30 per cent
in the medium term.
During 2009, signifi cant time and resources
were committed to restructuring the businesses
and implementing the actions identifi ed by the
Strategic Review. The proportion of revenue
from the defence and aerospace market
increased to 13 per cent in 2009 (2008:
11 per cent) whilst the medical market
increased to 3 per cent (2008: 2 per cent).
Sales to the automotive market decreased
from 40 per cent to 36 per cent.
We made good progress during the year in
strengthening the senior management team
and creating a structure to enable a clear focus
on delivery and accountability. A number of
initiatives have been implemented to improve
the way we interface with customers, most
notably within the Components division. In
addition, we have introduced virtual market
teams to drive growth in key areas. Further
details are set out on page 9.
Market conditions
During the fi rst half of the year, performance was
aff ected by a signifi cant reduction in demand
from the automotive industry and to a lesser
extent, from many industrial customers. This
particularly impacted the Components, Sensors
and General Industrial divisions. Whilst the
reduced demand continued through the third
quarter, there was some improvement towards
the end of the year particularly in the automotive
business, although this was partly due to
government “scrappage” schemes. Following a
robust end to 2008, IMS saw demand fall in early
2009 and continue at lower levels throughout
the year as the global downturn impacted
manufacturing. Whilst 2009 was a diffi cult year
for the Secure Power division with a decrease
in new orders for large projects, there was good
activity in a number of markets and geographies
including the petrochemical sector and in
Latin America.
Geraint Anderson
Group Chief Executive
Shatish D Dasani
Group Finance Director
12 March 2010
Revenue
£499.6m
499.6
09
08
584.3
Operating profit*
£6.5m
6.5
09
08
27.0
*before exceptional items
Capital employed
£212.7m
212.7
09
Year end headcount
6,302
09
6,302
08
326.1
08
7,466
Operating profit margin
1.3%
09
1.3%
08
4.6%
Operating cash flow*
£83.9m
83.9
09
08
50.1
*before exceptional items
U
For more information on our business,
For more information on our business,
please go to www.ttelectronics.com
£499.6m
Group revenue
£6.5m
Operating profi t
21
TT electronics plc
Annual Report 2009
Revenue
Group revenue reduced by 14.5 per cent to
£499.6 million (2008: £584.3 million). However,
the revenue fi gure benefi ted from foreign
exchange movements of approximately £44
million. The underlying reduction in revenue was
22 per cent. Volumes deteriorated sharply in the
fi rst half of 2009, with underlying sales down by
29 per cent at the half year. The second half saw
some relative improvement, particularly in the
fi nal months of 2009.
For the full year, underlying revenue in the
Components division was down 11.7 per cent.
The Sensors division saw some stabilisation of
activity in the last quarter but overall revenues
were down by 25.3 per cent. Revenue in the IMS
division was down by 35.9 per cent on an
underlying basis and in Secure Power by 9.0 per
cent. The performance of the General Industrial
division was distorted by the AB Automotive
climate control business which was run to
closure in 2009. The other businesses in the
division saw an underlying reduction in revenue
of 11.7 per cent. All fi gures exclude foreign
exchange variations.
Operating profi ts (before exceptional items)
Operating profi t was severely aff ected by the
reduction in sales. Following a diffi cult fi rst four
months, the Group traded profi tably from May
onwards as cost reduction actions began to
off set the drop in volumes. We achieved an
operating profi t of £7.1 million in the second half
compared with a loss of £0.6 million in the fi rst
half, giving an overall result for the year of
£6.5 million (2008: £27.0 million). This includes
the impact of the AB Automotive climate control
business which gave rise to a loss of £2.9 million.
Operating margins for all divisions, apart from
IMS, improved in the second half. There was a
small net benefi t of £0.2 million from the
impact of foreign exchange variations on
the retranslation of operating profi t.
Restructuring
The restructuring programme has been
implemented extensively with a series of
measures to reduce costs and improve
performance. These included the closure of
facilities and the consolidation of manufacturing
activity, headcount reductions, short time
working, a pay freeze and an extension to
normal factory shut-downs. Much of the
restructuring is now complete, with the
remaining activity being implemented in
the fi rst few months of 2010.
As a result of the measures taken, it is estimated
that costs will have been reduced by over
£31 million on an annualised basis. Headcount
reduced by 1,507 between June 2008 and
December 2009, representing 19 per cent
of the global workforce.
The cost of the restructuring in 2009 was
£15.9 million, of which £14.2 million relates
to major programmes or plant closures
and is treated as an exceptional cost.
The balance of £1.7 million has been
charged to operating profi ts.
AB Automotive – Climate control exit
Sensors – European restructuring
Sensors – Romford closure
IMS – UK consolidation
BI SMT – closure of manufacturing
General Industrial restructuring
Other restructuring
Profi t on sale of properties
Total exceptional
Operating
Total
Costs
2009
£m
3.2
7.4
0.4
1.2
1.0
1.4
0.6
(1.0)
14.2
1.7
15.9
Benefi ts –
annualised
cost
reduction
£m
4.0
8.2
1.6
1.9
0.8
0.9
0.3
–
17.7
13.6
31.3
2008
£m
2.7
–
1.1
–
–
–
–
–
3.8
2.1
5.9
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TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Components
“This is a very
exciting time to join
the management
team. The actions
completed in 2009,
and those currently
in progress, provide
the Components
division with a great
platform to deliver
diff erentiated
technical solutions
to our global
customers in our
target markets.”
Billal Hammoud
Divisional Chief Executive –
Components
The focus of the Components division is on
delivering highly engineered components,
including products which are custom
designed for specifi c applications by the
division’s global network of application sales
engineers, who support customers’ own
design centres. The business has strong
market positions in a number of product
segments including fixed and variable resistors
as well as military connectors and harnesses.
It is continuing to invest in new product
development in growth segments such as
visible optical and power semiconductors.
The division benefi ts from a global footprint with
facilities in North America, Mexico, Europe and
Asia, and with a sales presence in all major markets.
Historically, each of the division’s businesses had
their own sales teams and routes to market.
Following the Strategic Review, it was
determined that a single unifi ed sales force in
each of Europe, Asia and the US, would deliver
signifi cant benefi ts. The new sales structure for
Europe was implemented with eff ect from 1 July
2009 in order to improve the way in which all of
the division’s businesses address the European
market. New sales structures in the US and Asia
were launched on 1 January 2010. The key
account management programme launched
in 2009 has now been extended to 14 of the
Group’s top accounts. It has been well received
by customers leading to the development
of higher level partnerships. For example, the
Group has recently been granted “key supplier”
status by Schneider Electric.
Revenue
Operating profi t
£190.8m
£5.9m
Market conditions
The division operates across a number of end
markets including defence and aerospace,
industrial and automotive. Key growth drivers are
the increased use of complex control electronics
in applications where high reliability is vital, the
need for electronics to operate in harsh
environments and the increased circuit speeds
required by modern electronic solutions.
Demand in most market segments was
signifi cantly impacted in the fi rst half of the year
by the global recession. Whilst there was some
increase in demand towards the end of the year,
we remain cautious that this was primarily due to
a re-stocking of the supply chain as opposed to
a material increase in end market demand.
Performance
Underlying revenue was down by 11.7 per cent
after adjusting for foreign exchange movements.
Gross margins held up across most businesses
but there was a decline in operating profi t due
to the signifi cant reduction in volumes which
was off set to some extent by cost reductions.
Redundancy costs of £1.3 million were charged
to operating profi ts in the year and there was a
headcount reduction of 293.
Outlook
The increase in orders in the fi nal quarter of 2009
has continued into the fi rst quarter of 2010 with
improved visibility for the fi rst half of the year.
We will continue to improve the way in which
we serve our customers and expect to see
increasing benefi ts from the unifi ed sales
structures now in place in Europe, USA and Asia.
Revenue
£190.8m
190.8
09
08
192.1
Operating profit*
£5.9m
5.9
09
08
9.7
*before exceptional items
Operating profit margin
3.1%
09
3.1%
08
5.0%
Capital employed
£148.8m
148.8
09
Year end headcount
3,113
09
3,113
08
188.5
08
3,406
23
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Sensors
Historically, the Sensors division has focused
on providing highly engineered sensors
for specifi c automotive and industrial
applications, particularly with major German
automotive OEMs. The business has strong
market positions in speed, direction and
position sensing, especially in chassis,
powertrain and transmission applications,
and is developing an emerging position
in high temperature, gas, fl uid quality and
low pressure sensing. The division is now
focused on growing its business in system
critical automotive applications, the broader
transportation market and selective high
accuracy industrial sensors segments
whilst also consolidating its presence
in emerging markets.
Principal operations are based in Germany
with further sites in the UK, Eastern Europe,
China and India.
As part of the fundamental realignment of the
division’s cost base, a major restructuring
programme was implemented in Germany,
resulting in a headcount reduction of over 250
during the year. The cost arising from this of
£7.4 million has been charged as an exceptional
item and annualised savings of £8.2 million are
projected from these actions. The closure of the
AB Electronic facility at Romford was completed
on schedule with the majority of manufacturing
transferred to existing low-cost facilities in India
and China. These actions meant that the division
traded profi tably from June 2009.
Operations in China and India made signifi cant
progress in 2009 with support from our German
operations, with several strategic orders secured
from targeted indigenous OEMs in each region.
Revenue
Operating loss
£105.4m
£(3.9)m
Market conditions
Sensor usage on vehicles is growing, due to
tighter legislation relating to vehicle emissions
and safety. In Europe, Euro 5, which brought a
step change in standards, came into force in
2009 and similar standards are being rolled
out globally. In response, OEMs are striving
to improve engine effi ciency and meet the
legislation whilst remaining competitive.
Notwithstanding a steady increase in sensors
on each platform, demand from automotive
manufacturers in the US and in Europe
experienced a sharp reduction in the fourth
quarter of 2008 as all major OEMs reduced
their manufacturing output. This continued
throughout 2009 as many customers
implemented short time working and
extended factory close-downs. The premium
end of the passenger car market was
impacted the most, with smaller cars seeing
some benefi t from the scrappage schemes
implemented in the US and Europe in the
second half of the year. In addition, truck
volumes also reduced signifi cantly.
Performance
Underlying revenue in 2009, excluding the eff ect
of foreign exchange, fell by 25.3 per cent due to
the signifi cant reduction in automotive demand.
Although this was partly mitigated by cost
reductions, operating profi t before exceptional
items reduced sharply to a loss of £3.9 million.
Outlook
Whilst there has been some improvement in
demand in recent months, we do not expect to
see a material improvement in overall passenger
car or truck volumes amongst our European
customers during 2010. Instead, any revenue
growth is expected to be delivered by new
automotive programmes moving into volume
production. This will be augmented by our
progress in developing automotive business in
India and China and by a further move into new
industrial and broader transportation markets.
“We took signifi cant
steps during 2009 to
adjust the division’s
cost base leaving
us well positioned
to benefi t from any
recovery in demand
in 2010. In addition
to better serving
our traditional
customers, we are
actively pursuing
new business in
China and India
and looking at
ways to exploit our
technical expertise
in the broader
transportation
and industrial
markets over the
medium term.”
Revenue
£105.4m
105.4
09
08
125.9
Capital employed
£55.7m
55.7
09
Operating loss*
£(3.9)m
(3.9)
09
Operating profit margin
(3.7)%
09
(3.7)%
Pat Murray
Divisional Chief Executive –
Sensors
08
1.1
08 0.9%
*before exceptional items
Year end headcount
989
09
989
08
73.5
08
1,284
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TT electronics plc
Annual Report 2009
BUSINESS REVIEW
IMS
“The outsourced
manufacturing
market suff ered
from a signifi cant
drop in demand
in 2009 as a result
of the global
downturn. Whilst we
see some signs of
stability returning,
we remain cautious
about the coming
year and will
continue to focus
on the actions we
have put in place
to better serve our
customers and win
new business.”
John Molloy
Divisional Chief Executive –
IMS
With operations in the UK, USA, China
and Malaysia, the division specialises in
providing high quality electronic
manufacturing support for customers in
the defence and aerospace, telecom and
premium industrial sectors. The division
has a broad capability from board assembly
to full systems integration, design for
manufacturing and logistics support,
focused on higher mix/lower volume
business. It has a substantial design
engineering team and supports an
international purchasing offi ce in China.
Market conditions
Following a robust end to 2008, the division
experienced a signifi cant reduction in
demand in early 2009 as the global downturn
impacted manufacturing volumes worldwide.
The lower levels of demand persisted
throughout the year with many customers
reducing commitments and re-scheduling
deliveries. The move towards greater use
of outsourcing by medical and industrial
manufacturers seeking to reduce fi xed
costs continued during the year, albeit
at reduced levels.
A unifi ed strategy was implemented across
all businesses, targeting customers that require
more specialised integrated assembly in certain
markets. In line with this strategy, all businesses
within the division attained new quality awards
during 2009, with the facility in China becoming
the fi rst electronic manufacturing services
provider in the country to obtain the “IRIS”
international rail standard. The global footprint
of the IMS operations is a key strength that is
increasingly valued by customers. A global sales
structure is now in place to allow the division to
better meet the needs of customers across
multiple geographies. In the UK we have
announced the closure of the Aylesbury plant.
This is on track for completion by the end of
March 2010 and the transfer of business to our
Rogerstone facility is substantially complete.
Revenue
Operating profi t
£75.1m
£2.4m
Performance
Underlying revenue was down by 35.9 per
cent after adjusting for foreign exchange
movements. The signifi cant reduction in
volumes resulted in a decline in operating
profi t to £2.4 million and there was a
headcount reduction of 179 during the year.
Outlook
We are seeing some improvement in demand
in China and the US as we move into 2010.
This is being accompanied by some tightening
in the labour market and a shortage of certain
components in China. Although there still
remains signifi cant uncertainty, customers are
beginning to provide more visibility in terms
of forward demand.
Revenue
£75.1m
75.1
09
Operating profit*
£2.4m
2.4
09
Operating profit margin
3.2%
09
3.2%
08
103.4
08
6.0
08
5.8%
Capital employed
£19.9m
19.9
09
*before exceptional items
Year end headcount
1,011
09
1,011
08
34.7
08
1,190
25
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Secure Power
The division has two principal operations:
Ottomotores in Mexico and Dale Power
Solutions in the UK. Both companies
provide secure power solutions for
customers’ critical power needs in
selected markets worldwide.
Ottomotores manufactures generator sets and
distributes uninterruptible power supplies (UPS)
within Mexico and key markets in the Middle
East and Latin America. Dale Power Solutions
provides a similar product line within the UK
and certain overseas markets. It has a particular
focus on delivering bespoke power solutions
to customers with mission critical power
requirements, including utilities and companies
in the petrochemical, fi nancial services and
healthcare sectors.
The Secure Power division has taken steps
to increase export business with further
development of its distribution network in Latin
America, coupled with new sales and service
offi ces opened in the Middle East during the
latter part of 2009 and in Brazil in January 2010.
The generator set and UPS product ranges have
also been improved and extended.
As part of the strategic development of the
Secure Power service business, a facility was
opened in Aberdeen to support the Group’s
growing off shore oil and gas maintenance
customer and contract base in the region. This
facility has already proved valuable in supporting
a three-year agreement with Total E&P UK Ltd to
provide service and maintenance, which was
secured during the year. In addition, four regional
support centres were established in Mexico to
enhance customer service and improve the
capture and retention of service business.
Revenue
Operating profi t
£59.1m
£4.8m
Market conditions
2009 was a diffi cult year for the global secure
power market with a reduction in new orders
for large projects linked to construction,
fi nancial services and tourism, particularly
in the UK and Middle East. The division was
able to off set some of this market weakness
through its focus on the petrochemical
sector and increased market penetration
in Latin America, notably Brazil.
Performance
The division delivered a solid performance in
2009 in diffi cult market conditions. Revenue was
down 9.0 per cent after adjusting for foreign
exchange movements. Operating profi t reduced
by £3 million due to lower revenues. In addition,
2008 operating profi t for the Mexican business
benefi ted from a foreign exchange gain, which
arose from a strengthening of the US dollar.
The successful completion of a gas turbine
refurbishment project in Kazakhstan, coupled
with the ongoing supply of secure power
systems to a number of UK hospitals, helped
underpin performance. The Mexican operation
benefi ted from new contracts in the domestic
oil exploration and power utilities sector.
Outlook
Developed markets are expected to remain
challenging during 2010 although there has
been an increase in activity for larger secure
power projects since the beginning of the year.
There is ongoing demand in developing
economies, particularly in Latin America, as
demand for power continues to outstrip
investment in generation and distribution
infrastructure. Demand from the Middle East
remains subdued.
Revenue
£59.1m
59.1
09
08
65.9
Operating profit*
£4.8m
4.8
09
08
7.8
*before exceptional items
Operating profit margin
8.1%
09
8.1%
08
11.8%
Capital employed
£11.6m
11.6
09
Year end headcount
589
09
589
08
18.4
08
629
“During 2009 we
implemented a
number of steps
to better serve
new markets
and customers
including opening
a new service
offi ce in Aberdeen,
broadening and
enhancing our
product range
and establishing a
presence in Brazil.
Whilst we expect
the market to
remain diffi cult
in 2010, I believe
that these actions
position the division
well for continued
future growth.”
Nigel Brice
Divisional Chief Executive –
Secure Power
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26
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
General Industrial
“Despite diffi cult
trading conditions
during 2009, the
General Industrial
division, with
the exception of
AB Automotive,
generated cash
and profi t in the
second half of the
year. The actions
taken to reduce
costs and develop
sales position the
division well for
the coming year.”
Andrew Dick
Divisional Chief Executive –
General Industrial
U
For more information on our business,
please go to www.ttelectronics.com
With operations in the UK, South Africa,
India, China, USA and Canada, the division
serves a range of market sectors.
Applications include magnetics, electrical
fusegear, specialist compounds for the cable
and pipe markets and fastenings for the
industrial and automotive sectors.
General Industrial also incorporated the
AB Automotive climate control business,
which was closed during 2009.
A new Divisional Chief Executive was appointed
in April to manage the businesses for value. In
2009, the Group invested in the relocation of AEI
Compounds to a new facility and in additional
capacity to meet the increasing demand for
specialist low smoke and fume compound for
the cable market. The relocation of further
manufacturing from the W T Henley facility
in the UK to the Group’s site in China was
announced in November and is on track to
be completed by the end of March 2010.
During 2009, the sales of two small businesses
in Scotland and Australia were completed.
In addition, the conditional sale of Wire Systems
Technology (Pty) Ltd, based in South Africa,
was announced on 17 February 2010.
Revenue
Operating loss
£69.2m
£(2.7)m
Market conditions
The businesses within General Industrial serve
a wide range of end markets all of which were
impacted by the global recession during 2009.
In general terms, there was a signifi cant decline
in the fi rst half of the year with some signs of
stability in the fourth quarter.
Performance
Revenue for the division reduced by 32.1 per
cent on a constant currency basis with a £5.1
million reduction in operating profi t. The
fi nancial performance was impacted by the exit
from the AB Automotive climate control business
which was completed by the end of 2009 and
which gave rise to an operating loss of £2.9
million for the year, and by the sales of two
small businesses during the year. Revenue for
continuing businesses reduced by 11.7 per cent
to £53.2 million with an operating profi t in 2009
of £0.2 million (2008: £4.9 milllion). £0.3 million of
restructuring costs were charged to operating
profi t during the year.
Outlook
Following a steep decline in demand, particularly
in the fi rst half of 2009, there have been signs of
stability in the fi rst quarter of 2010 with volumes
refl ecting a reversal of some of the de-stocking
which took place in the fi rst half of last year.
Revenue
£69.2m
69.2
09
08
97.0
Capital employed
£23.2m
23.2
09
Operating loss*
£(2.7)m
(2.7)
09
Operating profit margin
(3.9)%
09
(3.9)%
08
2.4
08
2.5%
*before exceptional items
Year end headcount
556
09
556
08
35.8
08
911
27
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Financial review
Overview
Operating profi t for the year reduced to
£6.5 million (2008: £27.0 million) due to the
impact of the global economic slowdown, off set
to some extent by the cost reductions arising
from the implementation of the restructuring
programme. Profi t before tax and exceptional
items was £0.8 million (2008: £21.1 million).
Exceptional items
Exceptional costs of £18.0 million were incurred
in the year (2008: £3.8 million). This comprised
£14.2 million in respect of restructuring
described on page 21 and £3.8 million on
impairment of goodwill in respect of Optek
Technology, Inc. The impairment has been
made following a review of the future cash
fl ows of the business compared with the
carrying value of goodwill and other assets.
Taxation
The tax charge for the year was £2.4 million,
after a £0.4 million credit relating to exceptional
items. The charge arises from profi ts generated
in overseas countries, particularly Mexico and
China. There was no tax payable in the UK due
to current year losses.
Underlying operating cash fl ow of £83.9 million
was £33.8 million higher than 2008 due mainly
to the signifi cant reduction in working capital
which off set reduced profi ts. The working capital
improvement of £47.2 million represented a
signifi cant out-performance on the upgraded
target reduction of £17-20 million. This
achievement was driven by actions undertaken
at all business units to improve material fl ows
across the factory, deliver supply chain
effi ciencies and agree improved terms with
customers and suppliers. Inventory reduced by
£31.1 million accompanied by an improvement
in stock turns from 4.1 to 5.0 times. There was
also an improvement in debtor days and creditor
days as shown above with a £22.2 million
reduction in debtors off set in part by a £6.1
million reduction in creditors.
Capital expenditure was £9.4 million compared
with depreciation of £24.1 million. New approval
processes have been introduced to ensure that
expenditure is focused on key projects with an
attractive return and that post-implementation
reviews are undertaken for major projects
to compare the benefi ts attained with
previous projections.
Dividends and earnings per share
Headline loss per share was 1.3 pence compared
with earnings of 9.2 pence in 2008. Basic loss
per share was 12.6 pence (2008: earnings
of 7.5 pence).
Exceptional restructuring cash costs were
£9.6 million (2008: £1.7 million) arising from
the implementation of the cost-reduction
programmes described previously.
As announced in January 2009, the Board has
set a dividend policy to maintain cover of at
least two times underlying earnings per share.
For the year ending 31 December 2009, the
Board has not recommended a fi nal dividend
(2008: nil) and no interim dividend was paid
(2008: 3.69 pence).
Cash fl ow, borrowings and facilities
2009
£million
2008
£million
Underlying operating
cash fl ow
Capital expenditure
Development expenditure
Exceptional restructuring costs
Net debt
Stock turn (times)
Debtor days
Creditor days
83.9
9.4
6.9
9.6
50.1
21.9
10.9
1.7
56.9 113.2
4.1
58
50
5.0
48
57
Net cash fl ow for the year was £51.4 million
(2008: £16.1 million negative) and this, together
with the favourable £4.9 million exchange
variance, led to a near halving of the net debt to
£56.9 million (December 2008: £113.2 million).
The Group has total banking facilities available
of £131 million, of which £32 million comprises
working capital facilities with a number of
major UK and overseas banks. This amount
is periodically reviewed. The main term loan
of £70 million is a multi-currency revolving
facility with HSBC extending to 2011.
The main fi nancial covenants are in the HSBC
loan agreement and restrict gross debt to below
three times total earnings before interest, tax,
depreciation, amortisation and exceptional
items (”EBITDA before exceptionals”). In addition,
EBITDA before exceptionals is required to cover
gross interest by at least six times. The covenants
are tested annually and were satisfi ed
comfortably at December 2009:
Gross debt / EBITDA
before exceptionals
EBITDA before
exceptionals / gross interest
Term Actual
< 3
1.9
> 6
11.8
The Directors have reviewed the budgets for
2010 and the projections for 2011 developed
during the 2009 annual strategic planning cycle,
which have been adjusted to take account of the
current trading environment. Demand in most of
the Group’s end markets was severely aff ected
by the global economic recession. Recognising
this, the Directors have considered a range of
diff erent scenarios and the impact of these on
the Group’s cash fl ow, facilities and headroom
within its banking covenants. Further, the
Directors have assessed the future funding
requirements of the Group and compared them
with the level of available borrowing facilities.
Based on this work the Directors are satisfi ed that
the Group has adequate resources for the
foreseeable future.
Pensions
The Group operates both defi ned benefi t and
defi ned contribution schemes in the UK. Assets
and liabilities of the defi ned benefi t schemes
are summarised below:
Fair value of assets
Liabilities
Defi cit – UK scheme
Overseas schemes
Total Group defi cit
December
2009
£million
302.9
(343.6)
(40.7)
(3.0)
(43.7)
December
2008
£million
279.0
(294.1)
(15.1)
(3.5)
(18.6)
The increase in the defi cit during the year was
due to the reduction in the discount rate, off set
in part by higher asset values.
The defi ned benefi t schemes have been closed
to new entrants for a number of years and,
following consultations with members, a
decision has been taken to close the UK scheme
to future accrual and to transfer members to
a defi ned contribution scheme. This was
implemented for the USA scheme during 2009.
A revised funding agreement was agreed with
the Trustee in January 2009, fi xing defi cit
contributions out to 2016. Under the agreement,
a contribution of £2.2 million was made into the
scheme in 2009 (2008: £2.2 million).
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28
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Principal risks and uncertainties
The Group is subject to a variety of risks which could have a negative impact on its
performance and fi nancial position. The Board is responsible for the Group’s system
of internal control and risk management and for reviewing its eff ectiveness. The principal
risks are considered to be:
Principal risks
Description of risk
How we mitigate that risk
Market and customer
related
General economic downturn leading to reduction in
customer demand and production volumes
Signifi cant erosion of existing customer base as a
result of customer relocation or a reduction in end user
demand for their products
Over-dependence on one or more key market sectors
Major customer default giving rise to bad debts and/or
unsold inventory
Manufacturing and
operational
Major product liability claim or recall costs from quality
failure, particularly in the automotive sector
Forward-looking indicators are regularly
reviewed to identify deteriorating market
conditions. The cost base is reduced as required
and there is a management structure in
place to enable a rapid response to changing
circumstances
We review key customers as part of the annual
strategic planning process and establish and
monitor plans to diversify the customer base.
A key account management programme ensures
major customers are serviced on a global basis.
We continue to increase our capabilities to
service customers in emerging markets
Market concentration is reviewed annually at
a business, divisional and Group level as part of
the annual strategic planning process. Plans are
established to address any issues identifi ed
Customer credit limits are regularly reviewed
and the ageing of receivables is reported
monthly. Major new customers are credit
checked and, where appropriate, payments
are secured in advance of shipping
Comprehensive quality control procedures are
backed up by an appropriate level of insurance.
Major contracts are reviewed by the Group
Legal Counsel
Failure of business continuity plans with consequential
impact on revenue and profi t
Robust business continuity plans in place at
each business and tested periodically
Inadequate succession planning, combined with a
lack of training and development, resulting in a lack of
management talent
Damage to reputation amongst key stakeholders due to
product quality or product delivery issues
A talent review process is held twice a year to
assess senior management across the Group,
identify succession issues and determine
training and development needs. In addition,
we are now able to identify, assess and monitor
the development of the Group’s management
using a web-based performance management
tool introduced in the fi nal quarter of 2009
Comprehensive quality control procedures are
in place and we continuously work to build and
maintain relationships with all key stakeholders
Financial
Liquidity, foreign exchange and interest risk
Financial risks are managed at a Group level as
further described below
29
TT electronics plc
Annual Report 2009
Financial risks
As an international business, the major fi nancial
risks faced by the Group are liquidity risk,
currency risk and interest rate risk and these
are regularly reviewed by the Board.
Liquidity
The current economic conditions continue to
create uncertainty regarding the availability of
bank fi nancing and consequently there is a risk
that the Group may have insuffi cient resources
to meet its fi nancial liabilities as they fall due.
The Group addresses this risk by maintaining
adequate banking facilities and by continuously
monitoring forecast and actual cash fl ows to
ensure that bank covenants and liquidity
requirements will be met. The Group regularly
discusses its requirements with its principal
bankers and it is considered unlikely that the
Group will face any signifi cant funding issues
in the foreseeable future.
Foreign currency
The Group’s main foreign exchange exposures
relate to the translation of profi ts and net
assets denominated in overseas currencies into
sterling and transactions in foreign currencies.
The Group’s policy is to use hedges to reduce
these risks. These hedges are achieved
through forward currency contracts and
currency borrowings.
Interest cost
Interest cost risk is mitigated by the use of a
combination of short and medium-term debt
at both fi xed and fl oating rates and by the use
of interest rate caps where appropriate.
Directors’ review
The Directors have reviewed the eff ectiveness
of risk management and internal control during
the year to 31 December 2009 and the period
since then to the date of this report and have
taken appropriate actions for improvement
where necessary.
Risk management process
In common with other international businesses,
the Group is exposed to a number of potential
risks which may have a material eff ect on its
reputation and fi nancial or operational
performance including product liability, credit
risk, reliance on customers’ commitments and
other usual commercial risks. We have a wide
portfolio of products and operate in a number
of market sectors. It is not possible to identify
or anticipate every risk that may aff ect us, or
the materiality of that risk. However, there are
established control procedures in place to
manage such risks, including production quality
control, management and fi nancial control
procedures and insurance with reliable insurers,
which are considered appropriate to the risk
involved and the marketplace in which the
exposure arises. The Board has overall
responsibility for risk management and internal
controls, supported by the Risk Committee
and the Audit Committee.
The Risk Committee of the Board holds monthly
meetings to review risks and assess and monitor
actions to mitigate those risks. This provides a
framework for managing risks throughout the
Group. During the year the Committee was
chaired by the Group Chief Executive and
included the Group Finance Director, the Group
Legal Counsel, the Group Internal Controls
Executive and up to four senior executives from
within the Group. Business risk evaluation
including the nature, likelihood and materiality
of the risks aff ecting each Group business
is assessed by operational management on a
monthly basis during the year and a Principal Risk
Register maintained for each business. On the
basis of these assessments, the Risk Committee
produces a Group Risk Register and a Group Risk
Map. Minutes of the Risk Committee meetings,
together with the Group Risk Register and Risk
Map, are circulated to the Board and to the
Audit Committee.
The Risk Committee monitors the eff ectiveness
of risk management with the assistance of the
Group Internal Controls Executive who conducts
a series of internal audits in line with an annual
plan approved by the Audit Committee. After
each site visit, a report is prepared and presented
to local entity and divisional management and to
the Chairman of the Audit Committee. A copy
is also made available to the external auditors.
Further details of the Group’s system of internal
controls are contained in the Directors’ report
on corporate governance on pages 37 to 41.
As described in the Corporate governance
report, there is an embedded process for
monitoring and managing risks through
monthly fi nancial and operational reporting
procedures. In addition, appropriate levels of
cover are maintained under the Group insurance
programme in respect of insurable risks.
The risk management procedures and systems
of internal control are designed to identify and
assess the signifi cant risks which the Group faces
and to manage them appropriately. It should be
recognised that such systems can only provide
reasonable and not absolute protection against
risk, material misstatement or loss.
Operational risks
The ongoing eff ects of the global fi nancial crisis
continue to present signifi cant challenges to the
Group, principally related to the level of demand.
The Group directly and indirectly serves large
automotive OEM customers. This exposes the
Group to several risks including fl uctuating
manufacturing volumes, the potential for
signifi cant quality and recall claims and customer
default. In the event that one of the larger
automotive manufacturers or suppliers defaults
or seeks protection from its creditors, the Group
may not recover all of the amounts owed to it.
In addition, the Group is exposed to risks of
product liability, credit risk, supply chain issues,
reliance on customers’ commitments and other
usual commercial risks in all of its businesses,
including those identifi ed as Principal Risks
in the table opposite. The Group has a wide
portfolio of products and operates in a
number of market sectors.
There are established procedures in place to
manage such risks, including production quality
control procedures and insurance with reliable
insurers, which have been put in place taking
into account the risk involved and the
marketplace in which the exposure arises.
In addition, major contracts are reviewed by
the Group Legal Counsel.
The Group has contractual and other
arrangements with numerous third parties
in support of its business activities. This report
does not contain information about any of
these third parties as none of the arrangements
with them are considered essential to the
business of the Group.
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Environment
Above and beyond the commitment to
ISO14001 already described, we are focused on
effi ciency and waste reduction together with
reducing the use of potentially dangerous,
volatile or environmentally damaging chemicals.
Community engagement
In 2009, the Group contributed £53,000 to
charitable causes in addition to giving-in-kind
through employee time.
We are immensely proud of the causes our
employees support. During the year, these
included blood donation services, substance
abuse centres, medical research charities and
children’s charities. This work helps us to attract
and retain talent, by engaging existing
employees and building a local reputation as
an employer of choice. In 2010, a more robust
structure will be implemented around
community engagement to ensure that it
meets the needs of our business and continues
to inspire our people.
30
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Corporate responsibility
Priority issues
People and culture
A talented, engaged workforce is central
to our ability to deliver world-class products.
We focus on making TT electronics a place
where people feel supported, can develop
their skills and have a clear understanding
of the Group’s business objectives.
In 2009, we launched a set of Group values,
which seek to defi ne what the organisation
stands for and to bring employees together
under a clear common purpose. The values
focus on themes such as integrity, excellence,
innovation and teamwork. However, they also
acknowledge our commitment to delivering
customer value through the retention and
development of high quality people.
Health and safety
Providing a workplace where our employees
feel safe is not only a legal obligation, but a
fundamental factor in building their
engagement with the Group. We aim to reduce
the frequency of accidents through management
intervention, awareness campaigns and a culture
that encourages employees to raise concerns
about workplace safety.
Low-carbon technology
Our expertise in technological innovation
ensures that we are well positioned to support
the global transition to a low-carbon economy.
Work to date has seen several businesses within
the Group deliver solutions to increase energy
effi ciency or renewable energy production. For
example, in 2009 we established a team to look
at opportunities in electric and hybrid vehicles
and we are already working with customers to
increase the effi ciency of the systems we design
and build for them.
We are an integral part of the lives of our
people and the communities where we
operate and we have a clear duty to
operate responsibly.
Operating responsibly means a number of
things for the Group. Whilst it means running our
businesses in line with the expectations of diverse
global stakeholders, Corporate Responsibility
(CR) is also a discipline which helps manage
risks, eliminate waste and maximise the
opportunities presented by a changing world.
In 2009, we invested signifi cant energy in
CR, including a global audit of CR activity,
engagement with industry bodies and the
roll out of new Group values.
A commitment to CR
We use CR to manage issues such as measuring
and improving performance on environmental
impacts, health and safety and employee and
community engagement.
The Group Chief Executive chairs the Corporate
and Social Responsibility Committee which also
includes an independent non-executive Director,
the Group Legal Counsel and up to three senior
executives from within the Group.
An audit of Group-wide activity in 2009 helped
to benchmark existing activity and will be used
to inform future actions.
Although we have not historically measured
our performance against non-fi nancial
targets or indicators, this is something that
will be implemented during 2010 as explained
on page 10.
External standards and benchmarking
In 2009, the Group became a member of the
Electronics Industry Citizenship Coalition (EICC).
Membership mandates the adoption of EICC’s
code of conduct, which, in 2010 and beyond,
will be embedded throughout our operating
companies. This year also saw the Group
become a member of Business in the Community.
Approximately half of the Group’s operating
companies have ISO9001 accreditation, with
around 40 per cent holding ISO14001 accreditation.
All operating companies are encouraged to gain
accreditation to adopt these standards as a
baseline for non-fi nancial management.
In addition, the virtual market teams are
highlighting growth opportunities off ered by
their target markets. With the strengthened
senior management team now in place and new
systems implemented to identify and develop
our key employees, the Board is confi dent that
the actions taken during 2009, and those in
progress in 2010, will provide the Group with
a platform for sustainable growth.
Although the shape and timing of the global
economic recovery is diffi cult to predict, visibility
for the fi rst half of the year has improved in
certain markets with the Group tracking slightly
ahead of the Board’s previous expectations.
31
TT electronics plc
Annual Report 2009
BUSINESS REVIEW
Outlook for 2010
Following diffi cult trading conditions
throughout most of 2009, the situation
improved in the fourth quarter in most of our
markets. This has continued in the fi rst two
months of 2010. A number of factors have
contributed to an increase in demand, including
government scrappage schemes in the
automotive sector, the fi scal stimulus packages
introduced in many countries and a re-stocking
of the supply chain following the aggressive
de-stocking that took place in late 2008 and the
fi rst half of 2009.
We continue to implement the actions outlined
in this report, focusing the Group on those
markets which we believe will provide
opportunities for higher growth and margins.
We are improving the way we interface with our
customers through the implementation of
unifi ed regional sales teams in the Components
division and maintaining our focus on the key
account management programme, which
is enabling us to better serve our major
global customers.
Chairman
After more than 20 years with the Group,
John Newman has announced his intention
to step down from the Board at the next AGM.
We would like to express our gratitude to John
for his leadership and vision in developing
TT electronics over many years and also for his
support to us since joining the Group. The Board
is delighted that Sean Watson, who has been a
non-executive Director since 2007, will become
non-executive Chairman following the next
AGM, to be held in May.
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32
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors and Company Secretary
John W Newman (64)
Non-executive Chairman
Chairman of the Nominations and Corporate
Governance Committees
Appointed to the Board in 1986. Became
Non-executive Chairman on 1 September 2009,
having previously served as Executive Chairman.
A Chartered Accountant who is also Chairman of
the Newship group of companies.
Geraint Anderson (50)
Group Chief Executive
Chairman of the Corporate and Social
Responsibility and Risk Committees
Appointed to the Board in 2008. Previously Vice
President and General Manager of the Worldwide
Service Provider Organisation for Linksys, a division
of Cisco Systems, Inc.
Shatish D Dasani ACA (48)
Group Finance Director
Member of the Corporate Governance and
Risk Committees
Appointed to the Board in 2008. A Chartered
Accountant, previously with De La Rue plc,
Lafarge SA and Blue Circle Industries plc.
Was also previously a non-executive director
of Camelot plc.
David S Crowther (64)
Senior Independent Non-executive Director
Chairman of the Audit and Remuneration
Committees and member of the Nominations
Committee
Appointed to the Board in 2005. A Chartered
Accountant who was a senior partner with
PricewaterhouseCoopers LLP. Member of the
Professional Oversight Board, a part of the Financial
Reporting Council, and a non-executive Board
Member and chairman of the Audit Committee of
the Treasury Solicitor’s Department.
Tim H Roberts (39)
Group Business Development Director
Appointed to the Board on 26 January 2010.
Joined TT electronics in January 2008. Previously
Strategy and Business Development Director with
Spirent Communications plc and formerly a solicitor
specialising in corporate fi nance.
John C Shakeshaft (55)
Independent Non-executive Director
Member of the Audit, Remuneration, Nominations
and Corporate Governance Committees
Appointed to the Board in 2007. Currently chairman
of Ludgate Environmental Fund Limited and of
Valiance Special Opportunities Fund of Funds
and Co-Investment Fund; investment director,
Corestone, AG and a director of Tele2 AB, Xebec
Adsorption, Inc and TEB, NV. Also an external
member of the Audit Committee of Cambridge
University. Previously a corporate fi nancier with
ABN AMRO, Lazard and Barings.
Sean M Watson (61)
Independent Non-executive Director
Member of the Remuneration, Nominations and
Corporate and Social Responsibility Committees
Appointed to the Board in 2007. A partner at CMS
Cameron McKenna LLP and was a non-executive
director of Informa plc from 2000 to 2009.
Wendy J Sharp ACA (44)
Group Company Secretary
Member of the Corporate Governance Committee
33
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ report
The Directors present their report and the audited financial statements for the year ended 31 December 2009.
Principal activities and business review
TT electronics plc is the parent company of a group whose principal activities during the year were the design, manufacture and sale of electronic
and electrical components for the defence, aerospace, medical, automotive and other industrial electronics markets. Further details of the Group’s
activities and future plans are set out in the Chairman’s statement and the Business review on pages 2 to 4 and 20 to 31 of this Annual Report and
these should be read as part of the Directors’ report.
The principal operating subsidiaries are listed on pages 81 to 82.
Results and dividends
The Group’s profit on ordinary activities before taxation and exceptional items was £0.8 million (2008: £21.1 million). After taxation and exceptional
items a loss of £19.6 million was reported (2008: profit of £11.6 million). The audited financial statements of the Group and the Company are set
out on pages 47 to 82. Further details of the Group’s activities are set out in the Business review on pages 20 to 31.
The Directors are not recommending a final dividend for the year ended 31 December 2009 (2008: nil). No interim dividend was paid during the
year (2008: 3.69p).
Disposals
No significant disposals have been made during the year.
Post balance sheet event
On 17 February 2010, the conditional sale of Wire Systems Technology (Pty) Ltd was announced, the consideration being Rand 60 million plus an
amount equal to the cash balances of the company on the day preceding the completion date, subject to completion accounts.
Fixed assets
No professional valuation of land and buildings has been carried out during the year, but in the opinion of the Directors the market value, on an
existing use basis, is considered to be not materially different from net book value.
Research and development
The Group carries out research and development in order to develop new products and processes and to substantially improve existing products
and processes. Further details are given in note 11 to the consolidated financial statements.
Financial risk management objectives and policies
These are set out under Financial risks in the Business review on page 29.
Significant agreements relating to change of control
The Group has a number of borrowing facilities provided by various banking groups. Some of these facility agreements include change of control
provisions which, in the event of a change in ownership of the Company, could result in renegotiation or withdrawal of these facilities.
There are a number of other agreements that may be renegotiated upon a change of control of the Company. None is considered to be
significant in terms of their potential impact on the business of the Group as a whole.
Supplier payments policy
The Group’s policy in relation to the payment of its suppliers is to agree its terms of payment with each supplier when negotiating the terms of
each business transaction. It is Group practice to abide by the agreed terms of payment unless the supplier defaults under its own obligations.
Trade creditors at the year end amount to 57 days of average supplies for the year (2008: 50 days).
Employment
The Group is committed to the fair and equal treatment of all its employees regardless of gender, race, age, religion, disability or sexual
orientation. Where existing employees become disabled, the policy of the Group is to provide continuing employment and training wherever
practicable. The Group makes significant efforts to ensure that high standards of employee welfare are maintained worldwide in all its operations,
irrespective of geography and local market conditions, and intends to seek assurances from suppliers that they too are committed to high
standards of employee welfare.
Further details on the Group’s policies relating to its employees are given on page 30.
Corporate governance
The application of the principles and provisions of the Combined Code is set out in the Directors’ report on corporate governance on pages
37 to 41.
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TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ report (continued)
Directors
The Directors are listed on page 32 with brief biographical notes. All the Directors held office throughout the year, with the exception of
T H Roberts who was appointed on 26 January 2010. J W Newman, who had previously been executive Chairman became non-executive
Chairman with effect from 1 September 2009. J W Armstrong retired on 5 January 2009.
At the forthcoming Annual General Meeting D S Crowther retires and, being eligible, offers himself for re-election. T H Roberts, having been appointed
since the previous Annual General Meeting, retires in accordance with the Articles of Association and, being eligible, offers himself for re-election.
Rules for the appointment and replacement of Directors are set out in the Company’s Articles of Association. Directors are appointed by the Board
on the recommendation of the Nominations Committee. Directors may also be appointed or removed by the Company by ordinary resolution at
a general meeting of holders of Ordinary shares. The office of a Director shall be vacated if his resignation is requested by all the other Directors,
not being fewer than three in number. The Corporate governance report sets out further details of the requirements for re-election of Directors
on page 37. In addition, further details of the activities of the Nominations Committee are set out on pages 39 to 40.
There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment that
occurs as a result of a takeover bid except that provisions of the Company’s share plans may cause options and awards granted under such schemes
to vest on takeover, subject to the satisfaction of any performance conditions. Further details of the executive Directors’ service contracts can be found
in the Directors’ remuneration report on pages 42 to 46. Copies of the executive Directors’ service contracts and letters of appointment of the non-
executive Directors are available for inspection by any person at the Company’s registered office during normal business hours on any weekday
(public holidays excepted) and at the Annual General Meeting from 15 minutes before the Annual General Meeting until it ends.
The Group maintains Directors’ and Officers’ liability insurance. The Directors of the Company also benefit from a qualifying third party indemnity
provision in accordance with Section 234 of the Companies Act 2006 and the Company’s Articles of Association. The Company has provided a
pension scheme indemnity within the meaning of Section 235 of the Companies Act 2006 to directors of associated companies.
Directors’ interests
The Directors of the Company at 31 December 2009 held interests in the following numbers of the Company’s Ordinary shares of 25p each on
1 January 2009, 31 December 2009 and 8 March 2010:
J W Newman
G Anderson
S D Dasani
J W Armstrong
D S Crowther
J C Shakeshaft
S M Watson
8 March 2010
Ordinary shares
10,848,627
140,000
350,000
n/a
65,000
15,479
62,950
31 Dec 2009
Ordinary shares
10,848,627
140,000
350,000
n/a
65,000
15,479
62,950
1 Jan 2009
Ordinary shares
10,848,627
90,000
150,000
70,582
40,000
15,479
62,950
T H Roberts, who was appointed on 26 January 2010, held interests in 33,196 of the Company’s Ordinary shares of 25p each on appointment and
at 8 March 2010.
The interests of the Directors in the Company’s share options and Long Term Incentive Plan are shown in the Directors’ remuneration report on
pages 42 to 46.
Substantial shareholding notifications
At 8 March 2010 the Company had been notified of the following voting rights attaching to TT electronics plc shares in accordance with the
Disclosure and Transparency Rules:
Legal & General Group plc and Legal & General Investment Management Limited(1)
Tweedy, Browne Company LLC
J O Hambro Capital Management Group Limited
J W Newman(2)
Legal & General Group plc(1)
Number
15,620,319
15,620,319
15,359,648
15,359,648
15,107,960
15,107,960
9,452,010
9,452,010
9,313,546
9,313,546
%
10.0
9.9
9.7
6.1
6.0
(1) Legal & General Group plc have a direct interest in TT electronics shares which makes them a substantial shareholder in their own right. Accordingly, under the Disclosure and
Transparency Rules, their direct interest is initially notifiable at 3% (and thereafter every time it moves through a percentage point – eg. from 3% to 4%) . They also hold shares as a fund
manager, via their subsidiary, Legal & General Investment Management Limited, whereby they have an indirect interest. The combined total of their direct and indirect interests is then
subject to 5% and 10% disclosure thresholds.
(2) At the time of the last disclosure made by J W Newman in his capacity as a substantial shareholder under the Disclosure and Transparency Rules, 9,432,437 TT electronics shares in
which J W Newman had voting rights were held by Newship Investments Limited. (Newship Investments Limited is a wholly-owned subsidiary of Newship Industries Limited, in which
J W Newman holds a controlling interest). Since then, various transactions have taken place and directors shareholding announcements containing details of these transactions have
been released to the Stock Exchange in accordance with DTR 3.1.4R. No further disclosure has been made by J W Newman in his capacity as a substantial shareholder because these
transactions have not resulted in the total number of shares over which he holds voting rights crossing a requisite threshold.
35
TT electronics plc
Annual Report 2009
So far as has been ascertained no other person or corporation holds or is beneficially interested in any substantial part of the share capital of the
Company.
Share capital
The Company’s issued share capital comprises a single class of share capital which is divided into Ordinary shares of 25p each. All issued shares
are fully paid. The share capital during the year and the number of Ordinary shares reserved for issue are shown in note 14 to the consolidated
financial statements. The rights and obligations attaching to the Company’s Ordinary shares are set out in the Company’s Articles of Association,
copies of which can be obtained from Companies House in the United Kingdom or by writing to the Group Company Secretary. Subject to
applicable statutes, shares may be issued with such rights and restrictions as the Company may by ordinary resolution decide, or (if there is no
such resolution or so far as it does not make specific provision) as the Board may decide. Holders of Ordinary shares are entitled to speak at
general meetings of the Company, to appoint one or more proxies and, if they are corporations, to appoint corporate representatives and to
exercise voting rights. Holders of Ordinary shares may also receive a dividend and on a liquidation may share in the assets of the Company.
In addition, holders of Ordinary shares are entitled to receive the Company’s Annual Report and accounts. Subject to meeting certain thresholds,
holders of Ordinary shares may require a general meeting of the Company to be held or the proposal of resolutions at Annual General Meetings.
Authority to allot shares and disapply statutory pre-emption rights
The Directors will be seeking to renew their authorities to allot unissued shares and to disapply statutory pre-emption rights at the Annual General
Meeting to be held on 12 May 2010. Further details are set out in the papers containing details of the Annual General Meeting which accompany
this document.
Purchase of own shares
At the Annual General Meeting held on 13 May 2009, the Company was given authority to purchase up to 15,495,279 of its Ordinary shares until
the date of its next Annual General Meeting. No purchases were made during the year. The Directors will be seeking a new authority for the
Company to purchase its Ordinary shares at the forthcoming Annual General Meeting. Further details are set out in the papers containing details
of the Annual General Meeting which accompany this document.
Voting rights and restrictions on transfer of shares
On a show of hands at a general meeting of the Company every holder of Ordinary shares present in person or by proxy and entitled to vote has
one vote and on a poll every member present in person or by proxy and entitled to vote has one vote for every Ordinary share held. Further
details regarding voting at the Annual General Meeting can be found in the Notice of the Annual General Meeting which accompanies this
document. None of the Ordinary shares carry any special rights with regard to control of the Company. Electronic and paper proxy appointments
and voting instructions must be received by the Company’s Registrars not later than 48 hours before a general meeting. A shareholder can lose
his entitlement to vote at a general meeting where that shareholder has been served with a disclosure notice and has failed to provide the
Company with information concerning interests in those shares.
The Directors may refuse to register a transfer of a certificated share which is not fully paid, provided that the refusal does not prevent dealings in
shares in the Company from taking place on an open and proper basis. The Directors may also refuse to register a transfer of a certificated share
unless the instrument of transfer: (i) is lodged, duly stamped (if stampable), at the registered office of the Company or any other place decided by
the Directors accompanied by the certificate for the share to which it relates and/or such other evidence as the Directors may reasonably require
to show the right of the transferor to make the transfer; (ii) is in respect of only one class of shares; (iii) is in favour of a person who is not a minor,
bankrupt or a person in respect of whom an order has been made on the ground that such person is suffering from a mental disorder or is
otherwise incapable of managing their affairs; or (iv) is in favour of not more than four transferees.
Transfers of uncertificated shares must be carried out using CREST and the Directors can refuse to register a transfer of an uncertificated share in
accordance with the regulations governing the operation of CREST.
The Directors may decide to suspend the registration of transfers, for up to 30 days a year, by closing the register of shareholders. The Directors
cannot suspend the registration of transfers of any uncertificated shares without obtaining consent from CREST.
There are no other restrictions on the transfer of Ordinary shares in the Company except:
• certain restrictions may from time to time be imposed by laws and regulations (for example insider trading laws);
• pursuant to the Company’s share dealing code whereby the Directors and certain employees of the Group require approval to deal in the
Company’s shares; and
• where a shareholder with at least a 0.25 per cent interest in the Company’s certificated shares has been served with a disclosure notice and has
failed to provide the Company with information concerning interests in those shares.
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of Ordinary shares or on
voting rights.
Articles of Association
The Company’s Articles of Association may only be amended by special resolution approved at a general meeting of the shareholders.
Annual General Meeting
The Annual General Meeting of the Company will be held on Wednesday 12 May 2010 at the offices of KBC Peel Hunt Ltd, 111 Old Broad Street,
London EC2N 1PH at 11.30 am. The Notice of the Company’s Annual General Meeting accompanies this document.
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TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ report (continued)
Auditors
Grant Thornton UK LLP have expressed their willingness to continue in office as Auditors and a resolution will be proposed to reappoint them at
the Annual General Meeting.
The Auditors’ responsibilities are set out on pages 47 and 73 and should be read in conjunction with those of the Directors as set out below.
Going concern
The Directors have reviewed the budgets for 2010 and the projections for 2011 developed during the 2009 annual strategic planning cycle, which
have been adjusted to take account of the current trading environment. Demand in most of the Group’s end markets was severely affected by the
global economic recession. Recognising this, the Directors have considered a range of different scenarios and the impact of these on the Group’s
cash flow, facilities and headroom within its banking covenants. Further, the Directors have assessed the future funding requirements of the
Group and compared them with the level of available borrowing facilities. Based on this work, the Directors are satisfied that the Group has
adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern
basis in preparing the financial statements.
Statement of Directors’ responsibilities in relation to financial statements
The Directors are responsible for the preparation of the Annual Report and the financial statements for each financial year in accordance with
applicable law and regulations.
The Directors are required to prepare the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union. The Directors have elected to prepare the Company’s financial statements under UK Generally Accepted
Accounting Practice (UK GAAP).
The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or
loss of the Group.
The Directors, in preparing the financial statements, are required to:
• use suitable accounting policies and to apply them consistently;
• make reasonable and prudent judgements and estimates;
• state that the consolidated financial statements comply with IFRS as adopted by the European Union and that the Company financial
statements comply with UK GAAP subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to assume that the Company will continue in business.
The Directors have responsibility for:
• ensuring that the Company and the Group prepare and maintain adequate accounting records which disclose with reasonable accuracy at any
time the financial position of the Company and the Group at that time and which enable them to ensure that the financial statements comply
with the Companies Act 2006 and Article 4 of the lAS Regulation;
• taking such steps as are reasonably open to them to safeguard the assets of the Company and the Group and to prevent and detect fraud and
other irregularities;
• the maintenance and integrity of the financial information on the Company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
To the best of each Director’s knowledge and belief, there is no audit information relevant to the preparation of the Auditors’ report of which the
Auditors are unaware and each Director has taken all the steps which might be expected to be aware of such relevant information and to
establish that the Auditors are also aware of that information.
By order of the Board:
W J Sharp
Group Company Secretary
12 March 2010
Responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and loss of the Company and the undertakings included in the consolidation taken as a whole; and
• the Business review includes a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
G Anderson
Group Chief Executive
12 March 2010
S D Dasani
Group Finance Director
37
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ report on corporate governance
The Company is committed to achieving and maintaining high standards of corporate governance. The principles of good corporate governance
set out in Section 1 of the 2008 Combined Code (“Code”) contained in the Listing Rules of the Financial Services Authority, have been complied
with throughout the year ended 31 December 2009 and this compliance has continued through to the date of this report. Details and
explanations of the application of the principles of corporate governance are set out below.
The Board
Subject to the Company’s Memorandum and Articles of Association, UK legislation and any directions given by special resolution, the business
of the Company is managed by the Board. The Board’s main roles are to provide leadership to the management of the Group, determine the
Group’s strategy and ensure that the agreed strategy is implemented. The Board has also reserved certain specific matters to itself for decision.
These include financial policy, acquisition and disposal policy, and the approval of major capital expenditure projects. The Board appoints its
members and those of its Committees, and reviews recommendations of the Board committees and the financial performance and operation of
each of the Group businesses. It regularly reviews the identification, evaluation and management of the principal risks faced by the Group and the
effectiveness of the Group’s system of internal control.
During 2009 the Board comprised up to three executive Directors and up to four non-executive Directors. J W Newman, the Chairman, served as
an executive Director until 1 September 2009 when he became a non-executive Director.
Of the remaining executive Directors, S D Dasani and G Anderson served throughout the year. T H Roberts was appointed on 26 January 2010 and
therefore did not serve during the year.
The remaining non-executive Directors, D S Crowther, J C Shakeshaft and S M Watson served throughout the year. D S Crowther is the senior non-
executive Director.
S M Watson is a partner at CMS Cameron McKenna LLP, one of a number of law firms which advise the Company. Prior to his appointment as a
non-executive Director, the Company, in consultation with Riskmetrics and major shareholders, undertook an assessment to ascertain whether
S M Watson met the criteria for independence set out in the Code. It was concluded that he did as the value of the fees charged by CMS Cameron
McKenna LLP to the Company, relative to each of their respective turnovers, was not significant enough to be considered material. This continues
to be the position, the Company having paid CMS Cameron McKenna LLP circa £65,000 during 2009 in respect of legal advice.
Accordingly, of the non-executive Directors, D S Crowther, J C Shakeshaft and S M Watson are considered to be independent as defined by the Code.
During the year there were seven Board meetings on scheduled dates for which full notice was given. Unscheduled supplementary meetings also
take place as and when required and, during 2009, two such meetings took place. The Board has had two scheduled and three unscheduled
supplementary meetings to date during 2010. Full details of each Director’s Board and Committee meeting attendance are given on page 40.
Directors’ biographies including the Committees on which they serve and chair are shown on page 32. In accordance with the Company’s Articles
of Association each Director will offer himself for re-election every three years.
The non-executive Chairman and Group Chief Executive
Up until 31 August 2009, the Company had an executive Chairman and a Group Chief Executive. However, from 1 September 2009, in line with
the announcement made on 21 January 2009, J W Newman became non-executive Chairman and, as a result, the division of responsibilities
between the non-executive Chairman and the Group Chief Executive has been re-defined, formalised in writing and approved by the Board:
The non-executive Chairman maintains responsibility for the leadership and effectiveness of the Board and setting its agenda; ensuring that all
Directors receive accurate, timely and clear information on financial, business and corporate matters to enable them to participate effectively in
Board decisions; facilitating the effective contribution of non-executive Directors in particular and ensuring constructive relations between
executive and non-executive Directors; and ensuring effective communication with shareholders.
The Group Chief Executive is responsible for the operations of the Group. He is responsible for developing Group objectives and strategy having
regard to the Group’s responsibilities to its shareholders, customers, employees and other stakeholders and, following presentation to, and
approval by, the Board, for the successful implementation and achievement of those strategies and objectives. His other areas of responsibility
include managing the Group’s risk profile, including its health and safety performance; ensuring that the Group’s businesses are managed in line
with strategy and approved business plans, and comply with applicable legislation and Group policy; and ensuring effective communication
with shareholders.
Under the provisions of the Code, the Chairman should on appointment be considered independent. However, J W Newman was appointed
executive Chairman in 1995 before the Company was bound by any provision as to the independence of its Chairman.
Board procedures and performance evaluation
All Directors have access to the advice and services of the Group Company Secretary and are offered training to fulfil their role as Directors, both
on appointment and at any subsequent time. There is an agreed procedure for any individual Director to take independent professional advice at
the Company’s expense if he considers it necessary.
In accordance with the provisions on conflicts of interest in the Companies Act 2006, the Company has put in place procedures for the disclosure
and review of any conflicts, or potential conflicts, of interest which the Directors may have and for the authorisation of such conflict matters
by the Board. In deciding whether to authorise a conflict or potential conflict the Directors must have regard to their general duties under the
Companies Act 2006. The authorisation of any conflict matter, and the terms of authorisation, may be reviewed at any time and, in accordance
with best practice, a review of Directors’ conflicts of interests is conducted annually.
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TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ report on corporate governance (continued)
During the year the Board conducted an evaluation of its performance covering, among other matters:
• maintaining and improving its performance;
• developing the Group’s strategy;
• maintaining the optimum mix of skills and knowledge among the Directors;
• ensuring robust and effective risk management; and
• considering full and timely information on financial and other performance.
In addition, each of the principal Committees carried out an assessment of its own performance during the year.
The performance of individual Directors is also reviewed annually and includes discussions between the Chairman and senior non-executive
Director on their respective performance.
Following these detailed reviews it was considered that the Board and its Committees were performing satisfactorily, although it was noted that
as the Audit Committee comprised just two members, and it was thus reliant on both members being available to be quorate, a third member
would be an advantage. It is anticipated that this will be addressed during 2010.
Review of principal risks and internal controls
The Directors have overall responsibility for the Group’s systems of internal control and for reviewing their effectiveness. These systems have been
in place for the full financial year. The Group is committed to a policy of maintaining strict internal control over all of its activities. Controls are
designed to provide the Directors with reasonable assurance that assets are safeguarded, transactions are properly authorised, and that material
errors and irregularities are prevented or, failing which, are discovered on a timely basis. The systems of control are reviewed regularly and
improved where necessary to meet the Group’s requirements. Business risk evaluation takes place at operating company and Group level as part
of the annual budget preparation. Having identified risks, each operating company then monitors, reviews and updates them regularly.
The Group Chief Executive oversees maintenance of the Group’s Register of Principal Risks. Members of staff who are involved in the Group’s risk
management function report directly to the Group Chief Executive at a monthly Risk Committee meeting. The principal risks of the Group are
subject to review by the Risk Committee, Audit Committee and the Board. Further details of the Group’s exposure to risk and processes in place
to manage the same are set out in the Business review on pages 28 to 29.
The risk management procedures and systems of internal control are designed to identify and assess the significant risks which the Group
faces and to manage them appropriately. However, such systems can only provide reasonable and not absolute protection against material
mis-statement or loss.
Principal features of the system of internal control
• The Directors meet as a Board at least every other month to monitor financial performance, give direction on significant strategic and financial
issues and review the principal risks of the Group.
• The Group Chief Executive chairs a Committee (“Operating Board”) consisting of the executive Directors, Divisional Chief Executives and other
senior management. The Operating Board meets on a monthly basis and reviews the historical performance and the outlook for the Group as
a whole and agrees and implements any actions as necessary. In addition, it is responsible for monitoring and driving delivery of the Group’s
key priorities and acts as a forum to raise and debate significant operational issues.
• The Group Chief Executive also chairs the Risk Committee which meets monthly. Further details on the remit and activities of the Risk
Committee are set out on page 41.
• Each operating company within the Group operates within the policies, rules and procedures determined by the Directors and communicated
through a Group manual. The Directors exercise control over operating companies through divisional senior executives who monitor and
oversee the activities, financial performance and controls of each operating company. The directors of operating companies are held
accountable for the effectiveness of the implementation and maintenance of controls within their companies. This provides constant and
consistent management.
• The Group has detailed financial planning and reporting systems. Detailed management accounts are prepared monthly by each operating
company comparing actual performance with budget. The financial performance of each operating company is subjected to detailed formal
review at monthly meetings. One purpose of these reviews is the early identification of potential business risks and agreement on suitable
and prompt courses of action. Operating companies prepare strategic plans and annual budgets which are reviewed and approved by the
divisional senior executives, Group management and the Board.
• The Group has comprehensive control and approval procedures which are rigorously enforced. There are clear definitions of appropriate
authorisation levels. Capital investment and other major items of expenditure are made only after compliance with detailed appraisal
procedures and, if above set levels, only with the approval of the executive Directors.
• Accounting and reporting policies and practices require that the Group’s accounting records are prepared consistently, accurately and in
compliance with Group policy and relevant accounting standards.
• The framework for maintaining control and the adherence to procedures is reviewed by the Group Internal Controls Executive, who reports
to the Group Finance Director and to the Audit Committee.
• Certain key functions, including treasury, taxation, pensions, provision of legal advice, risk and insurance are controlled at the Group’s head
office and are monitored by the executive Directors.
39
TT electronics plc
Annual Report 2009
The Directors have reviewed the effectiveness of the systems of risk management and internal control during the year to 31 December 2009
and during the period since then to the date of this report. They have made improvements where necessary.
Board Committees
The Board has established a number of Committees, each with its own delegated authority defined in terms of reference. These terms are
reviewed periodically and the Board receives reports and copies of minutes of Committee meetings. The Board appoints the chairmen of all
principal Board Committees, having received the recommendations of the Nominations Committee.
The principal Committees and brief descriptions of their terms of reference (full details of which are available for inspection by shareholders at the
Annual General Meeting and on the Group’s website) and duties are as follows:
a) Audit Committee
During the year, the Audit Committee comprised two of the independent non-executive Directors: D S Crowther (Chairman) and J C Shakeshaft,
the former having recent and relevant financial knowledge, as required by the Code. The Committee’s duties include reviewing and advising the
Board on:
• the integrity of the financial statements;
• the appointment and remuneration of external auditors;
• the effectiveness of the Auditors in line with the requirements of the Code;
• the nature and extent of non-audit services provided by the Auditors to ensure that their independence and objectivity are maintained;
• changes to accounting policies and procedures, decisions of judgement affecting financial reporting, compliance with accounting standards
and with the Companies Act;
• the Auditors’ assessment of internal audit and other internal controls;
• the scope, performance and effectiveness of the internal audit and other internal control functions;
• risk management (by reference to reports received regularly from the Risk Committee and the head of the internal control/audit function) and
any changes to the Register of Principal Risks; and
• the Company’s written procedures for responding to any allegations made by whistleblowers.
In order to fulfil its duties the Audit Committee regularly receives reports from the Risk Committee and on the findings of the Group Internal
Controls Executive who is required to attend the Committee’s meetings. The Committee also reviews internal audit plans and recommendations.
During 2009 the Audit Committee met five times and has had one meeting to date during 2010. Both committee members attended all the
meetings. The Committee met twice with the Auditors without executives of the Company being present. The Committee also met twice with
the head of the internal control function without executives of the Company being present.
The Committee reviewed the effectiveness of the external Auditors during the year. This process included seeking feedback from the finance
directors of each operating subsidiary. Comments received were then analysed to identify both recurring themes and specific issues and the
results were presented to the Committee. It was concluded that the Auditors’ performance had been satisfactory and, where areas for
improvement had been identified, these were communicated to the Auditors.
The independence of the Auditors is assessed annually by the Audit Committee. This is achieved by means of a self-assessment of independence
which is completed by the Auditors and is then subject to review, analysis and query by the Audit Committee to ensure that suitable policies
and procedures are in place to safeguard the Auditors’ independence and objectivity. Such policies and procedures include the Company’s policy
regarding the provision of non-audit services which states that non-audit services may be obtained from the most appropriate source having
regard to expertise, availability, knowledge and cost. Non-audit services where fees are expected to exceed a pre-determined threshold should
be approved, in advance, by the Chairman of the Audit Committee or in his absence by another member of the Audit Committee. There is a
restriction so that non-audit services fees will not exceed the audit service fees, paid to the same service provider, for more than two consecutive
years unless specifically recommended by the Audit Committee and agreed by the Board. The preference of the Committee is not to engage the
Auditors for additional non-assurance services, absent compelling reason (e.g. capability, time, cost) to the contrary.
The Committee also carried out a self assessment of its performance, based on a questionnaire completed by the members of the Committee.
b) Remuneration Committee
The Directors’ remuneration report on pages 42 to 46 includes details of the Remuneration Committee and its work.
c) Nominations Committee
The Nominations Committee generally meets twice a year to make recommendations to the Board regarding the appointment of replacement
or additional directors. It comprises the independent non-executive Directors and the non-executive Chairman, who also chairs the Committee.
The Committee has an established procedure for recommending Board appointments and for the appointment of members to the Audit and
Remuneration Committees. In 2009 the Committee met three times. All Committee members attended each meeting. The Committee also
carried out an assessment of its performance in 2009.
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40
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ report on corporate governance (continued)
The Committee has had two meetings to date during 2010, following which the appointments of T H Roberts as an executive Director and
S M Watson as Chairman were recommended to the Board.
T H Roberts had joined the Company in 2008, in advance of the retirement of J W Armstrong, who had previously held the post of Corporate
Development Director. At the recommendation of the Nominations Committee, T H Roberts is receiving executive coaching which involves
networking with other executive directors, governance training and coaching to address other identified development needs. This commenced
in advance of his appointment as an executive Director.
S M Watson has been an independent non-executive Director of the Company since 2007. Before nominating him to become Chairman the
Committee weighed the relative merits of appointing an internal candidate conversant with the agreed strategy and its current execution or an
external candidate with different skills and experience from existing Board members. The Committee took external advice from the Company’s
bankers, brokers and remuneration consultants. Two members of the Board offered themselves as candidates. The Committee took soundings
of all Board members and engaged recruitment consultants to interview both candidates against a set of professional competences (board
leadership; influencing and collaboration; coaching and development; strategic acumen; independence and integrity; and industry and market
knowledge) and also against a control group of possible external candidates. Both candidates measured well on both sets of criteria and stronger
than the external set on the particular requirements of the Company. Reviewing all the assessments the Committee recommended S M Watson’s
nomination.
Board and Committee eeting ttendance 2009
m
The table below shows the number of meetings held by the Board and its principal committees and the attendance of each of the Directors at
those meetings.
a
Total meetings held
J W Newman
G Anderson
S D Dasani
D S Crowther
J C Shakeshaft
S M Watson
Board
9
9
9
9
8(1)
9
8(1)
Audit
Committee
5
n/a
n/a
n/a
5
5
n/a
Remuneration
Committee
7
n/a
n/a
n/a
7
7
7
Nominations
Committee
3
3
n/a
n/a
3
3
3
(1) D S Crowther and S M Watson were each unable to attend one unscheduled supplementary board meeting.
J W Armstrong retired on 5 January 2009. However, given that no Board or Committee meetings took place during the period 1 to 5 January 2009,
he has not been included in the above table.
Corporate Governance Committee
The Corporate Governance Committee is responsible for monitoring the Group’s compliance with good corporate governance. During the year it
was chaired by the Chairman and included the Group Finance Director, one independent non-executive Director and the Group Company
Secretary. The Committee’s duties are as follows:
• to review regularly the corporate governance procedures of the Company;
• to ensure that the Company’s corporate governance procedures are up-to-date and effective and that these are communicated to those
employees, officers and/or Directors of the Company or its subsidiaries to whom they are relevant;
• to make recommendations to the Board from time to time on any procedures, or processes, that may need changing, in order to ensure that
the Company is compliant with relevant legislation, including but not limited to, the Companies Act 2006;
• to ensure that the Company is compliant with the standards and disclosures required by the Combined Code and the Listing, Prospectus and
Disclosure rules of the UK Financial Services Authority; and
• to receive reports, or any views expressed by shareholders, stakeholders, government or other regulatory bodies and any other interested
parties in relation to corporate governance.
The Committee met three times during 2009.
41
TT electronics plc
Annual Report 2009
Corporate and Social Responsibility Committee
The Corporate and Social Responsibility Committee is chaired by the Group Chief Executive and also comprises one non-executive Director, the
Group Legal Counsel, and up to three senior executives from within the Group. The Committee met four times during 2009 and has had one
meeting to date during 2010. The Board regularly receives reports on its activities.
Further information on the activities of the Corporate and Social Responsibility Committee is given in the Corporate responsibility section of the
Business review on page 30.
Risk Committee
The Risk Committee assists the Board and the Audit Committee in fulfilling their responsibilities by:
• providing a framework for managing risks throughout the Group; and
• providing an appropriate level of reporting on the status of risk management within the Group.
This is achieved by promoting awareness of risk management, and ensuring that a risk management framework is in place to ensure that risks are
identified, quantified, managed, monitored and reported.
During the year the Committee was chaired by the Group Chief Executive and included the Group Finance Director, the Group Legal Counsel, the
Group Internal Controls Executive and up to four senior executives from within the Group. A representative from the Company’s insurance brokers
also regularly attends meetings. The Committee met 12 times during 2009 and has had three meetings to date in 2010.
Further information on the activities of the Risk Committee is given in the Principal Risks and Uncertainties section of the Business review on
pages 28 to 29.
Donations
During the year the Group contributed £53,000 (2008: £50,000) for charitable purposes. Employees across the Group regularly fund-raise for
charity.
There were no political contributions.
Communications with shareholders
G Anderson and S D Dasani meet institutional investors immediately after publication of the annual and interim results, as well as providing the
information needed to maintain an orderly market in the Company’s shares. D S Crowther, as senior independent non-executive Director, also
undertakes consultation on certain matters with major shareholders. Through these Directors the Company maintains a regular dialogue with
institutional shareholders and analysts and feedback received is reported to the Board so that all Directors develop an understanding of the views
of major shareholders about the Company. Trading updates and press releases are issued as appropriate and the Company’s brokers provide
briefings on shareholder opinion and compile independent feedback from investor meetings. Information offered at the analysts’ meetings
together with our financial press releases are available on the Group’s website. The Annual General Meeting is used by the Directors to
communicate with both institutional and private investors.
Approved by the Board on 12 March 2010 and signed on its behalf by:
W J Sharp
Group Company Secretary
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42
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ remuneration report
This report has been prepared in accordance with the Companies Act 2006 and Schedule 8 of the Large and Medium Sized Companies and
Groups (Accounts and Reports) Regulations 2008. A resolution to approve the report will be proposed at the Annual General Meeting on
12 May 2010. This report sets out the Company’s policy for Directors’ remuneration, the arrangements for 2009 and proposals for 2010, and
has been divided into separate sections for audited and unaudited information.
Unaudited information
Remuneration Committee
The Remuneration Committee (the “Committee”) comprises the independent non-executive Directors and is chaired by D S Crowther (the
senior independent non-executive Director). Its other members are J C Shakeshaft and S M Watson. The Company Chairman is not a member
of the Committee.
In 2009 the Committee met seven times and all members of the Committee attended each meeting. During the year the Committee carried out a
self assessment of its performance, constitution and terms of reference based on a questionnaire completed by the members of the Committee.
The role of the Committee is to recommend to the Board the policy for, and the amount of, the remuneration of the Chairman, executive
Directors, Divisional Chief Executives, Divisional Directors and the Group Company Secretary. Such remuneration covers fees, salaries and other
benefits, pensions, performance-related pay and share incentive plans, and the terms and conditions of service. In determining these matters the
Committee has due regard to the contents of the Code as well as to the UK Listing Authority’s Listing Rules and associated guidance. No director
is involved in deciding his own remuneration.
As well as considering the circumstances of the Group and the demands on its senior management, the Committee takes into account the
position of the Company relative to other companies and is informed of what these companies are paying, though comparisons are treated with
caution. The Committee has appointed independent external consultants to advise on senior executive remuneration matters. During 2009 this
advice was provided by Hewitt New Bridge Street (“HNBS”) and they continue to advise the Remuneration Committee. HNBS provided no other
services to the Company during the year.
Remuneration policy
The objectives of the Group’s remuneration policy are to recruit, retain and motivate talented and well-qualified senior executives so as to realise
the Group's strategy and business objectives and to align their interests with those of shareholders. A significant proportion of their remuneration
is structured so as to link rewards to corporate and individual performance.
Base salary
The policy is to provide senior executives with a base salary that is competitive with the base salary paid in other comparable companies.
The base salaries of executive Directors are reviewed annually at 1 July having regard to personal performance, Group performance, competitive
market practice as determined by external research and pay levels within the Group.
Details of current base salary levels for executive Directors who served during the year are set out below:
G Anderson
S D Dasani(1)
1 July 2009
£350,000
£240,000
At date of
appointment
£350,000
£220,000
(1) S D Dasani’s base salary was increased from £220,000 to £240,000 on 1 January 2009 as specified in his letter of appointment.
These salaries were not increased at the July 2009 review, consistent with the pay freeze that applied to the Group’s workforce generally
during 2009.
T H Roberts’ base salary on appointment to the Board on 26 January 2010 was £175,000.
Annual bonus
Executive Directors participate in an annual bonus arrangement. The objective of the performance linked element of remuneration is to stimulate
improved results of the Group by providing the opportunity of increased remuneration, subject to achieving challenging performance criteria.
For 2009, the performance measures were a balanced set of annual performance targets, comprising a sliding scale of profit targets (50 per cent
of total bonus potential), a sliding scale of cash flow targets (30 per cent of total bonus potential) and tailored personal objectives linked to the
implementation of the Group’s strategy (20 per cent of total bonus potential). No bonus for personal objectives arises unless at least threshold
performance against both the profit and cash flow targets has been achieved.
For 2010 similar performance criteria will apply except that achievement of strategy-related personal objectives will qualify for bonus potential
separately from financial target elements. This recognises the importance attached to successful implementation of the Group’s strategy,
notwithstanding a possible delayed financial benefit. Furthermore the bonus arrangements for all senior executives below Board level are to be
based consistently on the same performance criteria, including (to encourage greater team working) an element of profit of the whole division or
group into which they report.
The maximum potential bonus which can be earned was, and continues to be, capped at 100 per cent of salary. Annual bonus payments are
not pensionable.
Details of bonuses awarded to the executive Directors for the year ended 31 December 2009 are set out in the emoluments table on page 44.
43
TT electronics plc
Annual Report 2009
Long Term Incentive Plan 2005 (“LTIP”)
The LTIP is the primary long-term incentive arrangement of the Company. LTIP participants may receive annual awards of up to 100 per cent
of base salary. The award is a contingent right to receive shares in the future, subject to continued employment and the achievement of
predetermined performance criteria.
Participants make no payment upon the grant, vesting or release of an award (other than such as may be required as a result of tax, social security
or other regulatory requirements). Awards normally vest three years after the date of grant.
Performance conditions
The performance targets attached to awards granted in May 2009 require the achievement of earnings per share (“EPS”) and total shareholder
return (“TSR”) targets as follows:
• The performance target attached to 50 per cent of an award is based on three year EPS targets: 25 per cent of the shares subject to this part of
the award will vest for EPS growth of 3 per cent compound per annum in excess of Retail Price Index (“RPI”), increasing on a straight-line basis to
100 per cent vesting for EPS growth of at least 7 per cent compound per annum in excess of RPI; and
• The performance target attached to the other 50 per cent of an award is based on TSR performance targets against companies within the FTSE
SmallCap (excluding investment trusts) index; 25 per cent of shares subject to this part of the award will vest at median performance increasing
on a straight-line basis to 100 per cent vesting at the upper quartile of the comparator group. As well as the TSR targets, the Committee will
consider the Company’s underlying financial performance to ensure that vesting percentages under this part of an award are appropriate.
The Committee considers that the combined use of EPS and TSR performance conditions provides a good blend of performance metrics, with
EPS rewarding strong financial performance and TSR rewarding relative stock market performance. It is envisaged that similar targets will apply to
the 2010 LTIP awards.
Award levels
At its meeting in early March 2009, reflecting investor pronouncements with respect to reducing award levels where a company’s share price has
fallen, the Committee resolved to grant LTIP awards over 875,000 and 600,000 shares to the Group Chief Executive and Group Finance Director
respectively. This equated to an award of approximately 50 per cent of salary based on a share price of circa 20 pence at that date (a reduction
from the normal 75 per cent of salary policy). The awards were granted in May 2009 when the share price had risen to circa 30 pence. Following a
substantial recovery in the Company’s share price over the past year and good progress in implementing strategy, the intention is to grant
between 75 and 100 per cent of base salary for the 2010 executive Director LTIP awards.
Shareholding guidelines
The Company now operates shareholding guidelines for executive Directors which are linked to the out-turn of the LTIP. At the time awards vest
under the LTIP (or any other executive plan operated in the future), there will be a requirement to retain no fewer than 50 per cent of the shares
(net of taxes) until such time as a total personal shareholding equivalent to 100 per cent of prevailing base salary has been achieved.
Total shareholder returns
The Company’s total shareholder return performance for the five years to 31 December 2009 is shown on the graph below compared with the
index of the FTSE SmallCap companies (excluding investment trusts). The Company is a constituent of the FTSE SmallCap Index and for this
reason the Directors consider it appropriate to benchmark the Company’s performance against it.
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TT electronics plc
FTSE Small Cap (excl. Investment Trusts)
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44
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ remuneration report (continued)
Share options
The Company has operated a number of share option schemes in the past. It is the Committee's intention not to make further grants to executive
Directors under these plans.
Sharesave Scheme
The Company is seeking shareholder approval for the adoption of a Sharesave Scheme at the forthcoming Annual General Meeting. Further
details regarding the proposed Sharesave Scheme can be found in the Notice of the Annual General Meeting which accompanies this document.
Service contracts
The executive Directors have service contracts which reflect both current market practice and the appropriate balance between the interests of
the Company and the individual Director. These contracts include 12 month non-compete clauses and standard provisions for summary
termination and are terminable on 12 months’ notice from either side.
Non-executive Directors
The remuneration of each of the independent non-executive Directors is determined by the Chairman and the executive members of the Board,
reflecting time commitment, responsibility of each role and the fees paid in other comparable companies. Consistent with the Group’s pay freeze,
no fee increases were awarded in 2009. No benefits in kind are provided for non-executive Directors.
The remuneration of the Company Chairman is a matter for the Committee. Following J W Newman’s switch from executive to non-executive
Chairman on 1 September 2009, the Committee determined that an annual fee of £100,000 would be appropriate from that date. As executive
Chairman he was previously earning £214,882.
Audited information
Aggregate Directors’ emoluments
Set out below are tables of remuneration of the Directors who served during 2009 and 2008. The amount of each element of the remuneration
received and receivable by the Directors in the year including base salary and fees paid during the year, bonus, benefits in kind and other
payments is:
Executive Directors
G Anderson(1)
S D Dasani(1)
J W Armstrong(2)
N A Rodgers(1)
R W Weaver(1)
Non-executive Directors
J W Newman(3)
D S Crowther
D E A Crowe(1)
J C Shakeshaft
S M Watson
Salary/fees
£000
Annual
Bonus(4)
£000
Other
£000
Benefits
£000
350
240
–
–
–
177
42
–
32
32
873
105
72
–
–
–
–
–
–
–
–
177
–
–
25
–
–
–
–
–
–
–
25
26
23
4
–
–
1
–
–
–
–
54
2009
Total
£000
481
335
29
–
–
178
42
–
32
32
1,129
2008
Total
£000
151
161
216
582
230
226
41
21
31
31
1,690
(1) G Anderson was appointed on 4 August 2008 and S D Dasani was appointed on 1 August 2008. N A Rodgers resigned on 11 June 2008 and R W Weaver and D E A Crowe retired on
1 August 2008 and 3 September 2008 respectively.
(2) J W Armstrong retired on 5 January 2009. The bonus of £25,000 was paid based on the bonus arrangements in place for 2008.
(3) J W Newman became non-executive Chairman from 1 September 2009 and it was agreed that his fees from that date would be £100,000.
(4) The amounts are payable under the bonus arrangements in place for 2009 as explained on page 42.
T H Roberts, who was appointed to the Board on 26 January 2010, is due to be paid a bonus of £40,000 in respect of the year to
31 December 2009.
Benefits in kind during the year comprised company car benefits, telephone expenses and the provision of private medical insurance.
No Director received an expense allowance during the year.
45
TT electronics plc
Annual Report 2009
Executive Directors’ pensions – defined benefit
Two individuals who were executive Directors at the start of the financial year were members of the Company’s defined benefit pension scheme.
J W Newman
J W Armstrong
Notes
Increase/
(decrease) in
accrued
pension
£000
6
(5)
Accrued
pension at
31 December
2009
£000
226
61
Lump sum
received
during year
£000
–
99
Value at
31 December
2009
£000
3,943
1,231
(Decrease)/
increase
in value
£000
(250)
88
Value at
31 December
2008
£000
4,193
1,143
(a) J W Newman is in receipt of a pension from the scheme. The cash equivalent value of J W Newman’s future benefits fell during the year primarily due to the amounts paid to him during
2008 and, to a lesser degree, due to a rise in gilt yields.
(b) J W Armstrong retired on 5 January 2009 and elected to take a pension commencement lump sum in exchange for part of his pension entitlement.
(c) Pensions in payment accrued between 1 January 1989 and 5 April 2005 are increased annually in line with the annual rise in the All Items Index of Retail Prices subject to a maximum of
5 per cent per annum. Post 5 April 2005, increases are subject to a maximum of 2.5 per cent per annum.
(d) In the event of the death of an executive or former executive Director, a pension equal to one half of the Director’s pre-commutation pension will become payable to a surviving spouse.
Executive Directors’ pensions – defined contribution
During the year the Company contributed £35,000 for G Anderson and £37,200 for S D Dasani to the Company’s group personal pension
arrangement.
Long Term Incentive Plan
As at 31 December 2009, Directors’ interests under the LTIP were as follows:
J W Newman
J W Armstrong
G Anderson
S D Dasani
Notes
Date of grant
16 Jan 07
16 Jan 07
31 May 07
24 Apr 08
28 Aug 08
5 May 09
28 Aug 08
5 May 09
1 January
2009
117,596
38,754
19,969
43,182
101,905
341,463
–
341,463
214,634
–
214,634
Granted
during the
year
–
–
–
–
–
–
875,000
875,000
–
600,000
600,000
Lapsed
–
38,754
19,969
43,182
101,905
–
–
–
–
–
–
31 December
Vested
2009
117,596(1)
–
–(1)
–
–(1)
–
–(1)
–
–
–
341,463(1)
–
875,000(2)
–
– 1,216,463
214,634(1)
–
600,000(2)
–
814,634
–
Vesting date
16 Jan 10
Market price
at grant date
Pence
248.0
248.0
217.5
110.0
102.5
30.25
28 Aug 11
5 May 12
102.5
30.25
28 Aug 11
5 May 12
(1) For LTIP awards granted in 2007 and 2008, 25 per cent of the shares subject to an award will vest for EPS growth of 3 per cent compound per annum in excess of RPI, increasing on a
straight-line basis to 100 per cent vesting for EPS growth of at least 7 per cent compound per annum in excess of RPI.
(2) Performance targets for LTIP awards granted in 2009 are set out under “Long Term Incentive Plan 2005” above.
(3) J W Armstrong retired on 5 January 2009. His awards lapsed as the performance criteria had not been met.
T H Roberts holds LTIP awards granted in April 2008(1) and May 2009(2) over 10,000 and 202,667 shares respectively which are subject to the
relevant performance criteria as noted for the executive Directors above.
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46
TT electronics plc
Annual Report 2009
GOVERNANCE
Directors’ remuneration report (continued)
Directors’ share options
Options set out below granted under the 1994 Executive Share Option Scheme (Approved) are marked(1), the 1996 Executive Share Option
Scheme (Unapproved) are marked(2) and the 2004 Company Share Option Plan (Unapproved) are marked(3):
J W Newman
J W Armstrong
Notes
1 January
2009
147,058
248,192
128,593
273,180
155,241
112,823
1,065,087
73,529
109,289
38,253
11,818
28,975
86,662
49,247
37,181
434,954
Lapsed
147,058
147,058
73,529
109,289
38,253
11,818
28,975
86,662
49,247
37,181
434,954
31 December
2009
– (2)
248,192(2)
128,593(2)
273,180(2)
155,241(3)
112,823(3)
918,029
– (2)
– (2)
– (2)
– (1)
– (2)
– (2)
– (3)
– (3)
–
Exercise
price
Exercise period
Pence
136.0
Sep 2002–Sep 2009
166.0 May 2004–May 2011
165.0
Apr 2005–Apr 2012
80.0 Mar 2006–Mar 2013
145.0 May 2007–May 2014
Apr 2008–Apr 2015
205.5
136.0
91.5
166.0
165.0
165.0
80.0
145.0
205.5
Sep 2002–Jul 2009
Mar 2003–Jul 2009
May 2004–Jul 2009
Apr 2005–Jul 2009
Apr 2005–Jul 2009
Mar 2006–Jul 2009
May 2007–Jul 2009
Apr 2008–Jul 2009
(1, 2) Options granted under the 1994 and 1996 Executive Share Option Schemes are generally exercisable not less than three and not more than ten years after their grant, and only then
if a performance criterion has been achieved. Prior to 2001 the Group must have experienced annual growth in its earnings per share of at least 2 per cent over and above the Retail
Price Index for a period of three years following the grant of the options. Options granted after 2000 carry a performance condition of annual growth in the Group’s earnings per share
of at least 4 per cent over and above the Retail Price Index for a period of three years following the grant of the options. The constituent parts of the condition are calculated each year
to see if the performance condition has been met.
(3) Options granted under the 2004 HMRC Approved and the Unapproved Company Share Option Plans carry a performance condition stating that the growth in the Group’s earnings
per share must exceed the increase in Retail Price Index by an average of 4 per cent per annum over a period of three consecutive years. Any year in which earnings per share is
negative cannot be included. Options granted under these schemes lapse on the sixth anniversary of the date of grant in the event that any exercise condition is no longer capable
of satisfaction.
During the year options granted to the executive Directors totalling 582,012 shares have lapsed. No options were exercised by the executive
Directors.
The closing middle market prices for an Ordinary share of 25p of the Company on 31 December 2009 and 2008 as derived from the Stock
Exchange Daily Official List were 73.25p and 34.88p respectively. During 2009 the middle market price of TT electronics plc Ordinary shares ranged
between 19.25p and 84p.
Approved by the Board on 12 March 2010 and signed on its behalf by:
D S Crowther
Chairman of the Remuneration Committee
47
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Report of the Independent Auditors to the members
of TT electronics plc
Independent auditor’s report to the members of TT electronics plc
We have audited the group financial statements of TT electronics plc for the year ended 31 December 2009 which comprise the consolidated
income statement, the consolidated balance sheet, the consolidated statement of comprehensive income, the consolidated cash flow statement,
the consolidated statement of changes in equity and the related notes. The financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 36, the Directors are responsible for the preparation of the
group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the group financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKP.
Opinion on financial statements
In our opinion the group financial statements:
• give a true and fair view of the state of the group’s affairs as at 31 December 2009 and of its loss for the year then ended;
• have been properly prepared in accordance with IFRS as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the information given in the Directors’ report for the financial year for which the group financial statements are prepared is consistent with the
group financial statements; and
• the information given in the Directors’ report on corporate governance set out on pages 38 and 39 with respect to internal control and risk
management systems in relation to financial reporting processes and the information given in the Directors’ report on page 35 about share
capital structures is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• a Directors’ report on corporate governance has not been prepared by the Company.
Under the Listing Rules, we are required to review:
• the Directors’ statement, set out on page 36, in relation to going concern; and
• the part of the Directors’ report on corporate governance relating to the Company’s compliance with the nine provisions of the 2008 Combined
Code specified for our review.
Other matters
We have reported separately on the parent company financial statements of TT electronics plc for the year ended 31 December 2009 and the
information in the Directors’ remuneration report that is described as having been audited.
David Miller
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
12 March 2010
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TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Consolidated income statement
for the year ended 31 December 2009
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Other operating income
Operating profit before exceptional items
Exceptional items – restructuring
– goodwill impairment
Operating (loss)/profit
Finance income
Finance costs
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
Minority interests
(Loss)/profit for the year attributable to shareholders
(Loss)/earnings per share
– basic
– diluted
Note
1
1
4
4
2
2
5
7
2009
£million
499.6
(420.4)
79.2
(33.7)
(40.2)
1.2
6.5
(14.2)
(3.8)
(11.5)
15.8
(21.5)
(17.2)
(2.4)
(19.6)
–
(19.6)
2008
£million
584.3
(480.8)
103.5
(37.5)
(40.4)
1.4
27.0
(3.8)
–
23.2
18.1
(24.0)
17.3
(5.7)
11.6
–
11.6
(12.6)p
(12.6)p
7.5p
7.5p
49
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Consolidated balance sheet
at 31 December 2009
Assets
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Financial asset
Cash and cash equivalents
Total current assets
Total assets
Liabilities
Current liabilities
Short-term borrowings
Financial derivatives
Trade and other payables
Current tax payable
Provisions for liabilities
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred tax
Pensions and other post-employment benefits
Provisions for liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Share options reserve
Hedging reserve
Translation reserve
Retained earnings
Minority interests
Total equity
Approved by the Directors on 12 March 2010 and signed on their behalf by:
G Anderson
Director
S D Dasani
Director
Note
2009
£million
2008
£million
9
10
11
19
12
13
18
13
17
18
22
21
17
19
27
21
22
14
15
15
16
111.3
65.9
17.6
4.9
199.7
83.9
85.1
0.3
24.7
194.0
393.7
11.2
0.5
88.7
1.7
8.9
111.0
70.4
5.9
43.7
0.2
6.7
126.9
237.9
155.8
38.7
0.2
1.0
(11.5)
38.7
86.3
2.4
155.8
137.4
74.5
23.6
5.5
241.0
120.0
111.5
–
10.1
241.6
482.6
51.2
2.9
99.4
3.1
5.6
162.2
72.1
8.7
18.6
0.1
8.0
107.5
269.7
212.9
38.7
0.2
1.2
(18.1)
53.9
134.6
2.4
212.9
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TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Consolidated statement of comprehensive income
for the year ended 31 December 2009
(Loss)/profit for the year
Exchange differences on net foreign currency investments
Hedging reserve
Actuarial net loss on defined benefit pension schemes
Comprehensive (expense)/income for the year attributable to shareholders
Note
27
2009
£million
(19.6)
(10.7)
2.1
(28.7)
(56.9)
2008
£million
11.6
39.4
(2.1)
(3.2)
45.7
Consolidated statement of changes in equity
for the year ended 31 December 2009
At 1 January 2008
Comprehensive (expense)/income for the period
Minority interests
Dividends paid
Share-based payment
At 31 December 2008
Comprehensive (expense)/income for the period
Share-based payment
At 31 December 2009
Share capital
£million
38.7
–
–
–
–
38.7
–
–
38.7
Share
premium
account
£million
0.2
–
–
–
–
0.2
–
–
0.2
Share options
reserve
£million
1.1
–
–
–
0.1
1.2
–
(0.2)
1.0
Hedging
reserve
£million
6.1
(24.2)
–
–
–
(18.1)
6.6
–
(11.5)
Translation
reserve
£million
(7.6)
61.5
–
–
–
53.9
(15.2)
–
38.7
Retained
earnings
£million
141.8
8.4
–
(15.6)
–
134.6
(48.3)
–
86.3
Minority
interest
£million
2.0
–
0.4
–
–
2.4
–
–
2.4
Total
£million
182.3
45.7
0.4
(15.6)
0.1
212.9
(56.9)
(0.2)
155.8
51
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Consolidated cash flow statement
for the year ended 31 December 2009
Operating activities
Operating profit before exceptional items
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share-based payment (credit)/expense
Gain on disposal of property, plant and equipment
Pension curtailment gain
Other non-cash items
(Decrease)/increase in financial derivatives
Decrease/(increase) in inventories
Decrease in receivables
(Decrease)/increase in payables
Cash generated from operations before exceptional payments
Special payments to pension funds
Exceptional restructuring costs
Net cash generated from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment and grants received
Development expenditure and purchase of patents and licences
Acquisition of subsidiary net of cash acquired
Loan repayment
Net cash proceeds from sale of business
Net cash used in investing activities
Cash flows from financing activities:
Interest paid (net)
Repayment of loans
New loans
Finance leases
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Exchange difference
Cash and cash equivalents at end of period
Cash and cash equivalents comprise:
Cash and cash equivalents
Bank overdrafts
Note
2009
£million
2008
£million
6.5
27.0
24.1
11.8
(0.2)
(0.4)
(1.9)
(0.5)
(2.7)
31.1
22.2
(6.1)
83.9
(2.2)
(9.6)
72.1
(5.3)
66.8
(9.4)
5.7
(6.9)
(1.0)
–
–
(11.6)
(3.8)
(17.6)
2.9
(0.1)
–
(18.6)
36.6
(12.2)
0.1
24.5
24.7
(0.2)
24.5
23.4
10.9
0.1
(1.9)
(1.2)
(4.8)
2.2
(6.6)
–
1.0
50.1
(2.2)
(1.7)
46.2
(3.6)
42.6
(21.9)
5.1
(10.9)
(13.9)
2.0
0.9
(38.7)
(3.8)
(0.6)
10.0
(0.4)
(15.6)
(10.4)
(6.5)
(5.2)
(0.5)
(12.2)
10.1
(22.3)
(12.2)
23
13
17
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TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Accounting policies for the consolidated
financial statements
The consolidated financial statements have been prepared under International Financial Reporting Standards (IFRS) as endorsed by the
European Union.
The financial statements have been prepared under the historical cost convention modified by the revaluation of financial assets and derivatives
held at fair value and by the revaluation at the transition date to IFRS of certain property, plant and equipment.
IAS 1 Presentation of Financial Statements, IFRS 8 Operating Segments, IAS 23 Borrowing Costs and IFRS 7 Amended Financial Instruments
disclosure have been adopted in the current period. The Group’s operating segments have been redesignated, see note 1, and the Group’s policy
on the capitalisation of borrowing costs has been changed. The Group is not yet required to adopt and has not adopted revised versions of IFRS 5,
IAS 7, IFRS 3, IAS 27 and IAS 28. Adoptions of these revisions would not have had any significant effect on these financial statements.
IAS 1 Presentation of Financial Statements (Revised) requires presentation of a comparative balance sheet at the beginning of the first
comparative period in some circumstances. Management considers that this is not necessary this year because the 2007 balance sheet is the
same as that previously published.
Basis of consolidation
The Group's financial statements consolidate the financial statements of TT electronics plc and all its subsidiaries. Subsidiaries are consolidated
from the date on which control transfers to the Group and are included until the date on which the Group ceases to control them. Transactions
between Group companies are eliminated, together with unrealised gains on inter-group transactions, on consolidation.
Revenue recognition
Revenue is the fair value of the consideration, usually the invoiced value, for the provision of goods and services to external customers excluding
value added tax and other sales related taxes in accordance with IAS 18.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have transferred to the buyer.
In most cases this coincides with the transfer of legal title of the goods.
Revenue from the provision of services is recognised when the amount of revenue can be measured reliably and the receipt of the economic
benefit is probable, in accordance with IAS 18. The amount of revenue recognised is determined by reference to the stage of completion.
Goodwill
Goodwill arising on the acquisition of a business, representing the difference between the cost of acquisition and the fair value of the identifiable
net assets acquired, is capitalised and is tested annually for impairment. The net book value of goodwill at the date of transition to IFRS has been
treated as deemed cost. On the subsequent disposal or discontinuance of a previously acquired business, the relevant goodwill is dealt with in the
income statement except for the goodwill already charged to reserves.
Other intangible assets
Intangible assets acquired as part of a business combination are stated in the balance sheet at their fair value at the date of acquisition less
accumulated amortisation. Internally generated intangible assets, principally product development costs, are stated in the balance sheet at cost
less accumulated amortisation. The amortisation rates for intangible assets are:
Acquired patents and licences
Product development costs
Customer relationships
– up to 10 years
– up to 3 years
– 3-8 years
Amortisation is on a straight-line basis.
The carrying values of intangible assets are tested for impairment when there is an indication that they may be impaired.
Foreign currencies
Initial recognition
Foreign currency transactions are recorded on initial recognition in the functional currency of the relevant operating company by applying to the
foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction.
Translation of foreign operations
Assets and liabilities of overseas subsidiaries are translated into sterling at the rate of exchange ruling at the balance sheet date. The results and
cash flows of overseas subsidiaries are translated into sterling using an exchange rate that approximates to the exchange rates at the dates
of the transactions. The exchange differences arising from these translations are recognised within equity and reported in the statement of
comprehensive income. All other exchange differences are dealt with through the consolidated income statement. On disposal of an overseas
subsidiary any cumulative exchange movements relating to that subsidiary held in the translation reserve are transferred to the consolidated
income statement.
The Group uses forward currency contracts in order to partially hedge its exposure to foreign exchange risks.
53
TT electronics plc
Annual Report 2009
Property, plant and equipment
Property, plant and equipment are stated at cost less a provision for depreciation. Depreciation is calculated so as to write-off the cost less
estimated residual value of the assets in equal instalments over their expected useful lives. No depreciation is provided on freehold land.
Depreciation is provided on other assets at the following rates:
Freehold buildings
Leasehold buildings
Plant, equipment and vehicles
– 2 per cent
– 2 per cent (or over the period of the lease if less than 50 years)
– 10 per cent to 33 per cent
The carrying values of property, plant and equipment are reviewed for impairment when there is an indication that they may be impaired.
Borrowing costs from 1 January 2009 directly attributable to the acquisition, construction or production of assets that take a substantial period of
time to get ready for use are capitalised. In previous financial years such costs were expensed. The effect in 2009 is immaterial.
Inventories
Inventories are valued at the lower of cost, including related overheads, and net realisable value. Cost comprises direct materials and, where
applicable, direct labour costs and the overheads incurred in bringing inventories to their present location and condition. Cost is calculated on a
weighted average cost basis.
Deferred taxation
Deferred taxation is provided on taxable temporary differences between the carrying amounts of assets and liabilities in the financial statements
and their corresponding tax bases. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against
which temporary differences can be utilised or that they will reverse. No provision is made for deferred tax which would become payable on the
distribution of retained profits by overseas subsidiaries unless there is an intention to distribute such profits. Deferred tax is measured using the
tax rates expected to apply when the asset is realised or the liability settled based on tax rates enacted or substantially enacted by the balance
sheet date. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless
the related transaction is a business combination or affects tax or accounting profit.
Leases
Assets acquired under finance leases which confer substantially all the risks and rewards of ownership of an asset are capitalised within property,
plant and equipment and the outstanding rental instalments, net of interest, are shown in borrowings. Assets held under finance leases are
depreciated over the shorter of the lease terms and the expected useful lives of the assets.
Payments on operating leases are charged to the income statement on a straight-line basis over the lease term.
Trade and other receivables
Trade and other receivables are carried at the invoiced or contractually agreed amount less any required allowances for uncollectable amounts.
Financial derivatives
Derivative financial instruments are measured at fair value. The Group uses forward foreign exchange contracts and interest rate instruments to
manage the relevant exposures. These derivative financial instruments are classified as fair value through profit or loss and all changes in fair value
are recognised in the consolidated income statement.
Hedge accounting
The Group uses cash flow hedges to reduce its exposure to exchange rate, interest rate and other financial risks. The application of the hedge is
documented before hedge accounting commences and is regularly reviewed for effectiveness. The net gains or losses relating to hedged items
to the extent that the hedge is effective are dealt with in the statement of comprehensive income. Any ineffective portions are dealt with in the
income statement.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand, demand deposits and short-term highly liquid investments that are easily convertible into
known amounts of cash.
Bank borrowings
Bank borrowings are carried at amortised cost.
Trade payables
Trade payables are carried at the amounts expected to be paid to counterparties.
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TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Accounting policies for the consolidated
financial statements (continued)
Employee benefits
The Group operates defined benefit post-retirement benefit schemes and defined contribution pension schemes.
The liability recognised in the balance sheet for defined benefit schemes is the present value of schemes’ liabilities less the fair value of schemes’
assets. The operating and financing costs of defined benefit schemes are recognised separately in the income statement. Operating costs
comprise the current service cost, any gains or losses on settlement or curtailments, and past service costs where benefits have vested. Finance
items comprise the unwinding of the discount on schemes’ liabilities and the expected return on schemes’ assets. Actuarial gains or losses
comprising differences between the actual and expected return on schemes’ assets, changes in schemes’ liabilities due to experience and
changes in actuarial assumptions are recognised immediately in the statement of comprehensive income.
Pension costs for the defined contribution plans represent the amount of contributions payable in respect of the accounting period.
Government grants
Government grants relating to non-current assets are treated as deferred income and credited to the income statement by equal instalments over
the anticipated useful lives of the assets to which the grants relate. Other grants are credited to the income statement over the period of the
project to which they relate.
Research and development
Research costs are written-off as incurred. Development costs incurred in the development of new or substantially improved products and
processes are capitalised as intangible assets if it is probable that the expenditure will generate future economic benefits and can be measured
reliably. Such costs are amortised on a straight-line basis over three years.
Share-based payments
The fair value at the date of grant of share-based remuneration is calculated using appropriate pricing models and charged to the income
statement on a straight-line basis over the vesting period of the award. The charge to the income statement takes account of the estimated
number of shares that will vest. All share-based remuneration is equity settled.
Discontinued operations
The Group reports a business as a discontinued operation when its sale, probable sale or abandonment results in the cessation of a major line of
business or geographical area of operation.
Segmental reporting
Operating segments are those components of the business where results are regularly reviewed by the Board to assess their performance and to
make resource allocation decisions. The operating segments are identified by the products and services they supply and the similarity of their
economic characteristics and not by their geographical area of operation.
Critical judgements in applying the entity’s accounting policies
Other than the key sources of estimation uncertainty there were no material transactions or events during the year requiring critical judgements
in applying the Group's accounting policies.
Key sources of estimation uncertainty
i Recoverability of internally generated intangible assets
The recoverability of capitalised development costs is dependent on assessments of the future commercial viability of the relevant products and
processes. The carrying amount of £13.4 million at 31 December 2009 (2008: £18.3 million) is considered to be fairly stated.
ii Impairment of goodwill
The carrying amount of goodwill is £65.9 million (2008: £74.5 million). This has been tested for impairment by estimating the value in use of the
cash-generating units to which it has been allocated. The value in use is estimated by discounting future cash flows. This process gives rise to
uncertainty in respect of the cash flows themselves and the discount factors applied. An impairment of £3.8 million has been charged as an
exceptional cost in 2009.
iii Defined benefit pension obligations
The defined benefit pension obligations are calculated using a number of assumptions, such as future inflation, salary increases and mortality and
the obligation is then discounted to its present value using an assumed discount rate. The pension deficit of £43.7 million at 31 December 2009
has been calculated using the assumptions set out in note 27. A decrease of 0.1 per cent in the discount rate of 5.8 per cent increases the deficit
by approximately £6.6 million. An increase of 0.1 per cent in the inflation rate of 3.4 per cent increases the deficit by approximately £5.7 million.
The deferred tax asset recognised in relation to pension obligations has been restricted to £5.2 million (2008: £4.1 million).
iv Provisions
The Group makes appropriate provision on a consistent basis for risks of product liability, litigation, credit risk and other normal trading exposures.
v Deferred tax
The recognition of deferred tax assets is dependent on assessments of future taxable income in the countries concerned.
55
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements
1 Segmental reporting
Following the Strategy Review, the Group’s businesses have been reorganised into the following divisions with effect from 1 January 2009:
• Components – specialist resistive components and microcircuits, connectors and interconnection systems.
• Sensors – electronic accelerator pedals, engine and wheel speed, temperature and pressure sensors and chassis height sensors.
• Integrated Manufacturing Services – the provision of global electronics manufacturing capability with logistics, interconnect and
integrated solutions.
• Secure Power – standby generation and uninterruptible power systems manufacture and service.
• General Industrial – manufacturing operations serving a range of market sectors with applications including magnetics, electrical fusegear,
compounding and fine wire.
Further descriptions of the operating segments are given in the Business review on pages 22 to 26. Comparatives have been restated.
Revenue
Sector result
– Components
– Sensors
– Integrated Manufacturing Services
– Secure Power
– General Industrial
Total
Exceptional operating items (note 4)
Operating (loss)/profit
Finance income (note 2)
Finance costs (note 2)
(Loss)/profit before tax
Taxation (note 5)
(Loss)/profit for the year
There are no significant sales between sectors.
– Components
– Sensors
– Integrated Manufacturing Services
– Secure Power
– General Industrial
Sector assets and liabilities
Pensions and other post-employment benefits
Unallocated assets and liabilities
Total net assets
2009
£million
190.8
105.4
75.1
59.1
69.2
499.6
2008
£million
192.1
125.9
103.4
65.9
97.0
584.3
2009
£million
5.9
(3.9)
2.4
4.8
(2.7)
6.5
(18.0)
(11.5)
15.8
(21.5)
(17.2)
(2.4)
(19.6)
2008
£million
9.7
1.1
6.0
7.8
2.4
27.0
(3.8)
23.2
18.1
(24.0)
17.3
(5.7)
11.6
2009
£million
181.1
80.9
39.1
28.8
34.2
364.1
–
29.6
393.7
Assets
2008
£million
226.8
98.1
56.9
33.9
51.3
467.0
–
15.6
482.6
2009
£million
32.3
25.2
19.2
17.2
11.0
104.9
43.7
89.3
237.9
Liabilities
Total capital employed
2008
£million
38.3
24.6
22.2
15.5
15.5
116.1
18.6
135.0
269.7
2009
£million
148.8
55.7
19.9
11.6
23.2
259.2
(43.7)
(59.7)
155.8
2008
£million
188.5
73.5
34.7
18.4
35.8
350.9
(18.6)
(119.4)
212.9
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56
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
1 Segmental reporting (continued)
– Components
– Sensors
– Integrated Manufacturing Services
– Secure Power
– General Industrial
Total – before exceptional items
Exceptional items
Total
Geographical analysis
The Group operates globally. Revenue by geographical destination is:
United Kingdom
Rest of Europe
North America
Rest of the World
Capital additions
Depreciation
and amortisation
2009
£million
3.9
9.1
0.5
0.4
2.4
16.3
–
16.3
2008
£million
11.2
16.0
1.0
1.0
3.6
32.8
–
32.8
2009
£million
13.9
16.5
2.2
0.6
2.7
35.9
–
35.9
2009
£million
91.5
195.9
132.5
79.7
499.6
2008
£million
13.6
14.2
2.3
0.6
3.2
33.9
0.4
34.3
2008
£million
108.3
213.4
154.3
108.3
584.3
Revenue from transactions with any individual major customers is below 10% of Group revenues. Revenue from services is less than 2% of Group
revenues. All other revenue is from the sale of goods.
The carrying amount of non current assets, excluding deferred tax assets, analysed by the geographical area in which the assets are located is
as follows:
United Kingdom
Rest of Europe
North America
Rest of the World
2009
£million
40.0
58.7
84.5
11.6
194.8
2008
£million
47.6
72.0
101.3
14.6
235.5
57
TT electronics plc
Annual Report 2009
2 Finance costs – net
Interest receivable
Expected return on pension scheme assets
Finance income
Interest on bank overdrafts and loans
Interest on finance leases
Unwinding of the discount on pension scheme liabilities
Finance costs
Finance costs – net
3 (Loss)/profit for the year
(Loss)/profit for the year is stated after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets included in cost of sales
Net foreign exchange losses
Cost of inventories recognised as an expense
Employee emoluments
Fees to Group Auditors
– Company and consolidation statutory audits
Fees to Group Auditors and associates
– statutory audit of subsidiaries
– tax services
Fees to other Auditors
– statutory audit of subsidiaries
– tax services
Government grants credited
Share-based payment
4 Exceptional items
Restructuring costs
AB Automotive – closure costs
– property profit
General Industrial – Climate control exit costs
Sensors – European restructuring
Sensors – Romford closure
IMS – UK consolidation including Aylesbury closure
Components – BI SMT closure of manufacturing
General Industrial restructuring
Other restructuring
Profit on sale of properties
Exceptional restructuring costs
Exceptional impairment of goodwill, see note 10
Exceptional items
2009
£million
0.2
15.6
15.8
3.6
–
17.9
21.5
5.7
2009
£million
24.1
11.8
0.8
420.4
139.3
0.1
0.8
0.2
0.1
0.1
(1.1)
(0.2)
2009
£million
4.1
(0.9)
3.2
7.4
0.4
1.2
1.0
1.4
0.6
(1.0)
14.2
3.8
18.0
2008
£million
0.4
17.7
18.1
4.4
0.1
19.5
24.0
5.9
2008
£million
23.4
10.9
1.1
480.8
153.9
0.1
0.8
0.2
0.1
0.1
(1.4)
0.1
2008
£million
2.7
–
2.7
–
1.1
–
–
–
–
–
3.8
–
3.8
Exceptional restructuring costs include redundancy costs of £13.7 million, impairment to plant and equipment of £1.0 million, loss on disposal of
surplus plant and equipment of £1.0 million and stock write offs of £0.4 million.
The Group reports income or expenditure as exceptional when the size, nature or function of an item or aggregation of similar items is such that
separate presentation is relevant to an understanding of its financial position.
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58
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
5 Taxation
Current tax
Deferred tax (note 19)
2009
£million
4.1
(1.7)
2.4
2008
£million
5.9
(0.2)
5.7
UK tax is calculated at 28% (2008: 28.5%) of taxable profit. Overseas tax is calculated at the rates ruling in the relevant countries. Despite the Group
reporting a loss before taxation a tax charge of £2.4 million (2008: £5.7 million) has arisen due to profits generated in certain overseas countries.
An overall tax rate of 33
% was reported for 2008.
The tax charge is explained as follows:
(Loss)/profit before taxation
Tax at the UK income tax rate
Effect of tax rates of non-UK subsidiaries
Utilisation of losses not previously recognised
Losses for which no deferred tax asset is recognised
Expenses not deductible for tax purposes
Other
6 Dividends
No dividends have been paid in the year:
Final dividend for prior year
Interim dividend for current year
The Directors are not recommending the payment of a final dividend for 2009.
7 (Loss)/earnings per share
Headline(1)
Basic
Diluted
2009
£million
(17.2)
(4.8)
(0.1)
(1.0)
8.0
0.9
(0.6)
2.4
2009
pence per
share
–
–
–
2009
£million
–
–
–
2008
pence per
share
6.36
3.69
10.05
2008
£million
17.3
4.9
0.6
(1.1)
0.5
0.8
–
5.7
2008
£million
9.9
5.7
15.6
2009
pence per
share
(1.3)
(12.6)
(12.6)
2008
pence per
share
9.2
7.5
7.5
(Loss)/earnings per share has been calculated by dividing the (loss)/profit attributable to shareholders by the weighted average number of shares
in issue during the year. The numbers used in calculating basic and fully diluted earnings per share are reconciled below:
(Loss)/profit for the year attributable to shareholders
2009
£million
(19.6)
2008
£million
11.6
59
TT electronics plc
Annual Report 2009
7 (Loss)/earnings per share (continued)
Weighted average number of shares in issue:
Basic
Adjustment for share options
Diluted
2009
million
155.0
–
155.0
2008
million
155.0
0.1
155.1
(1) Headline loss per share on continuing operations before exceptional items of 1.3p (2008: earnings of 9.2p) is based on the loss for the year of £19.6 million (2008: profit of £11.6 million)
adjusted for exceptional items of £18.0 million (2008: £3.8 million) less the associated taxation of £0.4 million (2008: £1.1 million).
8 Employees
The average number of full time equivalent employees (including Directors) during the year was:
By function
Production
Sales and distribution
Administration
By sector
– Components
– Sensors
– Integrated Manufacturing Services
– Secure Power
– General Industrial
Total continuing operations
The aggregate emoluments including those of Directors for the year were:
Wages and salaries
Employers’ social security charges
Employers’ pension costs
Remuneration in respect of the Directors was as follows:
Emoluments
2009
number
2008
number
5,369
598
436
6,403
3,027
1,044
1,056
587
689
6,403
2009
£million
115.3
20.2
3.8
139.3
6,455
645
492
7,592
3,326
1,280
1,343
630
1,013
7,592
2008
£million
129.1
21.3
3.5
153.9
2009
£million
1.1
2008
£million
1.7
Further details of individual Directors’ remuneration, pension benefits and share options are shown in the Directors’ remuneration report on
pages 42 to 46.
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60
TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
9 Property, plant and equipment
Cost
At 1 January 2008
Additions
Acquisition of subsidiary
Disposals
Exchange translation differences
At 1 January 2009
Additions
Disposals
Exchange translation differences
At 31 December 2009
Accumulated depreciation and impairment
At 1 January 2008
Depreciation charge for the year
Acquisition of subsidiary
Eliminated on disposals
Exchange translation differences
At 1 January 2009
Depreciation charge for the year
Impairment
Eliminated on disposals
Exchange translation differences
At 31 December 2009
Carrying amount
At 31 December 2009
At 31 December 2008
The following rates are used for the depreciation of property, plant and equipment:
Land and
buildings
£million
Plant and
equipment
£million
Total
£million
55.9
3.4
2.6
(3.7)
10.9
69.1
0.5
(1.9)
(2.9)
64.8
13.7
1.7
–
(2.7)
2.5
15.2
2.1
–
(0.2)
(0.8)
16.3
48.5
53.9
291.3
18.5
2.6
(8.7)
60.6
364.3
8.9
(26.2)
(15.9)
331.1
221.5
21.7
1.0
(8.3)
44.9
280.8
22.0
1.0
(23.7)
(11.8)
268.3
347.2
21.9
5.2
(12.4)
71.5
433.4
9.4
(28.1)
(18.8)
395.9
235.2
23.4
1.0
(11.0)
47.4
296.0
24.1
1.0
(23.9)
(12.6)
284.6
62.8
83.5
111.3
137.4
Freehold property
Leasehold land and buildings 2% (or over the period of the lease if less than 50 years)
Plant and equipment
10% to 33%
2%
The carrying amount of land and buildings includes £0.3 million (2008: £0.4 million) in respect of assets held under finance leases.
The impairment of plant and equipment relates to items that are no longer of economic value following the exit from the climate
control business.
61
TT electronics plc
Annual Report 2009
10 Goodwill
Cost
At 1 January 2008
Acquisition of subsidiaries
Exchange translation differences
At 1 January 2009
Impairment
Exchange translation differences
At 31 December 2009
Goodwill is primarily attributed to the following cash generating units in the sectors shown:
Bl Technologies – Components
Optek Technology Inc – Components, after impairment of £3.8 million
TT electronics integrated manufacturing services, Inc USA – Integrated Manufacturing Services
TT electronics integrated manufacturing services (Suzhou) Co Ltd – Integrated Manufacturing Services
New Chapel Electronics Limited – Components
Semelab Limited – Components
£million
52.3
5.7
16.5
74.5
(3.8)
(4.8)
65.9
£million
28.5
18.0
7.9
5.1
3.4
2.3
Goodwill has been tested for impairment by assessing the value in use of the relevant cash generating units. The value in use calculations were
based on projected cash flows for the years 2010 onwards. Cash flows for 2010 are based on the budget for the year, which was finalised in
December 2009. Cash flows for 2011 and 2012 are based on the financial data derived from the annual strategic review. The strategic review was
conducted for every subsidiary and reviewed in depth by key management. The results of the strategic review have been endorsed by the Board.
Cash flows for 2013 and 2014 assume sales growth of 6% per annum and beyond 2014 the assumed sales growth rate is 2%. Using these
conservative assumptions and discounting future cash flows by 10% per annum which is the estimated weighted average cost of capital for the
businesses concerned, there was no impairment except for Optek Technology Inc where the impairment was £3.8 million. Sensitivity analyses
using a range of sales growth projections and discount rates confirmed that Optek’s goodwill was impaired but that the remainder were not
impaired. The sensitivity analyses for Optek showed a range from no impairment (sales growth of 10% up to 2013 and 3% in perpetuity and a
discount rate of 10%) to impairment of £7.4 million (based on 6% sales growth up to 2015 and 3% thereafter discounted at 12%). The conclusion
reached from the value in use assessments and consideration of Optek’s trading history was that the goodwill attributable to Optek Technology
Inc of £21.8 million was impaired by £3.8 million.
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TT electronics plc
Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
11 Other intangible assets
Cost
At 1 January 2008
Additions
Acquisition of subsidiaries
Retirements
Exchange translation differences
At 1 January 2009
Additions
Retirements
Exchange translation differences
At 31 December 2009
Amortisation
At 1 January 2008
Charge for the year
Retirements
Exchange translation differences
At 1 January 2009
Charge for the year
Retirements
Exchange translation differences
At 31 December 2009
Carrying amount
At 31 December 2009
At 31 December 2008
Product
development
costs
£million
Patents
and licences
£million
Customer
relationships
£million
Total
£million
27.7
10.3
–
(9.3)
7.3
36.0
6.9
(10.6)
(2.0)
30.3
13.4
10.0
(9.3)
3.6
17.7
10.8
(10.6)
(1.0)
16.9
13.4
18.3
3.7
0.6
0.2
–
0.2
4.7
–
–
(0.1)
4.6
1.3
0.4
–
0.1
1.8
0.4
–
–
2.2
2.4
2.9
1.1
–
2.3
–
0.2
3.6
–
–
(0.1)
3.5
0.5
0.5
–
0.2
1.2
0.6
–
(0.1)
1.7
1.8
2.4
32.5
10.9
2.5
(9.3)
7.7
44.3
6.9
(10.6)
(2.2)
38.4
15.2
10.9
(9.3)
3.9
20.7
11.8
(10.6)
(1.1)
20.8
17.6
23.6
Product development costs are amortised over up to three years and are retired when fully written-off. Patents and licences are amortised over
ten years. The attributed value of customer relationships are amortised over 3-8 years.
12 Inventories
Raw materials
Work in progress
Finished goods
2009
£million
37.8
19.5
26.6
83.9
2008
£million
51.9
24.3
43.8
120.0
Inventories are stated after deduction of a provision for slow moving and obsolete items of £17.9 million (2008: £19.0 million). The carrying
amount of inventories has reduced by £4.7 million as a result of currency exchange rate movements.
63
TT electronics plc
Annual Report 2009
13 Other financial assets and prepayments
Financial assets
Loans and receivables (including cash and cash equivalents)
Financial derivatives
Trade and other receivables
Trade receivables
Prepayments
Other debtors
The carrying amount of trade and other receivables approximates to their fair value.
Financial derivatives
Financial derivatives are the market value of forward currency contracts.
Cash and cash equivalents
2009
£million
101.8
0.3
102.1
2008
£million
113.0
–
113.0
2009
£million
2008
£million
68.3
8.0
8.8
85.1
2009
£million
0.3
2009
£million
24.7
98.1
8.1
5.3
111.5
2008
£million
–
2008
£million
10.1
Cash and cash equivalents comprise bank balances and short-term bank deposits. The carrying amount approximates to fair value.
Credit risk
Credit risk arises from the possibility that counterparties may not be able to settle their obligations as they fall due. The credit risk on the cash and
cash equivalents is negligible because the counterparties are banks with high credit ratings. The carrying amount approximates to fair value.
Trade receivables are stated net of an allowance for estimated irrecoverable amounts of £2.3 million (2008: £2.8 million) and the carrying amount
approximates to fair value. The Group is not reliant on any particular customer in the markets in which it operates and there is no significant
concentration of credit risk.
An analysis of the age of loans and receivables (excluding cash) that were past due at the year end but for which no impairment provision was
made is:
Not more than three months
More than three months but not more than six months
More than six months but not more than 1 year
2009
£million
11.0
1.1
1.3
13.4
2008
£million
20.7
1.4
0.1
22.2
The Group has strict procedures in place to manage the credit risk on trade receivables. It ensures credit limits are properly authorised and that
debts are collected in a timely manner.
Trade receivables are denominated in the currencies in which the Group trades. The Group’s policy is that receivables and payables not in the
functional currency of the subsidiary concerned are covered by forward foreign currency exchange contracts. The exchange risk at Group level is
therefore restricted to the risk on the translation of overseas assets, liabilities and cash flows into sterling.
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Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
13 Other financial assets and prepayments (continued)
Financial assets analysed by currency are:
Sterling
US dollar
Euro
Other
14 Share capital
Authorised
226,000,000 (2008: 226,000,000) Ordinary shares of 25p each
Issued and fully paid
154,952,795 (2008: 154,952,795) Ordinary shares of 25p each
The Ordinary shares of 25p each are equity share capital.
2009
£million
35.8
18.5
30.4
17.4
102.1
2008
£million
35.5
24.5
23.3
29.7
113.0
2009
£million
2008
£million
56.5
56.5
38.7
38.7
Potential issues of Ordinary shares
The Company has share option schemes, which are closed for future grants, and a Long Term Incentive Plan (“LTIP”) for senior executives.
Details of the share options outstanding during the year are:
At 1 January
Granted
Forfeited
Exercised
Expired
At 31 December
Exercisable at 31 December
2009
Weighted
average
Number of
Exercise
price (p)
share options
134.2 5,136,108
–
–
(849,302)
125.6
–
–
146.4
(141,387)
135.3 4,145,419
546,730
145.0
2008
Weighted
average
exercise
price (p)
135.0
–
111.4
–
300.0
134.2
145.0
Number of
share options
4,145,419
–
(1,036,879)
–
(490,497)
2,618,043
447,419
For share options outstanding at 31 December 2009 the range of exercise prices was 80.0p to 205.5p (2008: 80.0p to 205.5p) and the weighted
average remaining contractual life was 3.0 years (2008: 3.4 years). Options are equity settled, have a life of ten years (with the exception of certain
schemes where the options lapse after six years if the performance criteria are not achieved) and vest after three years. Exercise of the options is
conditional on there being an increase in earnings per share over any consecutive three year period of 2% per annum for options granted prior to
2001 and 4% per annum for options granted after 2000 above the increase in the Retail Price Index over the same period.
On 5 May 2009 and 27 October 2009 grants of awards were made under the LTIP for the issue of up to 3,799,835 and 202,667 shares in 2012.
During the year, 733,953 shares were forfeited and 5,458,293 shares were outstanding as at 31 December 2009 (2008: 2,189,744 shares).
The award is a contingent right to receive shares in the future, subject to continued employment and the achievement of predetermined
performance criteria. The performance targets attached to awards granted in 2009 require the achievement of earnings per share (“EPS”) and total
shareholder return (“TSR”) targets as follows:
• The performance target attached to 50% of an award is based on three year EPS targets: 25% of the shares subject to this part of the award will
vest for EPS growth of 3% compound per annum in excess of Retail Price Index (“RPI”), increasing on a straight-line basis to 100% vesting for EPS
growth of at least 7% compound per annum in excess of RPI; and
• The performance target attached to the other 50% of an award is based on TSR performance targets against companies within the FTSE
SmallCap (excluding investment trusts) index; 25% of shares subject to this part of the award will vest at median performance increasing on a
straight-line basis to 100% vesting at the upper quartile of the comparator group. As well as the TSR targets, the Committee will consider the
Company's underlying financial performance to ensure that vesting percentages under this part of an award are appropriate.
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Annual Report 2009
14 Share capital (continued)
The estimated fair values of the LTIP grants on 5 May 2009 and 27 October 2009 are 28.75p and 75.0p per share respectively for those with non
market conditions and 7.19p and 18.75p per share for those with market conditions respectively. These fair values were calculated using the
following inputs:
Share price
Dividend per annum
Grant vesting
5 May
Market
Condition
28.75p
–
100%
5 May
Non-Market
Condition
28.75p
–
25%
27 October
Market
Condition
75.0p
–
100%
27 October
Non-Market
Condition
75.0p
–
25%
The Group credited £0.2 million (2008: charge of £0.1 million) to the Consolidated income statement in respect of share-based payments.
The credit represents the cost allocated to 2009 in respect of the LTIP grants in 2007, 2008 and 2009 offset by credits arising from the 2006 LTIP
not vesting and attrition to options and LTIPs issued in 2003, 2005, 2007 and 2008.
15 Hedging and translation reserves
At 1 January 2008
Exchange differences on translation of foreign operations
Exchange differences on US$124 million borrowings
Cash flow hedges
At 1 January 2009
Exchange differences on translation of foreign operations
Tax on exchange differences
Exchange differences on US$124 million
Cash flow hedges
At 31 December 2009
borrowings
16 Retained earnings
At 1 January 2008
Profit for the year
Actuarial net loss on defined benefit pension schemes
Dividends paid
At 1 January 2009
Loss for the year
Actuarial net loss on defined benefit pension schemes (see note 27)
At 31 December 2009
Hedging
reserve
£million
6.1
–
(22.1)
(2.1)
(18.1)
–
–
4.5
2.1
(11.5)
Translation
reserve
£million
(7.6)
61.5
–
–
53.9
(15.6)
0.4
–
–
38.7
Total
£million
(1.5)
61.5
(22.1)
(2.1)
35.8
(15.6)
0.4
4.5
2.1
27.2
£million
141.8
11.6
(3.2)
(15.6)
134.6
(19.6)
(28.7)
86.3
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Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
17 Borrowings
Bank overdrafts
Bank loans
Finance leases
The borrowings are repayable as follows:
In one year or less
In more than one year but not more than two years
In more than two years but not more than three years
In more than three years but not more than four years
In more than four years but not more than five years
In more than five years
In more than one year
The carrying amounts of the Group's borrowings are denominated in the following currencies:
Sterling
US dollar
Euro
Other
Borrowings of £77.0 million (2008: £96.9 million) are at fixed interest rates for an average period of 0.1 years (2008: 0.4 years).
The average interest rates at the balance sheet date were:
Bank overdrafts
Bank loans
Finance leases
The estimated fair value of borrowings is:
Bank overdrafts
Bank loans
Finance leases
2009
£million
0.2
81.0
0.4
81.6
2009
£million
11.2
70.0
0.1
0.1
0.1
0.1
70.4
2009
£million
75.6
–
6.0
–
2009
%
5.5
1.1
8.0
2008
£million
22.3
100.5
0.5
123.3
2008
£million
51.2
1.7
70.0
0.1
0.1
0.2
72.1
2008
£million
22.2
89.0
11.7
0.4
2008
%
3.1
4.0
7.8
2009
£million
0.2
81.0
0.4
2008
£million
22.3
100.5
0.5
The borrowing facilities available to the Group at 31 December 2009 amounted to £142.1 million (2008: £166.2 million).
At 31 December 2009, the Group had available £27.8 million (2008: £14.9 million) of undrawn committed borrowing facilities.
The Group borrowings at 31 December 2009 are funded mainly through bank overdrafts including short-term committed facilities of £38.7 million
and a committed unsecured £70.0 million multi-currency revolving bank loan facility which expires in April 2011. Under this facility funds can be
drawn in sterling, US dollars or euros or a combination thereof at fixed rates of interest for periods varying from one month to a year. Interest rates
are at a fixed margin over the inter-bank borrowing rate at the date the funds are drawn. The £70 million multi-currency bank loan was drawn
down in US dollars up to 2 June 2009 and in sterling thereafter. The Group’s approach to liquidity risk is described in the Business review.
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Annual Report 2009
17 Borrowing (continued)
Hedge of net investment
The Group had designated $124.0 million of its borrowings as a currency hedge of its US dollar denominated net assets until 2 June 2009.
This is an effective partial hedge. The net result of translating the US dollar net assets and the $124.0 million of borrowings is dealt with in the
translation and hedging reserves and reported in the Consolidated statement of comprehensive income, together with the exchange difference
arising from the translation of the Group's other overseas net assets.
In 2009 there was a net loss of £10.7 million (2008: net gain of £39.4 million) on translation of overseas assets after accounting for this hedge.
Reconciliation of net cash flow to movement in net debt
At 1 January 2008
Cash flow
Exchange differences
At 31 December 2008
Cash flow
Exchange differences
At 31 December 2009
18 Derivative financial instruments
Forward foreign currency contracts
Interest rate hedge
Net cash/
overdraft
£million
(5.2)
(6.5)
(0.5)
(12.2)
36.6
0.1
24.5
Loans and
finance
leases
£million
(69.8)
(9.0)
(22.2)
(101.0)
14.8
4.8
(81.4)
Net debt
£million
(75.0)
(15.5)
(22.7)
(113.2)
51.4
4.9
(56.9)
2009
Assets
£million
0.3
–
2008
Assets
£million
–
–
2009
Liabilities
£million
–
0.5
2008
Liabilities
£million
2.9
–
The Group uses forward foreign exchange contracts to reduce currency exposure on sales and purchasing transactions for up to a year ahead.
At 31 December 2009 the Group had an interest rate cap applying to $50.0 million of borrowings at a rate of 4.75% from 4 February 2008 to
4 February 2010. This cap is designated as a cash flow hedge and marked to market at the year end. At 31 December 2009 and 31 December 2008
the market value was £nil million.
At 31 December 2009 the Group had an interest rate swap fixing the interest rate on $50.0 million of borrowings to April 2011. This swap is
designated as a cash flow hedge and marked to its market value, a liability of £0.5 million at the year end.
The Group hedged the effect of currency movements against sterling on the translation of 2009 profit earned in US dollars and Chinese yuan, by
selling forward US dollars and Chinese yuan for sterling at fixed exchange rates. At 31 December 2009 contracts were in place to hedge the
translation of 2010 profits for $3.6 million and euro 0.6 million. Subsequently contracts for the sale of a further $4.0 million were entered into.
The contracts were marked to market at 31 December 2009 and were a net liability of less than £0.1 million.
The Group's financial assets and liabilities are sensitive to movements in currency exchange rates against sterling. Analysis of financial assets and
liabilities by currency are given in notes 13 and 22, the major overseas currencies being the US dollar and the euro. The effect of any such currency
movement on the net financial liabilities is reported in equity in the Group accounts.
US dollar – effect of 10% strengthening: an increase in equity of £0.3 million
Euro
– effect of 10% strengthening: an increase in equity of £1.2 million
Whilst the Group had a small net financial asset in US dollars, overall it had a large net asset position when taking into account inventory and non-
current assets. Details of the Group's exposure to risk are given on pages 28 to 29 of the Business review.
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Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
19 Deferred tax
At 1 January 2008
Income statement
Exchange differences
At 1 January 2009
Income statement
Exchange differences
At 31 December 2009
Deferred tax assets
Deferred tax liabilities
Accelerated
capital
allowances
£million
(5.4)
0.6
(1.6)
(6.4)
(0.3)
0.5
(6.2)
Deferred
development
costs
£million
(4.1)
(0.1)
(1.3)
(5.5)
1.2
0.3
(4.0)
Retirement
benefit
obligations
£million
4.3
–
(0.2)
4.1
0.9
0.2
5.2
Other
£million
3.4
(0.3)
1.5
4.6
(0.1)
(0.5)
4.0
2009
£million
4.9
(5.9)
Total
£million
(1.8)
0.2
(1.6)
(3.2)
1.7
0.5
(1.0)
2008
£million
5.5
(8.7)
At 31 December 2009 the Group had unused tax losses of £28.2 million (2008: £14.0 million) for which no deferred tax asset has been recognised.
None of these tax losses have an expiry date.
At the balance sheet date the aggregate unrecognised deferred tax liability in respect of undistributed earnings of subsidiaries is £1.4 million
(2008: £2.1 million).
20 Obligations under finance leases
Amounts payable under finance leases:
One year or less
Between one and five years
Over five years
Minimum lease payments
Present value of minimum
lease payments
2009
£million
2008
£million
2009
£million
2008
£million
0.1
0.3
0.1
0.1
0.3
0.2
0.1
0.2
0.1
0.1
0.2
0.2
The obligations derive mainly from property leases where the risks and rewards of ownership are considered to be with the Group and which are
therefore accounted for as finance leases. The average implicit interest rate used to evaluate the obligation is 8% (2008: 8%). The fair value of the
lease obligation approximates to carrying amount. Total minimum lease payments include £0.1 million (2008: £0.1 million) of future finance costs.
21 Provisions for liabilities
At 1 January 2009
Utilised
Transfer from/(to) Consolidated income statement
At 31 December 2009
Reorganisation
£million
2.5
(9.6)
13.7
6.6
Environmental
£million
0.1
0.1
–
–
–
–
0.1
Legal and
other claims
£million
3.1
3.
1
(1.0)
1.0)
0.3
3
0.
2.4
Total
£million
5.7
(10.6)
14.0
9.1
The reorganisation provision relates to the restructuring programme described in note 4. The environmental provision is for probable clean up
costs of ex-production sites. Legal and other claims represent the best estimate for the cost of settling outstanding product and other claims.
The total provisions are analysed:
Non-current
Current
2009
£million
0.2
8.9
9.1
2008
£million
0.1
5.6
5.7
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Annual Report 2009
22 Trade and other payables
Financial liabilities
Financial derivatives
Other financial liabilities
Current liabilities
Trade payables
Taxation and social security
Other payables, accruals and deferred income
Non-current liabilities
Accruals and deferred income
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£million
2008
£million
0.5
143.2
143.7
2.9
190.2
193.1
2009
£million
2008
£million
50.5
5.6
32.6
88.7
58.7
4.7
36.0
99.4
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£million
2008
£million
6.7
8.0
The carrying amount of trade and other payables approximates to their fair value.
Trade and other payables are denominated in the currencies in which the Group trades. The Group’s policy is that trade receivables and payables
not in the functional currency of the subsidiary concerned are covered by forward foreign currency exchange contracts. The exchange risk at
Group level is therefore restricted to the risk on the translation of overseas assets, liabilities and cash flows into sterling.
Financial liabilities comprising trade and other creditors, bank overdrafts and other borrowings analysed by currency are:
Sterling
US dollar
Euro
Other
The maturity analysis of financial liabilities (including estimated interest where appropriate) is as follows:
0 – 6 months
6 months – 1 year
1 – 2 years
2 – 3 years
Over 3 years
2009
£million
98.4
15.2
18.4
11.7
143.7
2009
£million
73.4
0.7
70.4
0.1
0.3
144.9
2008
£million
52.2
100.6
22.6
17.7
193.1
2008
£million
102.2
24.0
4.5
70.7
0.4
201.8
23 Acquisition of subsidiaries
The Group acquired New Chapel Electronics Limited on 2 April 2008 and assets comprising the majority of the business of Semelab Limited on
21 August 2008. The Group owns 100% of the equity of the acquired entities. The total consideration for these assets was £14.9 million of which
£13.9 million was paid in 2008. Deferred consideration capped at £1.0 million was paid in 2009 in respect of New Chapel Electronics Limited.
The fair value of the assets acquired was £9.2 million.
24 Contingent liabilities
The Group has contingent liabilities amounting to £1.5 million (2008: £2.7 million) in respect of performance bonds and guarantees entered into
in the normal course of business. The Group is the subject of claims which arise in the ordinary course of business. Other than those for which
provisions have been included within note 21, the Directors consider the likelihood of any other claims giving rise to a liability to be remote.
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Annual Report 2009
GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
25 Capital commitments
Contractual commitments for the purchase of property, plant and equipment
26 Operating leases
Minimum operating lease payments charged to operating profit:
Fixtures and equipment
Land and buildings
The Group has outstanding commitments under non-cancellable operating leases, which fall due as follows:
In less than one year
Between one and five years
After five years
2009
£million
1.8
2008
£million
6.3
2009
£million
2008
£million
0.3
4.4
0.3
4.6
2009
£million
4.0
9.1
4.0
2008
£million
4.6
11.0
4.2
Lease terms for land and buildings are predominantly for less than ten years with rents fixed for an average of four years. There are no
contingent rents.
27 Retirement benefit schemes
Defined contribution schemes
The Group operates defined contribution schemes in the United Kingdom and the Rest of the World and 401(k) plans in North America. The assets
of these schemes are held independently of the Group. The total contributions charged by the Group in respect of defined contribution schemes
were £2.1 million (2008: £1.6 million).
Defined benefit schemes
The Group operated one significant defined benefit pension scheme in the United Kingdom and two overseas. The Company has reached
agreement with the UK scheme for additional fixed contributions extending to 2016 based on the actuarial deficit at April 2007. These planned
contributions amount to: 2010 £3.2 million, 2011 £3.5 million then increasing by £0.2 million each year to £4.5 million in 2016. The freeze on
pensionable salaries in the UK was extended by one year to April 2011 and this generated a curtailment gain of £1.2 million. The Group also
operates defined benefit schemes in the United States and Japan. The United States defined benefit scheme was closed to further accruals in
2009 and this gave rise to a curtailment gain of £0.7 million. All these schemes are closed to new members. Actuarial valuations of the schemes
were carried out by independent qualified actuaries in 2007 and 2009 using the projected unit credit method. These actuarial valuations have
been updated by the actuaries to assess the assets and liabilities of the schemes at 31 December 2009. Pension scheme assets are stated at
market value at 31 December 2009. The Group has entered into discussions with affected staff on the proposed closure to future accrual of its
defined benefit scheme in the UK.
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Discount rate
Inflation rate
Increases to pensions in payment
Salary increases to April 2011 (pensionable salaries have been frozen)
Salary increases thereafter
2009
%
5.8
3.4
2.5–3.4
–
3.9
2008
%
6.1
2.9
2.2–2.9
–
3.4
A decrease in the discount rate by 0.1 % per annum increases the liabilities by approximately £6.6 million. An increase in the inflation rate of 0.1 %
per annum increases the liabilities by approximately £5.7 million.
The expected percentage long-term rates of return on the main asset classes, net of expenses, set by management having regard to actuarial
advice and relevant indices were:
Equities
Bonds
Gilts and swaps
Cash
The mortality tables applied by the actuaries at 31 December 2009 were PA92 MC + two years.
2010
7.8
5.2
3.8
0.1
2009
7.0
5.4
3.0
1.3
2008
7.4
5.9
4.4
4.7
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Annual Report 2009
27 Retirement benefit schemes (continued)
The amounts recognised on the Consolidated balance sheet are:
Equities
Bonds
Gilts and cash
Swaps
Fair value of assets
Present value of funded obligation
Net liability recognised on the Consolidated balance sheet
2009
£million
190.0
36.8
61.6
18.1
306.5
(350.2)
(43.7)
2008
£million
174.7
25.8
48.7
33.9
283.1
(301.7)
(18.6)
2007
£million
182.0
12.4
103.8
–
298.2
(315.6)
(17.4)
2006
£million
187.8
10.9
73.4
–
272.1
(344.7)
(72.6)
2005
£million
170.5
2.9
72.3
–
245.7
(335.9)
(90.2)
2004
£million
154.6
4.0
44.9
–
203.5
(274.4)
(70.9)
The schemes’ assets do not include the Group’s financial instruments nor any property occupied by, or other assets used by the Group. Swaps are
liability driven instruments taken out to hedge part of the scheme inflation and interest rate risks.
Amounts recognised in the Consolidated income statement are:
Current service cost
Curtailment
Interest on obligation
Expected return on schemes’ assets
2009
£million
1.7
(1.9)
17.9
(15.6)
2008
£million
1.9
(1.2)
19.5
(17.7)
Of the current service cost of £1.7 million (2008: £1.9 million), £1.1 million (2008: £1.3 million) is included in cost of sales in the income statement,
£0.3 million (2008: £0.3 million) is included in distribution costs and £0.3 million (2008: £0.3 million) is included in administrative expenses.
The actual return on schemes' assets was a gain of £31.4 million (2008: a loss of £7.7 million). Actuarial gains and losses are recognised directly in
retained earnings and reported in the Consolidated statement of comprehensive income and, since transition to IFRS, amount to a net loss of
£26.6 million.
Changes in the present value of the defined benefit obligation are:
Opening defined benefit obligation
Current service cost
Interest on obligation
Scheme participant contributions
Curtailment
Change in actuarial estimates and assumptions
Exchange differences
Benefits paid
Closing defined benefit obligation
Changes in the fair value of the schemes’ assets are:
Opening fair value of schemes’ assets
Expected return on schemes’ assets
Excess/(deficit) of actual over expected returns
Contributions by employer
Contributions by employees
Exchange differences
Benefits paid
Closing fair value of schemes’ assets
2009
£million
301.7
1.7
17.9
1.0
(1.9)
44.5
(0.6)
(14.1)
350.2
2009
£million
283.1
15.6
15.8
5.4
1.0
(0.3)
(14.1)
306.5
2008
£million
315.6
1.9
19.5
1.2
(1.2)
(22.2)
2.2
(15.3)
301.7
2008
£million
298.2
17.7
(25.4)
5.1
1.2
1.6
(15.3)
283.1
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GROUP ACCOUNTS
Notes to the consolidated
financial statements (continued)
27 Retirement benefit schemes (continued)
The experience adjustments arising on the schemes' assets and liabilities are reported in the Consolidated statement of comprehensive income
and expense and are as follows:
Experience adjustments on schemes’ liabilities
Experience adjustments on schemes’ assets
2009
£million
(44.5)
15.8
(28.7)
2008
£million
22.2
(25.4)
(3.2)
2007
£million
37.8
0.5
38.3
2006
£million
(6.2)
9.4
3.2
2005
£million
(47.6)
21.6
(26.0)
2004
£million
(19.1)
8.9
(10.2)
The Group expects to contribute approximately £6.0 million to defined benefit schemes in 2010.
28 Related party transactions
TT electronics plc
Subsidiaries
Purchase of goods and
services
Sale of goods and services
Rents paid
Rents received
Amounts owed to
related parties
2009
£000
–
–
–
2008
£000
1
–
1
2009
£000
1
–
1
2008
£000
9
–
9
2009
£000
110
–
110
2008
£000
165
2
167
2009
£000
–
–
–
2008
£000
5
–
5
2009
£000
–
–
–
2008
£000
16
–
16
Sales and purchases of goods and services were on normal credit terms at third party prices. Rentals, which included for premises used by
J W Newman in performing duties as executive Chairman up to 31 August 2009, were calculated on open market bases and paid to agreed terms.
As part of the demerger from TT electronics plc on 14 May 2001 two loans totalling £8 million were made to Newship Limited (formerly Send
Group Limited). Subsequently, Newship Limited became a related party on 15 November 2002. One loan of £6.0 million was repaid in 2004 and
the other of £2.0 million was repaid on 15 May 2008. Interest on the loan amounted to £46,000 for 2008.
Compensation of key management personnel
The remuneration of key management during the year was as follows:
Short-term benefits
Compensation for loss of office
Post-employment benefits
Share-based payments
2009
£million
2.3
0.1
0.2
–
2.6
2008
£million
2.5
0.4
0.2
0.1
3.2
Key management personnel comprise the Directors, Company Secretary, Divisional Chief Executives and Divisional Directors. Their compensation
is considered and recommended to the Board by the Remuneration Committee.
29 Post balance sheet event
On 17 February 2010, the Group announced the disposal of its wholly-owned South African subsidiary Wire Systems Technology (Pty) Ltd (WST).
The sale will complete following approval from the South African authorities. The consideration payable on completion is Rand 60 million, plus
cash on completion, adjusted by the difference between the net assets on completion and Rand 77.8 million.
WST is part of the Group’s General Industrial division.
73
TT electronics plc
Annual Report 2009
COMPANY ACCOUNTS
Report of the Independent Auditors to the members
of TT electronics plc
Independent auditor’s report to the members of TT electronics plc
We have audited the parent company financial statements of TT electronics plc for the year ended 31 December 2009 which comprise the parent
company balance sheet, and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set out on page 36, the Directors are responsible for the preparation of the
parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the parent company
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/UKP.
Opinion on financial statements
In our opinion the parent company financial statements:
• give a true and fair view of the state of the Company’s affairs as at 31 December 2009
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors’ report for the financial year for which the financial statements are prepared is consistent with the parent
company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the parent company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Other matters
We have reported separately on the Group financial statements of TT electronics plc for the year ended 31 December 2009.
David Miller
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
12 March 2010
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TT electronics plc
Annual Report 2009
COMPANY ACCOUNTS
Company balance sheet
at 31 December 2009
Fixed assets
Tangible assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Total net assets
Capital and reserves
Share capital
Share premium
Profit and loss account
Shareholders’ funds
Approved by the Directors on 12 March 2010 and signed on their behalf by:
G Anderson
Director
S D Dasani
Director
Note
2009
£million
2008
£million
1
2
3
4
4
6
8
8
2.3
132.3
134.6
119.0
0.1
119.1
(7.7)
111.4
246.0
(70.0)
176.0
38.7
0.2
137.1
176.0
2.3
132.3
134.6
122.0
–
122.0
(20.6)
101.4
236.0
(70.0)
166.0
38.7
0.2
127.1
166.0
75
TT electronics plc
Annual Report 2009
COMPANY ACCOUNTS
Accounting policies for the Company
financial statements
The financial statements of TT electronics plc (the Company) have been prepared under the historical cost convention as modified by the
revaluation of financial assets and derivatives held at fair value in accordance with applicable United Kingdom accounting standards.
The principal accounting policies of the Company are:
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less a provision for depreciation. Depreciation is calculated so as to write-off the cost less estimated residual
value of tangible fixed assets, in equal instalments over their expected useful lives. No depreciation is provided on freehold land. The depreciation
rates for the major categories of asset are given in note 1. The carrying values of fixed assets are reviewed for impairment when there is an
indication that the assets may be impaired.
Investments
Investments in subsidiaries are carried at cost less amounts written-off.
Deferred taxation
Deferred taxation is the taxation attributable to timing differences between the results computed for taxation purposes and results as stated in
the financial statements. It is recognised on all timing differences where the transaction or event which gives the Company an obligation to pay
more tax, or the right to pay less tax in the future, has occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely
than not that they will be recovered. Deferred tax is measured using the rates of tax enacted or substantively enacted by the balance sheet date.
Pension costs
The Company is a member of a multi-employer defined benefit scheme. The Company cannot identify its share of the scheme assets and
liabilities. Pension costs are therefore accounted for under the rules for defined contribution schemes and represent the contributions payable in
respect of the period.
Foreign currencies
Assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date.
Share-based payments
The fair value at the date of grant of share-based remuneration is calculated using appropriate pricing models and charged to the profit and loss
account on a straight-line basis over the vesting period of the award. The charge to the profit and loss account takes account of the estimated
number of shares that will vest. All share-based remuneration is equity settled.
Leases
Payments on operating leases are charged to the profit and loss account on a straight-line basis over the lease term.
Financial instruments
Derivative financial instruments used to manage exposure to interest rate risk and to changes in currency exchange rates are measured at fair
value. All changes in fair value are recognised in the profit and loss account.
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TT electronics plc
Annual Report 2009
COMPANY ACCOUNTS
Notes to the Company
financial statements
1 Tangible fixed assets
Cost at 31 December 2009 and 1 January 2009
Depreciation at 1 January 2009
Charge for the year
Depreciation at 31 December 2009
Net book amounts
At 31 December 2009
At 31 December 2008
Freehold land and buildings includes a carrying value for freehold land of £0.6 million (2008: £0.6 million).
No depreciation is provided on freehold land. Depreciation is provided on other assets at the following rates:
Freehold buildings
2%
Plant, equipment and vehicles 10% to 33%
2 Fixed asset investments
At 1 January 2009
Provision
At 31 December 2009
Freehold
land
and
buildings
£million
2.9
0.7
–
0.7
Plant,
equipment
and vehicles
£million
0.7
0.6
–
0.6
Total
£million
3.6
1.3
–
1.3
2.2
2.2
0.1
0.1
2.3
2.3
Subsidiary
undertakings
£million
132.3
–
132.3
The Company's principal operating subsidiary undertakings and the location of their principal operations are shown in note 14.
The Company owns 100% of the ordinary share capital or equivalent and 100% of voting rights of all subsidiary undertakings other than Thuthuka
Conductors and Insulations (Pty) Ltd which is 74% owned, Padmini TT Electronics Private Limited which is 51% owned and Rodco Limited, which
is non-trading and is 60% owned. Shareholdings are held indirectly for all principal operating subsidiary undertakings.
3 Debtors
Amounts falling due within one year
Trade debtors
Amounts owed by subsidiary undertakings
Prepayments and accrued income
Corporation tax
2009
£million
2008
£million
0.1
115.1
0.5
3.3
119.0
0.1
116.7
0.6
4.6
122.0
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TT electronics plc
Annual Report 2009
4 Creditors
Amounts falling due within one year
Short-term borrowings (note 5)
Trade creditors
Financial derivatives
Amounts owed to subsidiary undertakings
Taxation and social security
Accruals and deferred income
Amounts falling due after more than one year
Bank loans (note 5)
2009
£million
2008
£million
0.2
0.6
0.5
3.1
0.4
2.9
7.7
14.4
0.8
–
2.3
0.5
2.6
20.6
70.0
70.0
5 Borrowings and financial derivatives
The Company's principal borrowing is under a committed unsecured multi-currency loan facility which expires in April 2011. Under this facility
funds can be drawn in either sterling, US dollars or euros or a combination thereof at fixed rates of interest for periods varying from one month to
one year. Interest rates are at a fixed margin over the appropriate inter-bank borrowing rate at the date the funds are drawn. In November 2007
the Company purchased an interest rate cap of 4.75% on $50.0 million of borrowings for the period 4 February 2008 to 4 February 2010. The fair
value of this cap at 31 December 2009 was £nil million (2008: £nil million).
The carrying amounts of the Company's borrowings are denominated in the following currencies:
Sterling
US dollars
The borrowings are repayable as follows:
On demand or within one year
In the second year
In the third year
2009
£million
70.2
–
70.2
2009
£million
0.2
70.0
–
70.2
2008
£million
–
84.4
84.4
2008
£million
14.4
–
70.0
84.4
The fair value of borrowings is the same as their carrying value. At 31 December 2009, the Company had committed undrawn borrowing facilities
available of £nil million (2008: £nil million). There are other substantial committed and uncommitted borrowing facilities available to the Group.
Financial derivatives
Current liabilities
Interest rate swap
2009
£million
2008
£million
0.5
–
At 31 December 2009 the Group had an interest rate swap fixing the interest rate on $50 m
liability of £0.5 million.
illion
of borrowings to April 2011. The fair value was a
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TT electronics plc
Annual Report 2009
COMPANY ACCOUNTS
Notes to the Company
financial statements (continued)
6 Share capital
Authorised
226,000,000 (2008: 226,000,000) Ordinary shares of 25p each
Issued called up and fully paid
154,952,795 (2008: 154,952,795) Ordinary shares of 25p each
Ordinary shares of 25p each are equity share capital.
2009
£million
2008
£million
56.5
56.5
38.7
38.7
Share option schemes
At 31 December 2009 options were exercisable over 2,618,043 (2008: 4,145,419) Ordinary shares under the Group share option schemes up to
2015. Subscription prices range from 80.0p to 205.5p with a weighted average of 135.3p. Subsequent to 31 December 2009 no options have been
exercised. Following the approval of the Long Term Incentive Plan 2005 at the Extraordinary General Meeting held on 20 October 2006, all existing
share option schemes were closed for future grants.
1994 Executive scheme
This scheme for senior executives was approved at the Annual General Meeting on 24 May 1994. The options outstanding at the date of this
report are over 655,432 Ordinary shares and such options are:
Exercisable
on or after
28.03.2003
18.04.2004
03.04.2005
26.03.2006
Options
122,556
122,395
171,981
248,500
Subscription
price (p)
91.5
163.0
165.0
80.0
1996 Executive scheme
This scheme for senior executives was approved at the Annual General Meeting on 14 May 1996. The options outstanding at the date of this
report are over 1,154,355 Ordinary shares and such options are:
Exercisable
on or after
28.03.2003
18.04.2004
23.05.2004
03.04.2005
26.03.2006
Options
106,338
69,240
248,192
189,605
540,930
Subscription
price (p)
91.5
163.0
166.0
165.0
80.0
Options issued under the 1994 and 1996 Executive Share Option Schemes may not generally be exercised for a period of three years from the
date of grant and are conditional on there being an increase in earnings per share over any consecutive three year period between the date of
grant and the date of exercise of 2% per annum for options granted prior to 2001 and 4% for options granted after 2000 above the increase in the
All Items Index of Retail Prices over the same period. For this purpose earnings per share on any relevant date is that derived from the audited
financial statements of the Company and its subsidiaries last published prior to such date.
2004 Approved Plan
This scheme for senior executives was approved at the Annual General Meeting on 19 May 2004. The options outstanding at the date of this
report are over 202,413 Ordinary shares and such options are:
Exercisable
on or after
25.05.2007
07.04.2008
Options
113,884
88,529
Subscription
price (p)
145.0
205.5
79
TT electronics plc
Annual Report 2009
6 Share capital (continued)
2004 Unapproved Plan
This scheme for senior executives was approved at the Annual General Meeting on 19 May 2004. The options outstanding at the date of this
report are over 605,843 Ordinary shares and such options are:
Exercisable
on or after
25.05.2007
17.04.2008
Options
333,535
272,308
Subscription
price (p)
145.0
205.5
Options issued under the 2004 Approved and Unapproved Company Share Option Plans may not generally be exercised for a period of three
years from the date of grant and are conditional on there being growth in the Group's earnings per share exceeding the Retail Price Index by an
average of 4% per annum over a period of three consecutive years prior to exercise. Any year in which earnings per share is negative cannot be
included. For this purpose the earnings per share on any relevant date is that derived from the audited financial statements of the Company and
its subsidiaries last published prior to such date.
Long Term Incentive Plan 2005
This scheme for senior executives was approved at the Extraordinary General Meeting held on 20 October 2006. On 5 May 2009 and 27 October
2009 grants of awards were made under the Long Term Incentive Plan 2005 for the issue of up to 3,799,835 and 202,667 shares in 2012.
The awards outstanding at the date of this report are over 5,458,293 Ordinary shares and such awards potentially vest on the following dates:
Normal
vesting
date
16.01.2010
31.05.2010
24.04.2011
28.08.2011
05.05.2012
27.10.2012
Shares
301,283
358,066
535,512
556,097
3,504,668
202,667
The award is a contingent right to receive shares in the future, subject to continued employment and the achievement of predetermined
performance criteria.
The performance targets attached to awards granted in 2007 and 2008 are that the Group's earnings per share, measured over a three year
period, must grow by at least 3% compound per annum in excess of the Retail Price Index. At this level only 25% of an award will vest. For an
award to vest in full, the Group's earnings per share measured over the same period must have grown by at least 7% compound per annum in
excess of the Retail Price Index. For earnings per share between these thresholds, the number of shares vesting will be calculated on a
proportional basis. Any part of an award that does not vest after three years where the performance criterion is not reached will lapse.
The performance targets attached to awards granted in 2009 require the achievement of earnings per share (‘EPS’) and total shareholder return
('TSR') targets as follows:
• The performance target attached to 50% of an award is based on three year EPS targets: 25% of the shares subject to this part of the award will
vest for EPS growth of 3% compound per annum in excess of Retail Price Index (“RPI”), increasing on a straight-line basis to 100% vesting for EPS
growth of at least 7% compound per annum in excess of RPI; and
• The performance target attached to the other 50% of an award is based on TSR performance targets against companies within the FTSE
SmallCap (excluding investment trusts) index; 25% of shares subject to this part of the award will vest at median performance increasing on a
straight-line basis to 100% vesting at the upper quartile of the comparator group. As well as the TSR targets, the Remuneration Committee will
consider the Company's underlying financial performance to ensure that vesting percentages under this part of an award are appropriate.
7 Share-based payments
Details of the share options issued and Long Term Incentive Plan are given in note 6. The bases of calculation of the share-based payments are
given in the consolidated financial statements, note 14.
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TT electronics plc
Annual Report 2009
COMPANY ACCOUNTS
Notes to the Company
financial statements (continued)
8 Reserves
At 1 January 2009
Share-based payment
Profit for the year
At 31 December 2009
Share
premium
£million
0.2
–
–
0.2
Profit and
loss account
£million
127.1
(0.2)
10.2
137.1
In accordance with the exemption allowed by Section 408 of the Companies Act 2006, the Company has not presented its own profit and
loss account.
9 Guarantees and financial commitments
Financial commitments relating to bank loans are set out in note 5. The Company has guaranteed bank borrowings of a subsidiary up to
£10 million. The amount outstanding at 31 December 2009 was £5.0 million.
10 Obligations under operating leases
The operating lease payments due within one year to which the Company was committed at 31 December 2009 were:
On leases expiring:
Within one year
Between two and five years
11 Pension schemes
Land and
buildings
£million
Other
£million
2009
Total
£million
Land and
buildings
£million
Other
£million
2008
Total
£million
0.1
0.4
0.5
–
0.1
0.1
0.1
0.5
0.6
0.3
0.5
0.8
–
0.1
0.1
0.3
0.6
0.9
Defined benefit scheme:
The Company is a member of a multi-employer defined benefit scheme which is closed to new entrants. The Company is unable to identify its
share of the underlying assets and liabilities of the scheme. Accordingly the Company has applied the exemption in FRS 17 and accounted for
the scheme as if it were a defined contribution scheme. The total contributions charged by the Company in respect of the year ended
31 December 2009 were £2.2 million (2008: £2.5 million). The most recent triennial valuation of the scheme has been updated by an independent
qualified actuary, taking account of the requirements of FRS 17 to assess the liabilities of the scheme at 31 December 2009. The market value of
the scheme's assets at the year end was £299.5 million and the present value of the scheme's liabilities was £339.7 million.
Further details and an analysis of the Group’s pension schemes are given in note 27 to the consolidated financial statements.
Defined contribution scheme:
The Company operates a group personal pension plan for employees and pays contributions to administered pension insurance plans.
The Company has no further payment obligation once the contributions have been paid. Payments to the defined contribution scheme are
charged as an expense as they fall due. The total contributions charged by the Company in respect of the year ended 31 December 2009 were
£151,000 (2008: £84,000).
81
TT electronics plc
Annual Report 2009
12 Employees
The average number of employees (including Directors) during the year was:
By function
Administration
The aggregate emoluments (including those of Directors) for the year were:
Wages and salaries
Employer’s social security charges
Employer’s pension contributions
Remuneration in respect of the Directors was as follows:
Emoluments
2009
number
2008
number
41
46
2009
£million
4.3
0.5
2.3
7.1
2009
£million
1.1
2008
£million
4.4
0.6
2.5
7.5
2008
£million
1.7
Further details of individual Directors’ remuneration, pension benefits and share options are shown in the Directors' remuneration report on pages
42 to 46.
13 Related party transactions
Related party transactions of the Company are reported in note 28 to the consolidated financial statements.
14 Principal operating subsidiaries
The principal operating subsidiaries are:
Components
International Resistive Company, Inc, USA
BI Technologies, USA, UK, Mexico, Malaysia
Optek Technology, USA, Mexico
Semelab Limited
AB Mikroelektronik GmbH, Austria
Welwyn Components Limited
AB Connectors Limited
AB Interconnect, Inc, USA
New Chapel Electronics Limited
Sensors
AB Elektronik GmbH, Germany
AB Elektronik Sachsen GmbH, Germany
AB Electronic Limited
Padmini TT electronics Private Limited, India (51% owned)
Integrated Manufacturing Services
TT electronics integrated manufacturing services Limited
TT electronics integrated manufacturing systems Limited
TT electronics integrated manufacturing services (Suzhou) Co Ltd, China
TT electronics integrated manufacturing services, Inc, USA
BI Technologies, Malaysia
Secure Power
Ottomotores SA de CV, Mexico
Dale Power Solutions plc
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Annual Report 2009
COMPANY ACCOUNTS
Notes to the Company
financial statements (continued)
1 Principal operating subsidiaries (continued)
4
General Industrial
AEI Compounds Limited
WT Henley Limited
ABtest Limited
BAS Components Limited
MMG Magdev Limited
Wire Systems Technology (Pty) Ltd, South Africa
MMG India (Private) Limited, India
Companies are located and incorporated in the UK except where indicated.
83
TT electronics plc
Annual Report 2009
Historical record
Accounting year
Revenue
Operating profit
Profit before taxation
Earnings
Earnings per Ordinary share
Ordinary dividend
Ordinary dividend per share
Average Ordinary shares in issue
Net debt
Shareholders’ funds
Notes
(£million)
(£million)
(£million)
(£million)
(p)
(£million)
(p)
(million)
(£million)
(£million)
2009
499.6
6.5
0.8
(2.0)
(1.3)
–
–
155.0
56.9
155.8
2008
584.3
27.0
21.1
14.3
9.2
5.7
3.69
155.0
113.2
212.9
2007
544.9
37.7
33.3
24.0
15.5
15.6
10.05
154.9
75.0
182.3
2006
539.4
36.2
31.2
21.8
14.1
15.6
10.05
154.8
71.0
157.0
2005
503.8
29.9
24.5
16.4
10.6
15.6
10.05
154.8
47.1
151.7
(1) Results have been adjusted where appropriate to exclude discontinued operations.
(2) Operating profit, profit before taxation, earnings and earnings per share are stated as being before impairment provisions, goodwill amortisation and exceptional items where
appropriate for the applicable accounting standards ruling at that time.
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TT electronics plc
Annual Report 2009
Shareholder information
Annual General Meeting
The Annual General Meeting will be held on 12 May 2010 at 11.30 am at the offices of KBC Peel Hunt Ltd, 111 Old Broad Street, London EC2N 1PH.
Results
Announcement of 2010 half year results – late August 2010.
Preliminary announcement of 2010 results – late March 2011.
Annual report 2010 – to be posted mid April 2011.
Dividends
For the year ending 31 December 2009, the Board has not recommended a final dividend (2008: nil). No interim dividend was paid during the year
(2008: 3.69p).
Multiple accounts on the shareholder register
If you have received two or more copies of this document, this means that there is more than one account in your name on the shareholder
register. This may be caused by either your name or address appearing on each account in a slightly different way. For security reasons, the
Registrars will not amalgamate the accounts without your written consent, so if you would like any multiple accounts combined into one
account, please write to Equiniti Limited at the address given below.
Share dealing services
Shareview Dealing is a telephone and internet service provided by Equiniti and provides a simple and convenient way of buying and selling
TT electronics plc shares.
Log on to www.shareview.co.uk/dealing or call 0845 603 7037 between 8.30am and 4.30pm, Monday to Friday, for more information about this
service and for details of the rates and charges.
A weekly postal dealing service is also available and a form together with terms and conditions can be obtained by calling 0871 384 2248*.
Commission is 1 per cent with a minimum of £10.
ShareGift
ShareGift is a charity share donation scheme for shareholders, administered by The Orr Mackintosh Foundation. lt is especially for those who may
wish to dispose of a small parcel of shares whose value makes it uneconomical to sell on a commission basis. Further information can be obtained
at www.sharegift.org or from Equiniti.
Shareholder enquiries
Equiniti maintain the register of members of the Company. If you have any queries concerning your shareholding, or if any of your details change,
please contact the Registrars:
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Telephone 0871 384 2396*
Fax 0871 384 2100*
Textphone for shareholders with hearing difficulties 0871 384 2255*
Equiniti also offer a range of shareholder information on-line at www.shareview.co.uk.
* Calls to this number are charged at 8p per minute from a BT landline.
Other telephony provider costs may vary.
Website
Information on the Group’s financial performance, activities and share price is available at www.ttelectronics.com.
OVERVIEW
Who we are
TT electronics is a focused,
global electronics group
supplying leading
manufacturers in the
defence, aerospace, medical,
automotive and industrial
electronics markets.
Our development of new
technologies is based
on understanding our
customers’ needs and
providing innovative
solutions to meet them.
Designed and produced by Radley Yeldar (www.ry.com) using the paperless proofi ng system Wizardry.
TT electronics plc are committed to caring for the environment and looking for sustainable ways to minimise our impact on it.
We take care to minimise the impact on the environment in the paper we use. The paper we have chosen:
• contains material sourced from responsibly managed forests, certifi ed in accordance with the FSC (Forest Stewardship Council)
• is manufactured under strict environmental management systems, the international ISO 14001 standard, EMAS (Eco-Management & Audit Scheme) and the IPPC
(Integrated Pollution Prevention and Control) regulation.
FSC – Forest Stewardship Council. This ensures there is an audited chain of custody from the
tree in the well-managed forest through to the fi nished document in the printing factory.
ISO 14001 – A pattern of control for an environmental management system against which
an organisation can be credited by a third party.
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TT electronics plc Annual Report 2009
Positioned for
sustainable
growth
TT electronics plc
Clive House
12 – 18 Queens Road
Weybridge
Surrey KT13 9XB
Reg No 87249
Tel +44(0) 1932 841310
Fax +44(0) 1932 836450