TT ELECTRONICS PLC
ANNUAL REPORT & ACCOUNTS 2023
IN THIS ANNUAL REPORT
Read more on page 4
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CHAIRMAN’S STATEMENT
We have delivered against the strategic
and operational priorities set for the year,
including achieving a significant increase
in adjusted operating profit margin to 8.6%
and strong free cash flow.
CEO Q&A
TT has strong fundamentals: a solid
business with leading technologies and
great people. It has been a real pleasure
meeting my colleagues at our various sites
and discussing with them the opportunities
we have for further growth and
performance enhancements.
WE ARE A GLOBAL PROVIDER
OF DESIGN-LED, ADVANCED
ELECTRONICS TECHNOLOGIES
FOR PERFORMANCE-
CRITICAL APPLICATIONS
IN SPECIALISED MARKETS
We solve technology challenges for a sustainable world. We do this by
delivering solutions for our customers that enable products that are
cleaner, smarter and healthier, and that will benefit our planet and people.
Our positioning and offering to customers in markets that are growing
well, and our differentiated customer service, are driving strong top line
growth for the Group.
Read more on page 29
Read more on page 68
OUR PEOPLE, COMMUNITIES
AND ENVIRONMENT
We are committed to having a positive impact
on the world around us through our products
and the way we do business.
GOVERNANCE
We have a strong governance platform
that enables enhanced decision-making.
Read our report online
www.ttelectronics.com/investors/annual-report/
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023
1
CONTENTS
2023 PERFORMANCE HIGHLIGHTS
STRATEGIC REPORT
IFC
In this Annual Report
1
2023 performance highlights
2
Who we are
4
Chairman’s statement
7
CEO Q&A
11
Our business model
12
Our markets
15
Our strategy
16
Strategic business wins
17
CFO review
27
Key performance indicators
29
Our people, communities and environment
Task Force on Climate-related Financial Disclosures 47
57
Stakeholder engagement and S172 Statement
59
Risk management
62
Principal risks and uncertainties
67
Viability statement and Going concern
GOVERNANCE AND DIRECTORS’ REPORT
Governance at a glance
Board of Directors
Chairman’s introduction to governance
Leadership and Company purpose
Nominations Committee report
Audit Committee report
Remuneration Committee report
Executive remuneration at a glance
Remuneration Policy overview
Annual report on remuneration
Other statutory disclosures
Statement of Directors’ responsibilities
FINANCIAL STATEMENTS
Independent auditor’s report
Consolidated income statement
Consolidated statement
of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the Consolidated financial statements
Company statement of financial position
Company statement of changes in equity
Notes to the Company financial statements
Five-year record
Reconciliation of KPIs and non IFRS measures
Shareholder information
Glossary
68
70
72
75
82
88
94
98
100
102
112
114
116
126
126
127
128
129
130
167
167
168
173
174
178
181
– Excellent business development
success, with 37 significant contract
awards delivering c. £250 million of
potential lifetime revenues
– Delivered an 18% reduction in
Scope 1 & 2 emissions
– Broadened our customer offering by
extending our capabilities in Mexico
– Successful transfer of Ferranti
business to a modern facility in
Greater Manchester
– Achieved employee engagement score
in line with 3*** ‘world class companies
to work for’
– Agreement for sale of Cardiff,
Hartlepool and Dongguan business
units for £20.8 million on cash and
debt free basis signed – expected to
enhance margins and reduce leverage
– Environmental ratings of B- from CDP
and AA from MSCI
REVENUE
ORGANIC REVENUE GROWTH
RETURN ON INVESTED CAPITAL
£613.9m
2022: £617.0m
1%2022: 20%
12.0%2022: 10.5%
ADJUSTED OPERATING PROFIT
STATUTORY OPERATING PROFIT
CASH CONVERSION
£52.8m
2022: £47.1m
£8.7m2022: £(3.4)m loss
92%2022: 33%
ADJUSTED OPERATING PROFIT MARGIN
STATUTORY OPERATING MARGIN
LEVERAGE
8.6%2022: 7.6%
1.4%2022: (0.6)%
1.7x2022: 2.0x
ADJUSTED EPS
STATUTORY EPS
DIVIDEND PER SHARE
19.2p
2022: 18.2p
(3.9)p
2022: (7.5)p
6.8p
2022: 6.3p
Throughout this Annual Report we refer to a number of Alternative Performance Measures (“APMs”) which have been adopted by the Directors to provide further information
on underlying trends and the performance and position of the Group. Details of these APMs and a reconciliation to statutory measures can be found on pages 174 to 177.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION We solve technological challenges for
a sustainable world.
2
INSIDE TT ELECTRONICS
WHO
WE ARE
OUR GLOBAL REACH
We service our global
markets from 21 design
and manufacturing
facilities in Europe,
North America and Asia.
Global breakdown
Europe: 9 primary locations
39% of Group revenue
North America: 9 primary locations
37% of Group revenue
Asia: 3 primary locations
24% of Group revenue
OUR KEY CAPABILITIES
Power
We design and manufacture customised, highly
efficient power management devices.
Connectivity
Our products support the digitisation of industrial
processes, smart infrastructure and automation.
Sensing
Our solutions improve the precision, speed and
reliability of critical aspects of customer
applications.
OUR CUSTOMERS
Our customers range from start-up businesses to
global multi-nationals operating in the healthcare,
aerospace, defence, automation, electrification,
electronics and energy sectors. We aim to work
as part of the customer’s team, driving solutions,
and with our products and services integral to
customers’ designs.
PEOPLE AND CULTURE
Our talented team of design, engineering and
manufacturing experts operate in a supportive
culture that champions expertise, innovation,
problem-solving and doing the right thing.
RESPONSIBLE BUSINESS
We are committed to having a positive impact on
the world around us: creating value and enhancing
sustainability through our products; the way we
do business, including how we look after our
employees; and by reducing our environmental
footprint. This commitment is described in our
purpose and embedded in our strategy as one
of our four strategic priorities.
% GROUP REVENUE
Healthcare
Aerospace &
Defence
Automation &
Electrification
Distribution
sales channel
24%
20%
36%
20%
Read more
on page 16
Read more
on page 29
Read more
on page 29
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Power and Connectivity
P&C designs and manufactures custom
power and control systems, electromagnetics
and connected devices that deliver size,
weight and efficiency benefits for high-
performance applications.
28% of Group revenue
Read more on page 22
OUR MARKETS
HEALTHCARE
Direct patient care and
monitoring
– Patient monitoring equipment,
including remote applications
– Anaesthesia machines
– Surgical lighting
– Cardiopulmonary perfusion
equipment
– Ventilators and defibrillators
– Fluid monitoring
– Wearable technologies
Advanced interventional
and surgical devices
– Surgical navigation technology
– Implantable pacemakers and
defibrillators
– Neuromodulators
– Implant programmers and chargers
– Ventricular assist systems
– Robotic assisted surgery
Global Manufacturing Solutions
GMS provides manufacturing services and
engineering solutions for our product divisions
and to customers that often require a lower
volume and higher mix of products, including
complex integrated product assemblies
and engineering services such as value-
engineering and designing testing solutions.
49% of Group revenue
Read more on page 23
AEROSPACE & DEFENCE
Cockpit avionics and
flight controls
– Avionics and display units
– Flight controls
– Landing gear
– Joystick controls
– Wing de-icing
Engine controls and
fuel systems
– Engine control units
– Fuel distribution systems
– Engine ice protection
– Auxiliary power units
Electric propulsion
– On board systems for electric flight
Aircraft interiors
– Passenger control units
– In-flight entertainment systems
– Cabin signage
– Mood and ambient lighting
Innovative diagnostic and
imaging
– Ultrasound, X-ray and MRI
– Radiotherapy equipment for
cancer treatment
– Sensor-enabled diagnostic devices
Laboratory and life sciences
– Therapeutic drug monitoring
– Gene sequencing
– Blood analysis
– Pill counting and dispensing
– Portable haemodialysis systems
– Scientific instrumentation
Precision guidance,
communication and
navigation systems
– Laser targeting and inertial
navigation
– Communications, signalling
and navigation
– Precision guidance
– Global positioning (“GPS”)
– Radar and radar
jammers
3
Sensors and Specialist Components
S&SC works with customers to develop
high-specification, standard and customised
solutions including sensors and power
management devices that improve the
precision, speed and reliability of applications.
23% of Group revenue
Read more on page 24
AUTOMATION & ELECTRIFICATION
Factory automation and
electrification
– Industrial robotics and automation
equipment
Clean energy and smart cities
– Renewable energy generation and
smart grid metering
– Power management and energy
– Power monitoring
– Industrial safety and security
control systems
– Water and wastewater
controls
– Smart packaging and labelling
equipment
– Electric vehicle inverter technology
measurement and monitoring
– Smart lighting, security systems
and fire detection
– Secure access and safety controls
– Energy-efficient home appliances
Smart infrastructure and industrial connectivity
– Transportation communication systems
– Electric vehicles and charging stations
– Railway signalling systems and temperature control
– Data centre power
– Asset tracking and inventory management systems
– Communication and cloud service connectivity
Read more on page 12
Read more on page 13
Read more on page 14
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 4
CHAIRMAN’S STATEMENT
CONTINUING
PROGRESS
WHAT MAKES US
DIFFERENT?
Our target markets
have strong, long-term
structural growth
potential supported by
the megatrends we are
aligned to.
We have a culture of
expertise and our teams
are passionate about
finding solutions to the
world’s toughest
technology challenges.
We are focused on
design-led technology,
creating bespoke
technology solutions for
customer applications.
Our success has been
built on engaging deeply
with our customers and
becoming real partners.
See Our markets
on page 12 and
Our business model
on page 11
I am very pleased to report a year of strong
and improved operational and financial
progress for TT. We have delivered against
the strategic and operational priorities
set for the year, including achieving a
significant increase in adjusted operating
profit margin to 8.6% and strong free
cash flow. While mindful of the wider
macroeconomic environment, the outlook
for the Group is good, underpinned by the
strength and visibility of our order book,
robust demand and growth in our end
markets, and planned operational and
strategic initiatives under our new CEO,
Peter France.”
Warren Tucker
Chairman
BUSINESS PERFORMANCE
In 2023 TT delivered on all priorities set at the
beginning of the year. A strong order book was
converted into revenue and double-digit operating
profit growth; our margin increased by 110 bps at
constant currency; and we saw an improved
performance in the P&C business. From a balance
sheet perspective, strong free cash flow generation
resulted in reduced debt and a further reduction in
leverage to 1.7x.
We also invested substantially in the business to
enhance our pipeline of new products and build
capacity to meet existing and future demand from
customers. Organic investment in the business
totalled £33.2 million, with £10.8 million spent on R&D
and £22.4 million on capex, in particular to support
the move to our new flagship P&C facility in Greater
Manchester, UK and the expansion of manufacturing
capacity in Mexicali, Mexico where we are seeing
significant demand from some GMS customers
looking to near-shore.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
PEOPLE AND CULTURE
GOVERNANCE AND BOARD ACTIVITY
5
Our 2023 Board
evaluation exercise once
again reinforced the
positive working
dynamics of the Board
and its Committees, and
I thank my colleagues
for this and for all their
support during the year.”
Read more about
governance and board
activity on page 72
In addition to the appointment of Peter France, there
were two changes to the Board in 2023 when we
welcomed Michael Ord and Wendy McMillan as
Non-executive Directors in January. We benefited
during the year from their wealth of experience,
particularly the valuable insight provided by Michael
as a serving CEO of a UK listed company. We were
saddened that, having accepted a new executive
position with a third-party organisation, Wendy had to
step down from the Board in November. TT has since
engaged an external recruitment firm to start the
process of identifying suitable candidates for the next
phase of NED succession planning and we are hopeful
that this will contribute further to our gender, ethnic
and overall diversity on our Board in the future.
While a significant portion of Board time was spent
on succession planning and appointments, the Board
was able to spend a large amount of time on strategic
initiatives which, in 2023, have included the continued
strengthening of TT’s capital structure; our deleveraging
imperative; strengthening internal controls; investment
in the business for future growth; delivery of organic
growth; equality, diversity & inclusion (“ED&I”); and
Health & Safety. We also continued to pay close
attention to TT’s sustainability agenda and our people
and culture objectives, both of which are considered
critical to future success.
Our 2023 Board evaluation exercise once again
reinforced the positive working dynamics of the Board
and its Committees, and I thank my colleagues for
this and for all their support during the year.
CHAIRMAN’S STATEMENT CONTINUED
Our success has been built on engaging deeply
with our customers to build long-term relationships
where we collaborate right from the early stages
of product development. This embeds us deeply
in their value chains and creates the opportunity
for multi-year revenues.
In 2023 we secured 37 significant contract wins
with the potential to deliver c. £250 million of lifetime
revenues across our three end markets. These wins
included optical sensors for a new blood gas analysis
device and a power module for a leading aerospace
manufacturer that will advance electric propulsion
in the sector (see page 6).
We are absolutely focused on continuing to develop
our capabilities and our relationships with customers
so that we are in the best position to take advantage
of expected growth from the megatrends driving
our markets.
TT is, at its heart, a people business. In a competitive
marketplace we aim to make TT stand out as an
employer where people are happy and proud to work
because their needs are being met, whether that is the
opportunity to work flexibly, feeling included at work,
or career progression. I am proud of the incredible
progress we are making in this area which is obvious
at the sites visited by members of the Board in 2023.
The 3*** score achieved in our latest employee
engagement survey (the highest rating possible) is
testament to the efforts of everyone at TT to keep
building our culture and make us a great place to work.
We really focused on encouraging our employees to
make their voice heard in the survey this year,
concluding with a record 91% globally completing
the survey, up from 86% in previous years.
APPOINTMENT OF NEW CEO
NET ZERO
After a thorough and wide-ranging recruitment
exercise, we were delighted that Peter France agreed
to join us as our new CEO in October, with our prior
succession planning being a meaningful accelerator.
Peter was quickly identified as the stand-out candidate
for the role early in the search process with the
undoubted calibre and experience to progress our
change agenda in the coming years. He brings with him
an unparalleled track record in the industrial engineering
and manufacturing sector having been CEO of ASCO
Group, and with a 28-year career at Rotork plc, including
nine years as CEO. The Board is very much looking
forward to working with Peter to build on our strong
foundations and accelerate the execution of our
strategy for sustainable disciplined growth.
On behalf of the Board, I express sincere thanks for
the enormous contribution made by our outgoing CEO,
Richard Tyson, to the Group. Richard served as CEO
for over nine years and oversaw the transformation of
the business to address higher growth market sectors
and the development of the capabilities and culture
that TT enjoys today. He leaves the Group with our
very best wishes for the future.
Thanks to our highly motivated teams we continue to
advance our transition to Net Zero. We have developed
a road map to Net Zero Scope 1 & 2 emissions in
2035 (page 45) and are on track with our operational
emissions now down 62% from our 2019 baseline and
renewable electricity at 53% of total electricity use.
We have also completed assessment and measurement
of our Scope 3 emissions with the intention of
improving collection methods and validation in 2024.
The Board was pleased that our first solar project in
Kuantan, Malaysia came on stream during the year
and to see the start of our next solar project in
Mexicali, Mexico. Peter has visited both facilities,
along with the vast majority of the sites in the Group.
We are pleased that our focus on ESG matters is
recognised externally, with a rating of “AA” in the latest
MSCI ESG Ratings assessment and a “B-” rating
from CDP.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
6
DIVIDEND
Given our strong trading performance in 2023 and
the positive outlook for 2024 and beyond, the Board
is proposing a final dividend of 4.65 pence per share.
When combined with our interim dividend of 2.15 pence
per share this represents a dividend increase of 8%
vs 2022.
CASE STUDY
Warren Tucker
Chairman
6 March 2024
INSIDE TT ELECTRONICS
TT SOLUTIONS DRIVING THE
ELECTRIC FLIGHT REVOLUTION
Electric propulsion is rapidly
revolutionising mobility technologies
across industries, including flight, where
a key UK aerospace OEM is a leader in
the journey to “jet zero”.
A new long-term partnership with the manufacturer
has the potential to deliver revenue for TT in excess
of £30 million over the course of the contract once
fully in production and incorporated into a range of
applications supporting electric flight and other
low-carbon projects.
The cornerstone of the partnership is TT’s
development of a new power module to advance
propulsion systems for electric aircraft applications.
State-of-the-art technology in the E Drive 150 Power
Module will enhance electrical switching
functionalities in key on board systems such as
electric starter generators, cabin air systems,
electric pumps, and electric actuation for test, and
later, production models. The E Drive 150 also has
the potential for use in other sectors served by the
company including urban air mobility and small
modular nuclear reactors.
The agreement, furthermore, presents an opportunity
for TT to expand its capabilities in silicon carbide
power modules, a rapidly growing market segment
becoming crucial in the drive to electrify aerospace
and sectors such as energy storage.
TT was chosen as partner based on the collaborative
approach demonstrated in our existing relationship,
our power module expertise, and the team’s
determination to develop a solution to this complex
challenge. The first order for work under the
agreement was secured in November 2023 and we
look forward to working on this new programme over
many years.
The landmark agreement had the additional benefit
of kickstarting an exciting opportunity for TT to
participate in an ambitious collaboration with the
product development facilities of the UK Driving the
Electric Revolution (“DER”) initiative. The DER is a
UK government-funded programme supporting the
acceleration of electrical power technology
development and the creation of a resilient cross-
sectoral UK manufacturing supply chain to underpin
automotive electrification and the transition to a
low-carbon economy.
LIFETIME REVENUE
POTENTIAL
£30m+
The E Drive 150
also has the
potential for use
in other sectors
served by the
manufacturer
including urban
air mobility and
small modular
nuclear reactors.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION CHIEF EXECUTIVE OFFICER
Q&A
The positive feeling from my initial review
is that the business is in a good place with
several structural improvements already
made by the team. We have a strong
foundation to launch our accelerated
performance strategy that will deliver a
stronger balance sheet, improved margins
and disciplined growth.”
Peter France
CEO
7
ADJUSTED OPERATING
PROFIT MARGIN
8.6%
Q
What are your initial thoughts as you approach the
end of your first 100 days?
Firstly on the business?
It is a great honour to have been appointed CEO of
TT Electronics in early October. The role was attractive
as I could see a company with a strong culture and
highly technical products focused on attractive
end markets.
As I have visited our various locations, it is clear that
my initial thoughts were well founded. TT has strong
fundamentals: a solid business with leading
technologies and great people. It has been a real
pleasure meeting my colleagues at our various sites
and discussing with them the opportunities we have for
further growth and performance enhancements. It has
also been good to meet a number of other stakeholders
including customers and shareholders and hear from
them on how TT can support their objectives.
The partnership with our customers is something that
has been evident during my first few months and our
engineering expertise, along with our manufacturing
capability, provides a solid platform to accelerate
growth and improve execution.
On the people and culture?
The strength of the TT culture and the great people
we employ has been evident as I visited our sites
during my induction process. The depth of our domain
knowledge and appreciation of this by key customers
is also clear in my early conversations with
some customers.
The TT Way ensures we take care of our teams around
the world; I have been pleased to hear about a recent
focus on employee welfare support, not just physical
but also financial, through a range of schemes.
I will continue the focus on attracting and retaining
diverse talent who can contribute to our success and
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
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CHIEF EXECUTIVE OFFICER Q&A CONTINUED
who share our values. Looking after our people is
critical and the focus on safety, talent and development
providing interesting work and strong career paths is
something that I am passionate about but is an area
where we can still do more.
I was pleased to see the results of the recent Group-
wide engagement survey indicating that we have a
highly engaged workforce and I have seen that for
myself during my site visits.
Q
What does sustainability mean to you?
Sustainability is an important topic personally and as a
good corporate citizen it is important that we do all we
can to protect the planet. For me, part of the attraction
of joining TT was its ability to be part of the solution,
be front and centre with the components and products
we provide to our customers that enable them to meet
their own sustainability objectives. We, as TT, need to
ensure the opportunities presented to us by the move
to a lower-carbon world are clearly understood
whether it be by our customers, our investors or
employees, and that it is an integral part of our
purpose. On my visits I was able to hear about TT’s
work across a number of our sites with one of the
world’s leading engine manufacturers to spearhead
the development of electronic power modules and
electromagnetics to power a wide range of
aircraft systems.
I have been impressed by the progress already made
in reducing our own emissions and confirm that we
will continue to prioritise our journey to Net Zero.
Q
Do you think that TT is exposed to the right end
markets given your margin ambitions and need
to deliver through cycle growth?
2023 CONTRACT AWARDS
37
SIGNIFICANT AWARDS
TT’s end market exposure has been deliberately
targeted towards those areas exposed to megatrends
exhibiting structural growth: healthcare including
life sciences, aerospace & defence, and automation
& electrification.
I believe these markets are the right focus areas for
growth and investment. We will continue to develop
products and sales channels to maximise our position
in these attractive end markets.
Q
What are the results of your business review?
We will explore the results of my in-depth business and
strategy review at a Capital Markets Seminar in April.
The positive feeling from my initial review is that
the business is in a good place, with several
structural improvements already made by the team.
The divestment of the business units in Hartlepool
and Cardiff, UK and Dongguan, China is a great
example of the simplification and value creation we
can achieve. We have a strong platform from which
to accelerate growth. Alongside this, I see a number
of opportunities across the Group to create additional
value, namely additional focus on operational
excellence, commercial discipline and innovation.
Q
What are your thoughts on the strategy for
the Company?
I think we are going in the right direction but we now
need to focus on execution and speed of delivery.
My thoughts and approach will be shared as part
of our business review update.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION CHIEF EXECUTIVE OFFICER Q&A CONTINUED
THE TT MANAGEMENT BOARD
Q
What do you believe is the margin potential of
the Group?
There are many Group initiatives already set in train
throughout the business to create additional value and
I will accelerate the delivery of these projects. A first
step in driving improved margins is the recently
announced divestment of business units in Hartlepool
and Cardiff, UK and Dongguan, China. This together
with our focus on costs and pricing discipline and the
conclusion of pass-through margin impact, alongside
operational leverage from growth, underpins our
confidence in achieving 10% operating margin in 2024.
Q
Thoughts on the balance sheet?
Our attention in the short term is to strengthen the
balance sheet and generate strong cash flow. In 2024
we will focus on maintaining capital discipline and
careful use of the balance sheet to facilitate continued
investment; M&A will be focused on in future years.
Q
What are you excited about as you look into 2024?
Given the strength and visibility of the order book,
current end market activity and operational
improvement initiatives that are underway, while
mindful of the wider macro environment, we are
on track to deliver a 10% operating margin in 2024.
There is a lot to do but it will be an exciting journey.
Our new Management Board (“TMB”) replaced the previous Executive Leadership Team structure on
1 March 2024.
Peter France
Chief Executive Officer
Mark Hoad
Chief Financial Officer
Mike Leahan
EVP Commercial
Stewart Partridge
EVP Operations
Ian Buckley
Group General Counsel
and Company Secretary
(designate)
Clare Nicholls
EVP Human Resources
An EVP Engineering will be appointed to the TMB in the near future
9
EXTERNAL RECOGNITION
We are pleased to
continue to receive
external recognition
for ESG matters
AAWe received a rating
of “AA” in the 2023
MSCI ESG Ratings
assessment, placing
TT in the leading
companies in its
sector group
B-We also participate in
CDP’s annual climate
change survey.
We received a “B-”
(management level)
rating in 2023 for our
2022 data submission
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10
CHIEF EXECUTIVE OFFICER Q&A CONTINUED
CASE STUDY
INSIDE TT ELECTRONICS
CASE STUDY
SUPPORTING THE UK’S
FUTURE AS A GLOBAL LEADER
IN INTEGRATED AIR COMBAT
Building on existing work on the UK
Tempest programme, TT was awarded a
further contract during 2023 to support
feasibility studies for advanced electrical
power solutions on the sixth-generation
Tempest fighter aircraft entering service
from 2035 in the UK’s future combat air
system (“FCAS”).
The Team Tempest consortium is composed of the
UK Ministry of Defence and industry partners BAE
Systems, Rolls-Royce, Leonardo UK and MBDA,
working together to deliver an FCAS that pioneers
advanced technology including deep learning AI, the
ability to fly unmanned, and a virtual helmet cockpit
to stay ahead of evolving threats.
This award expands the longstanding business
relationship and multiple development and
manufacturing touchpoints between TT and BAE
Systems on the Tempest and other new military
aircraft as well as a range of other high-profile
military platforms in the UK and Europe. These
include the Boxer mechanised infantry vehicle
programme for which we provide primary power
assemblies including battery control units and
command display units for signalling and
communication, and electrical cable harnesses;
CV-90 armoured combat vehicles for which we
provide control panels; the prototype Challenger 3
main battle tank for the British Army; and next-
generation naval radar systems.
We are exceptionally proud to support
Team Tempest. Our working relationship
with BAE Systems is truly collaborative
and this win provides an excellent
opportunity to strengthen our ties and
become more deeply embedded in the
value chain of this incredible next-
generation platform.”
Matt Yeates
SVP Strategy & Programmes
INSIDE TT ELECTRONICS
TECHNOLOGY IMPROVING
PATIENT OUTCOMES
TT’s US team is continuing to work in partnership
with a medical device company on complex optical
sensors for use in blood analyser technology.
The two sensors will be used in the disposable test
vessel cartridges designed for our partner’s blood
gas analyser. The sensors detect the proper loading
of the cartridge to ensure alignment with the
analyser optics and correct spectral measurements,
making them essential for proper execution of the
test. The test can be used to measure, for example,
blood gases, pH, electrolytes or metabolites.
TT designed a custom assembly for the applications
and will be the sole source supplier for an estimated
15-year product life. As the vendor of choice, we are
now moving forward with the design of new
assemblies for the next generation of machines.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
OUR BUSINESS MODEL
STRONG
PLATFORM
OUR ASSETS
WHAT MAKES US DIFFERENT
Engineering and manufacturing capability
– Deep domain knowledge, years of
experience across our global footprint.
– Design and manufacturing skills that
make end products smaller, lighter and
more energy-efficient.
– Specialists in low-volume, high-mix
products, offering customisation and
flexibility to customers.
Research and development
– R&D capability with IP and specialist
product development skills.
– Agile development model brings
products quickly to market.
– Know-how and experience in complex
regulatory approvals.
Access to our customers
– Customer credibility and long-term,
value-creating partnerships.
– Business development organisation
that fosters inter-Group collaboration
and cross-selling.
People and culture
– Talented designers, engineers and
manufacturing experts passionate
about what they do.
– Caring, supportive and
service-driven teams.
– Always guided by our TT Way values.
Read more about our TT Way values
on page 31
Cleaner, smarter, healthier
Our target markets offer strong long-term
structural growth supported by global
megatrends pushing for the development
of cleaner, smarter and healthier products
and applications as we move towards a
more sustainable world.
Culture of expertise
Passionate teams finding solutions to the
world’s toughest technology challenges.
We champion knowledge, skills, innovation,
problem-solving and service, and attract
and promote talented people and develop
expertise at all levels.
Design-led technology
We design and manufacture bespoke
technology solutions for specific
applications. We work from initial concept
to production at scale, and from single
component to complete device
manufacture. We seek single source and
designed-in development opportunities
that enable us to move up the value chain
and create long-term revenue streams.
True partners
We engage deeply with our customers to
become true partners. Customer intimacy
enables us to leverage our capabilities to
respond to their unique requirements and
become a critical contributor to their teams
and products.
11
We are a business with high-quality assets and a differentiated offer aligned
with global megatrends. We create value by helping our customers to succeed
in growing markets by solving their technology challenges and contributing
to their sustainability goals; investing in and creating opportunities for our
people; and doing business responsibly and with integrity.
OUR STRATEGY
THE VALUE WE CREATE
Our strategy leverages our assets and
differentiators to generate optimum returns
for all our stakeholders while maintaining
strong capital discipline, a focus on cash
generation, and careful use of the balance
sheet to facilitate investment.
OUR STRATEGIC PRIORITIES
TECHNOLOGY AND CAPITAL
INVESTMENT SUPPORTING R&D
and new programmes to drive growth
and consolidate customer positions
MARGIN ENHANCEMENT
through portfolio change, operational
leverage and self-help actions
TARGETED AND
COMPLEMENTARY M&A
to expand technology capabilities
and customer and market reach
ESG
to drive sustainability into decision-
making and business practices, from
product development to recruitment
Customers and suppliers
– Critical products and services;
solving tough technology challenges.
– £33.2 million R&D and capex
investment in 2023.
– Fair treatment of suppliers.
Our people
– Employee safety and wellbeing a
priority.
– Investment to build skills, experience
and create development opportunities.
– Equality, diversity and inclusion
considered a positive business driver.
Environment and our communities
– Cleaner, smarter and healthier
products.
– 62% reduction in Scope 1 & 2
emissions in four years.
– Committed to social responsibility,
ethical business practices and
community support.
Shareholders
– 19.2p adjusted earnings per share.
– Increased ROIC by 150 bps to 12.0%
– 6.8p dividend per share.
Read more about our strategy
on page 15
Read more about our stakeholders
and how we engage with them
on page 57
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 12
OUR MARKETS
HEALTHCARE
We provide design and manufacturing
solutions for a range of diagnostic, surgical
and direct patient care devices critical to
the identification, treatment and prevention
of disease.
The ageing of populations in most developed countries
with continued increases in life expectancy (the world’s
population of over 60s is expected to double by 2050)
has major implications on healthcare costs. The ability
to deliver healthcare to these populations is a structural
driver of growth forcing the acceleration of the pace of
innovation in healthcare. Furthermore, the pandemic
significantly increased demand for remote healthcare
solutions, including home-based care and telemedicine.
The growing need to expand healthcare access and
reduce the burden on medical resources through the
use of technology in medical devices is driving an
expected CAGR of 7% through to 2027. Beyond this,
it is likely that growth will continue as medtech offers
cost-efficiency and convenience for both patients
and providers.
McKinsey recently reported that technological change
is one of the biggest developments forcing structural
change in healthcare, particularly the incorporation of
AI into medtech and healthcare and the use of data
and analytics to improve care and productivity. There
has been a rapid increase in healthcare innovations
which are benefiting society by enhancing quality of
life, fighting disease and promoting wellbeing.
Our power, connectivity and sensor technologies span
the modern surgical suite, from patient monitoring and
therapeutic devices to surgical navigation, diagnostic
equipment and life sciences. According to New
Venture Research, monitoring and surgical equipment
are set to experience the strongest growth in the
sector, followed by medical diagnostics technologies.
TT is focused on growing in three areas where
we are well placed to capitalise on this increasing
demand for high-complexity products driven by
technological advancement.
Robotic surgery
Minimally invasive surgical procedures are good for
both patient and doctor given the reduced risk and
faster recoveries. It is estimated that fewer than 10%
of procedures today are carried out using the aid of
a robot, despite resulting in greater precision and
improved overall patient outcomes. These are markets
measured in the billions of dollars and increased
penetration equates to huge growth potential over the
next few decades. We are pushing boundaries in this
area by enabling sensor miniaturisation, increased
sensor precision and highly effective integration of
sensor and device.
TT sensors attached to surgical instruments provide
real-time positioning and orientation information
and we are a market leader in the smallest electro-
magnetic micro-coil sensors for these applications.
Implantable devices
There is increasing use of wearable devices to track
health, as well as remote patient monitoring, including
devices that can conduct ECGs, detect high blood
pressure and monitor mental health indicators.
TT products also help deliver therapy directly to
patients through implantable devices such as
pacemakers and defibrillators. Implantables are
now also competing with pharmaceutical solutions
for issues like hypertension and sleep apnoea and
are able to support other external applications
requiring high-reliability power and sensor-
enabled communication.
Life sciences and laboratory equipment
We are continuing to expand our involvement in
life sciences and laboratory equipment, supporting
new ultra-low temperature freezers and gaining
momentum in automated sample storage systems.
By supporting our partners in this area, we are
collectively improving laboratory automation systems
and enabling samples to be collected and analysed
with minimal human intervention, the benefits of which
are improved data reliability and accuracy, less waste,
and time-efficient results.
We are pushing boundaries in robotic
surgery by enabling sensor miniaturisation,
increased sensor precision and highly
effective integration of sensor and device.”
TELEHEALTH AND
REMOTE PATIENT
MONITORING EXPECTED
SECTOR CAGR TO 2027
+7%
REVENUE BY DIVISION
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
17%
82%
1%
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
OUR MARKETS CONTINUED
AEROSPACE &
DEFENCE
We provide solutions for high-reliability
applications across a broad range of
platforms operating on land, air and sea.
Growth for TT is driven by increasing
electrification of these platforms, which
supports fuel efficiency and safety.
Megatrends impacting this market are the climate
crisis, global power shift, rapid urbanisation,
demographic changes, innovative technological
change and global connectedness. All these factors
are driving a multi-year up cycle in the aerospace
and defence sectors.
Being challenging industries to decarbonise,
aerospace and defence players have been at the
forefront of adopting new and advanced manufacturing
technologies, which can help address the sustainability
challenge. The industry is likely to move towards using
sustainable aviation fuels (“SAF”) at scale and new
propulsion technologies such as electric, hydrogen
and hybrid. In its efforts to advance decarbonisation,
the sector will likely establish multiple partnerships
comprising technology investors, energy companies,
airlines and government agencies.
Via our innovative solutions and systems with proven
mission-critical, high-reliability characteristics aimed
at commercial and military aircraft, defence products
and space programmes, we expect to grow in
these markets.
Aerospace
Air travel is rebounding strongly to pre-COVID levels
with continuing tailwinds given a growing, global
middle-class population which exhibits a greater
propensity to travel. Robust activity levels span
both aftermarket and, increasingly, original
equipment (narrow body predominantly) as supply
chains continue to show signs, albeit slowly, of
steady improvement.
Fundamentally, the need for safer, more efficient
and more environmentally friendly aircraft remains.
Moves to “conscious” or digital aircraft will require a
large increase in interconnected control systems with
an increased focus on cyber security. Growth in new
technologies such as advanced air mobility (“AAM”)
and evolving business models in the space sector
are also at the forefront of industry development.
This drives demand for increasingly advanced
electronic systems and applications, all of which
are supported by TT technologies. We are growing
capabilities in electrical power conversion and related
sub-systems and collaborating with aerospace
companies in the development of high efficiency,
high power density converters as well as technologies
for the next generation of higher voltage platforms.
The pace of growth continues in the space sector too,
both non-commercial, which is driving developments
in technology and capabilities, and commercial space
with NASA, SpaceX, Blue Origin and Virgin Galactic all
targeting lunar orbits. TT provides components for
satellites, space vehicles, and for power management.
Fundamentally, the need for safer, more
efficient and more environmentally friendly
aircraft remains.”
Defence
With the focus of global growth shifting, creating
more powerful national economies in different regions,
there will be greater resources to protect, and greater
resources available to invest in security and defence.
This rising tide looks set to support strong, sustainable
compound growth over the next decade, with priorities
shifting to intelligence and multi-domain integration.
Active conflict and geopolitical tensions have
increased weapons demand and replenishment of
stores. This is compounded by elevated security
concerns in several regions.
Aerospace guidance production, particularly in the
imaging, signal processing and smart weapons
categories, will continue to expand as military budgets
increase, with a large percentage of funding being
directed to modern electronics technology. Hypersonic
missile developments are gaining pace with significant
investment expected.
In 2023 the global defence electronics manufacturing
market is expected to have expanded by around 2.5%.
This is a pace reflective of the past seven years, all of
which have seen consistent, moderate expansion, as
governments invest to maintain state-of-the-art
capabilities, with a high level of upgrades on existing
platforms to meet the pace of demand. It is likely that
there will be a pickup in growth from here, with
estimates suggesting an additional $1 trillion in global
defence spending over the next decade, and further
investment in R&D, mostly in the US and Europe.
In defence, we are focused on next-generation
requirements for high-density power electronics
and electrical machines through the development
of technologies that reduce size, weight, power and
cost (“SWaP-C”), while simultaneously enhancing
command, control, communications, computing,
intelligence, surveillance and reconnaissance
(“C4ISR”) capabilities. Integrated sensing is a key
growth area in global defence spending with combat
vehicle platforms representing the highest upside.
13
ESTIMATED ADDITIONAL
GLOBAL DEFENCE
SPENDING OVER NEXT
5 YEARS
$1.5TN
REVENUE BY DIVISION
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
60%
36%
4%
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
14
OUR MARKETS CONTINUED
AUTOMATION &
ELECTRIFICATION
Customers rely on us to help solve their
toughest automation and electrification
challenges; streamlining their supply
chains; increasing their efficiency; and
helping them bring smart, new products
to market.
Digitalisation is a megatrend in its own right as it
permeates every industry and offers solutions for
many of the challenges faced. Industrial automation
is the backbone of manufacturing and production
processes that support economies and, with
increased focus on climate change and natural
resources, there is continuing pressure to facilitate
higher efficiency and productivity.
We support increased demand for digitalisation
through the design and manufacture of connectivity
solutions. Given the wide scope of these markets,
performance correlates strongly with global economic
growth, with key indicators being GDP growth and the
Purchasing Managers’ Index (“PMI”), but the
digitisation and proliferation of electronics and
electrification means markets will grow faster than
these indicators. The electronics manufacturing
market is estimated to have grown by over 5% globally
in 2023.
The pandemic significantly disrupted global supply
chains, highlighting the importance of digital
technologies, for example the Internet of Things (“IoT”),
to ensure operational continuity. While a globally
connected industry stimulates competition and
innovation, locating production close to markets –
known as nearshoring or local-for-local business –
makes local economies more resilient and sustainable.
This megatrend is described as glocalisation, the
success of which is dependent on access to digital
technology and its prerequisites of economic freedom,
standardisation, a reduction of technical barriers to
trade, and government policies that support the
digital economy.
Furthermore, the increasing trend of re-shoring
manufacturing capability, or moves to regions with
less expensive labour, will increase the demand for
AI, augmented reality, IoT and other aspects of
digitalisation. The enactment of the CHIPS Act in
the US has triggered investments in semiconductor
manufacturing in the country, with the first plant
expected to begin production in 2024.
Our positioning in sub-segments such as
electrification and industrial automation are good
contributors to growth.
Urbanisation is another megatrend that drives these
sectors. Megacities are on the rise. Today, the world
has 33 cities with more than 10 million inhabitants
and some of those – including Tokyo, Shanghai and
New Delhi – are home to more than 20 million people.
Forecasts suggest that, by 2030, there will be a total of
43 megacities, with most of the expansion occurring
in developing countries.
ESTIMATED GROWTH
IN ELECTRONICS
MANUFACTURING
MARKET IN 2024
+10%
REVENUE BY DIVISION
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
25%
61%
14%
Growing cities will require smart buildings, hospitals,
schools, and communication networks that provide
connectivity and edge computing. Software-based
optimisation and intelligent hardware technologies
will help reduce energy consumption and boost the
efficiency of buildings and factories.
For TT, the opportunity in electrification is our ability
to protect and ensure the efficiency of electronic
systems. The broad trend of electrification is in turn
driving more power and data usage. As electrification
prevails, the increasing installed base of electrical
equipment will require protection and connection and
electrified, digitalised industries and applications will
need an increasing number of data centres and
connected products. This megatrend has popularly
been referred to as the “electrification of everything’”
spanning the modernisation and decarbonisation of
the grid, the expansion of broadband with 5G, and the
shift to electric vehicles, among ongoing transitions.
Our positioning in sub-segments such as
electrification and industrial automation
are good contributors to growth.”
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
OUR STRATEGY
DRIVING
VALUE
STRATEGIC PRIORITY
2023 ACHIEVEMENTS
15
Our strategy is designed to leverage our assets and differentiators
to generate optimum returns for all our stakeholders while
maintaining strong capital discipline, a focus on cash generation,
and careful use of the balance sheet to facilitate continued
investment in the quality of our assets and growing our exposure
to long-term growth markets.
TECHNOLOGY AND
CAPITAL INVESTMENT
SUPPORTING R&D
and new programmes
to drive growth
and consolidate
customer positions
MARGIN
ENHANCEMENT
through portfolio change,
operational leverage and
self-help actions
TARGETED AND
COMPLEMENTARY M&A
to expand technology
capabilities and customer
and market reach
ESG
driving sustainability into
decision-making and
business practices, from
product development
to recruitment
– £33.2 million investment in technology and capital to support higher growth, innovative and sustainable products. R&D investment at 3.4% of the aggregate
revenue of our product businesses.
– 37 significant contract awards delivering circa £250 million of potential lifetime revenues.
– Collaboration with a prime defence contractor on power supplies for TEMPEST.
– Opened new Ferranti facility in Greater Manchester for the design and manufacture of advanced electronic and electromechanical power units.
– Enabled the expansion of the use of electromagnetic tracking for new medical procedures through TT sensor technology.
– As one of two strategic manufacturing partners supporting the Honeywell Anthem avionics suite, advanced the development of prototypes.
– Mexicali footprint expansion for our customer needs, replicating previous successful expansion into Kuantan.
– Investment in Kuantan solar (commissioned in 2023); commenced solar at Mexicali for commissioning in 2024.
– Increased programme volume throughput (resumption of growth in civil aero and defence markets) improving operational leverage and hence margin in P&C.
– Delivered final cost savings from self-help programme.
– Ramped up production in new clean rooms at Minneapolis and Bedlington.
– Operational improvements to achieve process efficiencies, including further easing of supply chains and automation improvements.
– Offset cost headwinds with efficiency and focus on appropriate pricing.
– Continued development of high-value New Product Initiatives (“NPI”).
– Completed integration and relocation of Ferranti business to flagship Power Solutions facility in Greater Manchester.
– Leverage reduced to 1.7x. Focus on reduction to lower end of 1–2x target range before recommencing M&A.
– Continued focus on building out technology and product opportunities that support energy transition and zero-carbon global goals.
– Completed climate risk and opportunities scenario analysis.
– Scope 1 & 2 emissions reduced by 62% (against revised 2019 baseline), with 53% of electricity now from renewable sources.
– Solar initiated at Kuantan and Mexicali and continued to assess further on-site solar projects.
– Engagement survey results in line with the 3*** “world class companies to work for” Best Companies Ltd benchmark.
– Maintained a strong governance framework and processes across the organisation.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 16
OUR STRATEGY CONTINUED
STRATEGIC BUSINESS WINS
HEALTHCARE
AEROSPACE AND DEFENCE
AUTOMATION AND ELECTRIFICATION
New healthcare customer in Cleveland
In our Cleveland facility we have won a new healthcare customer which
reflects our credentials in partnering with OEMs in highly regulated
markets, such as healthcare. We will work on a new, innovative, infant
feeding device for premature babies and will support the project to
meet the stringent regulatory requirements of ISO 13485 and FDA
(Food & Drug Administration) registration. This novel neonatal medical
device will improve neurological development with the aim of reducing
the length of stay in neonatal intensive care units and hence costs.
Life sciences contract in Malaysia
The next stage of our GMS expansion into our Kuantan site in Malaysia
is evidenced by a life sciences contract win to provide printed circuit
board assemblies (PCBAs) and systems integration for a mass
spectrometer. Such machines are used in spectrometry elemental
isotope analysis to understand the chemistry and composition of
materials used in healthcare and life sciences. We are currently
undertaking sample builds (first articles) with volume production
expected to commence in H2 2024. This work was secured given
our proven, 10+ year customer partnership and demonstrates the
success of our global manufacturing footprint expansion strategy.
Optical sensor opportunities in US
The US team secured two different optical sensor opportunities with
a medical device company, for use in a blood gas analyser. These
sensors are used in the disposable test vessel cartridges designed for
the device which is used for rapid blood analysis in laboratories and
at point of care to measure, for example, blood gases, pH, electrolytes,
metabolites and CO-Oximetry. The sensors are critical to detect the
proper loading of the cartridge as its alignment with the analyser optics,
for spectral measurements, is essential for proper execution of the test.
Development of new power module
We secured the first order for the development of a new power
module as part of a long term collaborative agreement with a leading
commercial aircraft engine manufacturer, aimed at advancing electric
propulsion systems for electric aircraft applications. The cornerstone
of this partnership revolves around the E Drive 150 Power Module
which enhances various electrical switching functionalities, critical for
vital aircraft systems. These include electric starter generators, cabin
air systems, electric pumps, and electric actuation with future potential
for use in Urban Air Mobility and Small Modular (Nuclear) Reactors.
We believe our power module expertise, along with our persistence in
finding a solution, were key factors in securing this win.
Design and manufacture of custom AC/DC devices
An example of TT moving up the value chain and engineering power
solutions being used in highly efficient, cutting-edge platforms is a
new win with a global aerospace and defence innovator. TT will design
and manufacture two novel custom AC/DC converters that will meet
SWaP-C and electrical requirements for airborne applications.
This multi-million dollar win showcases our ability to align our tech
roadmap with our customers and provide an airborne solution that
has never been seen in the market before. This technology is being
designed and built in Kansas City.
Tempest Fighter contract in UK
Building on existing work on the UK Tempest programme, TT was
awarded a further contract during 2023 to support feasibility studies for
advanced electrical power solutions on the sixth-generation Tempest
fighter aircraft entering service from 2035 in the UK’s future combat
air system (“FCAS”). The Team Tempest consortium is composed of
the UK Ministry of Defence and industry partners BAE Systems,
Rolls-Royce, Leonardo UK and MBDA, working together to deliver a
FCAS that pioneers advanced technology including deep learning AI,
ability to fly unmanned, and a virtual helmet cockpit to stay ahead of
evolving threats. This award expands the longstanding business
relationship and multiple development and manufacturing touch
points between TT and BAE Systems on the Tempest military aircraft.
Complex PCBAs for military air
We have secured a multi-million, five year contract with defence
innovator, Marotta Controls, to provide complex printed circuit board
assemblies for production of high-reliability electronics on a next
generation military air platform. Our ability to scale to meet the
customer and market demand was a key factor in this award.
Signalling solutions contract in China
In Suzhou we have won a contract with Casco, a TT customer of
over 10 years, for signalling solutions across the Urban Rail network
in China. We will provide complex, high level assembly build cabinets
and electronics solutions. The majority of Casco projects are focused
on China, where it is the number one player in the domestic rail transit
market. This win is further recognition of the success of our China
for Asia strategy.
Collaboration with Tier-1 customer in India
Our focus on working with our customers to bring smart, sustainable
products to market is illustrated by a collaboration with one of the
largest Tier-1 companies in India which supplies manual and hydraulic
steering systems to all major commercial vehicle manufacturers in the
country. TT is supplying an Electronic Power Steering (“EPS”) sensor
which is used to measure required torque and desired angle of the
steering system by the driver. The steering torque and position sensor
is mounted in line with the steering shaft of a vehicle and is a critical
part of the EPS assembly. We started supporting the customer at
an early design stage and provided technical assistance to complete
the design and build stage of the EPS system for the company’s
4W Electric Vehicles commercial segment. Our ability to provide
the required customisation of our sensor established us as the right
partner, leading to a growing business and technology relationship that
has positioned TT as the single source of supply for all this customer’s
EPS projects.
Securing customers in Mexico
Two long-standing customers in the Automation and Electrification
sector are secured for our new Mexicali facility as they leverage the
best-cost geography while retaining manufacturing footprint in the
Americas to serve local markets.
DISTRIBUTION SALES CHANNEL
We grew our revenues through distributors again in 2023 and this area
now represents 20% of our overall sales. The demand from distributors
comes from a very wide range of customers and end markets but is,
in large part, driven by the same megatrends supporting our focus end
markets including rapid technological change and digital transformation.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION CFO REVIEW
PRIORITIES
DELIVERED
17
ADJUSTED OPERATING
PROFIT AT CONSTANT
CURRENCY
+16%
Read more
on page 19
We have delivered against all of our
priorities set for the year with strong free
cash generation, a further reduction in
leverage, good operating margin
progression, and order book execution.”
Mark Hoad
Chief Financial Officer
OVERVIEW
Revenue for the year was £613.9 million, 1 per cent
higher than the prior year at constant currency and
3 per cent higher excluding the impact of the unwind
of pass-through revenues. Reported revenue included
£19.9 million of zero margin pass-through revenues,
a £10.4 million reduction on 2022 at constant currency.
This relates to materials where we experienced very
significant cost inflation which was being transparently
passed on to customers with no margin mark-up.
Adjusted operating profit was £52.8 million,
16 per cent higher than the prior year at constant
currency, reflecting the benefits of volume growth,
improved pricing and the balance of the benefits
of our self-help programme.
The adjusted operating margin was 8.6 per cent.
Excluding zero margin pass-through revenues,
adjusted operating margin was 8.9 per cent. After
the impact of adjusting items, including restructuring,
pension, acquisition and disposal costs, and a non-
cash asset write-down, the Group’s full-year statutory
operating profit was £8.7 million. The non-cash
write-down of £32.5 million relates to the recently
announced disposal of businesses in the Power and
Connectivity and GMS divisions, referred to internally
as “Project Albert”. Cash flow impacting adjusting
items totalled £4.0 million.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
18
CFO REVIEW CONTINUED
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023
£million (unless otherwise stated)
Revenue
Operating profit/(loss)
Operating profit margin
Profit/(loss) before taxation
Earnings/(loss) per share
Return on invested capital
Cash conversion
Free cash flow 1
Net debt 1
Leverage 1
Dividend per share
Adjusted results 1
Statutory results
Change
Change
constant FX
(1)%
12%
1%
16%
100bps
110bps
6%
5%
11%
10%
2023
613.9
52.8
8.6%
43.0
19.2p
12.0%
92%
2022
617.0
47.1
7.6%
40.4
18.2p
10.5%
33%
2023
613.9
8.7
1.4%
(1.1)
(3.9)p
23.9
126.2
1.7x
6.8p
2022
617.0
(3.4)
(0.6)%
(10.1)
(7.5)p
(13.1)
138.4
2.0x
6.3p
1 Throughout the Annual Report we refer to a number of alternative performance measures which provide additional useful information. The Directors have
adopted these measures to provide additional information on the underlying trends, performance and position of the Group with further details set out on
pages 27 to 28. The adjusted measures used are set out in the “Reconciliation of KPIs and non IFRS measures” section on pages 174 to 177.
Adjusted earnings per share (EPS) increased to
19.2 pence (2022: 18.2 pence), reflecting the improved
adjusted operating profit in the period offset by higher
interest charges. Basic EPS was a loss of 3.9 pence
(2022: 7.5 pence loss).
Cash conversion returned to target levels, at 92 per
cent (2022: 33 per cent) and with significantly reduced
cash impacting adjusting items and a pension surplus
refund (see below), cash generation has inflected
resulting in a free cash inflow of £23.9 million (2022:
outflow £13.1 million). Adjusted operating cash inflow
post capital expenditure during the period was
£48.8 million (2022: £15.7 million). On a statutory
basis, cash flow from operating activities was
£62.9 million (2022: £12.7 million).
Following the buy-in of our UK defined benefit
pension scheme (the “Scheme”) in November 2022,
the Scheme is de-risked with scheme liabilities now
matched by the buy-in insurance policy. Given the
higher level of confidence over there ultimately being
a surplus in the Scheme at the point of wind-up, in
December, the Scheme made an initial surplus refund
to the Company of £5.0 million less tax (£3.2 million net).
We ended the year with net debt of £126.2 million
(2022: £138.4 million), including lease liabilities of
£20.8 million (2022: £23.1 million). Year-end leverage
was 1.7 times (2022: 2.0 times), within the Board’s
target leverage range of 1-2 times. We are confident
this downward trajectory will continue as EBITDA
increases and as we deliver further strong free
cash flow in 2024.
CASH CONVERSION
92%
RETURN ON INVESTED
CAPITAL
12%
Our return on invested capital was 12.0 per cent in
2023, increasing by 150 basis points due to the growth
in adjusted operating profit, combined with the high
cash conversion which meant there was only a limited
increase in invested capital.
On 4 March 2024 we announced that we had agreed
to divest our business units in Cardiff and Hartlepool,
UK and Dongguan, China for £20.8 million on a cash
and debt free basis. These assets were classified as
held for sale at 31 December 2023 and were written
down by £32.5 million reflecting fair value and costs
to sell. The disposal is expected to complete by the
end of Q1 2024 and is expected to enhance group
margins and improve leverage.
On track to deliver 10% margins in 2024
The pursuit of higher margins remains core to the
Group’s strategy. In 2023 the Group made good
progress delivering a 110 basis point improvement
in adjusted operating margin to 8.6 per cent.
Excluding the impact of pass-through revenues,
adjusted operating margin was 8.9 per cent.
We anticipate pass-through revenues becoming
significantly less pronounced in 2024.
The reduction in pass-through revenues, the recently
announced business unit disposal and our focus
on efficiency, costs and pricing discipline alongside
operational leverage on growth, where we have
good visibility from our order book, all underpin our
confidence in achieving a 10% operating margin
in 2024.
Revenue
Group revenue was £613.9 million (2022: £617.0 million).
This included a currency translation headwind of
£11.3 million. Group revenue was 1 per cent higher
than the prior year at constant currency. Excluding the
zero margin pass-through revenues, organic growth
was 3 per cent, split approximately 1 per cent volume
growth and 2 per cent pricing. Sales volumes across
our key markets have been buoyant and the strength
of our order book, and the pipeline of new business
opportunities, gives us confidence that organic
growth will continue despite the headwind to headline
organic growth from the further unwind of pass-
through revenue.
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Operating profit and margin
The Group’s adjusted operating profit was £52.8 million
(2022: £47.1 million) and statutory operating profit was
£8.7 million (2022: £3.4 million loss) after a charge for
items excluded from adjusted operating profit of
£44.1 million (2022: £50.5 million) including:
– Restructuring costs of £2.0 million (2022:
£6.4 million) largely comprising costs associated
with the relocation of production facilities from our
US site in Covina to Kansas, representing the last
stage of the self-help programme which started
in 2020.
– Pension restructuring costs of £1.9 million (2022:
£13.8 million) relating mainly to work to prepare
the UK defined benefit scheme for buy-out.
– Acquisition and disposal costs totalled £3.1 million
(2022: £1.2 million) comprising £1.3 million (2022:
£1.1 million) of integration costs relating primarily
to the Ferranti acquisition, which was acquired early
in 2022; £1.2 million (2022: £nil) in preparing assets
held for sale; £0.4 million (2022: £0.1 million) relating
to integration activities for the acquisition of Torotel,
Inc. and £0.2m (2022: £nil) of other costs.
– Amortisation of intangible assets arising on
business combinations of £4.6 million (2022:
£6.0 million).
– Non-cash write-down costs totalled £32.5 million
relating to businesses held for sale in our IoT
Solutions and GMS CGUs (2022: £23.1 million
relating to the impairment of goodwill and other
assets in the IoT Solutions business).
from adjusted profit. The adjusted tax charge was
£9.2 million (2022: £8.4 million), resulting in an
effective adjusted tax rate of 21.4 per cent (2022:
20.8 per cent).
Earnings per share
Adjusted EPS increased to 19.2 pence (2022:
18.2 pence), reflecting the improved adjusted operating
profit in the period. Basic EPS was a loss of 3.9 pence
(2022: 7.5 pence loss). Adjusted operating cash inflow
after capex was £48.8 million (2022: £15.7 million
inflow). The improvement was as a result of increased
profitability and significantly reduced working capital
outflow both of which more than offset increased
investment in capital expenditure.
Cash flow
Capital and development expenditure of £24.0 million
(2022: £14.0 million) reflected investment to support
growth. This resulted in adjusted operating cash
conversion of 92 per cent (2022: 33 per cent). On a
statutory basis, cash flow from operating activities
was £62.9 million (2022: £12.7 million). There was
a free cash inflow of £23.9 million (2022: outflow
£13.1 million), net of £4.0 million of restructuring and
acquisition related costs (2022: £11.1 million) primarily
relating to integration costs of the Ferranti acquisition
(£1.3 million), restructuring costs to move our facility in
Covina, US to Kansas, US (£1.0 million), costs incurred
in preparing assets held for sale (£0.9 million), pension
costs (£0.2 million) and other costs (£0.6 million).
There was a £3.2 million pension surplus refund from
the UK Scheme (2022: £nil). Dividend payments
totalled £11.3 million (2022: £10.2 million).
The adjusted operating margin of 8.6 per cent (2022:
7.6 per cent) reflects the benefits of operational
leverage and our self-help programme. We successfully
offset increases in input costs through price increases.
Finance costs and taxation
The net finance cost was £9.8 million (2022:
£6.7 million) with the increase being due to a
combination of higher base rates and higher drawn
debt levels. The Group’s overall tax charge was
£5.7 million (2022: £3.1 million), including a £3.5 million
credit (2022: £5.3 million credit) on items excluded
In June 2022 the Group re-financed its bank
revolving credit facility (RCF) with a syndicate of five
relationship banks at commercially attractive rates.
This £147.4 million facility had a four-year tenure with
a one-year extension option. In the first half of 2023
we exercised £15 million of a £32.6 million accordion,
thereby increasing the facility size to £162.4 million,
and we also exercised the one-year extension, taking
the facility maturity out to June 2027. The RCF is
complemented by £75 million of private placement
fixed rate loan notes, which were issued in December
2021, with 7 and 10 year maturities.
CASH FLOW, NET DEBT AND LEVERAGE
19
£million
Adjusted operating profit
Depreciation and amortisation
Net capital expenditure 1
Capitalised development expenditure
Working capital
Other
Adjusted operating cash flow after capex.
Adjusted operating cash conversion
Net interest and tax
Lease payments
Restructuring, acquisition and disposal related costs
Retirement benefit schemes
Free cash flow
Dividends
Lease payments
Equity issued/acquired
Acquisitions
Cash transferred to assets held for sale
Other
Increase in net debt
Opening net debt
New, acquired, modified and surrendered leases
Leases acquired
Leases transferred to liabilities held for sale
FX and other
2023
52.8
16.5
(22.4)
(1.6)
(0.5)
4.0
48.8
92%
(19.7)
(4.4)
(4.0)
3.2
23.9
(11.3)
4.4
1.3
–
(3.6)
(1.2)
13.5
2022
47.1
16.1
(11.7)
(2.3)
(38.8)
5.3
15.7
33%
(13.4)
(4.3)
(11.1)
–
(13.1)
(10.2)
4.3
0.4
(8.3)
–
(3.0)
(29.9)
(138.4)
(102.5)
(3.4)
–
2.6
(1.5)
(2.3)
(0.2)
–
(3.5)
Closing net debt as per balance sheet
(127.2)
(138.4)
Cash and leases held within assets and liabilities held
for sale
Closing net debt including assets and liabilities held
for sale
1.0
–
(126.2)
(138.4)
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CFO REVIEW CONTINUED
Net debt
At 31 December 2023, the Group’s net debt was
£126.2 million (31 December 2022: £138.4 million),
including £20.8 million of lease liabilities (31 December
2022: £23.1 million). Leverage at 31 December 2023,
consistent with the bank covenants, was 1.7 times
(31 December 2022: 2.0 times).
Pension buy-in
Following the buy-in of our UK defined benefit
pension scheme (the “Scheme”) in November 2022,
the Scheme is de-risked with scheme liabilities now
matched by the buy-in insurance policy. The Scheme
had a surplus of £25.3 million at December 2023
(December 2022: £31.3 million). Given the higher level
of confidence over there ultimately being a surplus
in the Scheme at the point of wind-up, in December
the Scheme made an initial surplus refund to the
Company of £5.0 million less tax (£3.2 million net).
TT is, in collaboration with the Scheme Trustee, in the
process of preparing the scheme for buy-out, which is
expected to be concluded by late 2024 or early 2025.
Shortly after the year-end, we completed the buy-out
of one of our much smaller US defined benefit pension
schemes at a cash cost of £1.8 million. The net surplus
across all Group schemes (including some smaller
defined benefit schemes in the US) at 31 December
2023 was £22.2 million (2022: £28.4 million).
Continued investment in the business
Organic investment in technology and capital is
important to support new project growth and totalled
£33.2 million in 2023. This in part results in us
becoming firmly embedded with our customers as
valued partners, enabling us to stay ahead of
customers’ needs and meet the challenges they set
us. Our investment is focused on bringing higher
growth, innovative, sustainable products to market.
These typically yield higher returns and development
is often undertaken in partnership with our customers.
INVESTMENT TO ADD:
75,000
square foot in Mexico
Manufacturing more
closely to our end
markets also reduces
the carbon footprint
of our products
for customers.”
CASE STUDY
Kuantan’s new high-speed SMT line has increased production
capacity to meet rising demand from TT’s healthcare and
industrial customers
INSIDE TT ELECTRONICS
EXPANDING OUR GLOBAL FOOTPRINT
We continue to invest in our global
facilities to support customer growth
and further our solid reputation for
delivering agile solutions and excellent
customer service.
In 2023 GMS expanded its footprint in the Americas
by opening a new state-of-the-art facility in Mexicali,
Mexico, adjacent to our existing S&SC facility. The
project utilised spare capacity in the existing site and
therefore required minimal capital spend as well as
building on our reputation as an employer of choice
in the region.
The new 75,000-square-foot operation will employ
around 250 people and has capacity for up-to-six
highly automated surface mount technology
(“SMT”) lines, the process by which electronic
components are mounted directly onto the surface
of a printed circuit board. Offering fully integrated
electronics manufacturing solutions, including
system integration and testing, the new facility
complements our operations in Cleveland,
Ohio and started operating in early 2024.
The expansion complemented similar investment
which increased our capability in Kuantan, Malaysia.
Here we installed a high-speed SMT line which
increased production capacity for high-level
assembly manufacturing solutions in response
to rising demand from healthcare and
industrial customers.
These key investments support growth in customer
demand while, at the same time, providing mitigation
against risk arising from geopolitical uncertainty.
Manufacturing more closely to our end markets also
reduces the carbon footprint of our products for
customers. With locations in the United States,
Mexico and Malaysia we are now well placed to
collaborate with customers on their re-
shoring activities.
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CFO REVIEW CONTINUED
Our R&D cash investment in the year was £10.8 million
(2022: £11.0 million), representing 3.4 per cent (2022:
3.7 per cent) of the aggregate revenue of our product
businesses. Capital expenditure totalled £22.4 million
(2022: £11.7 million).
In the second half of 2023 we relocated our Ferranti
business to a new flagship Power Solutions facility in
Greater Manchester. We are also expanding our GMS
offering in existing TT facilities. This started in 2020
with Kuantan, Malaysia and we are now adopting the
same low capital intensity approach in Mexicali,
Mexico to support growth programmes for our
customers and to enable their re-shoring priorities.
Outlook
2023 was a year of strong operational and financial
progress. The Group has delivered against the priorities
that were set for the year: strong free cash generation
has led to further reduction in leverage, and our strong
order book was converted into double-digit operating
profit growth, with good operating margin progression
underpinned by a recovery in our P&C business.
Based on the strength and level of visibility in our order
book, current end market activity and operational
improvement initiatives that are underway, while
mindful of the wider macro environment, we are
confident we are on track to deliver a 10% operating
margin in 2024.
CASE STUDY
INSIDE TT ELECTRONICS
TRANSITIONING COMMERCIAL
VEHICLES TO ELECTRIC
21
R&D AS % OF SALES
3.4%
Our focus is on working with our
customers to bring smart, sustainable
products to market.
This is illustrated by a collaboration with one of the
largest Tier-1 companies in India which supplies
manual and hydraulic steering systems to all major
commercial vehicle manufacturers in the country.
The company is now developing electronic power
steering (“EPS”) systems for commercial vehicles.
TT is supplying an EPS sensor for the steering
systems which is used to measure required torque
and desired angle of the system by the driver. The
steering torque and position sensor is mounted in
line with the steering shaft and is a critical part of
the EPS assembly.
We started working with the customer at an early
design stage and provided technical assistance to
complete the design and build stage of the EPS
system for the company’s 4W Electric Vehicles
commercial segment. Our ability to provide the
required customisation of our sensor established us
as the right partner, leading to a growing business
and technology relationship that has positioned TT
as the single source of supply for all EPS projects.
Our Mexicali facility recently secured a five-year,
c.£600k contract for EPS sensors for three- and
four-wheeler small commercial electric vehicles.
We started working with the customer
at an early design stage and provided
technical assistance to complete the
design and build stage.”
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22
CFO REVIEW CONTINUED
POWER
AND
CONNECTIVITY
Revenue increased by £15.5 million to £169.7 million
(2022: £154.2 million) and includes a currency
headwind of £0.4 million. Organic revenue was
10 per cent higher with good growth from healthcare
and aerospace & defence in particular, reflecting
increased market demand and previous business
win successes.
Adjusted operating profit increased by £6.4 million
to £14.3 million (2022: £7.9 million). Included within
this was a £0.1 million foreign exchange headwind.
The material step up in operating profit reflects very
healthy levels of drop through on the revenue growth,
price increases which more than offset cost inflation
and operational efficiencies. The adjusted operating
margin was up 330 basis points to 8.4 per cent (2022:
5.1 per cent) for the full year and was 9.4 per cent in
the second half.
Order intake has been good in the year and continues
to exceed growing revenues giving us confidence for
further growth and margin expansion in 2024.
In 2023 we have invested in and transferred production
to a new facility for the acquired Ferranti Power and
Control business, based in Greater Manchester, which
designs and manufactures mission-critical complex
power and control sub-assemblies for blue chip
customers in high-reliability and high-performance
end markets, primarily aerospace and defence.
FINANCIAL HIGHLIGHTS
2023
2022
Change
Change
constant fx
Revenue
£169.7m
£154.2m
£14.3m
£7.9m
10%
81%
10%
83%
8.4%
5.1%
330bps
330bps
Adjusted operating
profit 1
Adjusted operating
profit margin 1
1 See note 1 on page 3 for an explanation of alternative performance measures. Adjusting items are not
allocated to divisions for reporting purposes. For further discussion of these items please refer to the section
titled “Reconciliation of KPIs and non IFRS measures” on pages 174 to 177 of this document.
REVENUE BREAKDOWN
Revenue by market (%)
Healthcare
Aerospace & Defence
Automation & Electrification
Distribution sales channel
Revenue by geography (%)
North America
Europe
Asia and RoW
15%
44%
32%
9%
40%
47%
13%
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FINANCIAL HIGHLIGHTS
GLOBAL
MANUFACTURING
SOLUTIONS
site in Malaysia, back in 2020, which added value
through the regional expansion of our high-level
assembly capabilities to a variety of key customers.
The division’s planned revenues for 2024 are fully
covered and it has started to secure revenue for 2025.
23
2023
2022
Change
Change
constant fx
Revenue
£299.2m
£323.0m
£27.6m
£25.2m
(7)%
10%
(4)%
16%
9.2%
7.8%
140bps
160bps
Adjusted operating
profit 1
Adjusted operating
profit margin 1
1 See note 1 on page 3 for an explanation of alternative performance measures. Adjusting items are not
allocated to divisions for reporting purposes. For further discussion of these items please refer to the section
titled “Reconciliation of KPIs and non IFRS measures” on pages 174 to 177 of this document.
REVENUE BREAKDOWN
Revenue decreased, as expected, by £23.8 million
to £299.2 million (2022: £323.0 million) of which the
currency headwind was £10.9 million, with organic
revenue 4 per cent lower. Excluding currency effects
and the unwind of pass-through revenues, total
revenue was broadly unchanged as anticipated with
2023 a year of consolidation following two years of
exceptionally strong growth. Pass-through revenue
was £12.5 million lower in the second half, against the
second half of 2022 and £10.4 million lower for the full
year, which has created a head-wind to top line growth.
Adjusted operating profit increased by £2.4 million
to £27.6 million (2022: £25.2 million), including a
£1.5 million foreign exchange headwind. The constant
currency increase reflects operational efficiencies and
the benefit of improved pricing. The adjusted operating
profit margin was 9.2 per cent (2022: 7.8 per cent),
impacted by the pass-through revenues, without which
margins would have been 9.9 per cent.
This division performed well in 2023, reflecting the
momentum built from customers who are winners in
their own markets and provide opportunities to grow
share of wallet. The order book remains strong with
long visibility and in 2023 GMS has made incremental
capital investment to expand its capabilities into an
existing TT facility in Mexicali, Mexico. This follows the
successful addition of GMS capability to the Kuantan
The order book position has been underpinned
by several multi-million-pound wins, a number of
which extend beyond 12 months. We continue to
improve our understanding of how to leverage
these opportunities from the customer perspective.
Whether customers are seeking best-value-
geographies for their product, risk mitigation against
geopolitical uncertainties, or looking to reduce their
carbon footprint by manufacturing locally to the end
market, TT is well-positioned to support their needs.
Overall, the GMS division is in excellent shape and
our enhanced customer relationships and business
development initiatives are delivering strong order
intake. GMS has achieved a step change in its margin
profile over recent years, reflecting the value of the
service we bring to our customers, reliability, and the
value engineering and testing capability we offer.
We believe GMS margins can improve incrementally
with growth.
Revenue by market (%)
Healthcare
Aerospace & Defence
Automation & Electrification
Revenue by geography (%)
North America
Europe
Asia
40%
15%
45%
34%
38%
28%
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CFO REVIEW CONTINUED
SENSORS AND
SPECIALIST
COMPONENTS
Revenue increased by £5.2 million to £145.0 million
(2022: £139.8 million) and the currency impact was
neutral. Organic revenue was 4 per cent higher, with
good growth through the division’s distribution
partners a key driver. This business is in the sweet spot
of enabling our customers to reach their sustainability
goals with components for smart energy & city
infrastructure and factory automation.
longer to achieve than anticipated given delays in
receiving parts. The facility is now operating as
expected. We have undertaken a full review of the
viability of the system to ensure it is fit for purpose
and identified some control software and physical
improvements which will be implemented before
the return of warm weather.
Adjusted operating profit decreased by £2.8 million
to £19.0 million (2022: £21.8 million) with no currency
impact. The reduction in profit is attributable to the
one-off impact of the breakdown of the HVAC system
in our Plano facility.
The permanent fix to the HVAC system at Plano,
essential to the operation of our clean room, took
We monitor the stock levels in our distribution
channels and saw them increase in 2023. We are
now starting to see them reduce and expect them to
return to more normal levels in the first half of 2024.
While order intake from distributors therefore remains
somewhat subdued, we achieved new business wins
from a number of blue-chip customers in 2023 which
is benefiting our order intake in 2024.
FINANCIAL HIGHLIGHTS
2023
2022
Change
Change
constant fx
Revenue
£145.0m
£139.8m
4%
4%
Adjusted operating
profit 1
Adjusted operating
profit margin 1
£19.0m
£21.8m
(13)%
(13)%
13.1%
15.6%
(250)bps
(250)bps
1 See note 1 on page 3 for an explanation of alternative performance measures. Adjusting items are not
allocated to divisions for reporting purposes. For further discussion of these items please refer to the section
titled “Reconciliation of KPIs and non IFRS measures” on pages 174 to 177 of this document.
REVENUE BREAKDOWN
Revenue by market (%)
Healthcare
Aerospace & Defence
Automation & Electrification
Distribution sales channel
Revenue by geography (%)
North America
Europe
Asia
1%
3%
22%
74%
38%
32%
30%
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DIVIDEND POLICY AND DIVIDEND
PENSIONS
The Board has a progressive dividend policy, which primarily
takes into account adjusted earnings cover, but also sees
beyond this to take into account other factors such as the
expected underlying growth of the business, its capital and
other investment requirements, and its pension obligations.
The Group’s balance sheet position and its ability to generate
cash are also considered.
The Board considers these factors in the context of the Group’s
Principal risks, which are set out on pages 62 to 66, and the
overall risk profile of the Group.
The Group’s ability to pay a dividend is supported by the
distributable reserves available in the parent Company,
which operates as a holding company, primarily deriving its
net income from dividends paid by its subsidiary companies.
At 31 December 2023, TT Electronics plc had £199.7 million
(2022: £202.8 million) of distributable reserves, sufficient to
pay dividends for the foreseeable future. The parent Company
Balance Sheet is set out on page 167.
Given our strong trading performance in 2023 and the positive
outlook for 2024 and beyond, the Board is proposing a final
dividend of 4.65 pence per share. The total cash cost of this
dividend will be approximately £8.2 million. This, when
combined with the interim dividend of 2.15 pence per share
gives an increase of 8 per cent in the total dividend to 6.8 pence
(2022: 6.3 pence per share). Payment of the dividend will be
made on 15 May 2024, to shareholders on the register at
12 April 2024.
The Group has one significant defined benefit scheme in the
UK and some much smaller defined benefit schemes in the US.
All the Group’s defined benefit schemes are closed to new
members and to future accrual.
The total net accounting surplus under the Group’s defined
benefit pension schemes was £22.2 million (2022: £28.4 million).
The main driver of the decrease was a £5.0 million refund
repayment (£3.2 million after tax suffered by the scheme)
and the scheme supporting its own expenses of £3.2 million.
Net accounting pension surplus
Following the buy-in of the TT Group scheme in November 2022,
the principal financial risk the scheme is exposed to is the credit
risk associated with the insurer, which is assessed to be very low.
The assets and liabilities of the Group’s defined benefit schemes
are summarised below, together with the Group pension surplus:
£million
Fair value of assets
Liabilities
UK scheme (surplus)
Overseas schemes (deficit)
Total Group surplus
2023
363.5
341.3
25.3
(3.1)
22.2
2022
396.8
368.4
31.3
(2.9)
28.4
The triennial valuation of the TT Group scheme as at April 2022
showed a net surplus of £45.4 million against the Trustee’s
funding objective compared with a surplus of £0.3 million at
April 2019.
Further details of the Group’s defined benefit schemes are in
Note 22 on page 159 of the Consolidated Financial Statements.
25
FINANCIAL RISK MANAGEMENT AND TREASURY
POLICIES
The Group’s Treasury activities are managed centrally by the
Group Treasury Function, which reports to the Chief Financial
Officer. The Treasury Function operates within written policies
and delegation levels that have been approved by the Board.
The Group’s main financial risks relate to funding and liquidity,
interest rate fluctuations and currency exposures. The overall
policy objective is to use financial instruments to manage
financial risks arising from underlying business activities and
therefore the Group does not undertake speculative transactions
for which there is no underlying financial exposure. The Group
manages transactional foreign exchange positions by hedging
a minimum of 75 per cent of expected net cash flow exposures
for the next 12 months and 50 per cent of expected net cash
flow exposures for the period from 12 to 24 months.
More details of the Group’s Treasury operations are set out in
Note 21 on page 153 of the Consolidated Financial Statements.
FUNDING AND LIQUIDITY
The Group’s operations are funded through a combination of
retained profits, equity and borrowings. Borrowings are generally
raised at Group level from a group of relationship banks and
lent to operating subsidiaries. The Group maintains sufficient
available committed borrowings to meet any forecasted
funding requirements.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION INTEREST RATES
The Group monitors its exposure to interest rates to bring
greater stability and certainty to its borrowing costs. The policy
is to have between 25 per cent and 75 per cent of the Group’s
debt subject to a fixed interest rate.
GOING CONCERN
See page 67 for the Going concern statement.
26
CFO REVIEW CONTINUED
NET DEBT AND GEARING
At 31 December 2023 the Group’s net debt was £126.2 million
(including cash of £3.6 million included in assets held for sale)
(31 December 2022: £138.4 million). Included within net debt
was £20.8 million of lease liabilities (including £2.6 million
included in liabilities held for sale) (31 December 2022:
£23.1 million).
Leverage ratio
The Group’s year-end leverage ratio of 1.7 times is within the
Group’s target range of 1–2 times. Under the Group’s borrowing
agreements, the figure for net debt used in the calculation of the
net debt/adjusted EBITDA gearing ratio calculation is translated
at an average foreign exchange rate, with IFRS 16 lease liabilities
and other IFRS 16 impacts excluded. In addition, there are other
adjustments including the exclusion of certain specified items
from EBITDA.
Consistent with the Group’s borrowing agreements, which
exclude the impact of IFRS 16 Leases, leverage ratio was
1.7 times at 31 December 2023 (31 December 2022: 2.0 times).
Net interest cover was 6.1 times (31 December 2022: 7.4 times).
The Group’s debt covenants state that the leverage ratio must
not exceed 3.0 times and that interest cover must be more than
4.0 times.
TT’s capital allocation policy is set within the framework of
a target Group net debt/EBITDA gearing ratio that lies within
a range of 1–2 times in current market conditions.
A further summary of the Group’s borrowings and maturities
are set out in Note 20 on page 153 of the Consolidated
Financial Statements.
At 31 December 2023 the Group had available undrawn
committed facilities of £56.9 million. In addition, the Group had
available uncommitted facilities of £22.6 million. The Group’s
borrowings are in the form of a multi-currency Revolving Credit
Facility (“RCF”) and private placement (“PP”) fixed rate loan
notes. The RCF matures in June 2027 and the PP notes, issued
in December 2021, are split between 7- and 10- year maturities
with covenants in line with our bank facility.
The Group’s leverage is usually expressed in terms of its
net debt/adjusted EBITDA ratio. The Group’s main financial
covenants in its RCF and PP notes states that net debt must
be below 3.0 times adjusted EBITDA, and adjusted EBITDA
is required to cover interest charges, excluding interest on
pension schemes by at least 4.0 times.
FOREIGN CURRENCY TRANSLATION
The following are the average and closing rates of the foreign
currencies that have the most impact on the translation into
sterling of the Group’s Income Statement and Balance Sheet:
£million
Income Statement
$/£
RMB/£
Balance Sheet
$/£
RMB/£
2023
2022
Average rate
1.24
8.78
1.27
9.04
1.25
8.34
Closing rate
1.20
8.36
Foreign exchange translation exposure arises on the earnings of
operating companies based in the US and China, with additional
lesser exposures elsewhere in the world.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION HOW WE ARE PERFORMING
OUR KPIs
FINANCIAL
KPI DESCRIPTION AND WHY IT IS IMPORTANT
MEDIUM-TERM
TARGET
FIVE-YEAR PERFORMANCE CHART
2023 PROGRESS
Organic revenue growth (%)
The percentage change in revenue from continuing operations in the
current year compared to the prior year, excluding the effects of currency
movements, divestments and acquisitions. This measures the like-for-
like growth or decline of the business. Sustainable organic revenue
growth is an indicator of value creation. It reflects a combination of
conditions in our markets and our success in gaining market share from
serving our customers better.
4–6% organic
revenue growth
annually over the
medium term
1%
2022: 20%
2023
2022
2021
2020
2019
1%
10%
20%
After two years of strong growth,
organic revenue was up 1%.
Organic revenue growth, excluding
pass-through revenues, was 3%.
(12)%
4%
Adjusted operating profit margin (%)
Adjusted operating profit as a percentage of revenue. Adjusted operating
profit margin is an indicator of our ability over the longer term to extract
fair value from our products and services, driven by a mixture of
increasing revenue and an optimised cost base.
Double-digit
margin
Adjusted earnings per share (pence)
The profit for the year attributable to shareholders excluding items not
included within adjusted operating profit divided by the weighted average
number of shares in issue during the year. Adjusted EPS summarises the
overall financial performance of the Group, including revenue growth,
operating margin, the cost of debt finance and the rate of
underlying taxation.
Double-digit
adjusted EPS
growth annually
at constant
currency over the
medium term
8.6% 2023
2022: 7.6%
2022
2021
2020
2019
19.2p 2023
2022: 18.2p
2022
2021
Cash conversion (%)
Adjusted operating cash flow including capital expenditure, divided by
adjusted operating profit. Cash conversion measures how effectively
profit is converted into cash and, within this, reflects the management of
working capital and capital expenditure. A high level of cash conversion
aids investment in the business, enables the Group to deliver increased
returns for shareholders and supports a strong balance sheet.
90%+ cash
conversion
annually over the
medium term
92%
2022: 33%
Adjusted operating profit margin
was up 100 bps to 8.6% reflecting
strong recovery in Power &
Connectivity. Excluding zero-
margin pass through revenues,
adjusted operating margin
was 8.9%.
Adjusted EPS increased to 19.2p
reflecting improved adjusted
operating profit offset by higher
net finance costs and taxation
8.6%
7.6%
7.3%
6.4%
8.0%
19.2p
18.2p
14.5p
11.7p
17.8p
92%
33%
65%
130%
103%
Much improved cash conversion
of 92% reflects both increased
adjusted operating profit and
higher adjusted operating cash
flow due to a much reduced
working capital outflow.
2020
2019
2023
2022
2021
2020
2019
27
LINK TO
STRATEGY
Technology investment
and R&D
Technology investment
and R&D
Margin enhancement
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
Margin enhancement
Our KPIs include a number of Alternative Performance Measures (APMs) which have been adopted by the Directors to provide further information on underlying trends and the performance
and position of the Group. Details of these APMs and a reconciliation to statutory measures can be found on pages 174 to 177.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
28
FINANCIAL
KPI DESCRIPTION AND WHY IT IS IMPORTANT
Return on invested capital
Adjusted operating profit for the year divided by average invested capital
for the year. Average invested capital excludes pensions, provisions, tax
balances, derivative financial assets and liabilities, cash and borrowings.
It is calculated at average rates taking into account monthly balances.
Return on invested capital is a measure of how efficiently the Group is
utilising its assets, relative to profitability, in generating
shareholder returns.
NON-FINANCIAL
MEDIUM-TERM
TARGET
Exceed the cost of
holding assets
with year-on-year
increases
FIVE-YEAR PERFORMANCE CHART
2023 PROGRESS
12.0% 2023
2022:
10.5%
2022
2021
2020
2019*
ROIC increased by 150 bps
due to the growth in adjusted
operating profit.
12.0%
10.5%
9.1%
7.7%
10.8%
KPI DESCRIPTION AND WHY IT IS IMPORTANT
MEDIUM-TERM
TARGET
FIVE-YEAR PERFORMANCE CHART
2023 PROGRESS
R&D investment as a % of sales
R&D cash investment as a percentage of revenue. This metric excludes
GMS which is a manufacturing services business and has no R&D. A
consistent and sustainable level of R&D investment enables us to
introduce new products that increase our revenue and deliver on our
purpose to solve technology challenges for a sustainable world.
Maintain R&D
investment at
around 5 per cent
of revenue
annually over the
medium term
3.4% 2023
2022:
3.7%
2022
2021
2020
Safety performance (number of three-day lost-time incidents)
The number of workplace health and safety incidents that resulted in
employees, contractors or visitors needing to be off work for three days
or more. The number of incidents measures how well we are executing
on our commitment to raise safety standards globally and protect our
people on our journey to zero harm.
Year-on-year
reduction in
incidents,
ultimately leading
to zero harm
3
2022:
2
2019
2023
2022
2021
2020
2019
Employee engagement score
Results from a Best Companies Ltd third party survey which gathers
anonymous employee feedback and scores against eight success
factors. Having engaged employees is crucial to attracting and
maintaining the talent we need to execute our strategy.
Survey-on-survey
increase in the
Group’s
engagement
score over the
medium term
Scope 1 & 2 emissions
Total amount of carbon dioxide equivalent tonnes (tCO2e) of Scope 1 & 2
emissions from operations. Details of the calculation method are set out
on page 46. Reducing our Scope 1 & 2 emissions is a critical part of
reducing our environmental footprint. See footnotes on page 46 for
emission recalculations during 2023.
Annual reductions
vs our 2019
baseline. 50%
reduction by 2023
vs 2019 and Net
Zero by 2035
771.7 2023
2021:
718.5
2022
2021
2020
2019*
Interim pulse surveys
62% 2023
reduction
since 2019
2022
2021
10,533
12,782
15,740
20,875
27,545
2020
2019
3.4%
3.7%
4.5%
4.8%
5.1%
3
2
5
5
4
771.7
Interim pulse surveys
718.5
694.8
In 2023 we supported our
customers with organic
investment in a new facility
in Greater Manchester and an
expansion of our capabilities
in Mexicali.
Safety performance has improved
significantly in recent years as we
have matured our framework and
increased accountability. 85% of
TT locations have achieved at
least one or more years without
a lost-time incident.
In 2023 we were delighted to attain
an engagement score in line with
the 3*** “world class companies
to work for” Best Companies Ltd
benchmark.
We made good further progress
on reducing our Scope 1 & 2
emissions due to further site
rationalisation, transferring
capacity to modern, green
facilities and local site energy
saving initiatives.
LINK TO
STRATEGY
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
LINK TO
STRATEGY
Technology investment
and R&D
ESG
ESG
ESG
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT
A POSITIVE
IMPACT
We intend to have a positive impact on
the world around us: creating value and
enhancing sustainability through our
products; the way we do business,
including how we look after our employees
and interact with our communities; and
by reducing our environmental impact.
OUR PURPOSE
We solve technology challenges
for a sustainable world
We do this by delivering solutions for our
customers that enable products that are cleaner,
smarter and healthier and that will benefit our
planet and people.
Environment, social and governance and sustainability
matters are integrated into our strategy and day-to-
day decision-making at all levels of the organisation
to reduce risk and grow our business opportunities.
These activities are important to all of our
stakeholders including our customers, and especially
to our employees who we want to be proud of our
culture and our goals.
TT technologies address key sustainability megatrends
in our target markets and bring environmental and
social benefits to society. Whether improving fuel
efficiency through the development of lighter aircraft
power supplies, manufacturing complex factory
automation equipment to drive productivity gains,
or improving health and patient outcomes through
our highly precise medical device technologies,
sustainability is at the very core of what we do.
We are committed to helping our customers to
develop cleaner, lighter, more efficient and durable
solutions that help combat climate change and
resource scarcity. This focus is a key differentiator of
our customer offer and drives our approach not only
to R&D but to the way we develop, design, engineer
and manufacture our products and use raw materials
and other resource inputs in the most efficient way.
We have an ambitious agenda to reduce our
environmental footprint and carbon emissions and
we are building a safer, more inclusive and engaged
organisation right across the world.
Governance and risk management
Environment and people matters including culture,
strategy, compliance, risk and internal controls are
governed as part of our overall governance and risk
management frameworks, ultimately overseen by
the Board. An update on key people, safety and
environmental metrics and activities is provided at
Board meetings and in-depth reviews are undertaken
on at least an annual basis.
Non-financial reporting regulations
In accordance with Sections 414CA and 414CB of the Companies
Act 2006, our non-financial information can be found on the
following pages of this 2023 Annual Report: relating to
environment matters pages 42 to 46; social matters pages 29
to 41; employees pages 29 to 40; human rights page 30; and
anti-corruption and anti-bribery page 30.
29
Read more
about ethics
on page 30
Read more
about our people
and culture
on page 31
Read more about
our communities
on page 41
Read more about
our environmental
commitments
and progress
on page 42
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
Our business activities
and the way we operate
are closely aligned to
seven of the UN’s
17 Sustainable
Development Goals
30
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
AN ETHICAL COMPANY
We are an ethical company, acting
worldwide with integrity and within the law.
The fundamental principles of fairness,
honesty and common sense are at the
heart of our philosophy and corporate
standards. We have one ethical standard
worldwide to create an environment where
TT businesses can flourish within an
appropriate compliance and risk
management framework in line with
our TT Way values.
Our Statement of Values and Business Ethics Code
sets out these standards and covers a comprehensive
range of ethical matters including the working
environment, standards of behaviour, avoiding
conflicts of interest, hospitality and entertainment,
bribery, intellectual property protection and fair
competition. We do not tolerate fraud, corrupt
practices or behaviour not in line with our standards
and have in place systems and processes to effectively
detect and deal with any contraventions of our code.
Any concerns relating to matters covered by the code
and behaviour more generally can be reported, either to
management or by using our anonymous, multi-lingual
whistle-blower hotline either by telephone or using our
ethics and integrity portal. Reports are investigated
thoroughly, and any significant concerns are reported
to the Audit Committee. Our Whistleblowing Policy
describes how employees should raise matters of
concern, our approach to dealing with concerns, and
examples of the types of issue employees should
bring to our attention.
Day-to-day oversight of ethical matters is the
responsibility of our People, Social, Environmental and
Ethics (“PSEE”) Committee (see page 75). An Ethics
Committee of our senior leaders can also be convened
on an as-needed basis. Mandatory ethics training is
provided for relevant employees on an annual basis.
The Q&A section of the Audit Committee Report
provides details of the measures taken in 2023 to
strengthen the control environment to mitigate fraud
risks and deliver fraud awareness training, supported
by the introduction of a new Fraud Prevention Policy.
approval process required for the appointment of
new suppliers, together with our ongoing supplier
monitoring process which include the application
of a digital supplier risk rating tool.
Regulatory requirements are different around the
world, so we have a core structure which Group
businesses comply with, beyond which they are
empowered to tailor their approach to local needs.
The nature of our business and the markets we work
in means that legal and regulatory compliance is a
principal risk for TT.
Human rights
Upholding human rights is the responsibility of
everyone at TT and, as part of our ethics framework,
human rights are treated as an equal priority to other
business issues. We are an associate member of the
Responsible Business Alliance, pursuant to which we
make a formal commitment to uphold the human
rights of workers (at all points in our supply chains) and
to treat them with dignity and respect as understood
by the international community. Our approach is taken
from the industry standard (Responsible Business
Alliance Code of Conduct) and covers expected
standards for the treatment of workers.
Supply chain
We procure from a wide network of suppliers and
distributors through global supply chains. It is
important to us that our suppliers share our values
and our approach, and we seek out those that do.
Our Corporate and Social Responsibilities – Supplier
Requirements policy sets out our required standard
with regard to supplier social and environmental
practices. The policy is provided to all suppliers with
purchase orders. We carry out regular assessments
of our suppliers to ensure compliance with our
requirements and we will not do business with
suppliers that violate them.
Our Procurement Code of Conduct outlines the
standards expected for the purchase of goods and
services across the Group. This code focuses on the
Our Supply Chain Council forum meets on a monthly
basis and comprises a senior group of executives with
responsibility for global purchasing and supply chain
activities across TT. The Council considers ethical
matters including modern slavery as part of its remit.
Modern slavery
We have a zero-tolerance approach to Modern Slavery
– whether in the form of servitude; forced, bonded or
indentured labour; slavery; human trafficking or any
other activity that amounts to an unreasonable
restriction on the free movement of workers.
We recognise that the rights of individual workers can,
potentially, be violated within our supply chain and
other partnerships. We have had a Modern Slavery
Policy since 2016 which applies to all persons working
for TT and its subsidiaries or acting on its behalf in any
capacity. The Policy is reviewed each year.
Our approach to addressing the challenge of modern
slavery is to ensure that there is transparency in our
own business and throughout our supply chains.
We expect the same high standards from all our
contractors, suppliers, distributors and other business
partners, consistent with our obligations under the
Modern Slavery Act 2015. We include specific
prohibitions in our contracting processes against
the use of forced, compulsory or trafficked labour, or
any other activity that amounts to an unreasonable
restriction on the free movement of workers, and we
expect that our suppliers will hold their own suppliers
to the same high standards.
Our Modern Slavery Statement and our Modern
Slavery Policy are published on our website.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 31
EMPLOYEE ENGAGEMENT
SURVEY RESPONSE RATE
91%vs big company all
sector average of 64%
Read more about
our employee
engagement survey
on page 32
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
PEOPLE AND CULTURE
Our TT culture gives us a true competitive
advantage and makes us a great company
to work for and with. Walk onto any of our
sites – regardless of location, product or
market focus – and you will meet open and
caring people, proud of what they do and
who work together to bring out the best in
each other.”
Clare Nicholls
EVP Human Resources
TT Electronics is truly a people business. The passion,
expertise and values of our people drives our success,
and our most critical job is to value them and support
them to achieve great things for our business, our
customers and the communities we serve.
Our TT culture gives us a true competitive advantage
and makes us a great company to work for and with.
Walk onto any of our sites – regardless of location,
product or market focus – and you will meet open and
caring people, proud of what they do and who work
together to bring out the best in each other. We are
incredibly proud of the work we have done over the
last few years to build this culture, through our focus
on safety, pay and benefits, recognition, community
and leadership.
Our TT leaders succeed when they achieve results
through creating a local working environment where
our people feel trusted, empowered to contribute, and
feel able to bring their whole selves to work. We are
thrilled with the exceptional results of this year’s
Engagement Survey, achieving a benchmark level of
participation and a rating in line with the 3*** Best
Company rating for the Group as a whole, two of our
divisions and six of our sites. This is a testament to the
efforts of our leaders and the trust and partnership
they have built with employees over the past five years.
As we look forward, we will continue to focus on those
tangible things that are valued by our employees and
that make TT a great place to work.
Our culture and values
Being a great company to work for enables us to
attract and retain talented people, grow productivity,
build strong partnerships with our customers and,
ultimately, deliver our business goals.
TT’s culture is overseen and supported by the Board.
While some aspects, such as ethics and safety, are
aligned and reinforced by policy, others are governed
by frameworks originated at the centre which empower
our sites to work appropriately in their jurisdictions
and according to local needs and norms.
Our TT Way values connect us all and guide how we
work with each other and our stakeholders every day.
They are supported by our focus on leadership,
knowledge and performance to drive progress,
innovation and service as well as build respectful,
happy and supportive work environments.
We evaluate our culture and employee engagement
every two years through our Employee Engagement
Survey using Best Companies Ltd methodology and
metrics. We use pulse surveys for the latest feedback
and an indication of progress. Results from these
surveys drive HR and local planning in the form of
targeted action plans created by site management
teams in response to their results. Each manager
receives a personal engagement score relating to
their team, and we use these results, and the wider
engagement results, when considering management
discretionary incentive payments.
We were delighted to record continued development in
our overall Group engagement score this year as well
as celebrating progress at the majority of our sites and
exceptional progress at some. The survey response
rate of 91% was notably high versus a big company all
sector average of 64%.
OUR TT WAY VALUES
We do the right thing
We bring out the best in each other
We achieve more together
We champion expertise
We get the job done… well
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
32
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
2023 EMPLOYEE ENGAGEMENT SURVEY
3***
Our June 2023 Employee Engagement
Survey results signalled a further
improvement in employee engagement
at TT. We received a rating in line with a
3*** rating for the first time in the Best
Companies Ltd “outstanding companies
to work for” benchmark.
IMPROVEMENT IN EIGHT FACTORS OF ENGAGEMENT VS 2021
SIX SITES 3*** RATING
+8%
Fair deal
+7%
Leadership, My company
+6%
Personal growth, Wellbeing, My manager,
Giving something back
+5%
My team
3***
6 sites
2**
4 sites
1*
3 sites
One to watch (OTW)
6 sites
Unaccredited 2 sites
OVERALL SURVEY RESPONSE RATE
HIGHEST SCORES
HUGE IMPROVEMENT AT THREE SITES
91%
Up from 86% in 2020 and 2021 vs a big company
all sector average of 64%
YEAR-ON-YEAR RATING IMPROVEMENT
2023: 3***
2021: 2**
2020: 1*
There was no survey in 2022
My team
My company
Leadership
Wellbeing
TWO DIVISIONS ACHIEVED 3***
S&SC and GMS
Both scored 3*** with higher scores than 2021
Cardiff
(not accredited in 2021 to 3*** in 2023)
Juarez
(OTW in 2021 to 3*** in 2023)
Barnstaple
(Unaccredited in 2021 to 2** in 2023)
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 33
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
EMPLOYEE ENGAGEMENT AND COMMUNICATION
We communicate frequently and openly
with employees using a range of methods.
At Group level, our intranet, ConnecTT,
enables employees to communicate with
each other and easily find and share
resources and news in their local language.
We regularly publish news items celebrating
business and personal successes as well
as reporting on events across the Group.
ConnecTT also hosts employee
communities for skill specialisms,
equality, diversity & inclusion progress,
and personal interests.
Regular communication is critical to the success of
our sites. Activities include regular all-hands meetings,
Gemba walks to cover safety and wellbeing topics,
daily stand-ups to drive productivity and team
meetings. Several of our sites have established
employee forums to ensure robust two-way
communication and feedback.
Social and fundraising events are also a big part of
our culture, helping to create strong personal and
social bonds both within our sites and with our local
communities. Members of the senior leadership team
regularly visit, giving Town Halls, walking the floor
and recognising outstanding performance and
improvement. Members of our Board also take the
time to visit TT locations and the whole Board visited
our Plano and Kansas sites in 2023.
Employee voice at the Board
It is important that the employee voice is heard at the
highest levels of the organisation. The results of our
engagement surveys are reviewed by the Board so
that findings can be acted upon and TT’s Senior
Independent Director, Jack Boyer, participates directly
in people matters through his membership of the
PSEE Committee. The strong links described in the
diagram below ensure that the Board is aware of the
views and needs of our most important stakeholders
and can guide company actions accordingly. For the
purposes of the UK Corporate Governance Code,
Jack Boyer is the designated Non-executive Director
for engagement with the workforce.
LOCATIONS VISITED BY
WHOLE BOARD IN 2023
2
BOARD
Leadership meetings/
conference/divisional reviews
People, Social, Environmental
and Ethics Committee
Site Town
Halls,
including
Q&A
Personal
objectives
and
business
targets
t
e
n
a
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t
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e
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P
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i
s
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e
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B
/
D
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N
CEO Peter France visits our site in Kuantan, Malaysia
EMPLOYEES
e
n
i
i
l
t
o
h
g
n
w
o
b
-
e
l
t
s
h
W
i
l
y
e
v
r
u
s
t
n
e
m
e
g
a
g
n
E
Councils
Sustainability,
Sales, R&D,
Ops,
Procurement
Employee
engagement
per site
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
34
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
CASE STUDY
INSIDE TT ELECTRONICS
TT BARNSTAPLE: THE POWER
OF A WELL-EXECUTED PLAN
After scoring the lowest of all TT sites in our 2021 employee engagement survey and
facing a rapidly growing order book, wholesale change was required to set the TT
Barnstaple team back on the path to success.
In 2023 the team celebrated an enormous leap in the
site’s employee engagement score to 2** as well
as quantified business benefits including an increase
in productivity and capacity usage, an increase in
customer on time in full (OTIF), and improved
safety performance.
Determining the path to success
After digesting the 2021 survey results the leadership
team set about defining what good looked like and
creating a plan of action for the site which included:
– Restructuring the leadership team to bring in
people-centric leaders.
– Preparing and communicating a clear leadership
purpose statement.
– Embedding engagement into the objectives of the
leadership team.
– Relaunching regular two-way communication
activities including quarterly all-hands meetings
and team talks for real-time feedback.
– Piloting a four-day week for all employees.
– Deploying TT’s bite-sized line manager training
programme and ED&I training for all.
– Investing in the quality of the working environment.
– Holding social events to build informal
relationships across and between teams
and leaders.
Critical to the plan’s success has been site leaders’
determination to personally lead the change by
walking the walk and demonstrating TT’s Values
in action. Plans are now set, communicated and
reviewed annually to ensure the positive journey
continues. Recent new initiatives have been the
addition of regular stand-up meetings on the shop
floor to cascade metrics and accountability and lean
change programmes that have consolidated teams
to enable more efficient working.
Move to a four-day week
One of the most effective changes has been the move
to a four-day week. This change was tested as an
extended pilot from Autumn 2022 and became
permanent on 1 January 2024 after it was embraced
by employees and delivered clear business benefits in
terms of work capacity and productivity. Employees
are able to work longer days Monday to Thursday, with
the option of working overtime on Fridays rather than
at the weekend. Those choosing the shorter week have
Fridays free to pursue other interests/take care of other
commitments with the corresponding positive impact
on wellbeing. For the second six months of the pilot
period employees were able to advocate for their
preferred working hours and all requests were able
to be accommodated within the site’s more flexible
working schedule.
Andy Pacey
Site Director
TT Electronics, Barnstaple
People make our business and are critical to
performance. Having an engaged team drives
attendance, retention and productivity as well as
creating a positive working environment that people
are keen to be a part of.
The results of the 2021 survey were difficult to read
but not unexpected after a tough few years which
featured COVID-related redundancies, a high turnover
of leaders, a lack of focus on employee needs and
wellbeing, and low levels of site investment. We had
not only lost capability, capacity and tribal knowledge
but also the trust and partnership of our people. They
did not feel considered or empowered and we needed
to deliver substantial change.
Fundamentally, the stability and success of our site is
good for everyone’s future – for the business, for our
employees, for our customers and, as a reasonably
large employer, for our community. It was imperative
that we communicated this, walked the walk as
leaders, and changed attitudes and behaviours so
that our team could be proud of where they worked.
We are really pleased with where we are today but
acknowledge that this is an ongoing endeavour.
We have a great team that we want to do our best
for so we are already executing our 2024 plan.”
2023 ENGAGEMENT
SURVEY
96%Response rate
2**Rating
BARNSTAPLE
LEADERSHIP PURPOSE
STATEMENT
– To define the future,
monitor, guide and
inspire the company.
– To create an
environment that
enables and
empowers teams,
that satisfies/fulfils
the needs of the
customer,
employees and
stakeholders to
secure the future
and prosperity of
the business.
– To be a preferred
supplier/employer
of choice/business
of choice.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
35
LOCATIONS ACHIEVING
AT LEAST ONE OR MORE
YEARS WITHOUT A
LOST-TIME INCIDENT
92%
During 2023, we enhanced the training and knowledge
in the organisation to identify and report proactive
hazard observations. This data has been added to our
internal reporting and will continue to be tracked and
trended in 2024.
Global standards
During 2023 all sites implemented new Global HSE
Standards. These 15 standards are based on ISO 45001
and ISO 14001 requirements with implementation
required at all TT Electronics locations. During the
year all sites completed an internal audit against
the Standards. In 2024, all sites will once again be
auditing to all 15 of our Standards, requiring a higher
level of maturity for all locations. We utilise HSE
professionals from other sites to complete these
internal assessments, which allows for knowledge and
information sharing as well as personal peer-to-peer
development. Two of our sites also completed an
external regulatory compliance audit in 2023 as
scheduled by our rotating global three-year requirement.
Safety performance
Safety performance is a Group KPI and has improved
significantly in recent years as we have matured our
framework and increased accountability. Monthly
reporting is completed to the leadership team and
reviewed by the TT Board. Safety performance has
historically been quantified as the number of workplace
injuries/illnesses resulting in three or more days’
absence. This has been applied to all TT locations
worldwide and is more stringent than the Lost-Time
Incident (LTI) requirement for UK reporting which is
seven days’ absence. 92 per cent of TT locations
have achieved at least one or more years without
a lost-time incident.
Great safety performance is celebrated at TT sites
During 2023 our Kuantan, Malaysia site celebrated five million combined accident-free hours.
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
SAFETY, HEALTH AND WELLBEING
Healt h
S
a
f
e
t
y
ZERO
HARM
E
nvironm e
n t
TT Electronics prioritises safety. Our
Health, Safety & Environment (“HSE”)
framework and tools are designed to
ensure compliance and support best
practice safety measure identification and
implementation. Our site HSE professionals
report to our site General Managers with a
dotted line to our Global Director of Health,
Safety and Environment who leads
progressive HSE programmes and acts
as a support for the whole business.
In 2023, to further support all sites, Regional HSE Leads
were identified. In their roles, the Regional Leads assist
in the management of compliance and adherence to
our HSE Standards as well as serve as a best practice
sharing platform among peers. Our HSE Council was
also redefined to improve global sharing and build
further strategy alignment across the Group.
In 2024 we will take further steps to ensure that, as
a global enterprise, international best practices are
implemented. TT Electronics will be normalising injury
statistics and reporting not only by cases, but by
utilising incident rates. As another best practice step
forward, we will include incidents resulting in medical
treatment in these rates.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 36
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
SAFETY, HEALTH AND WELLBEING CONTINUED
TOTAL NUMBER OF THREE-DAY
LOST-TIME INCIDENTS
2023: 3
(2022: 2)
2023
2022
2021
2020
2019
3
2
5
5
4
Health and wellbeing
Supporting our employees to take care of their health
is also important to us. It is the right thing to do, and it
supports business needs by ensuring that our teams
are fit and well to be at work and feel supported to give
their best.
We see a strong crossover between all types of
health – physical, mental and financial health – and
we take opportunities to raise awareness and make
conversations on these matters normal and expected,
as well as giving employees access to resources and
things they need such as medical assessments. In
2023 we began piloting a wellbeing support framework
in the US covering the three key aspects of wellbeing
and we have an Employee Assistance Programme
(“EAP”) available to all employees where our people
can seek help from a third party organisation.
NUMBER OF SITES ACHIEVING ZERO HARM
(NO THREE-DAY LOST-TIME INCIDENTS)
Wellbeing framework
2023: 24/26*
(2022: 26/28*)
2023
2022
2021
2020
24/26*
26/28*
28/31*
26/31
* Includes office locations and sites that were closed during
the year
Physical health
Our physical health support programmes centre on
preventative measures and fun activities such as team
sports and on-site exercise classes. Our sites also
offer relevant local support such as health screenings,
flu shots, subsidised gym memberships and sharing
for success lunch time sessions. Many sites undertake
Gemba walks every day which incorporate physical
check-ins with employees to review temperature,
ergonomic environment and body posture, all of
which contribute to good physical and mental health.
We see a strong
crossover between all
types of health –
physical, mental and
financial health – and
we take opportunities
to raise awareness and
make conversations on
these matters normal
and expected.”
Mental health
Many TT sites have mental health first aiders who are
trained to recognise triggers and help mobilise support
for employees who may be struggling. Sites also
organise events to raise awareness of mental health
matters and provide mental health resources to help
employees cope with issues such as anxiety
and stress.
Financial health
We recognise that the global cost-of-living crisis has
been difficult for many employees and, over the last
two years, have made specific efforts to raise
awareness of the benefits we have available to
employees such as our EAPs, our UK and US health
plans, our UK and US all-employee share plans and
pension/retirement planning. Our more than 1,300 UK
employees have access to a support package of salary
finance options to help strengthen personal financial
fitness and arrangements. This is administered by a
specialist third party not-for-profit organisation and
offers financial health resources; debt consolidation;
salary advance payments; and savings options
attached to payroll.
WellbeingPhysicalMental &EmotionalFinancialPhysical workenvironmentRewards and performanceManagereffectivenessWorkingrelationshipsPersonal growthand aspirationsTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
DEVELOPMENT AND CAREERS
REWARD AND RECOGNITION
37
Being fairly rewarded and recognised for
your contributions is an important part
of our culture.
Reward
We ensure we pay fairly and equally for like-for-like
roles within each labour market and our employees are
rewarded solely on merit. Over the past three years, we
have worked to improve pay and earnings potential for
our direct labour employees, through significant
investment in hourly rates and via frameworks and
training which allow employees to earn more as they
grow their skills.
Our approach to flexible working makes it possible
to balance work and personal commitments so that
employees can take care of all the things that matter.
Our parental leave policy allows men and women to
share the responsibility and time at home with new
additions to the family.
Over and above salary, all employees are able to
participate in site-specific pay-for-performance
schemes, be it our site incentive schemes, or annual
incentive schemes and we operate attractive all-
employee share plans for UK and US employees.
In line with Corporate Code Provision 41 we have
undertaken reward workforce sessions which cover
our reward principles, the role of the Remuneration
Committee, and how we achieve alignment of
remuneration.
Recognition
Our BE Inspired recognition scheme is extremely
popular with employees as an opportunity to
recognise teams and individuals who demonstrate our
TT Way values and have a positive impact on the
business. Participation is high and in 2023 the awards
attracted more than 2,200 nominations, with each
winner receiving a sum of money and a site
celebration. As described on page 33 we also take
time to share personal and business successes with
the global TT community through ConnecTT.
NOMINATIONS FOR
OUR BE INSPIRED
RECOGNITION SCHEME
2,200
AVERAGE NUMBER
OF PEOPLE ATTENDING
OUR LEADERSHIP
WEBINAR SERIES
120
Our TT Mexicali team enjoying a trip to a baseball game.
Investing in the training and development of
all our people enables them to do their jobs
well, build long-term careers at TT and keep
us at the forefront of innovative product
development and customer service.
We are highly focused on “growing our own” leaders
and innovators by equipping our people with the right
knowledge, opportunities and clarity on career paths
and we take pride in the fact that anyone, at any level,
will always be given the opportunity, encouragement
and support to progress if they wish to. Our line
managers hold regular career conversations with their
direct reports and create personal performance
development plans that align with wider site, division
and Group objectives. We use a five-point performance
scale to guide performance conversations and give
clarity to employees.
We have implemented a successful summer
internship programme at a number of our US sites and
both apprentices and graduates at UK locations.
Several of our sites draw on regional and national
funding to help existing employees train for new roles
in the business. We will continue to evolve and grow
these offerings as we move through 2024.
Improving leadership and line management skills
Our line management skills programme helps new
and existing line managers to build leadership skills,
be more effective in their roles, and better support
those working for them. The six bite-sized modules
covering practical topics for leaders are available to all,
but are typically accessed by supervisors, team
leaders and new line managers. During 2023, more
than 70 first line leaders went through the programme
across six locations, brought together during a
two-day period, to learn both critical new skills and
build a network of leaders across the sites. We also
had a very successful year with our leadership webinar
series that saw an average of 120 people attend each
60 minute session. The sessions covered a range of
leadership topics including leadership and mental
health; high-performing teams; ED&I; and facing fear
and embracing change.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 38
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
CASE STUDY
INSIDE TT ELECTRONICS
TT KANSAS: AN EMPLOYEE OFFER
TO SUPPORT GROWTH
In a highly competitive local employment market, our Kansas team has taken big steps
to stand out from the crowd and create a strong employee offer to attract and retain a
highly skilled team capable of delivering the growth opportunities available. The offer
is multi-faceted and encompasses culture and values, recruitment, skills development,
pay, wellbeing and community outreach.
enjoy time together while giving back. Kansas now
records more volunteering hours than ever before.
Health and wellbeing
The site has adopted a four-day week since COVID,
enabling employees to work flexibly and establish a
good work life balance if preferred. The team have
taken this further by utilising the TT wellbeing
framework to focus on employee health and wellness
and financial health by providing a range of resources.
Members of the team are encouraged to take
advantage of the health and support plans available
to them and on-site health screening programmes
including biometric and other medical testing. In line
with other TT sites Kansas holds celebrations to
highlight important cultural events such as International
Women’s Day to foster inclusion and wellbeing among
all employee groups.
2,000
>2,000 days without
a safety incident
25%Current participation
in cross-training
activities
Employee value proposition
The team has developed and published a compelling
marketing document to promote the company,
its culture, and the benefits of joining the team to
new recruits.
Building skills, careers and pay
In response to business needs and to address
areas raised in the employee engagement survey
on self-development and pay the site has deployed
a skills matrix that details cross-training career
pathways to progress up the matrix and earn more.
Hourly paid employees are encouraged to embark
on a career journey using the matrix, with current
participation in cross-training activities running at
25%. Multi-skilled employees are bringing huge
benefits to the team through increased capacity
and productivity. External tuition costs are also
reimbursed for relevant skills development with
opportunities typically taken up by younger
employees who joined from high school.
Growing their own
In a tight labour market it has been important to
attract people right at the start of their careers.
Accordingly, the Kansas engineering intern scheme
has grown steadily from three interns in 2021 to
nine interns in 2023. The interns undertake summer
projects to get to know the business and receive care
packages and sponsorship when back at college.
Of the 2023 cohort, four interns have taken up
permanent graduate positions at TT Kansas and
the other five will return as interns in summer 2024.
Additional investment of time and money will enable
an even larger 2024 cohort to rotate around the site
to gain deeper insight into the business.
In the community
From a position of near zero community activity the
team has built employee awareness of TT’s “hours
for giving” programme to build a regular outreach
programme determined by employee suggestions.
One opportunity is put forward every month for
employees to use their five paid volunteer hours and
Andy Huffman
Program Manager;
one of the first interns
at TT Kansas
In the summer of 2021, I began my journey at TT as an
engineering intern. The internship programme allowed
me to apply my academic knowledge to real-world
scenarios and the opportunity to explore various
departments within TT. Through weekly meetings
with fellow interns across the United States, I gained
insights into TT’s different locations and expanded
my understanding of the company. I transitioned to
a full-time role as a LEAN Engineer in July 2022.
Since that time, I have been involved in several diverse
and transitional projects for the site, which have given
me the opportunity for frequent collaboration and
interaction with TT leaders and teams across
North America.”
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
EQUALITY, DIVERSITY AND INCLUSION (ED&I)
39
Gender diversity
We are pleased to have two women Board members
and a female member of our Management Board
(“TMB”) which replaced the Executive Leadership Team
(“ELT”) on 1 March 2024. The latter is a graduate of our
inaugural Women in Leadership programme, an integral
part of our ED&I strategy, which comprises joint
workshops with senior male leaders as well as skills,
mentoring and advocacy. In total, we have more
women employees than men. Our UK Gender Pay
Gap report is published annually on the TT website.
An inclusive culture is an
essential building block
for everyone in our
company to thrive, and
this has been a key
focus for leadership over
the past few years.”
See our Board
diversity disclosure
on page 86
Our Juarez and Manchester sites celebrate International Women’s Day
We see equality, diversity and inclusion
(ED&I) as a fundamental cornerstone in
ensuring we can attract, develop and retain
the talent we need to achieve our ambitions
as a company.
The need for equality and fairness at work is a given.
All employees and potential employees must be
treated fairly and have equal access to opportunities
in a workplace that is tolerant, respectful and ensures
dignity for all. As set out in our employment policies,
no employee, applicant, contractor or temporary
worker should be treated less favourably or victimised
or harassed on the grounds of disability, sex, marital
or civil partnership status, race, nationality, colour,
ethnicity, religion or similar philosophical belief,
sexual orientation, gender identity, age or any other
distinction other than merit.
An inclusive culture is an essential building block for
everyone in our company to thrive, and this has been
a key focus for leadership over the past few years.
Site employees and leaders have driven this agenda
with passion and creativity – celebrating the diversity
inherent in their cultures and communities, creating
psychologically safe environments to discuss such
topics, and providing training and support to all
employees to build awareness.
Although we have an ethnically diverse workforce
given our geographic spread, we are always looking for
ways to grow the diversity of our workforce as we hire
and develop people. International Women’s Day was
celebrated this year in our Northern UK businesses
through a Northern Women ConnecTT event, bringing
together women from a range of businesses and
roles for a day of training, speakers and connection.
Diversity is also essential in our early careers pipeline,
where we proactively encourage applications
from women.
We set out our ED&I policy and strategy three years
ago. The policy explains our approach to equality,
diversity and inclusion including such matters as
harassment, victimisation and bullying, recruitment
and promotion, religious accommodations, gender
confirmation and workplace adjustments; the expected
standards for employees and their responsibilities;
and how we will deal with infringements of the policy.
We do not have Group ED&I KPIs, but we encourage
our divisions and sites to prepare their own, relevant,
improvement plans every year, including focusing on
one annual ED&I objective.
GENDER DIVERSITY AT 31 DECEMBER 2023
Employees – full-time equivalents
Men
Women
Non-executive Directors
Executive Leadership Team (ELT)
ELT and direct reports
Senior managers (ex-ELT) 1
All employees:
Europe
North America
Asia
Total
3
4
20
66
865
888
521
2,274
2
0
9
17
518
1,061
1,092
2,671
1 Senior managers (ex-ELT) includes TT’s Group senior leaders,
our divisional and functional leadership teams, and Directors
of subsidiary companies.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
40
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
CASE STUDY
INSIDE TT ELECTRONICS
A FAMILY FEEL IN MEXICALI
AND JUAREZ
With our two Mexico sites expanding to support growth programmes and re-shoring for
customers and high local demand for skills, it has been a priority for our site leaders at
Mexicali and Juarez to build strong site cultures that make our employees happy and
proud to be part of the TT family.
Leaders at both sites have put a real focus on
bringing everyone together through events and
initiatives built on employee needs and interests
such as support for women’s voices against
violence, health and wellness programmes, diversity
celebrations, ultra-local community giving, and
family days. TT has also invested in both sites,
Mexicali in 2023 and Juarez beginning in 2024, to
create better working environments for employees
as well as more capacity. Our site leaders take the
time to get personally involved in site events and
celebrations as an opportunity to listen to feedback
and build stronger “family” bonds across the team.
Both sites performed extremely strongly in the
2023 employee engagement survey with Juarez
improving to a 3*** score from one to watch and
Mexicali moving up from 1* to 2**.
We are also extremely proud of the external
recognition achieved by Juarez in 2023:
– From the Women’s College of Lawyers on behalf
of the Government of the state of Chihuahua for
its “I believe you” programme which offered
professional consultation and advice from
psychologists and lawyers for female employees
dealing with male violence.
– Achieving the Business and Human Rights
Distinctive based on the site’s human rights policies,
labour practices, culture of inclusion and non-
discrimination, and environmental protection.
– For commitment to employee education from
the Government of the state of Chihuahua.
2**Mexicali employee
engagement survey
score improved from
2021: 1*
3***
Juarez employee
engagement survey
score improved from
2021: One to Watch
Top: Mexicali’s annual family day celebration had
a Mexican wrestling theme. The parking lot was
transformed into a wrestling arena and there was
fun for all the family with music, a wrestling exhibition,
games and food.
Middle: Juarez celebrates its Business and Human
Rights Distinctive award.
Left: Juarez celebrates PRIDE.
Our site leaders
take the time to get
personally involved
in site events and
celebrations as an
opportunity to listen
to feedback and
build stronger
“family” bonds
across the team.”
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
COMMUNITIES
We encourage our teams to take an active
role in their local communities, whether
fundraising and volunteering for chosen
charities or committing time and resources
to promoting STEM education and careers.
demonstrations and attending careers fairs to interest
and educate young people in the sector. Across the
world we also aid school curriculums directly by
supporting science projects and engineering
competitions to highlight the importance of STEM
subjects in everyday life.
STEM skills
Our teams of engineering, technology and
manufacturing experts are passionate advocates for
the development of STEM skills and engaging with the
next generation of potential talent. We are particularly
keen to encourage more women and under-
represented groups to take up STEM subjects
and careers.
Many of our employees give up their time to develop
local STEM partnerships to promote careers in
electronics and related fields, undertaking talks,
Volunteering and charitable giving
TT has a big fundraising and volunteering culture –
our efforts bring our employee teams together as well
as benefiting our communities. Each site chooses a
local charity to support through the year and our
“hours for giving” programme enables employees to
take five hours of paid leave per year to support local
causes. In 2023 nearly 6,000 hours were taken under
the programme. Our teams support many other
local and national causes and are able to request
matched funding from TT through the “giving the
TT Way” programme.
Our Woking HQ team celebrating the end of their 25 mile
fundraising walk to Hampton Court Palace.
41
VOLUNTEER HOURS
RECORDED IN OUR HOURS
FOR GIVING PROGRAMME
6,000
As part of our partnership with the University of Nottingham, TT hosted 37 Indonesian students for an introduction to TT.
Our intrepid Sheffield team visited 100 sports stadiums in
100 hours in support of a local charity.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 42
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
ENVIRONMENT
Application of our Group-wide Energy
Strategy and the work of highly motivated
teams at our sites has seen us deliver
further falls in energy consumption,
increase again the share of our electricity
coming from renewables, and take
benefits from our own renewable
electricity generation.”
Vicki Faith
Group Head of HSE and Sustainability
Climate Sustainability Council
In 2023 TT renewed its Climate Sustainability
Council with a stated purpose to “embed
sustainability in everything we do”. The Council
is comprised of passionate volunteers from
across TT representing Legal, Investor Relations,
Marketing, Business Development, Operations
and Communications. Looking forward to 2024 the
Council has a wide-ranging action plan focused on
our purpose. We will be organising a Global Climate
Sustainability Day, building a strong network with our
site Green Teams, developing training materials, and
helping our sites to achieve their own Net Zero status.
2023 TARGET REDUCTION
VS 2019 BASELINE
50%
ACTUAL REDUCTION VS
REVISED 2019 BASELINE
62%
We are mindful that our Net Zero roadmap should be
science-based, and this year we publish our Scope 1
& 2 roadmap, in an illustrative form, with an intention
to formally commit to Science-Based Targets in the
future. Additionally, we note recent guidance on
transition planning and we state our intention to
publish a Transition Plan in the future.
In this Annual Report we publish our Task Force on
Climate-related Financial Disclosures (“TCFD”)
statement and confirm our consistency with ten of
the eleven disclosures. 2023 has seen a significant
effort to assess our climate-related risks and
opportunities, including against a range of relevant
scenarios, and confirm the resilience of our strategy.
For full consistency we continue our work to deliver
a quantitative assessment of the impact of climate-
related risks and opportunities. See page 47 for our
TCFD disclosure. See page 48 for Board oversight of
environment and climate matters.
The past year has been one of tremendous progress
for our Net Zero journey and for our successful
transition towards a future low-carbon economy.
We continue to solve technology challenges for a
sustainable world and look forward to another year
of meaningful achievement ahead of us.
Sustainability
This year has seen TT make significant progress in all
areas of our sustainability strategy and deliver strong,
tangible results in our transition to achieve Net Zero.
Our Purpose is to solve technology challenges for a
sustainable world and, in doing so, we are ever mindful
to manage and reduce the impact of our own
operations on the environment.
First and foremost in our day-to-day actions is a
constant drive to reduce TT’s Scope 1 & 2 emissions
and we have continued to deliver meaningful results.
Application of our Group-wide Energy Strategy and
the work of highly motivated teams at our sites has
seen us deliver further falls in energy consumption,
increase again the share of our electricity coming
from renewables, and take benefits from our own
renewable electricity generation.
As a result of these efforts, we have seen another
excellent year of performance, with Scope 1 & 2
emissions falling 18% year-on-year and 62% from
our revised 2019 baseline. We are also mindful of our
impact on the environment relating to external factors,
including our supply chain, and this year has seen our
first measurement and publication of TT’s Scope 3
emissions. While further work is needed to improve
data collection in this area, we are now able to size
and analyse TT’s material Scope 3 emissions.
In addition to our work on CO2 emissions we are also
committed to reducing our impact on the environment
from our use of precious resources such as water,
use of single-use plastics and the unrecycled waste
we send to landfill. We have made good progress in
the capture of data in these areas and have set a target
to eliminate single-use plastics and waste to landfill
by 2035.
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43
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
ENVIRONMENT CONTINUED
CASE STUDY
INSIDE TT ELECTRONICS
A DRIVE TO DELIVER
Our drive to reduce electricity consumption, particularly in those plants not yet able to
access renewable electricity, has seen a reduction year-on-year in both absolute and
relative (to activity levels as measured by revenue) consumption. Committed teams
across TT have delivered a variety of impactful projects to make this happen. Here are
some examples of the work done by our teams this year.
Greater Manchester, UK
Our Greater Manchester team successfully
completed the move of all production from a legacy
facility to a new facility that is modern and energy-
efficient. The new site boosts space efficiency, has
eliminated the use of natural gas, and includes
100% LED lighting and improved heat insulation.
First and foremost in
our day-to-day actions
is a constant drive to
reduce TT’s Scope 1 & 2
emissions; and we have
continued to deliver
meaningful results.”
100%LED lighting
Kuantan, Malaysia
Our Kuantan team received significant capital support
from Group to install a major solar photovoltaic
system. This will generate more than 1 GWh of
renewable electricity per year. EVP Commercial,
Mike Leahan threw the “on” switch in 2023 and we
are already enjoying the benefits.
1 GWh
Renewable electricity generation capacity per year
Juarez, Mexico
Our Juarez team has engaged everyone in the team
on caring for the environment. After calculating that
air leaks could cause 20% excess use of electricity,
a successful project to eliminate air leaks was
launched and saved approximately 26 tonnes of
CO2 emissions in 2023.
26 TONNES
CO2 emissions saved in 2023
Suzhou, China
Our Suzhou team completed nine energy saving
projects in 2023, saving a total of 280 MWhs per
year. One of the key projects has been setting up
a smart energy management system that enables
the monitoring of energy use and supports
elimination of energy waste.
280 MWhs
Saved per year
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44
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
ENVIRONMENT CONTINUED
Scope 1 & 2 emissions
Our Group target for Scope 1 & 2 emissions was to
achieve a 50% reduction versus our 2019 baseline by
the end of 2023. As reported last year, we achieved a
54% reduction by the end of 2022 and we have taken
a further step forward this year by delivering a further
reduction of 18% versus 2022, taking us to a 62%
reduction versus our revised 2019 baseline. We are
well underway to achieve our target of Net Zero
Scope 1 & 2 emissions by 2035.
The main drivers of this achievement were: further
switch of purchasing to renewable electricity;
utilisation of self-generated renewable electricity from
solar panel installation; moving production to modern
energy-efficient facilities; and further improvements
in site energy efficiency.
Scope 3 emissions
We have completed assessment and measurement
of our Scope 3 emissions during the year and our
focus will now be to improve the methods of collecting
and qualifying our data. We found that our emissions
are dominated by Category 1 – Purchased Goods and
Services. We are committed to reporting, managing
and eliminating all categories of emissions from our
value chain where possible, while maintaining the
immediate priority on eliminating emissions from
our own operations. The reported emissions are
calculated directly, where possible, with data gaps
covered by proxy data, extrapolation, and use of
sampling as appropriate.
PERFORMANCE ON SCOPE 1 & 2 EMISSIONS AGAINST TARGET TO REDUCE BY 50% VERSUS
REVISED 2019 BASELINE BY 2023
Scope 1 & 2 emissions tCO2e
We have completed
assessment and
measurement of our
Scope 3 emissions
during the year and our
focus will now be to
improve the methods of
collecting and qualifying
our data.”
Category 1: Purchased goods and services
We have implemented a process to measure our
emissions using a combination of direct input from
our suppliers and estimates where necessary.
Category 4: Upstream transportation and distribution
We have partnered with our logistics providers to gain
access to emissions data.
Category 5: Waste generated in operations
We have constructed a robust system to measure
and report all of our waste streams at our facilities.
Category 6: Business travel
We have partnered with centralised travel providers
to gain access to emissions data.
Category 7: Employee commuting
We have calculated these emissions centrally
taking into consideration employee data supplied
by all locations.
Category 9: Downstream transportation
and distribution
Included in Category 4.
32,500
27,500
22,500
17,500
12,500
7,500
Revised 2019
2020
2021
2022
2023
Tonnes emitted
50% reduction vs revised baseline
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45
RENEWABLE ELECTRICITY
53%of total electricity
OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
ENVIRONMENT CONTINUED
OUR SCOPE 1 & 2 NET ZERO ROADMAP
We are mindful that our Net Zero roadmap should be science-based with science-based targets. This year we
publish our Scope 1 & 2 roadmap, in an illustrative form, with an intention to formally commit to Science-Based
Targets in the future. TT is committed to Net Zero Scope 1 & 2 emissions by 2035.
Net Zero roadmap: Scope 1 & 2 (tCO2e)
30000
24000
18000
12000
6000
0
9
1
0
2
1
2
0
2
3
2
0
2
5
2
0
2
7
2
0
2
9
2
0
2
1
3
0
2
3
3
0
2
5
3
0
2
Scope 1
Scope 2
Total
Action to Net Zero Scope 1 & 2
Waste, water and energy
As well as managing and eliminating our CO2
emissions, we are also committed to measuring and
eliminating, or reducing, the amount of electricity we
use from non-renewable sources, waste sent to landfill
and single-use plastics used at TT. We significantly
improved our data gathering ability in the latter two
areas this year and we have a target of zero waste
to landfill and single-use plastics by 2035. We also
track our water consumption and are committed to
minimising water use, though our manufacturing
processes use very little water.
SWITCHING TO RENEWABLE ELECTRICITY
Renewables as a % of total electricity consumed
53%
45%
36%
0%
6%
2019
2020
2021
2022
2023
Renewable: Tariff or REC
Renewable: Power purchase agreement (“PPA”)
Renewable: TT solar or wind
Energy use reduction
Factory utilisation
Replacement of natural gas
Electric vehicles
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OUR PEOPLE, COMMUNITIES AND ENVIRONMENT CONTINUED
ENVIRONMENT CONTINUED
Data
Our results are calculated centrally from data collected
locally. We use the market-based method for emissions
calculations and, in line with GHG Protocol guidelines,
we use the following information in this order of priority:
energy attribute certificates; contracts; supplier
emission rates; residual mix or grid average emission
factors. We are using an operational control boundary
for direct GHG emissions. We have adopted a cross-
sector calculation method in line with the GHG
Protocol Corporate Standard. For Scope 1 emissions,
we include our total owned and leased vehicle direct
emission impact. Emissions factors, for conversion of
activity or energy consumption into emitted CO2e, are
taken from widely used sources, often governmental.
The emissions factors used in this report are the most
recent available at time of publication.
EMISSIONS, WATER AND WASTE DATA
GHG emissions Scope 1 & 2 (tCO2e)
Scope 1 1
Scope 2 (location-based)
Scope 2 (market-based) 2
Scope 1 & 2 (location-based)
United Kingdom only
Scope 1 & 2 (market-based)
United Kingdom only
Intensity ratio Group (market-based tCO2e/£m revenue)
GHG emissions Scope 3 (tCO2e) 3
Category 1 – Purchased Goods & Services
Category 4 – Upstream Transportation & Distribution
Category 5 – Waste
Category 6 – Business Travel
Category 7 – Employee Commute
Category 9 – Downstream Transportation & Distribution 4
Scope 3 Total
Intensity ratio Group (tCO2e/£m revenue)
1 Entries for Scope 1 have been corrected to include emissions
related to fugitive GHG release, where data is available. The level
of emissions is not material but this is being included to improve
inventory completeness.
2 Baseline of 2019 has been recalculated in order to correct minor errors
related to inventory and emission factors. Although these are not
material, in accordance with GHG Protocol guidance on good practice,
these are being corrected as 2023 is a “target” year for the Group.
That is, we are reporting our performance against our target to reduce
Scope 1 & 2 emissions by 50% vs baseline 2019.
Energy consumption (MWhs)
Electricity (non-renewable)
Electricity (renewable)
Natural gas
Vehicle fuel
Total energy
United Kingdom only
3 Categories 3, 8, 10, 11, 12, 13, 14 and 15 are not included as they are
Intensity ratio Group (Total energy/£m revenue)
not relevant to the Group business model. Category 2 (Capital Goods)
is included in Category 1 (Purchased Goods & Services).
4 Downstream transportation (services paid for by ourselves) is
included in Category 4 (Upstream Transportation & Distribution) per
GHG Protocol guidance. The remaining Downstream Transportation
& Distribution (not paid for by ourselves) cannot currently be measured
and we are assessing the viability of measuring this in the future.
5 Excluding diverted from landfill (typically incineration).
6 Single-use plastics utilised for packaging. TT does not have any
widespread or significant single-use plastics consumption, other
than for packaging.
Water and Waste
Total waste (tonnes)
Waste to landfill (tonnes) 5
Single-use plastics (tonnes) 6
Intensity ratio Group (Total waste/£m revenue)
Water use (m3)
Intensity ratio Group (Water use/£m revenue)
Change vs
previous year
Change vs
revised 2019
baseline
2023
2022 revised 2019
(27)%
(2)%
(16)%
(4)%
0%
(18)%
(15)%
(18)%
NA
NA
NA
NA
NA
NA
NA
NA
(18)%
11%
(4)%
(35)%
(5)%
0%
(5)%
NA
NA
NA
NA
10%
10%
(25)%
(34)%
(64)%
(34)%
(25)%
(62)%
(89)%
(70)%
NA
NA
NA
NA
NA
NA
NA
NA
(63)%
NA
(7)%
(86)%
(24)%
(26)%
(40)%
NA
NA
NA
NA
NA
NA
1,102
17,107
9,431
18,209
3,670
10,533
549
17
158,998
5,329
212
1,883
4,202
1,513
17,371
11,269
18,884
3,654
12,782
648
21
–
–
–
–
–
Included in Category 4
170,624
278
–
–
21,985
24,435
3,912
409
50,741
15,182
83
1,406
417
43
2
26,765
21,982
4,054
625
53,426
15,166
87
–
–
–
–
140,175
127,720
228
208
1,479
26,066
26,066
27,545
4,862
27,545
4,862
58
–
–
–
–
–
–
–
59,261
–
4,185
2,890
66,336
20,509
139
–
–
–
–
–
–
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47
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”)
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES (“TCFD”)
TT Electronics solves technology challenges for
a sustainable world. We do this by delivering
solutions for our customers that enable products
that are cleaner, smarter and healthier, and that
will benefit our planet and people for
future generations.
As a global manufacturer of electronic components and provider
of manufacturing services, we understand the importance of
analysing the current and future potential impacts of climate
change on our activities and the urgent need to protect the
environment for future generations given the severity of the
climate crisis. This year we have undertaken a more
comprehensive analysis of our climate-related risks and
opportunities, taking into consideration their impact under
different timeframes, and scenarios. We support the transition
to a low-carbon economy through our products and through
our operations via our commitment to becoming a Net Zero
emissions business on a Scope 1 & 2 basis by 2035.
The Board has noted the requirement for mandatory climate-
related disclosures arising from the Companies (Strategic
Report) (Climate-related Financial Disclosure) Regulations 2022,
as well as FCA Listing Rule 9.8.6R(8). Below we have set out our
climate-related financial disclosures which demonstrate
consistency with ten of the eleven TCFD recommended
disclosures as detailed in ‘Recommendations of the Task Force
on Climate-related Financial Disclosures’, 2017, with use of
additional guidance from ‘Implementing the Recommendations
of the Task Force on Climate-Related Financial Disclosures’,
2021. The disclosure that we are not consistent with is Strategy
(b) where we have provided qualitative but not fully quantitative
analysis of our physical risks and transition risks and
opportunities. TT Electronics will continue to refine financial
impact analysis, relevant to Strategy (b) and Physical Risk, with
a view to updating the disclosures at the next reporting cycle.
The climate-related financial disclosures made by Group
comply with the requirements of the Companies Act 2006 as
amended by the Companies (Strategic Report) (Climate-related
Financial Disclosure) Regulations 2022.
Following independent third party and internal analyses
and assessment of the Group’s climate-related risks and
opportunities, which are detailed in the Strategy section of
this TCFD disclosure (see page 49), our view currently is that
significant financial planning or budgetary change as a result
of climate change is not likely to be required and the transition
to Net Zero is already incorporated into the Group’s
strategic planning.
Detail on the 11 recommended disclosures can be found
on the pages highlighted below.
TCFD RECOMMENDATION
RECOMMENDED DISCLOSURE
GOVERNANCE
Disclose the organisation’s governance around climate-related
risks and opportunities.
a. Describe the Board’s oversight of climate-related risks and opportunities.
b. Describe management’s role in assessing and managing climate-related risks and opportunities.
STRATEGY
Disclose the actual and potential impacts of climate-related
risks and opportunities on the organisation’s businesses,
strategy and financial planning where such information
is material.
a. Describe the climate-related risks and opportunities the organisation has identified over the short, medium and long term.
b. Describe the impact of climate- related risks and opportunities on the organisation’s businesses, strategy and financial
planning.
c. Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including
a 2°C or lower scenario.
RISK MANAGEMENT
Disclose how the organisation identifies, assesses and
manages climate-related risks.
a. Describe the organisation’s processes for identifying and assessing climate-related risks.
b. Describe the organisation’s processes for managing climate-related risks.
c. Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s
overall risk management.
METRICS AND TARGETS
Disclose the metrics and targets used to assess and manage
relevant climate-related risks and opportunities where such
information is material.
a. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk
management process.
b. Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (“GHG”) emissions, and the related risks.
c. Describe the targets used by the organisation to manage climate-related risks and opportunities and performance
against targets.
ANNUAL REPORT
REFERENCE
Page 48
Page 48
Page 50
Page 50
Page 50
Page 49
Page 49
Page 49
Page 56
Page 46
Page 56
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TCFD CONTINUED
GOVERNANCE
BOARD OVERSIGHT OF CLIMATE-RELATED RISKS
AND OPPORTUNITIES
At TT Electronics, the Board of Directors oversees all ESG
matters, including climate-related issues, across Group culture,
strategy, compliance, risk and internal controls as part of our
overall governance, budgetary approval and risk management
frameworks. The Board receives regular updates on the status
of Group environmental issues (including sustainability and
climate-related risks and opportunities). The Board also receives
regular updates on the progress made against targets and
ongoing action items in the form of a presentation and
supplementary written document.
An overview of risks and opportunities is provided in addition
to an update on the progress of current projects related to
strengthening the reporting infrastructure for climate-related
risks and opportunities. A review by the Board of the Group’s
Net Zero planning and Sustainability Strategy is undertaken
at least annually.
Audit and Risk Committees
The Board is also responsible for risk management, supported
by the Audit Committee and informed by the executive Risk
Committee, under which there is a periodically scheduled
meeting focused on the climate risk register. The Board defines
risk appetite and monitors the management of significant risks.
Climate-related risks are included in the Group risk register.
People, Social, Environmental and Ethics (“PSEE”) Committee
Beneath Board level, the PSEE Committee provides oversight
of and decision-making on our environmental strategy and
performance. The CEO chairs the PSEE Committee, which also
includes the Senior Independent Director (“SID”). The CEO
reports directly to the Board following each PSEE Committee
meeting, which occur three times per year.
The PSEE Committee receives updates on the progress of
climate-related strategic initiatives and is advised by our Group
Head of HSE and Sustainability who provides on-the-ground
insight and specialist advice as well as enabling the sharing of
best practice and ideas across the Group. The climate-related
content of the PSEE Committee agenda is closely aligned with
the Board report, albeit being more detailed in analysis and
more strategically focused.
Management’s role in assessing and managing climate-
related risks and opportunities
At the direction of the Board, management are assigned the
responsibility to assess, monitor and manage climate-related
risks and opportunities. We have put in place a process for
our executive management team to be fully engaged in the
governance process and monitor progress through monthly
reports/dashboards and more detailed quarterly reviews.
We use our existing structure to manage these processes.
Management receives information on emissions, and details
of any actions, strategic or financial planning required to
address climate-related issues. Executive management are
represented in the PSEE Committee and are also informed
by the Group Head of HSE and Sustainability.
Responsibility for local risk management, planning and
performance lies with our site managers who work with our
site environmental champions and employee Green Teams
to formulate and deliver projects and engage employees
with our local and global agendas. Site managers are also
responsible for the monitoring and management of any
physical climate-related risk exposure.
Climate-related governance framework
Board of Directors
Chair: Warren Tucker
Number of meetings in 2023: 7
Overall responsibility for climate-related policy, plans and
budget as well as mitigation of key climate-related risks
and leveraging opportunities.
Audit
Committee
Risk Committee
Executive
Leadership Team*
Chair: Anne Thorburn.
Independent Non-Executive
Director
Number of meetings
in 2023: 4
Supports the Board on risk
management. Oversees risk
management and internal
control processes.
Chair: Peter France, CEO
Number of meetings
in 2023: 3
Supports the Board and
the Audit Committee in
monitoring the exposure
to risks, reviewing risk
management processes
and controls. Provides the
framework for managing
Group risks and regularly
reviews principal risks.
Number of meetings
in 2023: 8
Responsible for
implementation of the
Group’s ESG strategy,
including climate change
risks and opportunities.
* From 1 March 2024 the TMB
Group Sustainability
People, Social,
Environmental & Ethics
(“PSEE”) Committee
Chair: Peter France, CEO
Number of meetings
in 2023: 3
Oversees the Group’s ongoing
commitment relating to
sustainability and climate-
related issues.
Group Head of HSE and Sustainability updates the Board on risks and opportunities, the outcome of climate-related scenario analysis
exercises, action plans and/or amends business processes.
Help achieve goals, feed back areas for improvement, and update business continuity plans. Responsible for data collection, reporting,
risk assessment and mitigation at site level. Also the integration of climate strategy into local business plans.
Management
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TCFD CONTINUED
RISK MANAGEMENT
OUR PROCESSES TO IDENTIFY, ASSESS
AND MONITOR CLIMATE-RELATED RISKS
Climate-related risks are fully integrated into and considered
as part of our overall Group risk management processes.
Our climate-related risk assessment considers existing and
emerging risks and all risk categories outlined in the TCFD
recommendations in relation to all of TT Electronics global
operations, selected key suppliers, and selected key customer
locations. Not all risk categories are applicable or material to
the business.
Climate-related risk identification is performed both bottom-up,
through a detailed assessment at operational site level, as well
as top-down, through an assessment of strategic and
market risks.
Site-level environmental risks are identified as part of our
operational risk assessments. This year, we enhanced our
site-level assessment of physical climate-related risks using
a natural hazards risk analysis software tool, which provided
greater depth to our analysis of all our global operations
(see below). We also extended this analysis to some of our
key suppliers and customers. Site-level risk assessments are
monitored and consolidated at divisional and then Group level.
Alongside risk identification and assessment, divisions provide
action plans to incorporate a consideration for mitigation in
the analysis. This assessment of physical climate-related risks
was initially performed as a “one-off” and going forward will be
repeated at least once every three years.
Climate-related transition risks, which tend to impact TT in
a top-down manner, are assessed in the periodic Climate Risk
Meeting, which was held three times in 2023. This meeting
informs the Board and the Audit Committee in monitoring
the exposure to climate-related risks through regular reviews,
including reviewing the effectiveness of risk management
processes and controls. The Group risk register is reviewed
by the Risk Committee and the Board. The Risk Committee
met three times in 2023.
Ongoing data and information relevant to climate-related
risks is supplied through regular Board reports in the form
of dashboards and written submissions. As part of the risk
management processes, the Board regularly considers its
risk appetite in terms of the tolerance it is willing to accept in
relation to each principal risk based on key risk indicators to
ensure it continues to be aligned with the Group’s goals and
strategy. Each risk is considered as to whether it currently falls
within the Group’s appetite for that risk and a decision is made
on whether to mitigate, control or accept that risk. As a result,
the relative materiality and the prioritisation of climate-related
risks is considered alongside other Group risks within the
existing Group risk management framework. In addition to our
disclosed climate-related risks and opportunities, sustainability,
climate change and the environment is an identified principal
risk of the Group. Climate-related physical risks have historically
been identified and considered for business continuity planning.
However, the current in-depth approach is new for 2023.
There are no planned changes to the processes used but
we anticipate refinements.
STRATEGY
CLIMATE-RELATED RISKS AND OPPORTUNITIES
Outlined in detail from page 51 are climate-related physical risks,
three headline climate-related transition risk categories,
and three headline climate-related opportunity categories
that have been identified as having an impact on our business.
The Group’s strategic planning for Net Zero and our emissions
reduction initiatives form the basis of our mitigation strategies
for our risks and our positioning to benefit from the opportunities.
For the purposes of this disclosure, TT Electronics defines time
horizons of where our climate-related risks and opportunities
first occur as follows:
SHORT-TERM
2024–2028
In line with specific business plan forecasting
MEDIUM-TERM
2029–2035
Encompassing the Group’s ambition for Net Zero
Scopes 1 & 2
LONG-TERM
2036–2100
Encompassing long-term industry and policy trends, such
as UK Net Zero 2050, the useful life of our facilities and
equipment (often >10 years and up to 50 years) and the
manifestation of long-term climate-related risks
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TCFD CONTINUED
STRATEGY CONTINUED
Impact of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning
The analysis and quantification of our climate-related risks
indicates that the climate risk exposure of the Group in the
short-term is mostly Very Low (see scale below), rising to mostly
Low in the medium-term. Long-term, some climate-related risks
rise to Medium and High levels, but in that time horizon, the
Group’s operating profit can be expected to be larger and more
able to withstand those risks. The Group’s climate-related
opportunities are also expected to be mostly Low in the
short-term. In the medium- and long-term horizons the analysis
indicates that climate-related opportunities are potentially
transformational for the Group. The margin of error in long-term
forecasting is high and thus there is a high level of uncertainty
in our long-term impact calculations for both our risks
and opportunities.
The identification of risks has allowed us to factor in certain
specific risk management and mitigation actions into our plans.
The Group’s existing business strategy, disclosure, and ambition
for Net Zero already provides some financial resilience and
strategic robustness to climate change, but the analysis will
also help focus our product and service strategy towards
exploiting the opportunities identified.
Our approach to climate scenario analysis
In 2023, we undertook a substantial qualitative and quantitative
analysis of the resilience of our business model and strategy.
Commonly-referenced public climate scenarios were used to
provide comparisons across potential climate outcomes.
These were selected because the outcomes, supporting data
and forecasts are appropriate for the nature of our business and
our operating environment. The outcome of this analysis is a
confirmation of the resilience of our strategy and that significant
financial planning or budgetary change as a result of climate
change is not likely to be required and the transition to Net Zero
is already incorporated into the Group’s strategic planning.
Physical risks were analysed using three scenarios from the
Intergovernmental Panel on Climate Change (“IPCC”) embedded
in the software platform used to analyse physical risks of
climate change:
– RCP 2.6: a “very stringent” pathway, likely to keep global
temperature rise below 2°C by 2100.
– RCP 4.5: an intermediate more likely than not to result in global
temperature rise between 2°C and 3°C, by 2100.
– RCP 8.5: a bad-case scenario where global temperatures rise
between 4.1–4.8°C by 2100.
Resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios,
including a 2°C or lower scenario
The transition to Net Zero is already incorporated into the
Group’s strategic planning and is considered “business as usual”
with respect to operational and capital costs. There are no
effects of climate-related matters reflected in judgements and
estimates applied in the financial statements as a result. We will
continue to develop our analysis as new data becomes available,
both internally and externally, and we will continue to monitor
our climate exposures and action plans through the Group’s risk
management framework.
To understand their potential future impact, our transition
risks and opportunities are modelled out to 2050 against two
International Energy Agency’s (“IEA”) scenarios. These were
selected as they are accompanied by supportive datasets,
forecasts and industry projections which are useful for
modelling climate positive outcomes:
– Net Zero Emissions by 2050 Scenario (“NZE”): a narrow but
achievable pathway for the global energy sector to achieve
Net Zero CO2 emissions by 2050. This scenario meets the
requirement for a “below 2°C” scenario. NZE also informs
the decarbonisation pathways used by the Science-Based
Targets initiative (“SBTi”).
– Stated Policies Scenario (“STEPS”): representing projections
based on the current policy landscape. Global temperatures
rise by around 2.5°C by 2100 from pre-industrial levels, with
a 50% probability.
CLIMATE-RELATED PHYSICAL RISKS
With locations (including both offices and manufacturing sites)
across the world, TT Electronics maintains a large and diverse
geographical footprint. This year we enhanced our physical
risk assessment, using geospatial risk modelling software to
analyse the group’s exposure to natural hazards and how
these risks may change in the future under various scenarios
for global temperature rise by 2030, 2050 and 2100.
Physical climate-related risks relate to changes to the
environment from the impact of climate change. The
assessment considers acute risks, defined by the TCFD as
the change in frequency and/or intensity of extreme events,
such as river flooding; and chronic risks, defined as longer-
term shifts in climate such as rising mean temperatures, rising
sea levels, changes in precipitation and weather extremes.
The primary physical climate-related risks for TT Electronics
are flood, storm and fire weather stress.
All 23 Group sites were assessed. Six of these sites
(Suzhou, Kuantan, Dallas, Mexicali, Juarez and Cardiff) are
more susceptible to climate-related risk and the potential
future risk for these sites, within the timescales presented here,
are deemed to be serious. Our definition of “serious” in this
case is a 100 year return period meaning that there is a 1%
chance (or 1 in 100 chance) of a significant weather event in
a given year. The nature of the potential climate-related risk is
detailed further in this section. Any other sites with heightened
risk exposure were deemed to be of low impact to the Group’s
ongoing business resilience.
The primary potential financial impact of climate-related
physical risks is business or production disruption and/or
asset damage leading to loss of revenue, increased insurance
premiums, reduced asset value and reduced labour
productivity. In addition, climate-related physical risks may
result in disruption to local or regional infrastructure or
transportation, and thereby cause disruptions to our upstream
and downstream supply chains.
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STRATEGY CONTINUED
We have also conducted the same climate-related physical risk
assessment on nine of our key customers (mostly distributors)
and ten key suppliers. The analysis of all current and future
potential physical risks will be shared with our value chain
partners as part of our engagement to help ensure
business continuity.
Following this analysis, our site managers have provided
feedback on individual sites’ historic exposure to natural hazards
and their impact, which to date has been insignificant. Each site
has been requested to review and/or amend business continuity
plans and investigate the requirement for mitigation. The
following existing features and mitigations have been identified:
– All TT Electronics sites are insured for both property and asset
damage as well as business interruption (i.e. loss of profit),
which materially limits the Group’s exposure to any climate-
related financial impact. Sites are periodically visited by
insurers, at their discretion, for risk assessment, including
climate-related risk.
– Affected assembly operations can be moved and/or dual
manufacturing strategies could be developed.
– Multiple sites operate on more than one floor for part of
their operations. They could be consolidated on upper floors
(partial manufacturing) with notice (c. 1 year).
– At least one site is at a higher elevation than the
surrounding area.
For more complex manufacturing facilities a timeline for a
factory move could be lengthy (in the region of 2–3 years);
however these facilities could be moved within the period
implied by physical risks and therefore a plant move is possible
as a pre-emptive mitigation action in the event that the physical
risk were to be considered unacceptable.
TT Electronics does not extensively use water-intensive
production processes, so drought risks are minor and relate
to employee wellbeing and services.
SITE POTENTIAL EXPOSURE TO PHYSICAL CLIMATE RISK
51
4
3
1
2
6
5
1 Mexicali, Mexico
Future: River flood and greater incidence of drought, heat and fire
weather stress
4 Cardiff 1, Wales
Future: River flood
1 Divestment of site announced 4 March 2024
2 Juarez, Mexico
Future: River flood and greater incidence of drought, heat and fire
weather stress
5 Kuantan, Malaysia
Future: River flood, sea level rise and greater incidence of drought,
heat and precipitation stress
3 Plano, USA
Future: River flood and greater incidence of fire, weather, heat and
precipitation stress
6 Suzhou, China
Future: River flood, storm surge and greater incidence of
precipitation stress
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TCFD CONTINUED
STRATEGY CONTINUED
Climate risks and opportunities are assessed on the timescale
(right) and a five-point scale based on gross impact on
business performance.
CLIMATE-RELATED TRANSITION RISKS
We have also enhanced our transition risk assessment via a more
detailed analysis of our climate risk exposures and the impact
of scenarios. Climate-related megatrends, which feature in our
analysis, are powerful, transformative forces that can change
the trajectory of the global economy by shifting the priorities of
societies, driving innovation and redefining business models.
SHORT-TERM
2024–2028
In line with specific business plan forecasting
MEDIUM-TERM
2029–2035
Encompassing the Group’s ambition for Net Zero
Scopes 1 & 2 by 2035
LONG-TERM
2036–2050
Encompassing long-term industry and policy trends,
such as Group Scope 1 & 2 Net Zero target 2035 and
UK Net Zero 2050
RISK
RISK DESCRIPTION
RISK TYPE
FINANCIAL IMPACT
Operational exposure to carbon pricing mechanisms. The
adoption of carbon pricing instruments is rising globally,
driving the price levels of all carbon pricing systems and
therefore the overall risk exposure. UK requirements may
exceed global industry standards.
Current &
Emerging
Regulation
Higher energy costs
or direct carbon tax
related to Scope 1 & 2
emissions
MITIGATION AND
RESPONSE
Our target is to achieve
Net Zero Scope 1 & 2
emissions by 2035.
Growing UK
and global
regulations
on carbon
emissions and
increasing
reporting
requirements.
Value chain exposure to carbon pricing mechanisms. The
adoption of carbon pricing instruments is rising globally,
driving the price levels of all carbon pricing systems and
therefore the overall risk exposure. The impact is likely
to be felt through potential increases to the cost of raw
materials and transport costs as suppliers pass on the
added costs to their customers.
UK listed companies reporting requirements. UK listed
companies reporting requirements become onerous. In
addition, the risk that UK legislation becomes onerous for
specific products and in the extreme drives them out of
existence. Potential loss of revenue and risk of insufficient
internal resource and data management for Group-level
and product level compliance reporting.
Higher cost of raw
materials and transport
should suppliers pass
on added costs
Our ambition is to
achieve Net Zero.
We are working to set
near-term targets for
Scope 3.
Loss of revenue
Resource and
data management
for Group-level
and product-level
compliance and
reporting.
Impact
SHORT
(2024–2028)
MEDIUM
(2029–2035)
LONG
(2036–2050)
SCENARIO
IMPLICATIONS
No change in exposure
between STEPS
and NZE scenarios,
given our projected
emissions profile
No change in exposure
between STEPS and
NZE scenarios, given
our Scope 3 projected
emissions profile
Requirements may
increase under the
NZE scenario, but we
expect no change to
our risk exposure
Materiality
Impact
Very low
Low
Moderate
High
Very high
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CLIMATE-RELATED TRANSITION RISKS CONTINUED
RISK
RISK DESCRIPTION
RISK TYPE
FINANCIAL IMPACT
Growing global
scrutiny of
commercial
businesses’
impact on, and
preparedness
for, climate
change and
the low-carbon
transition.
TT’s position within sustainability relative to performance
and reporting. Investors, lending banks, and customers
represent the key stakeholders demanding sustainability
performance from TT, especially around climate change.
Areas of scrutiny may include the group’s relative
sustainability performance, delivery on targets and the
Net Zero roadmap and strategic plan.
Net zero roadmap and targets. Investors, lending banks
and customers represent the key stakeholders demanding
sustainability performance from TT, especially around
climate change.
Legacy business, new business and NPI supplied to fossil
fuel industry. Risk related to TT’s direct exposure to the
fossil fuel industry.
Reputation
Not deemed
reasonably possible
to define reputational
financial impact
Not deemed
reasonably possible
to define reputational
financial impact
Not deemed
reasonably possible
to define reputational
financial impact
Rapid
transition to a
local carbon
economy and
technological
advancement
stranding
legacy
technology,
or impeding
businesses
supplying
customers
caught
with legacy
technology.
Legacy business, new business and NPI supplied to
aerospace industry. Loss of revenue as aerospace
industry becomes restricted and taxed to deter emissions.
Market
Loss of revenue
Technology – excessive technology redundancy in our
manufacturing, product and NPI portfolio. Our technology
(design/manufacturing) must keep pace with market and
customer requirements.
Technology
Loss of revenue
Technology – excessive technology redundancy in our
customers’ manufacturing, product and NPI portfolio. Our
customers fail to transition to a low-carbon economy.
Loss of revenue
MITIGATION AND
RESPONSE
Additional
sustainability
resources applied.
Additional reporting
and data management
resource and systems.
Additional
sustainability
resources applied.
Additional reporting
and data management
resource and systems.
Reduce and phase
out exposure to fossil
fuel industries.
Additional
sustainability
resources applied.
Additional reporting
and data management
resource and systems.
Additional
sustainability
resources applied.
Additional reporting
and data management
resource and systems.
Reduce and phase
out exposure to fossil
fuel industries.
53
Impact
SHORT
(2024–2028)
MEDIUM
(2029–2035)
LONG
(2036–2050)
SCENARIO
IMPLICATIONS
No change in exposure
between STEPS
and NZE scenarios,
given our projected
emissions profile
No change in exposure
between STEPS and
NZE scenarios, given
our Scope 3 projected
emissions profile
No change in exposure
between STEPS and
NZE scenarios, given
our Scope 3 projected
emissions profile
No change in exposure
between STEPS
and NZE scenarios,
given our projected
emissions profile
Large impact
under STEPS and
NZE scenarios
Large impact
under STEPS and
NZE scenarios
Materiality
Impact
Very low
Low
Moderate
High
Very high
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54
TCFD CONTINUED
CLIMATE-RELATED TRANSITION OPPORTUNITIES
OPPORTUNITY
OPPORTUNITY DESCRIPTION
OPPORTUNITY
TYPE
FINANCIAL IMPACT
Ability to
capitalise on
megatrends
associated
with the
low-carbon
economy
Products with
applications
that directly
reduce energy
consumption
and emissions
may
outperform
market
average for
growth
Annual profitability from alignment of products that drive
a low-carbon economy.
Market
Increased revenue
Significant majority of products are universal enablers.
Increased revenue
Exposure to megatrends – technology and products
(additional profitability).
Increased revenue
In-house technology and products for decarbonising the
aerospace industry.
Products &
Services
Increased revenue
In-house technology and products for decarbonising the
on-road vehicle, off-road vehicle and traction industries.
Increased revenue
In-house technology and products for systems, software
and devices that sense, control and manage energy
consumption.
Increased revenue
ADAPTATION AND
RESPONSE
Invest in aerospace
and automation &
electrification products
that drive a low-
carbon economy.
Invest in aerospace
and automation &
electrification products
that enable a low-
carbon economy.
Invest in technology
and products aligned to
climate megatrends.
Expand our exposure
to megatrends and
applications related
to aerospace.
Product marketing and
marketing resource
in conjunction with
future NPI.
Expand our exposure
to megatrends and
applications related
to transport.
Product marketing and
marketing resource
in conjunction with
future NPI.
Expand our exposure
to megatrends and
applications related
to energy.
Product marketing and
marketing resource
in conjunction with
future NPI.
Impact
SHORT
(2024–2028)
MEDIUM
(2029–2035)
LONG
(2036–2050)
SCENARIO
IMPLICATIONS
Large impact
under STEPS and
NZE scenarios
Large impact
under STEPS and
NZE scenarios
Large impact
under STEPS and
NZE scenarios
Large impact
under STEPS and
NZE scenarios
Large impact
under STEPS and
NZE scenarios
Large impact
under STEPS and
NZE scenarios
Materiality
Impact
Very low
Low
Moderate
High
Very high
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CLIMATE-RELATED TRANSITION OPPORTUNITIES CONTINUED
OPPORTUNITY
OPPORTUNITY DESCRIPTION
Growth
through
sustained
energy and
carbon
reductions,
and exceeding
sustainability
requirements
Renewables (Scope 2): purchase of renewable electricity
certificates or corporate power purchase agreements
(“PPAs”). Installation of solar photovoltaic (“PV”)
facilities, reducing reliance on local grid, emissions
and operating costs.
Energy strategy. Energy use reduction programmes,
elimination of use of fossil fuel & related equipment
(Scope 1 & 2 initiatives). Net Zero factory.
OPPORTUNITY
TYPE
Energy Source
FINANCIAL IMPACT
Reduced costs,
decreased exposure
to carbon price risks
(Scope 2)
Resource
Efficiency
Reduced costs
Reduce focus on airfreight, eliminate waste from
operations, employee travel assistance, minimise
business travel, partner with suppliers on a Net Zero
journey (Scope 3 initiatives). Logistics strategy.
Reduced costs
ADAPTATION AND
RESPONSE
Net Zero programme,
switch to renewable
electricity.
Net Zero programme,
energy reduction.
Employee engagement
to reduce energy
consumption.
LED lighting, renewable
energy installations
– solar PV, insulation,
boilers.
Net Zero programme,
Scope 3 reduction.
Non-hazardous waste
landfill target.
Recycling, waste
reduction initiatives.
55
Impact
SHORT
(2024–2028)
MEDIUM
(2029–2035)
LONG
(2036–2050)
SCENARIO
IMPLICATIONS
No change in exposure
between STEPS
and NZE scenarios,
given our projected
emissions profile
No change in exposure
between STEPS
and NZE scenarios,
given our projected
emissions profile
N/A
Materiality
Impact
Very low
Low
Moderate
High
Very high
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TCFD CONTINUED
METRICS & TARGETS
CLIMATE-RELATED METRICS AND TARGETS
TT uses a wide variety of metrics to assess climate-related risks
and opportunities. Metrics (and reduction targets) for emissions
of GHGs play a key role in reducing our impact on the planet,
addressing a principal risk of reputational damage and bolstering
our recognised opportunities related to our purpose of solving
technology challenges for a sustainable world. Comprehensive
emissions statistics are used at monthly divisional meetings,
quarterly Executive reviews and at Board meetings.
waste and downstream transportation and distribution
(the upstream element only of the latter). All other categories
are deemed not material.
Targets to manage climate-related risks and opportunities
Our Scope 1 & 2 emissions target of 50% reduction by 2023
from a 2019 base year was achieved in 2022, one year early. Our
remaining target is Net Zero Scope 1 & 2 by 2035. There are also
additional targets to transition all sites to renewable electricity
supply, where at all possible, and whether that is externally
supplied or internally generated by 2035.
In addition to Scope 1 & 2, TT reports all material categories of
Scope 3: purchased goods and services, employee commute,
business travel, upstream transportation and distribution,
Executive Director remuneration is already aligned with
sustainability and the achievement of ESG measures. The short-
term incentive plan is weighted 70% to financial performance
measures, 10% to ESG measures and 20% to strategic
objectives. In 2023 the ESG targets were largely focused
toward the environment and included targets linked to delivery
of Scope 1 & 2 emission reductions and wider environmental
progress. Short-term incentive plans for the wider leadership
group are weighted 75% to financial performance measures
and 25% to strategic objectives.
Typically, ESG forms one of the focus areas within the
strategic objectives, with metrics targeted to human capital
management and achieving our carbon Net Zero ambitions.
We have also widened our range of performance metric
definitions that can be used across both short-term and
long-term incentives to enable ESG measures to also feature
in our long-term incentives as appropriate in the future.
This table highlights some of the key metrics and targets used, or under consideration, within the Group
METRIC
DEFINITION
TARGET
KWhs of consumption for all Group locations
per annum, in ratio to revenue (£m)
Year-on-year reductions
Percentage of consumed electricity derived
from renewable sources
100% by 2035 (subject to availability)
Absolute CO2e emissions from our
own operations
Net Zero 2035 Scope 1 & 2. Net Zero being
a state where the amount of GHGs released
into the earth’s atmosphere is balanced by
the amount of GHGs removed
CO2e emissions from our own operations,
in ratio to revenue (£m)
Net Zero 2035
LINK TO CLIMATE-RELATED RISKS
AND OPPORTUNITIES
Opportunity to reduce both emissions and
costs with better use of energy source
and efficiency.
Risk exposure to emerging regulation,
reputation and future carbon
pricing mechanisms.
Risk exposure to emerging regulation,
reputation and future carbon
pricing mechanisms.
Risk exposure to emerging regulation,
reputation and future carbon
pricing mechanisms.
METRIC REPORTING STATUS
Tracked monthly as part of our emissions data management system.
Reported annually in conjunction with announcement on Group revenue.
Tracked monthly as part of our emissions data management system and
reported annually.
Tracked monthly as part of our emissions data management system and
reported annually.
Tracked monthly as part of our emissions data management system.
Reported annually in conjunction with announcement on Group revenue.
General waste, that cannot reasonably
be recycled or diverted, sent to landfill
(measured as a percentage of total)
Consumption of single-use plastics
in packaging (tonnes)
Zero by 2035
Opportunity to improve resource efficiency.
Tracked monthly as part of our emissions data management system and
reported annually.
Zero by 2035
Opportunity to improve resource efficiency.
Tracked monthly as part of our emissions data management system and
reported annually.
Business continuity plans for each location
that address physical climate risk
Plans in place and reviewed annually
Risk to impact from chronic or acute weather
events and climate change.
We are assessing our business continuity plans and determining the
suitability of this as a measure in relation to physical risk.
Energy
consumption
(intensity)
Switch to
renewables
Emissions
Scope 1 & 2
(absolute)
Emissions
Scope 1 & 2
(intensity)
Waste to
landfill
Single-use
plastics
Business
continuity
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ENGAGING OUR
STAKEHOLDERS
The principal decisions taken by the Board in 2023
centred around:
– Board and senior management succession planning
– strengthening TT’s capital structure
– Board-level engagement (particularly with TT management,
employees, customers and shareholders)
– increasing operational capacity at overseas
manufacturing sites
– development of TT’s sustainability/ESG initiatives
The Board believes that engagement with our stakeholders is key
to the long-term success of our business. We use the knowledge
and feedback gained from our stakeholders to push our business
forward and respond to key requirements and challenges in the
industries in which we operate. The Board considers its current
engagement mechanisms to be effective.
57
Under Section 172 of the Companies Act 2006,
Directors are required to promote the success of
the Company for the benefit of our shareholders,
while having regard to the factors set out in
Section 172 including the interests of our
other stakeholders.
The nature of Board meetings allows information about our
stakeholders to flow from the workforce, through commercial
teams and senior management to the Board and back down
the organisational structure. The Board also actively seeks
feedback from external advisers to help form its strategic
decisions. Throughout the year, the Board considered how
stakeholders are affected by its key decisions.
The Board fully understands its role in this process and regularly
reviews the Group’s key stakeholders and the impacts our
activities have on these groups. The Board encourages open
and purposeful engagement so that they can use clear and
honest feedback to assist in their decision-making processes.
The following engagement disclosures describe how the Board
has had regard to the matters set out in Section 172 (1) (a) to
(f) and forms the Directors’ statement required under Section
414CZA of the Companies Act 2006.
STAKEHOLDER
OUR ACTIVITIES THAT AFFECT THEM
HOW WE ENGAGE AT BOARD LEVEL
HOW WE ENGAGE ACROSS THE GROUP
OUTCOMES OF ENGAGEMENT
CUSTOMERS
AND
SUPPLIERS
– R&D and new product introduction
– Products, including those supporting
environmental sustainability
– Operations and production pipeline
– Safety, environmental quality control
and reliability
– Sustainability targets
– Legal and regulatory compliance
– Payment practices/prompt payment
– Inventory management
– Responsible business practices
– Supply chain management
– Modern slavery review
– CEO and Board regularly receive reports
– Day-to-day contact on supply chain,
– Continued focus on cleaner, smarter and
from divisions and internal Councils on key
customer and supplier initiatives.
– The Board reviews and approves payment
times and practices.
– The Board reviews and approves responsible
business practices and targets.
– Discussions with customers on funding of
working capital.
– Direct engagement with site senior
management on operational improvements
in production lines.
– Overview of Environment and
Sustainability actions and targets
through the PSEE Committee.
products and service.
– R&D partnerships.
– Collaboration across divisions to meet
customer needs including through our
Business Development and Supply
Chain Councils.
– Voice of the Customer formal feedback.
– Supplier assessments.
healthier solutions.
– New product launches and new contract
wins (see case study example on page 6).
– Continued review of Voice of the Customer
programme.
– Longer-term collaborative relationships
(see case study examples on page 10 and
page 20).
– Monitoring of supplier payment times,
global supply chain, inventory management
and export risks.
– Third party screening of intermediaries
to protect customers and suppliers.
– Improvements to the Internal Audit controls.
– Climate-related physical and transition risk
assessments carried out at most TT sites.
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STAKEHOLDER ENGAGEMENT AND SECTION 172 STATEMENT CONTINUED
STAKEHOLDER
OUR ACTIVITIES THAT AFFECT THEM
HOW WE ENGAGE AT BOARD LEVEL
HOW WE ENGAGE ACROSS THE GROUP
OUTCOMES OF ENGAGEMENT
EMPLOYEES
– Culture and purpose
– TT Way values and conducting business
– Oversight of Group culture.
– HSE and Sustainability updates at each
with integrity
Board meeting.
– Formal employee engagement survey
and regular engagement pulse surveys.
– Site employee forums and Town Halls
– Safety and wellbeing, including financial
– Board , CEO, CFO and ELT site visits
with ELT members.
– 3*** employer rating following employee
engagement survey (91% response rate).
– Leadership development workshops.
– Further development of the ED&I strategy
planning and security
– Employee Assistance Programme
– Training and development
– Group employment policies
– Engagement activities
– ED&I
– Environmental sustainability
– Pensions
INVESTORS
– Financial performance
– Leadership
– Governance and transparency
– Sustainability/ESG
– Reputation
– Communication
– Pensions buy-in
– RCF extension
(see page 74).
– CEO and SID are members of the PSEE
Committee ensuring the connection.
between the Board and the voice of
the employee.
– Employee engagement survey.
– Oversight of ED&I roadmap.
– Regular talent and succession updates.
– Support for Employee
Assistance Programme.
– Employee forums on
Executive Remuneration.
– Approval of environmental
sustainability targets.
Read more
on page 72
– Regular report to the Board on investor views
including on TCFD and ESG.
– Chairman engagement around the
appointment of our new CEO.
– Direct engagement with advisers on
geopolitical changes and upcoming risks
and challenges.
– Shareholder engagement regarding ESG
programme and targets.
– Results, Annual Report and AGM.
Read more
on page 74
SOCIETY
– Products that solve technology challenges
– Oversight of Group strategy including ESG
for a sustainable world
– Responsible business practices
– Environmental practices and sustainability
– Employment training and apprenticeships
– ED&I focus
– Employee Assistance Programme
– Local supply chains
– Supporting local communities
strategy and performance.
– The Board reviews and approves responsible
business practices and targets.
– CEO and SID are members of the
PSEE Committee.
– BE Inspired recognition scheme.
– Training and development activities aligned
at Group and site level.
– Employee mindfulness and
to business and employee needs.
wellbeing activities.
– ED&I Councils, inclusive leadership training
and employee courses.
– Regular employee information sessions on
personal wellbeing, salary review, pay rates
and company-wide employee benefits.
– Improving the wellbeing strategy for our
US-based employees
– Career conversations and personal
performance development plans.
Read more
on page 29
– Financial wellbeing initiatives.
– Investment in sales and business
development capability.
– Ambitious environmental
sustainability targets.
– Board diversity policy to complement
the Group policy.
– Changes to site production capacities.
– Flexible working initiatives (see a case study
example on page 34).
– Appropriate governance policies.
– Alignment of business and employees
around the Group strategy.
– Stable access to capital.
– Board review of strategic plan and investor
buy-in to TT strategic objectives.
– Engaging employees with Group strategy.
– Collection of data supporting ESG strategy.
– Ambitious environmental
sustainability targets.
– Review and decisions on site footprint and
production pipelines in light of changing
geopolitical situation.
– Focus on monitoring TT response to
sanction regimes and other compliance
requirements relevant to international
corporations.
– Legal and regulatory compliance.
– Responsible business practices including
environmental practices and approach to
modern slavery.
– STEM education activities in local
communities.
– Charitable initiatives in local communities.
– Consistent monitoring of our ESG and
sustainability programmes.
– Supply chain partnership with CDP.
– Collaboration with IEMA.
Read more
on page 41
– Introduction of climate sustainability
roadmap to 2035.
– Global reporting tool for emissions across
all sites.
– Continued focus on cleaner, smarter
and healthier solutions.
– New product launches that support
efficiency and sustainability.
– Site switches to renewable energy.
– Reduction in Scope 1 & 2 emissions.
– Driving ED&I strategy at Board, Group
and site level.
– Internships and apprenticeships.
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ROBUST PRACTICES IN SUPPORT OF OUR BUSINESS MODEL
RISK MANAGEMENT
The Board of Directors is responsible for risk management
and internal controls, supported by the Audit Committee and
informed by the executive Risk Committee. The Board defines
risk appetite and monitors the management of significant risks
to ensure that the nature and extent of significant risks taken by
the Group are aligned with overall goals and strategic objectives.
The Risk Committee supports the Board and the Audit
Committee in monitoring the exposure through regular reviews,
including reviewing the effectiveness of risk management
processes and controls.
RISK MANAGEMENT POLICY
The Group’s risk management strategy sets out the Group’s
approach to risk management including its risk appetite,
oversight and monitoring and roles and responsibilities.
The Group’s risk management framework draws from the
three lines of defence:
– The third line compromises oversight from the Board,
Audit Committee and Risk Committee with independent
assurance from the Group Internal Audit Function.
Our focus is to ensure continuous improvement
in our risk management processes and control
environment; we have refined our control
framework, delivered a tailored suite of training
across the Group and further embedded climate
risks and opportunities within our risk
management framework.”
Jennifer Chase
Group Financial Controller
RISK APPETITE
The Head of Internal Audit & Risk assists the Risk Committee
by advising management on improvements to the overall risk
management framework, facilitating the risk review process
and providing independent experience and input to the process.
Risk management processes and internal control procedures
are established within business practices across all levels of the
organisation. Risk identification, assessment and mitigation,
including climate-related risks, are performed at an operational
level, as well as through top-down assessment of strategic and
market risk at the Executive management and Board level.
– The second line includes the Head of Internal Audit & Risk
who manages the risk management framework alongside
divisional and functional teams who drive compliance
including Group Legal, Finance, Human Resources and
Health and Safety with oversight and monitoring from the
Executive Leadership Team (the TMB from 1 March 2024)
and Senior Management.
– The first line comprises the site operational and finance
teams responsible for day-to-day management of risk
and delivery of control procedures with oversight from
site management.
Risk management and internal controls provide reasonable but
not absolute protection against risk. The Board acknowledges
and recognises that in the normal course of business, the
Group is exposed to risk and that it is willing to accept a level of
risk in managing the business to achieve its strategic priorities.
Each principal risk is considered as to whether or not it currently
falls within the Group’s appetite for that risk. As part of the
year-end risk assessment with the Board, it was confirmed that
all of the principal risk areas continue to be within Board and
Executive management’s appetite for that risk.
Risk appetite is not static and, as part of its risk management
processes, the Board regularly considers its risk appetite in
terms of the tolerance it is willing to accept in relation to each
principal risk based on key risk indicators to ensure it continues
to be aligned with the Group’s goals and strategy.
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60
RISK MANAGEMENT CONTINUED
OUR RISK MANAGEMENT FRAMEWORK
Corporate-level steering
Top-down oversight; set risk appetite; monitor significant risks; alignment with strategic objectives at corporate level
Board of Directors
Primary responsibility for risk oversight; setting strategic
objectives; and defining risk appetite
Audit Committee
Oversees risk management and internal control processes
Risk Committee
Provides framework for managing risks; regular reviews
of principal risks; and risk management processes
Divisional-level steering and reporting
Risk identification assessment and implementation
of risk management action plans and actions
Functional-level steering and reporting
Risk identification assessment and implementation
of risk management action plans and actions
Business units/site-level steering and reporting
Implement and embed risk management at an
operational level
Risk and Assurance function
Operational steering and implementation
Bottom-up identification, assessment and mitigation of risk at operational level
RISK PROFILE AND EMERGING RISKS
At the direction of the Board, Executive management performed
a robust assessment of the principal and emerging risks facing
the Group, taking into account those that would threaten the
business model, future performance, solvency or liquidity, as
well as the Group’s strategic objectives. This process includes a
bottom-up analysis of key risks at a functional and divisional level,
including climate-related risks. All principal risks identified by this
process may have an impact on the Group’s strategic objectives
within the next six to twelve months. Executive management and
the Risk Committee perform further analysis to prioritise these
risks, with a focus on those principal elements posing the highest
current risk to the achievement of the Group’s objectives or the
ongoing viability of the business. Risks assessed as higher
priority are consolidated into a Group risk register. Risks included
on the register are monitored closely by the Board in terms of
both prioritisation and mitigation strategies.
It is recognised that, while these “top risks” represent a
significant proportion of the Group’s risk profile, Executive
management and the Risk Committee continue to monitor
the entire universe of potential risks to identify new or
emerging threats as well as changes in risk exposure and
a risk horizon scanning exercise is performed annually.
undertaken. This is reflected in the table of principal risks.
The risk horizon scanning exercise includes consideration
of the emerging risks facing TT as a provider of electronics
technologies and, as a result, if any new emerging risks or
additional mitigating controls require inclusion on the Group
risk register. As a result of the risk horizon scanning exercise
and consideration of new emerging risks throughout the year,
we have included a new “Geopolitical” risk. Geopolitical risk
and its impact was previously considered within the “General
Revenue Reduction” risk, but following discussions as set out
above, we have separated this out as a risk in its own right in
the Group risk register which flows through to our principal risks
detailed in this report. The Risk committee reviews the Group
risk register at each meeting to ensure that the risk profile is
appropriate and includes all relevant risks including emerging
risks as appropriate. The assessment of principal risks during
the year has identified that, while there have been some
significant changes in the external environment, the Group
has remained robust and resilient with mitigating activities
The Group has long been conscious of the ESG agenda which is
reported to the Board through our People, Social, Environmental
and Ethics Committee (“PSEE”) which is attended by the Senior
Independent Director. There continues to be a risk that a
negative perception of our ESG profile could impact on our
ability to attract new talent to the business, build relationships
with our customers, positively impact the communities in which
we operate, and attract investment from potential shareholders.
The risks in relation to these areas are captured in two principal
risks, “Sustainability, climate change and the environment” and
“Health and safety”. TT Electronics is committed to achieving
its sustainability objectives, reducing carbon emissions and
improving efficiency. We have further extended our climate
reporting in line with TCFD and CFD reporting requirements to
include identification of climate-related risks and opportunities
including physical risks. We have set out our approach and our
progress in these areas in the Our people, communities and
environment section of this report from page 29 and in the
TCFD section of this report from page 47.
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RISK MANAGEMENT CONTINUED
INTERNAL CONTROL ENVIRONMENT
The Internal Audit function is operated under a directed
co-sourced arrangement with PwC to enhance the levels of
resource and expertise available to the Group in specific areas,
with its activities under the direction of the ELT (the TMB from
1 March 2024) and the Audit Committee. A risk assessment is
performed each year when building our internal audit plan to
ensure that it continues to be focused on the risks that are
relevant and important to the Group and reflects the latest
changes and developments. All of our manufacturing sites
perform an annual self-assessment against the Control
Framework and the results inform the internal audit programme
of work and internal audit plan risk assessment. Enhancements
to the Group’s Control Framework have been made during the
year as set out below in the “Key Areas of Focus during the
Year” section.
The Board monitors the Company’s internal control systems
and has reviewed their effectiveness in 2023. The review
process considered all material controls including, (i) the
information relating to the general controls environment as
outlined in the Internal Audit reports submitted to the Audit
Committee at each meeting; (ii) financial controls; (iii)
compliance controls; (iv) the key outputs of the controls
framework programme; and (v) management actions in relation
to internal and external audit findings. The Board found that the
Group operates a sound system of internal control and did not
recommend any specific actions.
KEY AREAS OF FOCUS DURING THE YEAR
During the year, Internal Audit reviewed and refreshed the
Group’s Control Framework by:
– streamlining and removing control duplication
– updating control descriptions
– providing clarity and enhanced guidance on
evidence requirements
– designating key and fraud controls
Internal Audit took a risk-based approach to the review,
assessing all the associated risks for each process area and
mapping the existing controls in place against the risks to
ensure adequate coverage was in place. We also delivered a
suite of Control Framework training to aid the communication
of the updates made and support control compliance.
Internal Audit also completed a number of activities during
2023 to strengthen the Group’s fraud risk framework including
developing a Fraud Prevention Policy and Fraud Risk
Assessment and delivering Fraud Awareness training to Control
Framework control owners across the business to raise fraud
awareness and to support control compliance.
We have embedded the review of climate risks within our risk
management framework. This year in response to the TCFD
reporting requirements we have enhanced our climate reporting
to include climate risks and opportunities for the Group (see
from page 47).
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RISK MANAGEMENT CONTINUED
PRINCIPAL RISKS
AND UNCERTAINTIES
The risk management framework is described on page 60. Using this framework the Board sets out
the risks that it currently believes to be most significant to the Group as they have the potential to
undermine the achievement of our strategic objectives.
RISK DESCRIPTION
POTENTIAL IMPACT
MITIGATING ACTION
CHANGE IN THE YEAR
GENERAL
General revenue reduction
Reduction in demand and orders
due to economic downturn or
disruption to operations
(pandemic or other business
interruption event)
Sponsor
Peter France
Link to strategy
– Decelerating sales growth
affecting operating profit
– Monitor the wider economic conditions of
our markets
– Timely financial reporting to monitor performance
and provide a basis for corrective action
when required
– Ongoing optimisation of our cost base and strategic
moves creating a more resilient portfolio
– Business continuity and crisis management planning
– Management structures in place to enable a rapid
response to changing circumstances
STRATEGIC PRIORITIES
KEY
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
ESG
2023
Risk stable. There continue to
be economic challenges due to
cost inflation and supply chain,
but our order book remains
strong as we go into 2024
reflecting our successful
positioning in structural growth
markets, new project wins and
multi-year contracts.
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RISK MANAGEMENT CONTINUED
RISK DESCRIPTION
POTENTIAL IMPACT
MITIGATING ACTION
CHANGE IN THE YEAR
COMMERCIAL
Contractual risks
Potential liabilities from defects
in performance-critical products
that often operate in
extreme environments
Sponsor
Peter France
Link to strategy
– Reputational impact
– Deterioration in
customer relationships
– Liability claims
– Reduction in revenue,
profitability and
cash generation
– Quality control procedures and systems in place and
appropriate levels of insurance carried for key risks
– Group guidelines on acceptable levels of contractual
2023
Risk stable.
liability are reinforced
– Continuing to enhance and deepen expertise in
contract management across the Group
63
STRATEGIC PRIORITIES
KEY
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
ESG
– Close collaboration with key customers
– Active monitoring of costs and milestones
– Target R&D more effectively
– Implementation of standard project
management disciplines
Research and development
Delay in new product development
which is intended to support
revenue growth
– Increased cost in
product development
– Delay in achieving
projected revenue
– Inability to meet the latest
requirements due to a step
change in technology
Sponsor
Mike Leahan
Link to strategy
OPERATIONAL
People and capability
Ability to attract and retain
high-quality and capable people
– Loss of key personnel
– Potential business disruption
– Breakdown of
– Remuneration structure designed to
support retention
– Succession planning processes embedded within
Sponsor
Clare Nicholls
Link to strategy
communication
and misalignment
the businesses
– Campaigns to increase performance and
development of communication between managers
and employees to ensure alignment to objectives
– Regular talent reviews across all Divisions and Group
– Using a feedback loop utilising surveys to encourage
regular objectives and performance discussions.
See Our people and culture on page 31
2023
Risk reduced. R&D spend
is one of our key capital
allocation priorities and we
continue to forge strong
partnerships on long term
programmes including our
recent wins in Power with
the Tempest programme.
2023
Risk reduced. There continue
to be pockets of attrition
throughout our business,
however the 3*** engagement
survey results reflect the
investment in our people that
has had a positive influence
on retention.
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RISK MANAGEMENT CONTINUED
RISK DESCRIPTION
POTENTIAL IMPACT
MITIGATING ACTION
CHANGE IN THE YEAR
OPERATIONAL
Supplier resilience
Potential failure of critical suppliers;
product delivery delays; inability to
meet customer commitments
Sponsor
Mike Leahan
Link to strategy
IT systems and information
IT security breaches or disruption,
unauthorised access or mistaken
disclosure of information
Sponsor
Derek Winskill, CIO
Link to strategy
M&A and integration
Realisation of financial benefit
of acquisitions
Sponsor
Peter France
Link to strategy
– Reduction in revenue,
– Regular review of key supplier financial health and
profitability and
cash generation
product quality
– Monitoring of relevant commodity and precious
metals pricing
– Review of spend patterns to identify opportunities
– Inventory build on key components where
considered necessary to mitigate some of the
supply chain risk
– Supply Chain Council in place
2023
Risk stable. Supply chain
challenges reduced and now
in isolated areas, mitigated
by investment in inventory
to enable response to
customer demand.
STRATEGIC PRIORITIES
KEY
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
ESG
– Reputational impact,
– Regular analysis of cybersecurity and
business disruption and
potential deterioration in
customer relationships
data management
– IT strategy reviewed by management and the Board
– Information security policies updated recently
– Investment through recruitment of additional
IT security and enterprise resource planning
(“ERP”) specialists
– Processes and tools put in place to support
cybersecurity certifications
– Disaster recovery plans in case of system failure
– Annual penetration testing
– Internal vulnerability scanning
2023
Risk stable. We continually
update and strengthen our
cyber controls in response
to ongoing cyber risks.
– Full financial and other due diligence is conducted
to the extent achievable in the context of each
M&A opportunity
– A detailed business case including forecasts is
reviewed by the Board for each opportunity
– Integration risk and planning is reviewed and
undertaken as part of every acquisition
– Lessons-learned activities are built into future plans
2023
Risk stable. Most recent
acquisition of Ferranti in
January 2022 is fully
embedded within the TT
business and recently moved
to a new facility in Manchester.
– Failure to realise the
expected benefits of an
acquisition or post-
acquisition performance of
the acquired business not
meeting the expected
financial performance at the
time acquisition terms were
agreed could adversely
affect the strategic
development, future financial
results and prospects
of the Group
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65
STRATEGIC PRIORITIES
KEY
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
ESG
RISK MANAGEMENT CONTINUED
RISK DESCRIPTION
POTENTIAL IMPACT
MITIGATING ACTION
CHANGE IN THE YEAR
OPERATIONAL
Health and safety
The manufacturing industry may
have inherent risk related to, for
example, materials and processes.
Eliminating or managing these
risks is critical to mitigate the
impact on our employees, sites
and the environment of these risks.
Sponsor
Stewart Partridge
Link to strategy
Sustainability, climate change
and the environment
Our manufactured products or
other activities or decisions of the
Group, including in relation to
climate-related risks, may not be
judged by our customers,
employees, communities and
investors as being sustainable. Our
sites and business activities may
be subject to physical risks due to
climate change, or both risks and
opportunities as we transition to a
low carbon economy.
Sponsor
Stewart Partridge
Link to strategy
– Incidents occurring due to
unsafe use of materials or
manufacturing processes.
Failure to eliminate or
manage the impact of these
risks could negatively impact
our employees, cause harm
to the environment, or lead to
regulatory fines or
reputational damage.
– Health, Safety and Environmental (HS&E) Council
responsible for Group-wide best practice sharing,
monitoring and improvements, and strategy setting.
– Data analysis, processes and roadmaps in place to
minimise the risk of incidents.
– HS&E compliance annual self-assessment and
external global Health and safety audit on a rolling
three-year cycle across the sites.
2023
Risk reduced. Enhanced HS&E
reporting and processes in
place clarifying the strength
of our controls and mitigations
including the Group HS&E
Council which has been
enhanced to improve best
practice sharing on a
regional basis.
– Failure to appropriately
– HS&E and Sustainability Councils responsible
manage the environmental
impact of our operations
and products.
– Failure to manage climate
physical or transition risks,
or the failure to realise
transition opportunities
(as described in the TCFD
section on page 47).
– Reputational impact and
potential deterioration
in our relationships with
our stakeholders
for sharing Group-wide best practice, monitoring
improvements and strategy setting.
– PSEE Committee responsible for reporting Group
progress, to the Board, against the development
and monitoring of our strategy and associated KPIs
related to climate, including risks and opportunities.
– Continued investment in M&A, business
development and new product introduction in
areas where the solutions contribute to a more
sustainable world.
– Execution of our Net Zero Roadmap for Scope 1 & 2
carbon emissions, resulting in significant emissions
reductions and a practical path to zero emissions.
– Detailed scenario analysis of both physical
and transition risks to inform the Board
and Management.
2023
Risk reduced. We are actively
reducing our Scope 1 & 2
emissions ahead of our stated
targets, have a programme of
solar installations underway
and have switched to
renewable green electricity.
We also support the transition
to a low carbon economy
through our products. See
TCFD section on page 47 for
further detail
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RISK MANAGEMENT CONTINUED
RISK DESCRIPTION
POTENTIAL IMPACT
MITIGATING ACTION
CHANGE IN THE YEAR
OPERATIONAL
Legal and regulatory compliance
Intentional or inadvertent non-
compliance with legislation
including laws and regulations
covering export control, anti-
bribery and competition
– Reputational impact
– Civil or criminal liabilities
leading to significant fines
and penalties or restrictions
being placed on the ability
to trade
– Cross-divisional export compliance group
established and anti-bribery programme in place
– Export control policy, procedure and training all
in place and Denied Party Screening undertaken
– Approach involves risk assessment, policy, training,
review and monitoring
– Reduction in revenue,
– Whistle-blower process in place to ensure issues
2023
Risk reduced. Restructuring of
the Legal team to be more
regionally focused enhancing
our mitigation of global and
local risk.
Sponsor
Ian Buckley
Link to strategy
Geopolitical
War, the threat of war, trade wars,
blockades, sanctions, political
polarisation either globally or
locally that might affect our ability
to trade, resulting in reduced sales
and profitability
Sponsor
Peter France
Link to strategy
profitability and
cash generation
can be raised, investigated and managed
– Reduction in revenue,
profitability and
cash generation
– Supply chain challenges
– Diversification of manufacturing sites strategy
– Diverse product offering
– Management structures in place to enable a rapid
response to changing circumstances
– Strong customer relationships with key
account managers
– See also Supplier resilience risk for mitigating
actions in place
2023
Separated out as a standalone
risk for 2023.
Risk stable. While geopolitical
tensions remain elevated, we
have not seen any direct
impact on the business in 2023
and at the same time have
expanded our manufacturing
capabilities in Mexico to
increase choice for customers.
STRATEGIC PRIORITIES
KEY
Technology investment
and R&D
Margin enhancement
Targeted and
complementary M&A
ESG
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67
RISK MANAGEMENT CONTINUED
VIABILITY STATEMENT AND PROSPECTS
In accordance with the UK Corporate Governance Code, the
Directors have assessed the viability and long-term prospects
of the Group over the period to December 2026, taking into
account the Group’s current position and the potential impact of
the principal risks and uncertainties set out on pages 62 to 66 of
the Strategic report. Based on this assessment, the Directors
confirm that they have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as
they fall due over the period to December 2026.
TT operates in markets with structural growth dynamics. We
engineer and manufacture power, sensing and connectivity
solutions to address our customers’ challenges in the
healthcare, aerospace & defence, and automation &
electrification markets. These benefit from the trends for
improved healthcare, for increased aircraft fuel efficiency and
safety and demand for sustainable solutions to improve energy
efficiency. By positioning ourselves in the right markets, by
creating differentiated capabilities through our R&D investment,
and by attracting and developing the right talent we have a
strategy to create sustainable value over the long term.
While the Directors have no reason to believe the Group will
not be viable over a longer period, the period over which the
Directors consider it possible to form a reasonable expectation
as to the Group’s longer-term viability is the three-year period to
31 December 2026. This is encapsulated in the five-year period
business plan prepared annually and reviewed by the Board and
aligns with the business cycle including product development
and order intake trends. The Directors believe that this presents
investors and other key stakeholders with a reasonable degree
of confidence while still providing a longer-term perspective.
The Group’s existing primary facility agreements extend
throughout this period.
In making this statement, the Directors have carried out a
robust assessment of the principal risks facing the Group,
including those that would threaten its business model, the
underlying mitigation planning, the assessment of future
performance, solvency and liquidity, and the Group’s internal
controls environment.
In performing the assessment, the Directors have further
stress-tested the Group’s financial projections for the period
covered by the viability statement, testing it for “business as
usual” risks (such as profit growth and working capital
variances), the combined impact of “severe but plausible
events”, as well as a “reverse” stress test to understand the
conditions which could jeopardise the future viability of
the Group. This work included assessing against financial
covenants and facility headroom.
This severe but plausible events stress testing included
consideration of the potential impact of the Group’s principal
risks and uncertainties outlined on pages 62 to 66. The stress
testing specifically included the impact of the following principal
risks: general revenue reductions; contractual risks; people and
capability; supplier resilience; and health and safety. Principal
risks which were not specifically modelled were either
considered not likely to have an impact within the viability period
or their financial effect was covered within the overall downside
economic risks implicit within the stress testing.
The Group’s wide geographical and sector diversification helps
minimise the risk of serious business interruption or catastrophic
reputational damage. Furthermore, the business model is
structured so that the Group is not overly reliant on any single
customer, market or geography. While this review does not
consider all of the risks that the Group may face, the Directors
consider that this stress testing-based assessment of the
Group’s prospects is reasonable in the circumstances of the
inherent uncertainty involved.
GOING CONCERN
In determining the appropriate basis of preparation of the
financial statements, the Directors are required to consider
whether the Group can continue in operational existence for
the foreseeable future.
After making enquiries and having considered forecasts and
appropriate sensitivities, the Directors have formed the
judgement that there is a reasonable expectation that the Group
has adequate resources to continue in operational existence for
the foreseeable future, being at least 12 months from the date
of these financial statements.
More information on the going concern judgement can be
found in Note 1 to the financial statements. Accordingly,
the financial statements have been prepared on a going
concern basis.
The 2023 Strategic report, from pages IFC to 67, has been reviewed and was approved by the Board of Directors on 6 March 2024.
Peter France
Chief Executive Officer
Mark Hoad
Chief Financial Officer
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GOVERNANCE
AT A GLANCE
BOARD COMPOSITION
KEY GOVERNANCE HIGHLIGHTS FOR 2023
BOARD DIVERSITY – GENDER
CEO
APPOINTMENT
Following a thorough external recruitment exercise,
Peter France was appointed as the Group CEO in
October 2023, supported by a comprehensive
induction programme
Read more
on page 72
STRATEGY
REVIEW
STAKEHOLDER
ENGAGEMENT
INVESTMENT
PROGRAMMES
Review and confirmation of TT’s strategic
direction, focusing on the pursuit of revenue and
profit growth, talent/succession and prioritisation
of key initiatives, including ED&I, Sustainability
and People-based programmes
Continued focus on staff and customer engagement,
prioritising face-to-face meetings and NED site visits,
in support of delivering operational improvement,
talent/succession progression and enhanced
decision-making, as well as strengthening the
linkage of TT’s purpose and values to Group strategy
Support of investment programmes targeted at
providing customers with improved capability
(such as our new Power Solutions’ facility in Greater
Manchester, UK) and lower cost optionality in the
GMS customer domain (at our Mexicali, Mexico site)
Read more
on page 73
Read more
on page 74
Read more
on page 73
7 Board members
1 – Independent Non-executive Chairman
2 – Executive Directors
4 – Independent Non-executive Directors
Our Board split
2 – Women
5 – Men
BOARD TENURE IN YEARS
Warren Tucker
Jack Boyer
Alison Wood
Anne Thorburn
Michael Ord
1
3
4
7
7
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DIRECTORS’ SKILLS AND EXPERTISE
BOARD EXTERNAL APPOINTMENTS
UK CORPORATE GOVERNANCE CODE
COMPLIANCE STATEMENT
69
7
7
6
Leadership Management
Strategy/Growth
Financial/Risk
Management
Warren Tucker
Peter France
Mark Hoad
Jack Boyer
Alison Wood
Anne Thorburn
Michael Ord
2
2
2
2
2
2
2
2
6
6
5
Listed company boards
Listed company mandates
Based on ISS Governance and Glass Lewis voting guidelines
International Business
M&A/Financing
Aerospace & Defence
Sector
BOARD ATTENDANCE 2023
4
4
4
4
4
1. Board leadership and Company purpose
A. Board effectiveness, long-term value and
sustainability
Read more
on page
72-74
B. Purpose, values, strategy and culture
15, 31, 77
C. Governance framework
D. Stakeholder engagement
75
57
E. Workforce policies and practices
29-41, 78
3
2. Division of responsibilities
F. Roles and responsibilities
G. Leadership structure
H. External appointments
5
4
4
Manufacturing/
Engineering
Equity and Debt
Capital Markets
Investor Relations
3
2
2
Talent Succession
Engineering/Technology/
Innovation
Medical Sector
2
2
2
Operations/
Supply Chain
Product Technology
Transformation
Board
Audit
Committee
Nominations
Committee
Remuneration
Committee
I. Board policies and processes
Number of meetings
held
Chair
Warren Tucker
Executive Directors
Peter France 1
Mark Hoad
Richard Tyson 2
Non-executive Directors
Jack Boyer
Wendy McMillan 3
Michael Ord 4
Alison Wood
Anne Thorburn 5
7
7/7
2/2
7/7
5/5
7/7
5/5
6/6
7/7
7/7
4
4/4
3/3
4/4
4/4
4
4/4
4/4
3/3
4/4
4/4
4/4
3
3/3
3/3
2/2
3/3
1/1
3. Composition, succession and evaluation
J. Appointments, succession planning and ED&I
83-85
K. Skills, experience, knowledge and length of service
68-69
L. Performance evaluation
4. Audit, risk and internal control
M. Financial reporting, internal and external audit
functions
N. Fair, balanced and understandable
O. Internal controls and risk management
1. Peter France was appointed to the Board on 2 October 2023
2. Richard Tyson resigned from the Board on 1 October 2023
3. Wendy McMillan was appointed to the Board on 16 January 2023 and resigned from
the Board on 24 November 2023
4. Michael Ord was appointed to the Board on 16 January 2023
5. Anne Thorburn was appointed to the Remuneration Committee on 9 May 2023
5. Remuneration
P. Policies and practices
Q. Directors’ Remuneration Policy table
R. Remuneration outcomes and performance targets
102-107
80
75
69-71, 81
79-81
86-87
90-91
91
59-61
98-100
99-100
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THE RIGHT SKILLS AND EXPERIENCE
OUR TEAM
Warren Tucker
Chairman
Peter France
Chief Executive
Officer
Mark Hoad
Chief Financial
Officer
N R
RI P
RI
Joined: 2020
Joined: 2023
Joined: 2015
Joined: 2016
Jack Boyer OBE
Senior
Independent
Non-executive
Director
N R P A
Current external appointments:
– Non-executive director and chair of
the audit committee of Tate & Lyle plc
(UK listed)
Current external appointments:
– Non-executive director of
Spirax-Sarco Engineering plc
(UK listed)
Relevant skills and experience:
– Strategy Growth
– M&A
– Integration
– Innovation
– International Business
– Risk Management
– Talent Succession
– Leadership Management.
– Engineering/Manufacturing
– Sales and Marketing
Past appointments:
– CEO of Rotork plc
– CEO of ASCO Group Limited
– Non-executive director and chair
of the audit committee of BCP V
Modular Services Holdings Limited
(operating globally as Modulaire)
– Trustee on the board of Magna
Learning Partnership
Relevant skills and experience:
– Strategy/Growth
– M&A/Financing
– Equity and Debt Capital Markets
– Financial and Risk Management
– International Business
– Manufacturing/Engineering
– Operations/Supply Chain
– Aerospace & Defence Sector
– Investor Relations
Past appointments:
– Non-executive director of
Reckitt Benckiser Group plc and
the Foreign, Commonwealth
and Development Office
– Chief financial officer of Cobham plc
Current external appointments:
– Non-executive director and chair of
Current external appointments:
– Non-executive director of Ricardo plc
the audit committee of De La Rue plc
(UK listed)
Relevant skills and experience:
– Strategy/Growth
– Leadership/Management
– Financial Management
– International Business
– Restructuring
– Transformation
– M&A/Financing
– Equity and Debt Capital Markets
– Investor Relations
– Risk Management
– Aerospace & Defence Sector
Past appointments:
– Group Finance Director of BBA
Aviation plc
(UK listed)
– Chair of the University of Bristol
– Non-executive director of the
Department of Education
– Member of the Board of the
Henry Royce Institute for
Advanced Materials
Relevant skills and experience:
– Strategy/Growth
– Corporate Finance and Investment
– M&A
– Engineering/Technology/Innovation
– International Business
– Manufacturing/Engineering
– Product Technology
– Operations/Supply Chain
– Aerospace & Defence Sector
– Medical Sector
Past appointments:
– Non-executive director of
Elcogen Group plc, Mitie Group plc
and Laird plc
– Chairman of Ilika plc, AIM-listed
Seeing Machines Limited and the
Academies Enterprise Trust
OUR COMMITTEE KEY
N Nominations Committee
R Remuneration Committee
RI Risk Committee
P People, Social,
Environmental
and Ethics (“PSEE”)
Committee
A Audit Committee
Chair of the Committee
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71
OUR COMMITTEE KEY
N Nominations Committee
R Remuneration Committee
RI Risk Committee
P People, Social,
Environmental
and Ethics (“PSEE”)
Committee
A Audit Committee
Chair of the Committee
OUR TEAM CONTINUED
The Board will continue to play
a key role in setting the tone
from the top to help build upon
the strong corporate culture
we have in place across TT and
thereby maintain our focus on
delivering strong, sustainable
growth for the future.”
Warren Tucker
Chairman
Alison Wood
Independent
Non-executive
Director
R N A
Anne Thorburn
Independent
Non-executive
Director
A N R
Michael Ord
Independent
Non-executive
Director
N R A
Joined: 2016
Joined: 2019
Joined: 2023
Current external appointments:
– Group Chief Executive of Chemring
Group plc (UK listed)
Relevant skills and experience:
– Strategy/Growth
– Transformation
– Technology/Innovation
– Manufacturing/Engineering
– Product Technology
– Risk Management
– Leadership/Management
– Aerospace & Defence sector
Past appointments:
– Managing director of business
units of BAE Systems plc
– Trustee of The Education
& Training Foundation
Current external appointments:
– Non-executive chair of Galliford Try
Holdings plc (UK listed)
– Senior independent director and
Current external appointments:
– Senior independent director and
chair of the Audit Committee of
Diploma PLC (UK listed)
chair of remuneration committee of
Oxford Instruments plc (UK listed)
– Board member and chair of the audit
committee of SPT LabTech Limited
Relevant skills and experience:
– Strategy/Growth
– Financial Management
– Risk Management
– Audit and Internal Control
– M&A/Financing
– International Business
– Operations/Supply Chain
– Medical and Industrial Sectors
Past appointments:
– Chief financial officer of Exova
Group plc
– Group finance director of British
Polythene Industries plc
– Non-executive director of BTG plc
– Non-executive director of British
Standards Institution (BSI)
Relevant skills and experience:
– Strategy/Growth
– Remuneration Policy-Setting
– M&A/Financing
– International Business
– Regulatory
– Talent and Succession
– Risk Management
– Investor Relations
– Aerospace & Defence Sector
Past appointments:
– Global director corporate
development & strategy for National
Grid plc
– Group strategic development director
for BAE Systems plc
– Non-executive director of Capricorn
Energy plc, Cobham plc, e2v
technologies plc, BTG plc, THUS plc
and Costain Group plc
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7272
CHAIRMAN’S INTRODUCTION TO GOVERNANCE
GOVERNANCE
SUPPORTING
SUCCESS
WHAT’S INSIDE
Chairman’s introduction
Governance at a glance
The Board
Leadership and
Company purpose
Nominations Committee
report
Audit Committee report
Remuneration
Committee report
Other statutory
disclosures
72
68
70
77
82
88
94
112
I am pleased to report that our succession
planning activity has produced the intended
outcomes with a seamless transition in
CEO leadership.”
Warren Tucker
Chairman
A YEAR OF CHANGE
In last year’s Annual Report, I outlined how TT had
benefited from an extended period of Board continuity,
which had helped the Group navigate the
unprecedented business challenges faced in the
post-pandemic period. This year has been somewhat
different, as the Board has put its leadership
succession planning to the test in dealing with both
a CEO transition process and the integration of new
NED Board members. I am pleased to report that this
succession planning activity has produced the
intended outcomes, with a seamless transition in CEO
leadership helping to deliver a strong set of year-end
results and continued progression on our key metrics.
I see this outcome as testament to TT’s robust
governance structures and the wider bench-strength
we have at our disposal across the business.
In the context of what has been another successful
year for the Group, it is important to acknowledge
formally the Board’s appreciation for the significant
contribution made by our outgoing CEO, Richard
Tyson, to TT’s continued progression. Richard served
as CEO for over nine years, during which time he
oversaw a transformation of the business into more
profitable, higher growth sectors, with improved
customer focus and market penetration. We are very
much indebted to Richard for his unstinting dedication
to TT’s strategic progress and operational delivery,
which remained undiminished throughout the
six-month period of the Board-led search for his
successor. Richard leaves TT with our sincere thanks
and best wishes for the next phase of his career.
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73
Read more about
the CEO appointment
process and the
induction programme
on page 72
Read more about
People, communities
and environment
on page 29
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CHAIRMAN’S INTRODUCTION TO GOVERNANCE CONTINUED
While acknowledging these notable achievements,
Richard’s departure presented the Board with an
opportunity to implement its succession plan and
reassess the style of leadership required for the next
phase of TT’s evolution. After a thorough and wide-
ranging recruitment exercise, we were delighted that
Peter France agreed to join us as our new CEO in
October last year. Peter brings with him an unparalleled
track record in the industrial engineering and
manufacturing sector, which is highly complementary
to TT’s growth agenda, and includes a five-year term
as CEO of ASCO Group, a 28-year career with Rotork
plc (including nine years as CEO) and his ongoing NED
position with Spirax-Sarco Engineering plc. The Board
is delighted that this recruitment process has
concluded with the appointment of a CEO of Peter’s
undoubted calibre and experience. We are very much
looking forward to working with him to progress the
Group’s change agenda in the coming years – some
of Peter’s initial thoughts on this front are set out in
the Q&A section of his CEO report (see page 7).
I would also like to highlight the significant contribution
made by Michael Ord and Wendy McMillan since
joining the Board in January 2023, as well as the rest
of the Board in guiding TT through this period of
significant change. Unfortunately, Wendy had to step
down from the Board in November, having accepted
an executive position with a third party organisation
which had stipulated that she was no longer able to
continue with her NED role with TT. Nevertheless,
we have been in the very fortunate position in 2023
of benefiting from the expertise of two new NEDs,
each having a broad base of experience and excellent
credentials, closely aligned with TT’s business
portfolio and strategic focus. In particular, Michael,
being a serving CEO of a UK listed company, is able to
provide valuable insight to both the Board and the CEO.
For more information on the CEO appointment
process and the induction programme we put in place
for our three new Board members during 2023, please
see the Nominations Committee report on page 82.
Strategic prioritisation
Despite the importance of successfully concluding
the succession initiatives described above, the Board
also remained focused on delivering the core strategic
priorities for the Group in 2023 and has continued to
prioritise operational improvement in key areas such
as Health and Safety, Sustainability, ED&I and linking
our corporate purpose and values to our culture. This
is particularly well demonstrated by the 3*** rating
achieved from the “Best Companies” Employee
Engagement Survey conducted in 2023 (the highest
rating possible), which brings to life the exceptional
corporate culture we have in place across the Group
and the overwhelmingly positive response of our
employees to the support provided by TT during the
“cost-of-living” crisis that followed on from the
pandemic. I would like to congratulate all those
involved in achieving this rating.
The Strategic Report highlights the key areas of focus
for the Board in 2023 in driving forward TT’s strategic
plan, which are reinforced in the “People, communities
and environment” section (on page 29) and the
stakeholder engagement summary on page 57 (which
also includes our s172 statement). These sections
outline the continued focus on “people” initiatives
throughout the year, while also highlighting that TT’s
sustainability agenda remained at the heart of our
thinking. In addition, a considerable amount of Board
agenda time was spent on monitoring progress
against TT’s market positioning and the delivery of
organic growth opportunities, which is reflected in
the strong performance delivered in year, a period
characterised by only limited contribution from
bolt-on M&A. The following initiatives are particularly
noteworthy, in highlighting the Board’s focus on TT’s
growth agenda:
– The continued strengthening of TT’s capital
structure, which included the extension of the
revolving credit facility (“RCF”) for an additional
12-month period (as described in more detail in
the Strategic Report on page 26);
– The progress made in delivering TT’s deleverage
agenda, a notable example of which was the £5m
(£3.2m post-tax) interim cash receipt recorded in
2023 in respect of the UK Defined Benefit scheme
surplus (following the successful completion of the
bulk annuity insurance buy-in transaction in 2022
to de-risk the Group’s pension scheme obligations);
– The creation of new operational capability at our
existing site in Mexicali, Mexico to provide
customers with enhanced, lower-cost optionality
for their product requirements in the integrated
manufacturing services domain and to free up
capability at other GMS sites to facilitate more
complex, higher-margin activities; and
– The continued focus on talent management, ED&I
and succession planning (as described in more
detail in the Nominations Committee Report on
page 82).
Diversity and stakeholder engagement
Following the appointment of Michael Ord and
Wendy McMillan as NEDs in January 2023, the
female composition of our Board was 37.5%, although
it reduced to 28.5% at the end of November when
Wendy stepped down from the Board. We recognise
that this figure sits below the UK Listing Rules target of
40% female representation on listed company boards;
however, we believe that this outcome aligns positively
with our peer group and demonstrates a clear direction
of travel in terms of promoting gender diversity at the
Board level. As we explain in the Nominations
Committee Report on page 84, TT has engaged an
external recruitment firm to start the process of
identifying suitable candidates for the next phase of
our NED succession planning and we are hopeful that
this will improve the level of gender and ethnic diversity
on our Board in the future. A core element of our
approach to diversity is based around the wide range
of experience that our Board members bring to the
decision-making process, as well as their capability in
sectors that are close to TT’s business operations. It is
my view that this wealth of expertise, together with the
honest, open and collegiate way in which the Board
operates, lies at the heart of how we function as a
collective group in progressing TT’s growth agenda.
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CHAIRMAN’S INTRODUCTION TO GOVERNANCE CONTINUED
For the past couple of years, the Board has maintained
a strong focus on stakeholder engagement, in an
attempt to better understand the impact of external
macroeconomic factors on the Group’s core business
and ensure the effective linkage of the Group’s culture
and purpose to the Company’s strategic plan.
Wherever possible, meetings have been held face to
face, and with a wide range of important stakeholder
groups, including TT staff and senior management,
and shareholder representatives (as highlighted below).
The Board believes that these meetings have been
important in setting the Group’s strategic direction,
across various regions (with different cultural
approaches), reflecting factors such as cost inflation
pressures, geopolitical challenges and staff retention/
hiring considerations, without losing sight of TT’s
corporate purpose. Some examples of how these
factors have impacted the Board’s decision-making
in 2023 are set out in the Stakeholder engagement
section (on page 57) and elsewhere throughout the
Strategic Report. In addition, further information on
the results of the employee engagement survey
conducted in 2023, including the role of our SID in
managing feedback on stakeholder engagement
with the Board, is set out on pages 32 and 33.
UK Corporate Governance Code compliance
TT is committed to achieving and maintaining
the highest standards of corporate governance.
Throughout the year, the Group was compliant with
all of the relevant provisions of the UK Corporate
Governance Code 2018 (the Code).
For reference, the area of non-compliance with the
Code that was highlighted in last year’s annual report
(provision 38 relating to alignment of Executive
Directors pension contributions with the wider UK
workforce) was addressed with effect from 1 January
2023 and as a result, the Group was compliant with
the Code requirements in this regard throughout
the year.
EMPLOYEE ENGAGEMENT
3***
rating in our
2023 employee
engagement survey
KEY STAKEHOLDER EVENTS IN 2023
Key stakeholder events in the 2023 Board schedule included the following:
The Code is available to view at the website of the
Financial Reporting Council, www.frc.org.uk. The table
on page 69 sets out where details and explanations
of the application of the principles of corporate
governance can be found in this annual report.
Read more about
Stakeholder
engagement
on page 57
– Board visits to our Plano, Texas and Kansas City
sites, to meet senior management and staff
working in the S&SC and Power and
Connectivity divisions;
– As part of their induction programme, Michael Ord
and Wendy McMillan visited a number of TT sites,
including Mexicali, Minneapolis, Kansas City and
Bedlington during 2023;
– A detailed induction programme was developed
for our incoming CEO, which saw him visit most
of our facilities in the UK, North America and Asia
within his first three months in post, together with
representatives of key customers and most of
TT’s key institutional shareholder base;
– Our CFO, Mark Hoad, attended the opening
of our new Power Solutions facility in Greater
Manchester, UK, together with a number
of key stakeholders, including the Royal
Navy’s Submarine Capability Director and
representatives from important customers;
– Various face-to-face sessions were conducted
by the NEDs throughout the year with site leaders
and divisional/functional heads to discuss
business dynamics and operational challenges
(through Board dinners and ad hoc meetings);
– Face-to-face dialogue was held with key
advisers (including TT’s brokers and financial/
legal advisers) on key areas of strategic planning
and investor relations, together with targeted
engagement with investors involving (at separate
times) the Chairman, CEO, CFO, and Remuneration
Committee Chair; and
– As part of the annual Board cycle, the Chairman
met with a number of shareholders who accepted
his invitation to discuss TT’s progress; there were
also specific responses provided to shareholders
who had made requests for additional information
on TT’s ESG agenda.
Conclusion
I am delighted that the operational resilience and
adaptability we witnessed last year have been
maintained in 2023, despite the ongoing economic
challenges we have faced as a business and the
changes in leadership we have navigated in year.
Once again, I am indebted to my Board colleagues,
the senior management team and our talented group
of employees, who have delivered another strong set
of financial results and tangible progress against our
strategic plan, including an excellent set of Employee
Engagement scores in year and positive progress
against our ESG targets. The Board will continue to
play a key role in setting the “tone from the top” to help
build upon the strong corporate culture we have in
place across TT and thereby maintain our focus on
delivering strong, sustainable growth for the future.
Read more about
corporate governance
compliance
on page 69
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION LEADERSHIP STRUCTURE
Audit
Committee
Nominations
Committee
Remuneration
Committee
Committee report on
page 88
Committee report on
page 82
Committee report on
page 94
Board
Chief Executive Officer
Chief Financial Officer
75
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Executive Leadership Team*
Disclosure Committee
People, Social, Environmental
and Ethics (“PSEE”) Committee
Reviews business performance and agrees and implements any actions
as necessary
Responsible for monitoring and driving delivery
of the Group’s key strategic priorities
Acts as a forum to raise and debate significant operational issues
* ELT replaced by the Management Board (“TMB”) from 1 March 2024
Reviews potential existence of and manages the
disclosure of inside information
Maintains project insider lists
Health, Safety,
Environment
Human Resources
Employee engagement
with the Board
Local communities
Ethics
Read more
on page 29
Risk Committee
Senior Leadership Team
Diversity & Inclusion Committee
Provides a framework for managing risks
Monitors risk appetite and exposure through regular reviews of principal risks
Reviews the effectiveness of risk management processes and controls
Provides an appropriate level of reporting on the status of risk management
Assesses wider emerging risks
Reviews and discusses key strategic and
operational matters
Information-sharing between a wider group
of senior executives
Considers and scrutinises cross-divisional topics
Reviews and develops Equality, Diversity and
Inclusion (“ED&I”) Policy and strategic priorities
Provides an ED&I framework
Information-sharing across the business units
Councils
Research &
Development
Business Development
Operations
Supply Chain
HSE
Sustainability
Key
Delegation
Reporting
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7676
LEADERSHIP AND COMPANY PURPOSE
BOARD ACTIVITIES
During the financial year the Board discussed and implemented the following key actions:
STRATEGY
PEOPLE
FINANCING
– Managing growth and addressing challenges
raised by global geopolitical events
– Strategic planning for future growth
– Site rationalisation activity: completion of the
transfer of Covina operations to Kansas City,
finalising the transfer of ex-Ferranti operations
from Oldham to Greater Manchester and
bringing the new site in Plano, Texas, to
full capacity
– Creation of new operational capability at our
existing site in Mexicali, Mexico to provide
customers with enhanced capability for
GMS products
– Development of divisional strategic
growth plans
– Divisional Technology Roadmaps
– Recruitment and induction programme for
new CEO
– Induction programme for new NEDs
– Recruitment and retention processes for senior
management positions
– ED&I planning/development at Board and senior
management level, including Board-level policy
– Workforce engagement on remuneration and
wider employee engagement activities
– Cost-of-living initiatives
– Talent management and succession planning
– Extension of the Revolving Credit Facility
– Regular review of existing and emerging
financial risks
– Pension buy-in implementation (including
interim surplus refund)
– Tax/Treasury reviews
ESG/ENGAGEMENT
IR
OPERATIONS
– Sustainability planning and progress
(including continued development of our
Sustainability Council, and our global
dashboards); MSCI AA rating
– Site visits: Plano and Kansas City (for the entire
Board) and other ad hoc visits for individual
Board members
– Employee engagement at each site visit
– M&A integration activity (Ferranti Power
and Control)
– Implementation of an Energy Usage Policy
– Regular Investor Relations (“IR”) updates on
share price progression and movements in
major shareholdings
– Investor feedback analysis
– Customer engagement (i.e. order book
progression/deeper customer relationships
and opportunity pipeline)
– Board-level CRM, Marketing and Net Promoter
Score review
– Contract wins and commercial bids at
each meeting
– Review of supply chain challenges
– Overview of plant-specific outage
– Global geopolitical and fiscal events
Our talent management
and succession has
been a key priority for
the Group in a year of
significant change.”
Clare Nicholls
Group Human
Resources Director
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
LEADERSHIP AND COMPANY PURPOSE CONTINUED
COMPANY PURPOSE, STRATEGY AND VALUES
The Board’s main role is to provide oversight and leadership of the Group, to
determine and ensure the implementation of the Group’s strategy, and to maintain
the highest standards of corporate governance. Underpinning these aspects of the
Board’s responsibilities lies the principal aim of ensuring the sustainable, long-term
success of the Company.
The Board understands the relationship between the Company’s purpose, strategy
and values and their importance to the long-term success of the Group. The Board
oversees and monitors our culture to enable the Board to be satisfied that it aligns
with the Group’s purpose, values and strategy and is reflected consistently in our
workplace policies and practices.
RELATIONSHIP BETWEEN PURPOSE, STRATEGY AND VALUES
WHY?
Our corporate purpose describes why we do what we do and aligns the whole
of the Company.
WHAT?
Our strategy defines what we do for both our employees and our wider
stakeholders. The Company’s strategy is clearly defined and regularly
reviewed by the Board. The multi-year strategic plan is discussed in detail
and is approved annually, based on the Company’s activities; its progress on
delivering strategic priorities; and challenges identified within the business
and in the wider macroeconomic and geopolitical environment.
HOW?
The Company’s values, culture and behaviours drive how we execute our
relationships with internal and external stakeholders and our strategic vision.
Our TT Way values (see page 31) describe our culture and set out how we
expect our employees, from the top down, to conduct business and act with
integrity, transparency and professionalism.
Good governance sets the tone for the culture of TT. The Board and Executive
Directors strive to promote an atmosphere of openness and trust throughout
the Group.
77
The Company’s purpose statement is:
We solve technology challenges for a sustainable world.
The Board considers that this purpose is an appropriate reflection of the Group’s
culture, strategic direction and impact on the world.
Read more about
our TT Way values
on page 31
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connect us all and guide
how we work with each
other every day. They are
supported by our focus
on leadership,
knowledge and
performance to drive
progress, innovation
and service and build
respectful and happy
work environments.”
Clare Nicholls
EVP Human Resources
7878
LEADERSHIP AND COMPANY PURPOSE CONTINUED
BOARD OVERSIGHT OF CULTURE MATTERS – OUR TT WAY VALUES
WE DO THE RIGHT THING
WE ACHIEVE MORE TOGETHER
From ethics within our workforce
and safety matters, to consideration
of our wider impact on the
environment and our communities,
we pride ourselves on doing the
right thing and encourage others to
do the same. Our customers benefit
from our focus on providing cleaner,
smarter and healthier solutions to
technology challenges.
– Statement of Values and Business
Ethics Code
– Whistle-blowing reports
– Safety metrics
– Employee support during cost-of-
living crisis
– Integration of ESG and sustainability
matters into decision-making
and business practices as
a strategic priority
– Net Zero Scope 1 & 2 target by 2035
and other environmental impact
reduction work
– Anti-bribery and corruption policies
– Modern Slavery policy
– Global supplier standards for social
and environmental practices
– Human Rights Code
– Gender Pay Gap reports
– ED&I Policy
WE BRING OUT THE BEST IN EACH OTHER
Our people are our greatest asset.
We know that supporting
development, promoting wellbeing,
ED&I and collaborating with
our colleagues leads to better
performance for our people and
our business.
– Leadership programmes
and conferences
– Succession planning/talent reviews
– Remuneration schemes and
employee benefits
– Cross-divisional working and
information sharing
– ED&I initiatives promoting inclusivity
Throughout the business, our
people are encouraged to share
their ideas and feed back to improve
the way we work. Our culture of
openness and transparency is
demonstrated through the reporting
systems we have in place and the
two-way conversations we have
with our employees, our customers
and our suppliers.
– Best practice sharing across
the Group
– Ensuring transparency in
reporting systems
– Employee engagement survey
in 2023
– Voice of the Customer surveys
– SID (Jack Boyer) reports back from
the PSEE Committee to the Board on
stakeholder engagement processes
– Group-wide incentives
WE CHAMPION EXPERTISE
Our talented team of design,
engineering and manufacturing
experts operate in a supportive
culture that champions knowledge,
skills, innovation, problem-solving
and service. We cannot achieve
our purpose without passionate
support for technical expertise
in the business – from R&D and
manufacturing to marketing
and sales.
– Focus on capabilities – power,
connectivity, sensing, and
manufacturing and engineering
– R&D investment as a percentage
of sales target
– Targeted and complementary M&A
to expand technology capabilities
– BE Inspired awards for individual
achievements
– Focus on training, STEM and
apprenticeship initiatives
WE GET THE JOB DONE....WELL
TT’s strong business performance
is an indicator of getting the job
done, but our success is based
on a culture of pride within our
organisation to do the best job we
can. From the boardroom to our
manufacturing sites, decision-
making is based on achieving the
best results the TT Way.
– Strategic decisions for
long-term success
– Strong capital discipline and
financing to ensure continued
availability of funds to invest in
the business
– Successful integration
of acquisitions
– Customer feedback and Voice
of Customer surveys
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79
Read more about
the Group’s system
of internal control
on page 61
Read more about
the non-standard
areas of focus for
the Board in 2023
on page 76
LEADERSHIP AND COMPANY PURPOSE CONTINUED
LEADERSHIP
The Board
Subject to the Company’s Articles of Association,
UK legislation and any directions given by special
resolution, the Board manages the Company’s
business. The Board has reserved certain specific
matters to itself for decision. These include strategic
development; financial policy/reporting; internal
control and capital structure (including tax and
treasury matters); policy relating to acquisitions and
disposals; contracts exceeding certain thresholds;
and corporate governance matters (including non-
financial policies and appointments/remuneration
at a management layer below Board level).
The Board appoints its members, and those of
its principal Committees, having received the
recommendations of the Nominations Committee.
It also reviews recommendations of the Board
Committees and the financial performance and
operation of the Group’s businesses. It regularly
reviews the identification, evaluation and management
of the principal risks faced by the Group, including
emerging risks, and the effectiveness of the Group’s
system of internal control as set out on pages 59 to 66.
Board and Committee meetings are scheduled in line
with the Company’s financial calendar, thereby
ensuring that the latest operating data is available for
review and sufficient time and focus can be given to
matters under consideration. During the year, there
were seven principal Board meetings on scheduled
dates, for which full notice was given. Additional
meetings were held in the year to address the CEO
transition progress and certain strategic planning
initiatives. The Board has held two principal meetings
to date during 2024. The NEDs meet, without the
Executive Directors present, during the course of each
scheduled Board meeting, as a standing agenda item.
The main events in the Board calendar are the
approval of the half-year and full-year results, the
Board site visits, the review of the multi-year strategic
plan and the approval of the budget towards the end
of the year. At each meeting during 2023 the Board
discussed strategic issues (principally focused on
site change management projects, the Divisional
opportunity pipeline, climate-related risks and
opportunities, and the status of integration activity
on recent acquisitions) together with operational,
financial, human resources, legal, governance and
investor relations items.
The Directors reviewed, throughout the year, the
opportunities and risks to the future success of the
business by receiving and discussing information
from both internal and external sources regarding
the issues affecting the business, the wider industry
and the macroeconomic/geopolitical environment.
The non-standard areas of focus for the Board in
2023 are shown on page 76.
Leadership structure
Details of TT’s Board of Directors are set out on
pages 70 to 71 of this report. The leadership structure
chart on page 75 provides further information on how
leadership at the Board level is discharged. Most
importantly, the Board comprises a majority of
independent NEDs, with the division of responsibilities
between the Chairman and Chief Executive Officer
having been clearly articulated. The Board believes
that its composition, the structure of its principal
Committees and the processes it has in place to
discharge its primary areas of responsibility, meet the
requirements of “Board Leadership” and “Composition”
under the Code.
The Board has established a number of Committees,
each with its own delegated authority defined in
terms of reference. The Board reviews these terms
periodically (the last occasion being in November
2023) and receives reports and copies of minutes
of Committee meetings. The Board appoints the
members of all principal Board Committees,
having received the recommendations of the
Nominations Committee.
A NED (Jack Boyer) has been nominated to be a
member of the PSEE Committee with the purpose
of receiving information about the Company’s
engagement with its key stakeholders. As such, he is
the designated NED for the purposes of engagement
with the workforce under the Code. This includes the
outcomes of our employee engagement activities as
described on page 33 and sustainability initiatives,
including climate-related risk described from page 42.
The designated NED on the PSEE Committee reports
this information directly to the Board following each
Committee meeting. The key activities covered by the
PSEE Committee are described in more detail in the
leadership structure chart on page 75.
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LEADERSHIP AND COMPANY PURPOSE CONTINUED
DIVISION OF RESPONSIBILITIES
Chairman, Chief Executive Officer and Senior Independent Director
The division of responsibilities between the Chairman and the Chief Executive Officer has been defined,
formalised in writing and approved by the Board:
ROLES AND RESPONSIBILITIES
Chairman
Chief Executive Officer
Senior Independent Director
Maintains responsibility for:
– Reviewing the performance
of the Chairman;
– Providing a sounding board
for the Chairman on strategic
matters/succession planning;
– Supporting the Board on the
delivery of key objectives; and
– Acting as an intermediary for
Board members and/or an
alternative point of contact
for investors (as required).
Maintains responsibility for:
– The leadership and
effectiveness of the Board
and for setting its agenda;
– Ensuring all Directors receive
accurate, timely and clear
information on financial,
business and corporate
matters so they can
participate in Board
decisions effectively;
– Facilitating the effective
contribution of NEDs;
– Ensuring constructive
relations between Executive
and Non-executive Directors;
– Ensuring effective
communication with
shareholders; and
– Ensuring the performance
of individual Directors, the
Board as a whole, and its
Committees are evaluated
at least once a year.
Maintains responsibility for:
– The operations of the Group;
– Developing Group objectives
and strategy, having regard to
the Group’s responsibilities to
its shareholders, customers,
employees and other
stakeholders;
– Successful implementation
and achievement of strategies
and objectives, as approved
by the Board;
– Managing the Group’s risk
profile, including its HS&E/
Sustainability performance;
– Ensuring the Group’s
businesses are managed
in line with strategy and
approved business plans,
and complying with applicable
legislation and Group policy;
– Ensuring effective
communication with
shareholders; and
– Setting Group human
resource policies, including
management development
and succession planning for
the senior management team.
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Read more about
engagement activities
and our relations with
shareholders
on pages 57 to 58
LEADERSHIP AND COMPANY PURPOSE CONTINUED
DIRECTORS’ INTERESTS
APPOINTMENTS TO THE BOARD
BOARD SUPPORT
The table showing the beneficial interests held by
Directors of the Company (directly or through their
connected persons) at 31 December 2023 is shown
in the Remuneration Report on pages 106 and 110.
There have been no changes to the number of shares
held by Directors between 31 December 2023 and
5 March 2024.
CONFLICTS OF INTEREST
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 conflicts by the Board. All new external
appointments taken on by Directors in 2023 were
pre-approved by the Board before the effective date of
the appointment. 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, and the terms
of authorisation, may be reviewed at any time and, in
accordance with best practice, we conduct a review
of Director conflicts of interest annually.
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 or her resignation is requested
by all the other Directors, not being fewer than three
in number. Further details of the activities of the
Nominations Committee are set out on page 82.
COMPENSATION FOR LOSS OF OFFICE
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 Policy. Copies of the Executive Directors’
service contracts and letters of appointment of the
NEDs are available for inspection by any person at the
Company’s registered office, during normal business
hours on any weekday (other than public holidays)
and at the AGM from 15 minutes before the start of
the AGM until its conclusion.
All Directors have access to the advice and services
of the Group General Counsel and the Company
Secretary. They are also offered training to fulfil
their role as Directors, both on appointment and
subsequently. In 2023 there were Board sessions
aimed at developing a greater awareness and
understanding of our business and stakeholders.
The Board visited our sites in Kansas and Plano and
received presentations about site-based operations
in both the US and Mexicali and also the progress
of the Voice of the Customer initiative. There were
also learning sessions around IT, cybersecurity,
AI, geopolitical risks and the changing legal and
regulatory landscape. There is an agreed procedure
for any individual Director to take independent
professional advice at the Company’s expense
if they consider it necessary.
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.
Each member of the Board, including the SID, has
the right to include items on the Board agenda or
the agenda of the Committees they sit on.
RELATIONS WITH SHAREHOLDERS
The full list of engagement activities and our relations
with shareholders during the year are set out on pages
57 to 58.
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COMPOSITION, SUCCESSION AND EVALUATION
NOMINATIONS
COMMITTEE
REPORT
WHAT’S INSIDE
Principal responsibilities
82
Key activities during the
year
Q&A with the Chair
2023 review
Board composition
Equality, diversity and
inclusion
Board and Committee
performance evaluation
2024 Board objectives
Directors’ performance
evaluation
82
83
84
85
85
86
87
87
MEMBERSHIP
Warren Tucker (Chair)
Jack Boyer
Alison Wood
Anne Thorburn
Michael Ord (Appointed 16 January 2023)
PRINCIPAL RESPONSIBILITIES
– Regularly review the structure, size and composition of the Board as
a whole and make recommendations for any changes to the Board.
– Review the overall leadership needs of the organisation by considering
succession planning for the NEDs (having due regard to their length of
service), Executive Directors and members of the ELT (TMB from 1 March
2024)/CEO direct reports, and make recommendations to the Board.
– Manage the search for, and selection of, suitable candidates for the
appointment of replacement or additional Directors and nominate
candidates for the approval of the Board.
KEY ACTIVITIES DURING THE YEAR
– NED recruitment process completed, culminating in the appointment
of Michael Ord and Wendy McMillan to the Board in January 2023.
– CEO succession plan conducted over a six-month period, resulting in
the appointment of Peter France as the new Group CEO in October 2023.
– Ongoing review of the new FCA Listing Rules requirements for Board and
senior management ED&I targets.
– Succession planning review conducted at Executive Director and ELT/TMB
levels (plus a management layer below).
– Succession/recruitment project started with an external agency to consider
future NED requirements, factoring in ED&I considerations, NED length of
service and the future needs of the business.
– In-depth review of talent (“high potential” and talent gaps) at a senior
management level.
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The Committee remains
committed to
maintaining its focus on
increasing the diversity
of thinking/decision-
making at the Board
level, while also
developing a path to
full compliance in
the future.”
Warren Tucker
Chair
COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
Q&A
Q
What were the key aspects of the CEO recruitment
exercise that the Committee has overseen in 2023?
As highlighted in the Chairman’s Governance
statement, after a lengthy period of Board continuity,
the Nominations Committee was required to put its
succession planning processes into action during
2023, in dealing with both a transition to a new CEO
and the integration of two newly appointed NEDs onto
our Board.
Prior to the announcement of the outgoing CEO’s
departure in April 2023, there had not been any form of
engagement on a search process, with the Committee
preferring instead to maintain an active dialogue with
its external recruitment agency (and other professionals
in the sector) on succession planning, to ensure it
remained current on developments in the Executive
Director recruitment market. As a result, the
Committee was well placed to expedite the CEO
search process, with a role specification being made
available to the recruitment agency in short order and
the launch of the formal process commencing shortly
after the announcement of Richard Tyson’s departure
on 13 April. The Committee was then able to review
a “long-list” of CEO candidates later that month and
interview a “short-list” of potential successors in May,
which led to the identification of Peter France as the
stand out candidate by the start of June.
I am pleased to say we were able to resolve
the contractual discussions and all outstanding
requirements of Peter’s previous employer over
the summer period, resulting in the announcement
of his appointment as CEO on 27 July.
The systems we already had in place to address
succession issues at the Executive Director level
ensured a successful and seamless transition process,
which allowed Peter to hit the ground running on his
start date (2 October).
This CEO search exercise represented the key priority
for the Committee during the past year.
Q
To what extent was the Committee able to address
the new Listing Rules requirements on ED&l as part
of this CEO recruitment exercise?
The Committee had identified a range of different
criteria to help progress the CEO recruitment exercise,
which included targeting further progress on the
diversity profile of the Board. While the Committee
was guided in this process by the new FCA Listing
Rule 9.8.6(9) requirements on board diversity, TT’s
stated position on ED&I (together with its newly
implemented Board policy in this area) were additional
key drivers in its approach. In particular, our appointed
external recruitment agent was asked to consider
candidates from non-traditional backgrounds, whose
career history and experience might not typically
be aligned with a CEO search process for a UK
listed company.
In identifying the preferred candidate, the Committee
followed a rigorous process in selecting an individual
equipped with the necessary skills and experience to
take the Group on to the next stage in its progression.
This process included one-on-one interviews with all
of the NEDs and the CFO, each of whom came to an
early view that Peter France would be the ideal
successor as CEO.
While there were candidates on the original “long-list”
who came from backgrounds that were ethnically
and/or gender diverse, none of such candidates were
considered to have the necessary skills and experience
to merit progressing their applications beyond this
preliminary stage. Ultimately, it was Peter’s track
record over many years as a high-performing CEO,
with listed company experience, in international
businesses closely aligned with TT’s area of
operations, which were the determining factors.
Q
What plans does the Committee have in 2024 for
future change at the Board level?
The Committee is mindful of the fact that (as at the
date of this report), two of our NEDs are coming
towards the end of their eighth year as Directors of TT.
Just as importantly, the Committee recognises that
both of these individuals occupy key roles on the
Board; Jack Boyer is our SID and Alison Wood has
been Chair of our Remuneration Committee for a
number of years. Furthermore, the Committee was
informed in late November that one of its NEDs,
Wendy McMillan, had accepted an executive role with
a third party organisation, which had the stipulation
that she was no longer able to continue with her NED
role with TT.
With these considerations in mind, the Committee
decided to instruct an external recruitment firm to
undertake an independent assessment of Board
structure/composition. Following on from this review,
which also assessed TT’s position relative to the
Listing Rule 9.8.6(9) targets, the Committee has
initiated a recruitment exercise, with a view to
appointing one or more NEDs, having the requisite
skills to support TT in delivering its growth agenda.
We recognise that as at 31 December 2023, and as
at the date of publication, we do not meet the FCA’s
targets (as stated in the Listing Rules) that at least
one member of the Board should come from an ethnic
minority background; nor are any of the positions of
CEO, CFO, Chair or SID held by a woman and the level
of female representation on the Board remains below
the FCA stated target of 40 per cent (having stood at
37.5 per cent for most of 2023, which reduced to
28.5 per cent following Wendy McMillan’s decision
to step down from the Board in November).
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8484
Q&A CONTINUED
The Committee understands the intent behind LR 9.8.6(9)
and remains committed to maintaining its focus on increasing
the diversity of thinking/decision-making at the Board level,
whilst also developing a path to full compliance in the future.
If possible, the Committee would hope to achieve this as part
of the forthcoming NED recruitment exercise, recognising the
fierce competition for talent in this area; however, it is also
important to recognise the additional objective of enhancing
the Board’s diversity of perspective, which means identifying
future candidates capable of contributing fully to the strategic
debate, with experience and capability in sectors that are
closely aligned to TT’s business operations.
Numerical data on the gender diversity and ethnic
representation of the Board and senior management, as
at 31 December 2023, is set out in the table on page 86.
Each member of the Board and the Executive Leadership
Team submitted a completed questionnaire to enable us
to gather the numerical data required.
COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
2023 REVIEW
As stated in the Q&A section above, the Committee’s main
focus in the past year has been to manage the process for
recruiting a new CEO, which ultimately led to the appointment
of Peter France in October 2023. In addition, the Committee
has been at the forefront of planning the NED induction
programme for Michael Ord and Wendy McMillan (following
their appointments to the Board in January 2023) and starting
the process to recruit one or more new NEDs to replace two
of our Directors who are close to the end of their nine-year
appointment cycle (particularly given the 12-month lead-time
required under the Listing Rules before a NED can become a
successor candidate for Chair of the Remuneration Committee).
The Q&A section above provides background information on
the processes undertaken in managing these recruitment
projects, particularly with regards to the appointment of the
new CEO, which was led by an external recruitment firm,
Russell Reynolds, whose expertise was drawn upon in
developing a detailed role specification and subsequently,
a diverse list of candidates. There are no connections between
TT, its Directors and Russell Reynolds. Another key criterion
in the recruitment process was to address the ways in which
each candidate might contribute to increasing the Board’s
diversity of perspective and add fully to the strategic debate,
based on experience and skill sets.
As noted above, the Committee was mindful of the
requirements of LR 9.8.6(9) throughout the CEO and NED
recruitment exercises. The extent of TT’s compliance to date
with LR 9.8.6(9) is also summarised in the Q&A section, it being
noted that a Board-level diversity policy (which also applies to
the Board Committees) was adopted for the first time in 2022
and we have provided numerical data on the gender diversity
profile of the Board and senior management in the table set out
on page 86. The Committee remains focused on addressing
those areas where TT remains non-compliant with the
requirements of LR 9.8.6(9), as outlined in the Q&A section,
in future Board-level recruitment exercises.
The Committee held four meetings in 2023, at which (in addition
to the recruitment exercises described above) the Committee
undertook a detailed review of TT’s talent management
programme, which covered the senior management team
(operating at ELT level and a layer below), together with selected
members of the wider leadership group. Attention was also
focused on “high-performing” individuals across the
organisation, who had been identified as possessing the
capability to progress into senior management roles over the
medium to long term. This review exercise identified several
candidates across the business with the potential for promotion
to ELT and/or Executive Director roles in the future, with talent
development also being highlighted as a key priority area for
the Group going forward.
In addition to the activities referenced above:
– All Board members completed a conflicts of interest
questionnaire, which involved tracking the number of external
appointments held by each Director, including the number of
chairmanships and executive director roles held, to avoid
suggestions of “over-boarding”. No points of concern were
identified by the Committee from this process;
– The Committee assessed its performance in 2023 by
reviewing key activities during the year against its terms
of reference. It was concluded that the Committee had
performed satisfactorily and was structured appropriately
to provide effective support to the Board; and
– The Committee undertook a detailed review of ED&I activities,
both from a perspective of compliance with LR9.8.6(9) and
HR-focused initiatives across the business to embed ED&I
thinking into day-to-day operations.
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COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
BOARD COMPOSITION
Warren Tucker (Chairman), Mark Hoad (CFO), Jack Boyer (SID)
and Alison Wood and Anne Thorburn (NEDs) were continuously
in place as members of the Board throughout 2023. Michael
Ord and Wendy McMillan were appointed as new NEDs in
January 2023; Michael Ord continued as a member of the
Board throughout the remainder of the year, with Wendy
McMillan stepping down in November 2023 for the reasons
described in the Q&A section above. On 2 October 2023,
Peter France joined the Board as CEO and remains a Director
of the Company; he replaced Richard Tyson, who was a Director
throughout the year through to 2 October 2023. The only
changes in Committee membership during 2023 were: (i) the
appointment of Michael Ord and Wendy McMillan (January to
November) to the Nominations Committee; (ii) the appointment
EQUALITY, DIVERSITY AND INCLUSION (ED&I)
In 2020, the Company introduced its ED&I strategy to the
workforce, setting out our three-step multi-year programme
to enable the Company to understand the needs of its
diverse workforce and embed ED&I as an integral part of the
Company’s strategy (see page 39 for further information).
The Board (through the PSEE Committee) receives updates
on the progress of the initiatives launched pursuant to the
Company’s ED&I strategy and monitors the achievement of
targets set in line with the strategy. The Committee also
received an update on ED&I strategy/performance in 2023,
with the CEO committing to report back on progress/future
plans on the ED&I front during 2024.
As stated in the 2023 Review above, a Board-level diversity
policy was adopted for the first time in 2022, which requires
the Committee to have regard to issues such as culture and
diversity when reviewing recruitment practices and succession
of Wendy McMillan to the Audit Committee (January to
November); and (iii) the appointment of Anne Thorburn and
Michael Ord to the Remuneration Committee. Michael Ord
was also appointed to the Audit Committee in January 2024.
We provide full details of each Director’s Board and Committee
meeting attendance on page 69 and Directors’ biographies,
including the Committees they serve on and chair, which can
be found on pages 70 to 71.
At the time of his appointment as Chairman, Warren Tucker was
considered to be independent in accordance with the provisions
of the Code. All the remaining NEDs are also considered to be
independent as defined by the Code.
In accordance with the Company’s Articles of Association
and the Code, Directors must offer themselves for re-election
at the forthcoming AGM. This practice will continue in the
future, to ensure compliance with the requirements of the
Code and the Company’s Articles of Association. Following
formal performance evaluation, the Board has concluded that
the performance of each Director continues to be effective and
to demonstrate commitment to the role. The Notice of AGM
sets out details of the key areas of contribution made by each
of the Directors in providing leadership to the Company.
planning. This ED&I Board policy will assist the Committee
in overseeing a diverse pipeline for senior management and
Board positions.
impact on the Board’s governance processes and sends out
a strong message across the Group of the importance of a
diverse workforce to the future success of the business.
At all times during 2023, the Committee has sought to ensure
that the Board is balanced and effective, with diverse skills,
knowledge and experience, as highlighted in the Directors’
biographies on pages 70 to 71. The Committee attaches a high
degree of importance to diversity at all levels across the Group
and is committed to recruiting the best talent available, based
on merit, and assessed against an objective criteria of skills,
knowledge, independence and experience. However, we do not
advocate a forced approach to diversity at any level of the
organisation. The extent of TT’s compliance to date with
LR 9.8.6(9) is set out in the Q&A section above. Female
representation on the Board stood at 37.5 per cent for most
of 2023, which the Committee believes will have a positive
A table setting out data on the gender diversity and ethnic
representation of the Board and senior management, as
at 31 December 2023, is set out on page 86. The Board
recognises that we do not meet the FCAs targets (as stated
in the Listing Rules), see page 83 for more information.
For more detail on TT’s approach to ED&I across the
organisation, see page 39 of the Our people section.
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COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
BOARD DIVERSITY – GENDER AND ETHNICITY
TT Electronics plc Board of Directors
Senior positions
Executive Management (defined as Executive Leadership Team)
Number of Board Members
% of Board members
Number of senior positions on the Board
(CEO, CFO, SID & Chair)
Number in Executive Leadership Team
% of Executive Leadership Team
Men
Women
Other/Not specified/Prefer not to say
5
2
–
71%
29%
–
TT Electronics plc Board of Directors
Senior positions
Number of Board Members
% of Board members
Number of senior positions on the Board
(CEO, CFO, SID & Chair)
White British or other White
(including minority-white groups)
Mixed/Multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group (including Arab)
Not specified/ prefer not to say
7
–
–
–
–
–
100%
–
–
–
–
–
BOARD AND COMMITTEE PERFORMANCE EVALUATION
4
–
–
4
–
–
–
–
–
4
–
–
Executive Management (defined as Executive Leadership Team)
Number in Executive Leadership Team
% of Executive Leadership Team
4
–
–
–
–
–
100%
–
–
100%
–
–
–
–
–
The Group has selected 31 December 2023 as the reference date for the data provided above
In accordance with the Code, the Board has conducted
an evaluation of its performance and that of its principal
Committees during 2023.
responsibilities throughout the year and operated as a high-
performing team, in an environment of openness, transparency
and trust. In particular, it was noted that:
Following the external evaluation exercise conducted in 2021,
the Board decided to undertake an internal assessment for the
2023 reporting period (without the assistance of an external
facilitator), based largely on the number of Board-level changes
in year, including the CEO transition process. The Board
allocated part of a scheduled meeting in year to conduct this
evaluation exercise, using the Board objectives for 2023 (as
outlined in last year’s annual report) and the outputs of the
previous year’s evaluation exercise to frame the discussion,
which involved all Board members.
The 2023 evaluation exercise once again reinforced the positive
working dynamics at the Board level, with the strong focus on
the appointment and induction of the new CEO having greatly
assisted in maintaining effective continuity. As a result, it was
concluded that the Board had been effective in discharging its
– Close attention had been paid to addressing the issues raised
during the 2022 evaluation process, with the priority items
receiving appropriate levels of challenge and Board focus.
It was recognised that the Board attempted at all times to
take a “value-added” approach, based around a collective
aspiration for TT to be “the best company it possibly could
be”, for the benefit of all stakeholders.
– The NEDs are seen as being appropriately provocative
and challenging on key issues (using their own unique
approaches), with the appointment of a serving CEO
(Michael Ord) as a new NED being seen as having contributed
significantly to this process. Likewise, the Executive team is
regarded as very transparent and open. The importance of
maintaining TT’s unique and positive culture is very much
understood and promoted by the Board.
– Key positives for 2023 included: (i) the successful recruitment
of a new CEO (coupled with the appointment of two additional
NEDs); (ii) the Board having navigated the transition to a
new CEO (while minimising disruption to the business);
(iii) the Board’s continued focus on key strategic topics,
with execution against priority organic actions being seen as
the most obvious path to value creation; and (iv) the timely
progression of talent reviews, reward discussions and ED&I
initiatives in year.
– Using a skills mapping process, the evaluation exercise
reconfirmed that each Board member possessed the
requisite skills and experience in each of the core areas
relevant to TT’s operations, recognising the opportunity to
further enhance capability through future NED appointments.
In summary, the Board concluded from the evaluation exercise
that it (and its Committees) had performed well on all fronts
in 2023 and that the performance of each Director was highly
effective, while giving due commitment to his or her role.
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COMPOSITION, SUCCESSION AND EVALUATION CONTINUED
BOARD AND COMMITTEE PERFORMANCE EVALUATION CONTINUED
Discussion points and areas of focus
The 2023 evaluation review highlighted several developmental
areas for further consideration, which included the following:
– The Board recognised the need to ensure that strategic
planning, people development and monitoring of business
performance remained at the centre of its thinking, which
would be enhanced by: (i) increased accessibility to the senior
leadership team (to provide a wider assessment of
performance dynamics); (ii) changes to the Board cycle (to
improve alignment of the meeting schedule with key decision
points); and (iii) more opportunities for the NEDs to engage
with key shareholder/customer representatives.
– The review exercise noted the attempts to introduce Executive
Director/senior leadership remuneration targets earlier in the
annual cycle, recognising the practical challenges associated
with this objective, particularly given external factors such as
wage inflation dynamics. It was also recognised that the
Group had not yet been able to deliver fully on its ED&I
objectives (both at Board level and across the organisation),
which would continue to be a priority action for the Board.
– The Board concluded that, despite the positive progress
made on succession planning in 2023, this would remain a
priority objective for the year ahead, with a particular focus
on: (i) NED succession (given the fact that the tenure of two
long-serving NEDs was due to come to an end in 2025);
(ii) ensuring the retention of top talent at a senior
management level; and (iii) supporting the development of
newly appointed employees operating in key leadership roles.
Having considered these issues in detail, the overall outcome
of TT’s evaluation exercise was that the Board was operating
in a very effective manner and that the structure of the Board
remained fit for purpose, given the diversity of experience,
approach, mindset and thinking around the Board table. The
Board also agreed that this outcome had been observed across
the Board Committees, each of which had been extremely well
chaired in year.
2024 BOARD OBJECTIVES
Following the conclusion of the 2023 evaluation exercise, the
agreed Board objectives for the year ahead were summarised
as follows:
– NEDs will support the new CEO in: (i) gaining maximum
benefit from his induction programme; (ii) establishing
himself in role; and (iii) providing him with every opportunity
to have the desired impact on the performance of the Group.
– The NEDs will remain totally focused on setting the strategic
direction, in conjunction with the Executive Directors, while
giving the Executive Directors the necessary space to execute
and deliver against key performance targets.
– The Board will prioritise achieving further simplification of the
business portfolio, while maintaining operational performance
and driving delivery of margin aspirations.
– The Board will closely monitor geopolitical events to
mitigate the impact on Group strategy and delivery against
growth targets.
– The Board will continue to focus on HR priorities, including
succession/retention, talent management and ED&I.
DIRECTORS’ PERFORMANCE EVALUATION
In accordance with the Code, the performance of individual
Directors was evaluated during 2023.
For the NEDs, the output from a private meeting held between
the Chairman, the Executive Directors and the NEDs formed the
basis for individual appraisals held by the Chairman with each
NED. This also provided an opportunity to discuss any issues
which had arisen from either their individual assessments or
those of the Board and its principal Committees. For the
Chairman’s performance, the other NEDs, led by the Senior
Independent Director, and, with input from the Chief Executive
Officer and Chief Financial Officer, met privately to discuss this,
with the outcomes being fed back to the Chairman by the
Senior Independent Director for discussion.
At the beginning of the year, we set each Executive Director
challenging performance objectives, and reviewed progress
against these as the year progressed. This framework was
refreshed following the appointment of the incoming CEO,
Peter France, in October 2023.
Both of the Executive Directors take part in the Group’s
performance management programme which, together with
a review of progress against agreed goals and objectives, is
used to assess performance and to set clear objectives and
developmental plans for the following year (which are closely
aligned with the Group’s strategic priorities and values).
The Chief Executive Officer meets with the Chief Financial
Officer at the beginning of each year to discuss and review
performance against objectives. The Chairman conducted
the performance evaluation of the Chief Executive Officer,
taking account of the output from the Group’s performance
management programme together with feedback provided
by the other NEDs at a private meeting held to discuss this
and any other matters which the NEDs wished to raise.
Following the Directors’ evaluation process, It was concluded
that all Directors continued to be effective and to demonstrate
commitment to their roles.
Warren Tucker
Chair, Nominations Committee
6 March 2024
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AUDIT, RISK AND INTERNAL CONTROL
AUDIT
COMMITTEE
REPORT
MEMBERSHIP
Anne Thorburn (Chair)
Jack Boyer
Alison Wood
Michael Ord (Appointed 10 January 2024)
PRINCIPAL RESPONSIBILITIES
WHAT’S INSIDE
Principal responsibilities
88
Key activities during the
year
Q&A with the Chair
Procedural and
governance matters
2023 review
Significant issues
88
89
90
90
92
– Monitor the integrity of the financial statements and results announcements
(including significant reporting/accounting issues, going concern/viability
statements, sustainability reporting, and fair, balanced and understandable
reporting process).
– Recommend appointment and remuneration of the Auditor, assess
effectiveness and monitor provision of non-audit services.
– Assess content of the Auditor’s independence report in providing both
audit and non-audit services, including the Auditor fee structure.
– Review the remit, planned scope of activities, performance and effectiveness
of the Internal Audit function.
– Review changes to accounting policies and procedures, decisions of
judgement affecting financial reporting and compliance with accounting
standards and company law (including FRC recommendations).
– Review risk management/assurance processes and risk management
strategy, including the principal risks and internal control findings highlighted
by management or internal/external audit.
– Monitor the Company’s systems and controls for the prevention of bribery
and fraud.
– Review Group whistle-blowing arrangements and procedures.
KEY ACTIVITIES DURING THE YEAR
– Key areas of accounting judgement considered in detail, see page 92.
– Performance assessment of the external Auditor and overall audit quality
and effectiveness, identifying areas of potential improvement.
– Detailed consideration of findings from the risk/assurance reviews
undertaken by the Internal Audit function, including structuring the 2024
programme to align with key Group-level risks.
– Further strengthening the Internal Audit function, see page 90, including
embedding additional UK and US-based in-house resource.
– A strong focus on strengthening controls in key areas (in alignment with
previous Government proposals), including fraud prevention/detection
and policy.
– Enhanced focus on climate-related risks (and associated TCFD disclosures),
in light of the new regulatory requirements.
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Q&A
Q
How has the final outcome of the Government
proposals impacted TT’s approach to strengthening
the internal control environment across the Group in
the past year?
As stated in last year’s Committee report, TT takes
its governance responsibilities extremely seriously
and (regardless of the revised scope of the UK
Government’s audit/governance reform programme)
we remain fully committed to enhancing our audit,
internal controls and wider governance processes,
in the interests of all of our stakeholder groups.
We believe that a number of the Government’s original
recommendations were helpful in this regard and have
taken the opportunity to strengthen our governance
environment, using the Control Framework structure
we already have in place and applying some of the
principles suggested by the Government.
The key areas of focus on this front have included: (i)
refreshing and refining the Control Framework to ensure
completeness of controls and reducing duplication, as
well as identifying key controls followed by providing
bespoke training on the Control Framework, focusing
on the newer sites and those where there have been
personnel changes; (ii) concluding a risk assessment
on the Group’s fraud prevention/detection maturity
and financial reporting risks, which ultimately led to the
implementation of the new Fraud Policy; and (iii) holding
an initial series of internal workshops to understand our
current state in relation to internal controls for financial
reporting, compliance, IT and tax which will be used as
the basis for a gap analysis exercise in the future.
We believe that this activity puts TT in a strong
position to respond to the implementation of the
revisions to the UK Corporate Governance Code.
Based on the revised guidance following the release
of the 2024 Corporate Governance Code we intend
to carry out a “scoping exercise” to assess the
Group’s processes and controls, as well as sites and
components (on a materiality basis) to determine the
boundaries of work needed on the new operating,
compliance, financial and reporting control
requirements and to put in place a route map
for future compliance.
Q
You mention fraud prevention/detection above –
has that been an area of particular concern for the
Group in 2023?
TT does not consider itself to be more vulnerable
to fraudulent activity than any other company of
comparable size or operating in an equivalent sector,
and this has not been a factor impacting business
operations in recent years. That having been said,
we are keen to avoid complacency on this front and,
in anticipation of the original reforms proposed by
the Government, we took the decision to strengthen
our controls and policies in this area during 2023.
The initial step was to collate responses from across
the business into a “fraud questionnaire”, which
provided a generic set of indicators (rather than any
specific evidence of potentially fraudulent activity),
covering areas such as the potential to bypass
controls and the use of the whistle-blower hotline.
The outputs of this exercise provided the Finance
team with a timely opportunity to communicate
the importance of anti-fraud initiatives across the
business and reinforce the zero-tolerance culture
for bypassing controls.
The Internal Audit team then undertook a fraud risk
assessment work programme, which included a
“mapping” exercise of potential areas of fraud that
could arise from key operational activities. The main
conclusion from this exercise was that (of the one
“high” and three “medium” level risks identified),
cyber crime was rated as the area of highest risk
of fraud, which also resulted in the identification
89
of specific risk mitigations closely aligned with
the Group’s Control Framework. The Committee
recognised that an additional mitigation on the first
line of defence lies in the fact that TT’s business model
is largely based around processing high volumes of
transactions, at relatively low cost for each purchase
order. This risk assessment work directly led to the
creation of a new Fraud Prevention Policy, which was
designed to be closely aligned to both the UK Fraud
Act and the ongoing development of the Control
Framework. We have also delivered fraud awareness
training to control owners across the business to
increase the awareness of fraud and also linking this
to the importance of strengthening the control
environment to mitigate fraud risks.
TT takes its governance
responsibilities
extremely seriously
and we remain fully
committed to enhancing
our audit, internal
controls and wider
governance processes,
in the interests of all of
our stakeholder groups”
Anne Thorburn
Chair
Q
In the environmental section of last year’s Annual
Report, you set out a number of improvement areas
that you had planned for 2023 on TCFD reporting.
To what extent do you feel that you have delivered
the progress you were expecting on this front
during 2023?
We have invested significant effort in TCFD reporting
in 2023, to ensure that all key disclosure elements
were materially progressed well in advance of
year-end and that our external auditors were engaged
throughout the process, to address any areas of
perceived weakness well ahead of time. As part of
this work plan, the Group Head of HSE & Sustainability
provided the Committee with a detailed progress
update on TCFD planning activities during the Q4
period, it being noted that a gap analysis had been
conducted (in collaboration with external consultants)
to identify areas of priority focus and work undertaken
to assess where the Group was positioned from a
climate risk/opportunity perspective. The detailed
outputs of this TCFD review exercise are set out on
page 47 of this report.
Read more about
the TCFD review
exercise
on page 47
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9090
AUDIT, RISK AND INTERNAL CONTROL CONTINUED
PROCEDURAL AND GOVERNANCE MATTERS
Meetings of the Committee are structured on the
following basis:
In relation to Governance considerations:
– The CFO, the Group Financial Controller, the Company
Secretary and Auditor representatives attend each
Committee meeting, at which they present reports and
provide analysis on key areas of accounting judgement.
At the request of the Committee, other members of the
Board (including the Chairman and the CEO) also attend
for part of the scheduled Committee meetings.
– The Head of Internal Audit and Risk presents on the progress
of the internal audit plan (undertaken in conjunction with PwC
under the co-sourced partnering arrangement) and provides
updates on the Group’s risk management framework, to allow
members to review principal risks and the effectiveness of
risk management processes.
– The Committee meets with the Auditor at the close of each
meeting, without Executives being present. The Committee
also has the opportunity to meet with the internal audit
function on the same basis.
– The Committee Chair, Anne Thorburn, fulfils the Code
requirement of at least one member of the Committee
having recent and relevant financial experience
(see Anne’s biography on page 71).
– The Committee was comprised of three independent NEDs
throughout the year, which increased to four NED Committee
members between January and November 2023, when
Wendy McMillan was a member of the Board.
– All Committee members have competence in the sectors that
TT operates in and their biographies can be found on pages
70 to 71.
– The vast majority of audit work was undertaken on a
face-to-face basis in 2023, following the relaxation of
COVID-19 “stay-at-home” measures and a return to normal
working practices. However, the remote working systems and
methodologies that were first put in place in 2020 remain
available, where considered more beneficial to deliver internal
and external audit activities.
– The Committee undertook an evaluation of external Auditor
performance in 2023, which included input from the heads of
finance across the Group’s operations. Through this process,
several areas for improvement were identified and shared
with the Auditor (which included the prioritisation of TCFD
review work to occur earlier in the audit cycle and the
acceleration of certain audit close-out activity). In summary,
this evaluation process indicated an improvement in overall
Auditor performance in 2023, assisted by Deloitte having
now concluded several audit cycles since their appointment
at the 2020 AGM.
– The Committee recognised that the conclusion of the 2024
audit cycle would coincide with the requirement for Deloitte
to rotate its current lead audit partner. As a result, steps will
be taken to ensure that the audit partner succession process
is managed so as to minimise disruption to the audit
programme (noting the benefits experienced to date from
good levels of staff continuity provided by the Deloitte
audit team).
– The Committee assessed its performance in 2023 by
reviewing key activities during the year against its terms
of reference. It was concluded that the Committee had
performed satisfactorily in the year and was structured
appropriately to provide effective support to the Board.
2023 REVIEW
The Committee held four scheduled meetings during 2023.
A summary of the key financial reporting and judgement issues
considered by the Committee in 2023 is set out in the table on
page 92. In addition, as part of the Committee’s planning for the
2023 year-end audit process, a detailed assessment was
undertaken (in conjunction with the external Auditor) of the
FRC’s key areas of focus, as outlined in its “Review of Corporate
Governance Reporting” document issued in November 2023,
which highlighted the FRCs strong focus on risk management/
internal controls and the Committee’s role in demonstrating
“robust systems, governance and oversight are
operating effectively”.
The Q&A section on page 89 sets out details of the core areas
of activity for the Committee in 2023. In addition, the following
specific audit matters were considered by the Committee for
the reporting period: (i) consideration of items excluded from
adjusted profit; (ii) the classification of assets held for sale;
(iii) Group tax rates and provisioning (with the Committee
concluding that, as a result of processes first adopted in 2021,
the level of judgemental analysis applied in this area for the
current year had been significantly reduced); and (iv) the going
concern and viability position for the Group (reflecting current
year trading, the US private placement (“PP”) arrangement and
the RCF financing).
The Committee also assessed the outputs of the internal audit
reviews conducted during 2023, which are undertaken: (i) on a
site-specific basis (with the target of reviewing each principal
TT site at least once every three years, or two years for sites
generating revenues in excess of £50m per annum); and (ii) for
targeted functional areas; for 2023 these functional reviews
included Contract Management, Sales and Pricing, Delegated
Authorities, and Supply Chain activities. The Committee has
continued to pay close attention in the past year to the progress
made in developing the Group-wide Control Framework
programme, which has resulted in the Internal Audit team
setting a higher baseline standard for audit reviews in 2023.
These improvements in the Control Framework have been
designed to help drive business performance across TT,
particularly from the perspective of simplifying the approach
to managing key controls, the use of more standardised
procedures and prioritisation of the shared services function
for activities of a transactional nature. On this latter point, the
Finance team has focused on ensuring that clear lines of
responsibility are in place between the shared services function
and individual business units, supported by RACIs and site-by-
site SLAs. For further details of TT’s risk management
and internal controls structures see pages 59 to 66.
During 2023, the Risk Committee continued to conduct a
detailed review of possible emerging risks (in consultation with
the Internal Audit function), which were not currently addressed
in the Group risk register but could have application in the
future to an international business operating in TT’s sector.
The outputs of this analysis were discussed further at both the
Board and Audit Committee level, which included a review of
the risk appetite of the Group. For further details of the Board’s
approach to assessing the Group’s risk appetite, see page 59.
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AUDIT, RISK AND INTERNAL CONTROL CONTINUED
2023 REVIEW CONTINUED
In the fourth quarter, the Committee undertook a detailed
review of the Group’s climate-related risks and opportunities,
with particular reference to the new TCFD disclosure
requirements, as described in the Q&A section above.
KEY JUDGEMENTS
Management has confirmed to the Committee that it was not
aware of any material uncorrected misstatements or immaterial
misstatements made intentionally to achieve a particular
presentation. The Committee confirms that it is satisfied that
the external Auditor has fulfilled its responsibilities with
diligence and professional scepticism.
After reviewing the presentations and reports from
management and consulting where necessary with the Auditor,
the Audit Committee is satisfied that the financial statements
appropriately address the critical judgements and key estimates
(both for the amounts reported and the disclosures).
FAIR, BALANCED AND UNDERSTANDABLE
In accordance with the Code, the Board requested the
Committee to advise it on whether it believed the Group’s
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
shareholders to assess the Company’s position and
performance, business model and strategic plan. Procedures
are in place to facilitate the appropriate and timely review of the
drafts of the Annual Report and specifically to highlight
evidence of a fair and balanced representation, which supports
input and challenge from all independent NEDs, the external
Auditor and other external advisers. On careful review of the
Annual Report for the year ended 31 December 2023, and the
basis for the statement made by the Board on “Fair, balanced
and understandable” on page 115, the Audit Committee
recommended to the Board that, taken as a whole, the Annual
Report is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s position and performance, business model
and strategic plan.
AUDITOR’S INDEPENDENCE, OBJECTIVITY AND EFFECTIVENESS
Deloitte were appointed as the Group’s external Auditor in May
2020, following a formal tender conducted in 2019. The current
audit partner, Robert Knight, has held this role since May 2020.
The Audit Committee assesses the independence of the Auditor
annually to ensure suitable policies and procedures are in
place to safeguard the Auditor’s independence and objectivity,
having regard to length of tenure, provision of non-audit
services and the existence of any conflicts of interest.
The Committee has formally reviewed the independence
of the Auditor as part of the 2023 review. Deloitte has provided
a statement to the Committee confirming it remains
independent within the meaning of the relevant regulations
and in accordance with its professional standards. There are
no current plans to conduct a retendering exercise for the
external Auditor.
The Committee also reviewed the quality and effectiveness of
the audit programme during the year, as described on page 89.
POLICY OF NON-AUDIT SERVICES
The Company has an established policy regarding the provision
of non-audit services by the external Auditor, which was last
refreshed in 2021. This policy provides that non-audit services
may be obtained from the most appropriate source, having
regard to expertise, availability, knowledge and cost as
confirmation that they comply with the whitelist of permitted
services as set out in the Revised Ethical Standard 2019.
Non-audit services where fees are expected to exceed £25,000
should be approved, in advance, by the Chair of the Audit
Committee or, in her absence, by another member of the Audit
Committee. Any arrangement with the Auditor that includes
contingent fee arrangements is not permitted. There is also
a restriction that fees for non-audit services will not exceed 50%
of the annual audit fee which is more stringent than the FRC
imposed cap of 70% of the average audit fees paid for the audit
of the parent and its controlled subsidiaries in the last three
years. This limit will only be exceeded in unusual circumstances
and only with the pre-approval of the Audit Committee. The
overriding preference of the Committee is not to engage the
Auditor for additional non-assurance services, unless there are
compelling reasons to the contrary, such as capability,
time or cost.
In 2023, the total fees paid to Deloitte were £2.1 million,
including £0.1 million for their review of the Company’s interim
results, while no other non-audit service fees were paid to
Deloitte in the year. Accordingly, during 2023, non-audit service
fees paid to Deloitte represented less than 5 per cent of audit
service fees paid to them during the same period.
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AUDIT, RISK AND INTERNAL CONTROL CONTINUED
SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATEMENTS
The main areas of judgement and estimation are set out in
the accounting policies on pages 134 to 138. The Committee
received and reviewed reports from management and the
external Auditor setting out the significant issues in relation
to the 2023 financial statements, as outlined below.
They discussed these issues with management during the
year and with the external Auditor at the time the Committee
reviewed and agreed the external Auditor’s Group audit plan;
when the external Auditor reviewed the half-year results in
August 2023; and also at the conclusion of the audit of the
financial statements. The Committee is satisfied that the
significant assumptions used for determining the value of
assets and liabilities have been appropriately scrutinised
and challenged, and are sufficiently robust.
SIGNIFICANT ISSUES
SIGNIFICANT ISSUE
Adjusted profit (see Note 7)
The Group reports non-trading income or expenditure
outside of adjusted profit 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 performance.
Provisions – taxation (see Note 8)
Current tax provisions held in respect of tax risks are
included within current tax liabilities depending on the
underlying circumstances of the provision.
COMMITTEE ACTIONS/WORK UNDERTAKEN
The Committee challenged the items that were excluded from adjusted profit and were satisfied that these were in accordance
with the Group’s disclosed accounting policy and gave a true and fair view of the Group’s underlying financial position.
The Auditor explained to the Committee the work they had conducted and the results of their audit procedures on significant
items recorded outside adjusted profit.
Management confirmed to the Committee that the provisions recorded at 31 December 2023 represent its best estimate of the
potential financial exposure faced by the Group. The Committee reviewed each significant provision and challenged the basis of
management’s judgement and concurred with the estimates.
The Auditor explained to the Committee the work they had conducted during the year, including how their audit procedures were
focused on those provisions with the highest level of judgement on recognition criteria and/or measurement.
Classification of assets held for sale (see Note 4)
The Committee considered management’s assessment of
the conditions that must be satisfied in order to conclude
a disposal group is “held for sale”.
The Committee challenged management’s assessment of the conditions that were satisfied to conclude that the disposal group
was held for sale, in particular noting that it had been actively marketed, that there was a commitment to its disposal and that it
was available for sale in its current condition.
The Auditor explained their work performed to evidence the conditions supporting the classification and presentation as well as
the audit work performed over the allocation of assets to the disposal group.
Going concern and viability (see Note 1d)
The Committee considered the outcome of management’s
reviews of current and forecast net debt positions and the
various financing facilities and options available to the
Group, including the risk and potential impact of
unforeseen events.
The Committee reviewed the going concern and viability assessment over the three-year period based upon the 2024 budget
and the strategic plan to 2026. The Committee confirmed that the application of the going concern basis for the preparation of
the financial statements continued to be appropriate.
The Auditor explained to the Committee the work they had conducted and the results of their audit procedures on going concern
and viability.
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COMMITTEE ACTIVITIES IN 2023
FINANCIAL REPORTING
– Monitored and reviewed the Group’s financial statements and results announcements.
– Reviewed significant financial reporting and accounting issues.
– Reviewed going concern and viability statements, including appropriate sensitivity analysis.
– Reviewed the fair, balanced and understandable process for the financial reports.
– Reviewed and discussed 2023 H1 and year-end accounting issues.
GOVERNANCE
– Reviewed the revised outputs of the Government proposals on Audit and
Governance Reform.
– Reviewed Terms of Reference.
– Received and considered whistle-blowing matters reported through the Group’s
multi-lingual, anonymous ethics and integrity portal.
– Undertook an evaluation on the effectiveness of the Committee.
– Review of progress against TCFD reporting requirements.
– Considered new areas of audit disclosure under UK legislation/regulation.
INTERNAL AUDIT AND RISK AND ASSURANCE
EXTERNAL AUDIT
93
– Received a report at each meeting on progress on the internal audit and risk
assurance plan.
– Reviewed internal audit planned activity and resource.
– Agreed the remit of the internal audit programme of work.
– Considered the results of the 2023 internal audit activities.
– Reviewed and approved the 2024 internal audit plan.
– Conducted the annual review of the Group’s internal audit function.
– Monitored progress on improvement activities related to the Controls Framework.
– Risk assessment of controls designed to protect against fraud and implementation
of Group Fraud Policy.
– Ongoing monitoring of the Group’s internal controls environment throughout the year,
including risk management strategy.
Anne Thorburn
Chair, Audit Committee
6 March 2024
– Discussed and approved the external audit plan and audit fee.
– Reviewed external Auditor planned activity.
– Reviewed and confirmed both the independence of the external Auditor as part of the 2023
review, and non-audit fees.
– Assessed the quality and effectiveness of the audit programme, including the performance
of the Auditor relative to prior year.
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INTRODUCTION TO OUR:
REMUNERATION
COMMITTEE
REPORT
WHAT’S INSIDE
Principal responsibilities
94
Key activities during
the year
Q&A with the Chair
Annual statement
94
95
95
2023 Executive
Remuneration at a glance 98
Implementation of the
Policy for 2024
2024 Remuneration
Policy overview
Implementation of the
Policy for 2023
Total single figure
remuneration
Directors’ share interests
99
100
102
102
106
and
110
MEMBERSHIP
Alison Wood (Chair)
Warren Tucker
Jack Boyer
Michael Ord (appointed 16 January 2023)
Anne Thorburn (appointed 10 May 2023)
PRINCIPAL RESPONSIBILITIES
– Determine the Remuneration Policy for Directors for approval at least
every three years.
– Determine remuneration packages and terms and conditions of employment
for the Executive Directors, senior managers and the Chairman of the Board.
– Approve the design, performance measures, targets and outturns of
incentive schemes for the Executive Directors and senior managers.
– Set the Remuneration Policy within the wider context of remuneration
trends across the workforce.
– Produce an annual report of the implementation of the Directors’
Remuneration Policy in respect of the last financial year and for the
current year.
KEY ACTIVITIES DURING THE YEAR
– Our Remuneration Policy was approved by over 90% of shareholders that
voted at the 2023 AGM and we implemented those changes into our reward
arrangements in 2023.
– We sought to continue supporting our employees with the increased cost
of living which disproportionately impacts our lowest earners, providing our
lowest paid UK colleagues with higher salary increases in April 2023 and
we will do the same in 2024.
– In April 2023 Richard Tyson resigned as CEO, stepping down from the Board
on 1 October 2023.
– In July we announced the appointment of Peter France as CEO, starting on
2 October 2023.
– In managing the transition, the Committee determined the remuneration
arrangements for the departing CEO and the recruitment package for the
new CEO.
– We considered remuneration outcomes to ensure they remain fair,
appropriate, and in line with our remuneration principles and
Company performance.
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Q&A
Q
What were the primary considerations informing
the recruitment package for the new Chief
Executive Officer?
The Remuneration Policy, approved by over 90 per
cent of shareholders which voted at our last AGM,
incorporated changes to ensure our remuneration
packages remained appropriately positioned for
TT’s scale, complexity, and geographic footprint.
Having recently undertaken the Policy review, our
focus was to ensure that we were able to attract high
calibre individuals who were able to demonstrate a
track record of or demonstrate the potential to lead
and develop TT.
In defining the parameters of the recruitment package,
we considered: (i) the appropriate level of opportunity,
(ii) the approaches to any compensation forfeited, and
above all (iii) stakeholder value to ensure the delivery
of sustainable stakeholder value.
Q
The Remuneration Policy approved by shareholders
at the 2023 AGM brought about some changes to
remuneration and performance measures. A year on,
what are your reflections?
The Committee approached the Policy review to
ensure that we had appropriate flexibility in our
remuneration to ensure the management team
remained fully focused on building on our business
momentum to deliver the next phase of the Company
strategy and to attract, retain and motivate an
experienced leadership team. The changes were
considered to be of vital importance in respect
of being able to attract high calibre individuals
during the recruitment process who were able to
demonstrate a track record of leading and developing
a Company of our scale and complexity and
ultimately appoint Peter France as our new CEO.
As part of the Policy review, we also made changes
to our incentives to ensure a greater focus on our
short-term ESG progress and our longer-term
cash conversion to strengthen the balance sheet.
We believe that this focus continues to align with our
strategy to ensure appropriate capital reinvestment
to grow the Group and those changes are once again
reflected in our incentives for 2024.
Q
What areas will be the focus of the Remuneration
Committee in 2024?
The Committee has been pleased to see the
progress made by the Company to support
employees most impacted by high cost of living
and the sustained improvements in employee
engagement scores. In 2024, we will continue
to keep this under review.
Looking forward, as the Company continues to
develop under Peter’s leadership, we will continue to
assess and ensure our remuneration arrangements
remain “fit for purpose” to unlock the potential of the
Group and drive the appropriate behaviours which
are underpinned by our TT Way values.
ANNUAL STATEMENT
On behalf of the Remuneration Committee (the
Committee), I am pleased to present the Directors’
remuneration report for the financial year ended
31 December 2023 which will be put to an advisory
vote at the AGM on 10 May 2024.
The Committee was pleased to see that the 2023
Directors’ Remuneration Policy (the “Policy”) was
approved by over 90 per cent of shareholders which
voted at the 2023 AGM. Consistent with our long-
standing commitment to stakeholder engagement,
the Committee undertook an extensive consultation
process with our major shareholders whose feedback
helped to shape the Policy. Once again, I would like to
thank all our stakeholders for their time taken in
providing feedback.
Despite the challenges of the external environment,
this is an exciting time for the Group and we were
delighted to welcome Peter France as our new CEO.
The business has once again delivered significant
profit growth alongside strong free cash flow and we
believe that our remuneration and incentive outcomes
for the year are reflective of this performance.
BROADER EMPLOYEE REMUNERATION
CONSIDERATIONS
As a Committee, we continue to take a responsible
approach to ensure remuneration outcomes align
with wider Company performance and
stakeholder outcomes.
The Committee, independent from the Company,
receives updates and insights from multiple sources,
such as one-to-one check-ins with key role holders
and from NED site visits, which allow for open and
frank dialogue directed by feedback and priority
areas from our employees. In addition, there are
frequent updates and inputs by the designated NED,
incorporating feedback from the PSEE Committee.
95
2023 was a busy year
for the Committee and
we were delighted to be
able to appoint a new
CEO of Peter’s stature
and experience”
Alison Wood
Chair, Remuneration
Committee
Further details
on the Committee’s
approach and
the wider range
of activities
are provided
on page 59
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Further details
on the Groups
financial
performance
are provided
on page 17
9696
REMUNERATION COMMITTEE REPORT CONTINUED
Our people are a key differentiating factor of our
competitive advantage, operating performance and
growth. We recognise that many of our people
continue to be impacted by inflation and the cost of
living. Building on the range of support offered in 2022,
we were pleased to see support continue in 2023 with
significant base pay increases averaging 7 per cent
and base pay increases in 2024 expected to average
5 to 6 per cent. The Committee also received feedback
from HR leaders on the progress and success of the
support initiatives and reviewed a variety of data
points on how high inflation was impacting employees.
This will remain an area of review for the Committee.
We were delighted to see both this, and the progress
of our wider people strategy, reflected in our 2023
employee engagement scores which delivered an
improved score, in line with the 3*** “world class”
Best Companies Ltd benchmark.
CONTEXT FOR EXECUTIVE REMUNERATION
Our approach to remuneration is driven by the need
to attract and retain the right calibre of talent to deliver
long-term sustainable growth and stakeholder value.
TT is a diverse, complex multi-national Company
competing for talent with global peers in tight
labour markets.
Our remuneration principles (pay for performance,
strategic progress and the delivery of sustainable
value to shareholders), combined with our strong
organisational culture, underpinned by our TT Way
behaviours, define how decisions are made, how
people act and how we assess and reward them.
The majority of the Executive Directors’ remuneration
opportunity continues to be made up of variable,
performance-related pay, which is linked to stretching
financial, strategic, cultural and environmental,
social and governance (“ESG”) targets, and is
proportionately delivered in shares to strengthen
stakeholder alignment.
INCENTIVE OUTTURNS IN RESPECT OF 2023
PERFORMANCE
Performance for the year ended 31 December 2023
delivered strong year-over-year profit growth of 16 per
cent at constant currency. On the same basis revenue
grew organically and the operating margin has
increased by 110 bps to 8.6 per cent. Free cash flow
returned to material cash generation and leverage
reduced from 2.0 to 1.7 times in line with our debt
reduction priority. The Group’s progress continues to
be underpinned by good customer wins with a strong
order book giving good visibility for 2024, well above
historic levels. The Group exited the year with a second
half operating margin of 8.9 per cent; we are targeting
the achievement of a 10 per cent margin in 2024.
The Committee considered the formula-driven
incentive outturns in the context of our core
remuneration principles, the broader economic
environment, and the stakeholder experience, while
recognising that the performance targets set were
both stretching and linked to the Group’s strategy
and performance. The Committee considered the
outcomes under the FY2023 short-term incentive plan
(“STIP”) and the elements of the FY2020 and FY2021
long-term incentive plan (“LTIP”) grants reaching the
end of their performance periods in 2023. In light of
the Company performance in 2023 and the historic
impact of the pandemic on the business momentum
and progress during the LTIP performance period,
outcomes across the incentives were mixed.
The FY2023 STIP outcome has been measured by
performance against a combination of profit, cash,
ESG and strategic objectives. Financial performance,
once again delivered significant progress and the
resulting payout in respect of these elements was
91.0 per cent of the maximum. Non-financial
performance against ESG and the strategic objectives,
representing up to 30 per cent of the incentive
opportunity, was determined as 93.3 per cent of the
maximum for the CEO and 100 per cent for the CFO.
The overall short-term incentive achieved was
therefore 91.7 per cent of the maximum pro-rated
opportunity for the CEO (34.3 per cent of salary) and
93.7 per cent of the maximum opportunity for the CFO
(140.5 per cent of salary). The Committee concluded
that the payment was representative of the
performance. Consistent with the Policy, 30 per cent
of the bonus awarded will be deferred into shares.
The 2020 LTIP was based on a sole total shareholder
return (“TSR”) performance measure. As TSR over the
three-year period to March 2023 was slightly below the
threshold performance target, the award lapsed in full.
The 2021 LTIP is due to vest in March 2024 based on
two equally weighted performance measures, absolute
adjusted EPS and relative TSR performance up to the
date of vesting. The strong recovery from the pandemic
and successive years of year-on-year growth resulted
in the EPS component vesting at 87.8 per cent of the
maximum; the TSR element is currently below the
median threshold performance target, although as this
concludes in 2024, it will be disclosed in next year’s
Directors’ remuneration report.
The Policy operated as intended in terms of
Company performance and quantum. The Committee
did not therefore exercise any discretion in respect of
incentive outcomes.
CHANGES TO THE BOARD
During the year, we announced several changes to the
Board. As announced in July 2023, we were delighted
to appoint Peter France as CEO to succeed Richard
Tyson who stepped down as CEO on 1 October 2023.
The remuneration arrangements for the outgoing
and incoming Directors are in line with both the
Remuneration Policy approved by shareholders
and good governance practice.
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REMUNERATION COMMITTEE REPORT CONTINUED
Peter France’s remuneration package from
appointment (which is broadly equal to that of the
former CEO and represents the necessary levels to
recruit a high calibre, experienced candidate who is
able to lead a Company of our scale and complexity)
is as follows:
– Base salary: £550,000 per annum with the first
salary review being 1 January 2025
– Benefits: In line with the shareholder approved Policy
– Pension: Workforce aligned pension contribution
– STIP: 150% of salary (pro-rated in 2023 from
appointment)
– LTIP: 150% of salary.
In addition, the Remuneration Committee agreed to
compensate for Peter’s FY2023 pro-rata annual bonus
that he forfeited on resignation. However, rather than
compensate the amount in cash, Peter agreed to
receive the amount in deferred shares, with a three-
year vesting period with vesting subject to continued
service. Further details are set out on page 105.
Richard Tyson received salary, benefits and pension
up to 1 October 2023. He was not eligible to receive an
STIP award in respect of the 2023 financial year and
other than his awards granted under the Deferred
Share Bonus Plan, all of Richard’s share awards lapsed
at cessation. There was no payment in lieu of notice
associated with Richard’s departure, and he will remain
subject to the post-employment shareholding
requirement in line with our Policy. Further detail is
set out in the Annual Report on Remuneration.
In respect of the Non-Executive Directors, we
announced that Wendy McMillan and Michael Ord
joined the Board as Non-Executive Directors in
January 2023, with Michael also joining the
Remuneration Committee. In May 2023, we
announced that Anne Thorburn, who remains the
Audit Committee Chair, also joined the Remuneration
Committee. Wendy stepped down from the Board in
November following her appointment to a new
executive role which restricted external appointments;
we wish Wendy well in her new role.
IMPLEMENTATION FOR FY2024
In accordance with the terms of his recruitment,
Peter is not eligible to receive a salary increase in 2024.
The base salary of the CFO was increased, at a rate
below that of the wider workforce, by 3 per cent
effective from 1 January 2024. As in prior years,
a greater proportion of the salary increase budget
for UK employees will be targeted to our lowest paid
workers, who remain more significantly affected by
inflationary pressures. For the UK, the 2024 salary
increase budgets are expected to average in the
range of 5 to 6 per cent.
The STIP opportunity for the year will remain at 150%
of salary for the Executive Directors. The performance
measures will continue to be based on profit before tax
(46.7%), free cash flow (23.3%), ESG (10%) and strategic
objectives (20%). 30 per cent of any award payable will
be deferred into shares with a two-year holding period.
LTIP awards up to 150 per cent of salary are expected
to be granted to the Executive Directors in 2024,
mirroring those in 2023. This represents a 15 per cent
of base salary enhancement to the CFO’s typical grant
who is and will remain, for the coming year, pivotal to
the successful transition of the CEO. The measures for
the 2024 grants will continue to be based on earnings
per share (50%), cash conversion (25%) and total
shareholder return (25%). EPS will require compound
annual growth of between 4 per cent and 12 per cent
over three years and cash conversion a range of
80-95 per cent. TSR will be measured relative to
companies comprising the FTSE SmallCap index
excluding Investment Trusts, requiring median
performance for threshold vesting and upper quartile
performance for maximum vesting.
NON-EXECUTIVE DIRECTORS’ (“NED”) FEES
The fee for the Chairman was increased, at a rate
below that of the wider workforce, by 3 per cent
effective from 1 January 2024.
To reflect the time commitments and enable
the Company to attract and retain NEDs with the
experience and expertise required for a Company
of our size, scale and complexity, the base fee has
increased from £49,316 to £55,000 and the additional
fees payable for the Senior Independent Director
and Committee Chairs (excluding the Nomination
Committee) have increased from £8,610 to £10,000.
LTIP RULES
Our current LTIP rules, originally approved by
shareholders at the AGM in 2014, will shortly reach
the end of their 10-year shareholder approved life and
we will be seeking shareholder approval for the new
rules at the 2024 AGM. The new rules, which are not
materially different to the existing rules which were
last updated in 2019, have been updated for good
practice developments and to ensure alignment to
the Remuneration Policy.
CONCLUSION
The Committee has carefully considered the
remuneration outcomes for 2023 and the operation
of the Policy for the year ahead, to ensure the
continued delivery of sustainable year-on-year
progress, aligned to shareholders, employees and
wider stakeholders outcomes. We have carefully
managed the remuneration aspects relating to the
CEO transition and have ensured that we have paid
no more than necessary to secure a candidate of
Peter’s calibre. In what has undoubtedly been one
of my busiest years as Committee Chair, we have
remained mindful of the impact of high inflation on
our most valuable assets, our people and culture,
and will ensure this remains an area of focus.
It has and continues to be my pleasure to serve TT and
its stakeholders as both a NED and as Remuneration
Committee Chair. 2025 will see the end of my final
term on the Board and over the year I will be working
with the Company to commence a smooth handover
to my successor.
Alison Wood
Chair, Remuneration Committee
6 March 2024
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2023 EXECUTIVE REMUNERATION
IMPLEMENTATION OF REMUNERATION POLICY IN 2023
AT A GLANCE
To reinforce our philosophy, the majority
of the Executive Directors’ remuneration
package is made up of variable at-risk pay,
linked to stretching performance targets
that align with our strategy, the financial
performance of the Group and the creation
of sustainable shareholder value.
CONTEXT FOR REMUNERATION
BASE SALARY
Peter France, CEO
£550,000
SHORT-TERM INCENTIVE PLAN (“STIP”)
Total STIP payment (%of maximum)
Peter France, CEO
91.7%
Mark Hoad, CFO
£391,876
Mark Hoad, CFO
93.7%
Performance measures Weighting
Threshold
Outturn
Maximum Achievement (% of max)
Adjusted PBT
Free cash flow
ESG
46.7%
23.3%
10%
£39.7m
£11.9m
£47.3m
£27.8m
Scorecard
Full achievement
0
20
40
60
80
100
£46.1m
£31.0m
Scorecard
100%
72.9%
100%
Strategic objectives
20% Targets based on a range of objectives. CEO objectives reflect strategic deliveries from start date in October 2023.
Creating Value
– leverage our assets and differentiators
– maintain strong capital discipline
– grow our exposure to long-term growth markets
– deliver sustainable stakeholder value
LONG-TERM INCENTIVE PLAN (“LTIP”)
Total LTIP payment (%of maximum)
Peter France, CEO
N/A
Mark Hoad, CFO
29.3%
Our TT Way values
Performance measure
Weighting
Threshold
Outturn
Maximum Achievement (% of max)
Total shareholder return 166.7%
Median rank
Below median
EPS growth 2
33.3%
10% CAGR
16.8% CAGR
Upper quartile rank
18% CAGR
0%
87.8%
1 In line with the disclosures in the 2020 Annual Report and Accounts, 100% of the 2020 LTIP grant was based on relative TSR, the full value of which is included in
the 2023 single figure of remuneration.
2 2021 LTIP grant is based on 50% TSR and 50% EPS. In accordance with the completion of the vesting periods the TSR component will be disclosed in the 2024
We do the right thing
We champion expertise
single figure of remuneration.
We bring out the best in
each other
We get the job done… well
We achieve more together
Our remuneration principles
– performance-related
– strategic alignment
– alignment with stakeholders
– transparency and culture
– competitive
TOTAL REMUNERATION FOR 2023
Peter France, CEO
£0.734m
Salary and benefits
20%
Pension
1%
Short-term incentive
79%
Long-term incentive
n/a
ALIGNMENT WITH STAKEHOLDERS
Mark Hoad, CFO
£1.200m
Salary and benefits
36%
Pension
2%
Short-term incentive
46%
Long-term incentive
16%
Share ownership requirement:
200% of salary for
Executive Directors.
CEO
34%
CFO
330%
200%
Short-term incentive
Awards subject to a 30%
deferral into shares with
a two-year vesting period.
Long-term incentive
Delivered in shares and subject
to a three-year vesting period
and a two-year holding period.
Workforce alignment
Executive remuneration
set in the context of wider
workforce remuneration.
Remuneration principles flow
through the Group to ensure
alignment.
Post-employment
share ownership
Shares to the value of 100% of
salary to be held until two years
after cessation of employment.
Read more about
the Group’s financial
performance
on page 17
Read more about the
FY23 STIP outcome
and the ESG/
strategic objectives
from page 103
Read more about
the LTIP outcomes
on page 105
Read more about
single figure of
remuneration
from page 102
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SHAREHOLDING
REQUIREMENTS
Executive Directors are
required to build and
maintain a minimum
shareholding in
employment equivalent
to 200% of basic salary.
Post cessation of
employment, Executive
Directors are required to
maintain for two years,
a shareholding of half
this requirement or
maintain their actual
holding if lower.
STATEMENT OF IMPLEMENTATION OF REMUNERATION POLICY IN 2024
The tables set out a summary of how
the Directors’ Remuneration Policy
will be applied during the year ending
31 December 2024.
There are no material changes to the implementation
of the Policy from FY2023. As described in the Chair
Statement, both Executive Directors will receive LTIP
grants of 150 per cent of salary, mirroring the
approach taken in 2023.
The Committee is of the view that the current
remuneration framework remains fit for purpose
and therefore no changes to the Policy are proposed.
In the STIP, ESG performance will be focused on
quantitative reductions of our Scope 1 & 2 carbon
intensity; strategic objectives will focus on the
sustainable development of the group and
inventory efficiency.
BASE SALARY
Peter France, CEO
£550,000
(0% increase)
PENSION
7%
of base salary
Mark Hoad, CFO
£403,632
(3% increase)
BENEFITS
Benefits package consisting of healthcare, insurance benefits
and car benefit.
SHORT-TERM INCENTIVE PLAN (STIP)
LONG-TERM INCENTIVE PLAN (LTIP)
Maximum
150%
of base salary
Target
75%
of base salary
Performance
measure
Adjusted profit before tax 1
Free cash flow 1
ESG 2
Strategic objectives 2
Weighting
46.7%
23.3%
10%
20%
– 30% of STIP award deferred into shares for two years
– Specific targets are considered to be commercially sensitive and will
be disclosed retrospectively
1 Financial measures are measured using constant budget exchange rates.
2 To the extent that the threshold performance target for neither
financial performance measure is attained, the Committee will consider,
if appropriate, a reduction to the outcomes payable in respect to ESG
and/or strategic objectives, up to and including a reduction to zero.
PERFORMANCE MEASURES AND LINK TO STRATEGY
Maximum
150%
of base salary
Performance
measure
Weighting
Threshold
Maximum
(full vesting)
Adjusted EPS growth 1
Average cash conversion
Relative TSR performance 2
50%
25%
25%
4%
80%
12%
95%
Median Upper quartile
– Awards expected to be granted in March 2024 with performance conditions
over the three-year financial period
– Two-year post-vesting holding period applies
1 Adjusted EPS growth set as a compound annual growth rate
on a constant currency basis.
2 TSR comparator group is the FTSE SmallCap, excluding Investment Trusts.
Performance measures in our short-term incentive plan for FY24
Performance measures in our long-term incentive plan for FY24
Adjusted profit
before tax
Strong operational execution, encompassing our
strategic priorities of strategic business development
and operational excellence
Adjusted EPS
growth
Sustainable growth in the Group’s profitability
per share over three years
Free cash flow
Essential to capital reinvestment to fund technology
investment and R&D, reduce leverage and take
advantage of market opportunities such as targeted
and complimentary M&A
Average cash
conversion
Long-term operational cash flow efficiency over
three years, supporting cash generation for
capital reinvestment
ESG
Integration of ESG, doing the right thing with regard
to the environment and our stakeholders, ensuring
a sustainable business for the future
Relative TSR
performance
Aligns Executive reward to the shareholder
experience. Compares the Group’s share price
and dividend performance relative to a peer group
over three years
Strategic
objectives
Progress of the Group’s strategy to deliver sustainable
growth in stakeholder value
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REMUNERATION POLICY OVERVIEW
Remuneration objectives and key principles
The Remuneration Policy supports and rewards the achievement of the Group’s strategy to deliver profitable and sustainable growth over the short and longer
term. This is driven and evaluated by how the Group performs against a variety of strategically aligned KPIs, both financial and non-financial. Our Directors’
Remuneration Policy was last approved by shareholders at the AGM on 9 May 2023. A summary of the Policy is shown below.
Read the full
Remuneration Policy
in the 2022 Annual
Report and Accounts
on pages 112 – 121
Executive Director remuneration for 2024
Element
Maximum
Fixed Pay
Salary
Market competitive.
Increases set with reference
to the wider workforce.
2024
Salary paid.
Benefits
Pension
Market competitive.
Benefits paid.
Aligned to those available to
majority of local workforce.
Pension provision
paid.
2025
2026
2027
2028
Variable Pay
Short-term
incentive plan
CEO/CFO 150% of salary.
70% cash and 30% in
deferred shares.
Annual performance
conditions apply.
Majority weighting
on Group financial
targets, minority to
ESG performance
and strategic
objectives.
Cash
element paid
(70% of
incentive).
Two-year share deferral
(30% of incentive).
Long-term
incentive plan
CEO/ CFO 150% of salary.
Two-year holding period.
Based on a variety of financial and/or shareholder
value creation and/or ESG measures over a three-
year performance periods.
Two-year holding period.
Governance
Malus (withholding)
and clawback
(recovery)
All incentives.
Malus and clawback: misstatement, serious misconduct, serious reputational
damage, error in calculation and corporate failure.
Committee discretion: ability to exercise discretion and make adjustments
to formulaic outcomes.
Share ownership
requirement
Post-employment
share ownership
200% of salary.
Executive Directors required to build and maintain the share ownership requirement.
100% of salary.
Holding requirement for shares until two years after cessation of employment.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION ALIGNMENT WITH THE UK CORPORATE GOVERNANCE CODE
ALIGNMENT WITH THE WIDER WORKFORCE
101
The table below details how the Committee addresses the factors set out in Provision 40 of the
Code, which align with our principles and Executive Director remuneration framework.
Clarity
Simplicity
– We provide open and
– We are mindful to avoid overly complex
transparent disclosures of
our Executive Directors’
remuneration arrangements.
– We welcome stakeholder
engagement and are
committed to undertaking
stakeholder consultation when
considering changes to our
Remuneration Policy.
remuneration structures.
– We aim to ensure that remuneration arrangements for our
Executive Directors and the wider workforce are as simple
as possible to drive understanding and engagement.
– We take the time to engage with participants and
wider stakeholders.
Predictability
Proportionality, risk and alignment to culture
– The Remuneration Policy
details the maximum
opportunity levels for each
component of pay.
– Actual incentive outcomes
vary depending on the level of
performance achieved against
specific measures.
– The Committee undertakes an annual review of risks.
Identified risks are considered with appropriate mitigation
strategies or tolerance levels agreed.
– The metrics used to measure performance in our incentive
plans drive behaviours that are consistent with the
business strategy and our TT Way values.
– The incentive structures and balance of fixed to variable
pay do not encourage inappropriate risk taking. They are
subject to the achievement of stretching performance
targets and the Committee has the ability
to apply discretion to override formulaic outcomes.
– Our approach to decision-making ensures pay
outcomes are fair, proportionate and do not reward
poor performance.
– Clawback and malus provisions are in place across
all incentive plans and are clearly communicated.
– Annual short-term incentive deferral, LTIP holding periods
and our shareholding requirements provide a clear link
to the ongoing performance of the business and are
therefore aligned with shareholder interests.
The Committee considers a range of factors when deciding upon the remuneration for
Executive Directors, one of which is the alignment and cascade of reward programmes down
the organisation. In implementing the current Policy, the Committee took the opportunity to
ensure that changes to performance metrics in Executive Director incentives appropriately
cascaded down the organisation. In addition, the Company regularly engages with employees
on the alignment of reward practices and provides opportunity to give feedback to the Committee.
Sessions were conducted at three sites during 2023; there was no material feedback on Executive
Director remuneration.
The following summarises the alignment of remuneration for the wider workforce during 2023.
The detail of retirement and benefits are specific to each location and are shown for the UK.
Salary
All employees
Executive Directors
– Pay increase recommended
by site & division
– Reviewed and approved
by head office (UK average
7% in 2023)
– Pay rise % below or in line with
employee pay (5% in 2023)
Short-term incentive
– All employees are eligible
for a bonus
– Site incentive targets:
customer delivery,
productivity, quality, HSE
– Leadership and senior
managers: targets cascade
from Executive Director
design
Deferred share bonus plan
– Not applicable
Long-term incentive
– Leadership team, three-year
Retirement
Other benefits
performance period,
no holding period
– Up to 7% of salary
contribution
– Life cover
– Healthcare
– ShareSave
– Car allowance (Sales and
senior leadership)
– Life cover
– Healthcare
– ShareSave
– Car allowance
– Risk benefits
– Max 150%, on-target 75%
– Performance conditions:
profit, cash flow, ESG,
strategic delivery
– 30% of short-term incentive
deferred for 2 years
– Max 150% of salary
– Three years, two-year
holding period
– Performance conditions: EPS,
TSR, cash conversion
– 7% of salary contribution
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ANNUAL REPORT ON
REMUNERATION
IMPLEMENTATION OF THE REMUNERATION POLICY FOR THE YEAR ENDED
31 DECEMBER 2023
Single figure for total remuneration (audited)
Directors’ remuneration for the year ended 31 December 2023 was as follows:
£’000
Executive Directors
Peter France 4
Mark Hoad
2023
2022
2023
2022
Former Directors
Richard Tyson 5
2023
2022
Salary
Taxable
benefits
Pension
Total
fixed
pay
Short-
term
Incentive 1
Long-
term
Incentive 2
138
–
392
373
392
498
7
–
33
34
34
38
10
–
27
56
27
75
155
–
452
463
453
611
189
–
551
285
–
380
–
–
197
137
–
203
Total
variable
pay
Single
total
figure
579
–
748
422
734
–
1,200
885
–
453
583
1,194
Other 3
390
–
–
–
–
–
1 Executive Directors’ short-term incentive awards are subject to deferral into shares in the Company. The STIP value includes the incentive
paid in both cash and deferred into shares. In line with the prevailing Remuneration Policies at the time of grant 30% of the 2023 award
will be deferred into shares and 20% of the 2022 award was deferred into shares. Deferred awards are not subject to any further
performance conditions.
2 LTIP values shown in the single figure include dividend equivalents. The 2023 single figure is comprised of the 2020 award and the EPS
component of the 2021 award; the 2022 figure is comprised of the TSR element of the 2019 award. The value attributable to share price
appreciation in the 2023 single figure value for the CFO was £(57,666). The Committee did not exercise any discretion to vesting outcomes
in relation to the impact of share price movements.
3 Value relates to the bonus buy-out share award to compensate Peter France for the FY2023 pro-rata annual bonus forfeit on resignation.
4 Peter France joined as CEO on 2 October 2023.
5 Richard Tyson stepped down from the Board on 1 October 2023.
BASE SALARY
Base salaries for Richard Tyson and Mark Hoad were reviewed in December 2022 and were
increased by 5 per cent with effect from 1 January 2023. The increases were set at a level below
those of the wider UK workforce which averaged 7 per cent.
TAXABLE BENEFITS
The Executive Directors’ taxable benefits consist of a car allowance and insurance benefits.
Costs associated with insurance benefits reflect the circumstances of each Executive Director
and typically increase with age.
PENSION
Employer contributions were paid at 7 per cent of base salary in line with those available
to the wider UK workforce. Contributions are made as defined contribution pension and/or
a cash supplement.
SHORT-TERM INCENTIVE
Following approval of the Remuneration Policy at the 2023 AGM, the maximum opportunity
under the short-term incentive plan for Executive Directors is 150 per cent of salary, subject to the
achievement of the stretching performance measures detailed below. 70 per cent of the award is
paid in cash and 30 per cent is deferred into shares which will vest after two years. The award for
Peter France is pro-rata reflective of his time served in 2023.
Short-term incentive plan design for 2023
Performance measure
Weighting
Threshold
(% of salary)
Target
(% of salary)
Maximum
(% of salary)
Group adjusted profit before tax
Group free cash flow
ESG
Strategic objectives
Total
46.7%
23.3%
10%
20%
7%
3.5%
n/a
n/a
35%
17.5%
7.5%
15%
75%
70%
35%
15%
30%
150%
The plan includes an underpin relating to the achievement of ESG and/or strategic objective
performance measures. To the extent that neither threshold performance target of the financial
measures has been met, the Committee may reduce the outcomes payable in respect to these
measures, up to and including a reduction to zero.
2023 PERFORMANCE TARGETS
The Remuneration Committee sets targets for the Executive Directors prior to the start of the
performance period. Targets are set primarily on the business plan at the time, with reference
to external forecasts of the Group’s performance and market conditions.
In setting the performance targets, the Committee also took account of shareholder feedback
on the changes to the Remuneration Policy to ensure that targets were appropriately stretching
to reflect the increase in opportunity; this was achieved by stretching the level of performance
required to achieve the maximum and widening the performance range.
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FINANCIAL PERFORMANCE
For 2023, adjusted profit before tax (at the Group’s budget FX rates) was £47.3m, up 11% on
a like-for-like basis, which reflects performance exceeding the top end of the target range set
by the Committee at the start of the year.
The results reflect strong year-over-year delivery of increased profit growth. At constant currency
revenue continued to grow organically and the operating margin increased by 110 bps to
8.6 per cent.
Free cash flow performance (at the Group’s budget FX rates), as expected reached an inflection
point with a return to material cash flows of £27.8m, which reflects performance between the
threshold and maximum of the range set by the Committee.
The Group’s progress continues to be underpinned by good customer wins with a strong order
book giving good visibility for 2024, well above historic levels. The Group exited the year with a
second half operating margin of 8.9 per cent, targeting the achievement of 10 per cent margins
in 2024.
103
Performance measure
Group adjusted profit before tax 1
Group free cash flow 1
Weighting
46.7%
23.3%
Required for
threshold bonus
(£m)
Required for
maximum bonus
(£m)
39.7
11.9
46.1
31.0
Outturn
(£m)
Outturn
(% of maximum)
47.3
27.8
100%
72.9%
1 Short-term incentives are measured using constant budget exchange rates.
ESG
As previously disclosed, for 2023, ESG was a separate, higher-profile component of the short-term incentive to better reflect the strategic importance of ESG to sustainable shareholder value.
The Committee set a mix of quantitative and qualitative measure as follows:
Target
Scope 1 & 2 carbon
emission reduction
Committee assessment
In assessing the target the Committee noted:
– Reductions continued to be delivered ahead of plan to reach Net Zero by 2035;
– Year-on-year reductions remain impressive with FY2023 reduction to baseline increasing to 62% vs 54% for FY2022;
– Significant capital investment in solar installation completed in Kuantan, Malaysia and installation in Mexicali, Mexico due to complete in early 2024;
– Kansas City, USA transitioned to renewable electricity and significant progress was made towards future delivery of renewable electricity to Juarez,
Mexico; and
– Targeted energy saving projects in Mexicali, Mexico and Juarez, Mexico reduced electricity consumption by 1.1 GWh vs FY2022.
Evaluation of the material
Scope 3 impacts
Progress towards science-based
targets initiative (“SBTi”)
In assessing the target the Committee noted:
– Measurement and assessment of materiality of categories of material Scope 3 emissions completed;
– Reporting completed on six key categories; and
– Improvement continues to be made on material data challenges to target timely, robust and reliable data.
In assessing the target the Committee noted:
– Initial submission of commitment to SBTi is on track with full Net Zero Roadmap submission with the SBTi guideline timeframes.
Employee equity
In assessing the target the Committee noted:
– UK salary increases targeted toward roles most impacted by cost of living in both 2023 and 2024;
– Continued progress to recalibrate entry level pay and introduction of career pathways;
– Continued focus on cost-of-living support and changes to site-based incentives to increase value and frequency of payout;
– Review completed on how employees are coping with higher inflation and follow up actions; and
– Employee engagement survey continues to receive strong response rate with significant improvements on “fair deal” and overall 3*** outcome.
Outturn
Weighting
10%
Outturn
(% of maximum)
100%
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REMUNERATION CONTINUED
STRATEGIC OBJECTIVES
The strategic objectives of the Executive Directors focused on the creation of sustainable value. Strategic objectives for the CFO were set at the start of the year, the objective for the CEO was set
in line with his start date in October, and applied to the remaining three months of the plan year.
Strategic objective
Delivery of core
strategic actions
Peter France
Committee assessment
Outturn
Weighting
Outturn
(% of maximum)
Strategic objective
Mark Hoad
Committee assessment
Outturn
Weighting
Outturn
(% of maximum)
In assessing the target the Committee noted:
20%
90%
– Foundations laid for the successful execution of
strategic actions to deliver margin improvement
and to reduce leverage;
– Significant progress made on the inventory working
capital project. Foundations laid for further material
progress in 2024; and
– Significant progress made towards the successful
completion of the divestment of the business units
in Cardiff and Hartlepool, UK and Dongguan, China.
Strategic review of customer
strategies and global supply
chains to optimise growth
opportunities
In assessing the target the Committee noted:
10%
100%
– Full evaluation of TT global positions concluded taking
into account industry and political experts;
– Board concluded existing strategy and actions were
robust with actions underway to manage opportunities
and risks;
– Expansion of facilities in Kuantan, Malaysia and now
in Mexicali, Mexico increase our geographic product
diversification and facilitates re-shoring opportunities
with customers; and
– Alignment of businesses to local markets continues
to mitigate re-shoring impacts.
Human capital management
In assessing the target the Committee noted:
10%
100%
– Review of finance operating model completed to deliver a
high capability efficient and partnering organisation;
– Actions undertaken to create additional capacity and
capability. Upskilling delivered on control framework;
– Internal successors appointed to functional leadership
roles with support in place; and
– Talent and succession management in place for selected
core roles with succession optionality. Development
programmes in place for key role holders to
ensure readiness.
2023 SHORT-TERM INCENTIVE OUTCOMES
As it does every year, the Committee thoroughly evaluated the performance of both the Group
and the Executive Directors in the round to assess whether the level of short-term incentive award
is both appropriate and justified.
In line with the Remuneration Policy, 30 per cent of the short-term incentive will be deferred into
shares for two years. Peter France was eligible for a pro-rated award for the period he was an
Executive Director. Richard Tyson was not eligible for a 2023 award following his resignation as
CEO. The awards are as follows:
Taking into account the financial performance amid continued challenging and dynamic market
conditions, and the wider assessment of performance described in this report, the Committee
concluded that the formulaic award based on performance against stretching targets is justified
and no discretion was applied.
Performance measure
Group adjusted profit before tax
Group free cash flow
ESG
Strategic objectives
Total award (% of maximum)
Total award (% of salary)
Weighting
Peter France
Mark Hoad
46.7%
23.3%
10%
20%
100%
72.9%
100%
90%
91.7%
100%
72.9%
100%
100%
93.7%
34.3%1
140.5%
1 Peter France was eligible for a pro-rated award for the period he was an Executive Director in 2023.
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REMUNERATION CONTINUED
LONG-TERM INCENTIVE
LTIP awards over conditional shares have historically been granted with performance measures
over separate three-year performance periods; EPS performance aligns with the Group’s financial
year while the TSR performance ends on the third anniversary of the award date. Accordingly, the
performance periods of the performance conditions end in separate reporting years. Both the
2020 and 2021 LTIP awards had performance periods that ended on or by 31 December 2023
which are included in the single figure of remuneration for 2023.
The Committee is mindful that share price falls can lead to the perception of windfall gains.
The Committee did not believe that windfall gains would apply as a result of the share price
volatility at the time of grant but retains discretion to adjust formulaic incentive vesting
outcomes to ensure they reflect underlying business performance and shareholder interests.
PERFORMANCE MEASURES FOR LTIP AWARDS GRANTED DURING THE FINANCIAL
YEAR (AUDITED)
Award year and performance measure
2020 LTIP award 1: Relative
TSR performance against the
FTSE SmallCap (excluding
Investment Trusts)
2021 LTIP award 2: Adjusted EPS
compound annual growth on
a constant currency basis
Threshold
(25% vesting)
Maximum
(100% vesting)
Outcome
Percentage of
maximum achievement
Awards granted to Executive Directors during 2023 are subject to the three performance
measures over a three-year performance period as follows:
Median
Upper quartile
41 percentile
(Below threshold)
0%
Performance measure
10%
18%
16.8%
(Between threshold
and maximum)
Adjusted EPS compound annual growth on a constant
currency basis
87.81%
Average cash conversion
Relative TSR performance against the FTSE SmallCap
(excluding Investment Trusts)
Weighting
Threshold
(25% vesting)
Maximum
(100% vesting)
50%
25%
25%
4%
80%
12%
95%
Median
Upper quartile
1 2020 LTIP award (vested March 2023): As previously disclosed, following shareholder consultation, the award had a sole TSR performance
condition that ended in March 2023.
2 2021 LTIP award (vesting March 2024): The EPS performance period for this award ended on 31 December 2023; the vesting of the EPS
component was between the threshold and the maximum as indicated in the above table. An estimate of the vested value of the shares
subject to the EPS performance measure is included in the 2023 single figure of total remuneration based on the average share price in the
final quarter of 2023 (158.17p). This estimate will be restated for the actual vested value in the next remuneration report. The TSR
performance period ends in March 2024 and will be included in the 2024 single figure for total remuneration.
Malus and clawback
No malus or clawback events occurred during 2023.
LONG-TERM INCENTIVES GRANTED DURING THE FINANCIAL YEAR (AUDITED)
LTIP awards over conditional shares were granted to the CFO and former CEO on 16 March 2023.
An award was made to Peter France on 2 October 2023 following his appointment. Awards are
subject to a three-year vesting period plus an additional two-year holding period.
Basis of
award granted
(% of salary)
Share price at
date of grant
(pence) 1
150%
150%
150%
171.90
180.87
180.87
Number of
shares over
which award
was granted
479,930
433,241
324,992
Face value
of award
(£)
825,000
783,603
587,814
% of award
that would vest
at threshold
performance
25%
25%
25%
Performance
period end date
31/12/2025
31/12/2025
31/12/2025
Peter France
Richard Tyson
Mark Hoad
1 The share price used to determine the number of shares granted on 16 March was the average share price over the three trading days prior
to grant; for the 2 October grant the average share price was over the four days prior to grant.
DEFERRED SHORT-TERM INCENTIVE AWARDS
During the year, Executive Directors were awarded conditional shares as deferred bonus share
plan awards in relation to the 2022 STIP outcome. Details of the awards are summarised in the
table below. No performance conditions apply to these awards.
Richard Tyson
Mark Hoad
Date of grant
16/03/2023
16/03/2023
Number of shares
awarded
42,070
31,558
Share price at
date of grant
(pence) 1
180.87
180.87
Face value
of award
(£)
76,092
57,080
Date of vesting
16/03/2025
16/03/2025
1 The share price used to determine the number of shares granted was the average share price over the three trading days prior to grant.
BONUS BUY-OUT SHARE AWARD
In connection with Peter France’s recruitment, the Committee compensated Peter for the FY2023
pro-rata cash annual bonus that he forfeit on resignation from his prior employer. However, rather
than compensate the amount in cash, Peter agreed to receive the amount in deferred shares over
a three-year vesting period. Details of the award are summarised in the table below.
No performance conditions apply to this award.
Peter France
Date of grant
02/10/2023
Number of shares
awarded
Share price at
date of grant
(pence) 1
Face value
of award
(£)
Date of vesting
226,876
171.90
390,000
02/10/2026
1 The share price used to determine the number of shares granted was the average share price over the four trading days prior to grant.
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REMUNERATION CONTINUED
EXECUTIVE DIRECTOR INTERESTS IN SHARES
The table below sets out details of outstanding share awards held by Executive Directors at 31 December 2023.
Scheme
Date of grant
Performance
conditions apply
Exercise
price
(pence)
1 January 2023
Granted during
the year
Lapsed
Vested 31 December 2023
Market value at
31 December 2023
(£) 1
Market
price at granted
date
(pence)
Vesting date
Expiry date 2
Peter France
LTIP
02/10/2023
Buy-out Award
02/10/2023
Total outstanding
Richard Tyson
LTIP
13/03/2020
16/03/2021
14/03/2022
16/03/2023
DSBP
16/03/2021
14/03/2022
16/03/2023
ShareSave 7
29/09/2021
Total outstanding
Mark Hoad
LTIP
13/03/2020
16/03/2021
14/03/2022
16/03/2023
DSBP
16/03/2021
14/03/2022
16/03/2023
ShareSave 7
29/09/2021
Total outstanding
Y
–
Y
Y
Y
Y
–
–
–
–
Y
Y
Y
Y
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
479,930
226,876
365,983 3
349,621 4
388,550 5
21,011 6
61,374
433,241
42,070
–
365,983
349,621
388,550
433,241
–
21,011
174
7,964
7,964
247,085 3
262,265 4
262,321 5
15,761 6
46,039
–
–
–
–
–
–
–
174
7,964
324,992
31,558
247,085
–
–
15,761
479,930
226,876
749,651
354,380
706,806
1,104,031
–
–
–
–
–
–
–
–
–
–
61,374
42,070
–
95,866
65,713
–
103,444
161,579
–
262,265
262,321
324,992
–
46,039
31,558
7,964
–
409,658
409,745
507,638
–
71,913
49,294
–
935,139
1,448,248
172
172
196
208
192
181
208
192
181
226
196
208
192
181
208
192
181
226
02/10/2026
02/10/2026
13/03/2023
16/03/2024
14/03/2025
16/03/2026
16/03/2023
14/03/2024
16/03/2025
01/11/2024
13/03/2023
16/03/2024
14/03/2025
16/03/2026
16/03/2023
14/03/2024
16/03/2025
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
01/11/2024
30/04/2025
1 Calculated as the total number of shares awarded multiplied by the share price on 31 December 2023 of 156.2 pence. The calculation does not take into account dividend equivalents or the likelihood of vesting.
2 The expiry date, relevant only to ShareSave, is that applying in normal circumstances.
3 The sole performance condition attached to the award was TSR performance against the FTSE SmallCap (excluding Investment Trusts) during the three-year performance period from the date of award. 25% of the shares will vest at median performance increasing on a straight-line basis
to 100% vesting at the upper quartile of the comparator group. As previously disclosed, the award was granted shortly before the onset of the COVID-19 pandemic subject to equally weighted EPS and TSR performance conditions. Following consultation with shareholders, the EPS
performance condition was removed and the full weighting was allocated to the existing TSR performance condition.
4 The performance condition attached to 50% of the award is based on EPS. 25% of the shares subject to this part of the award will vest for EPS growth of 10% compound per annum, increasing on a straight-line basis to 100% vesting for EPS growth for the year ending 31 December 2023 of
18% compound per annum. The performance condition attached to the other 50% of the award is based on TSR performance against the FTSE SmallCap (excluding Investment Trusts) during the three-year performance period from the date of award. 25% of the 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.
5 The performance condition attached to 50% of the award is based on EPS. 25% of the shares subject to this part of the award will vest for EPS growth of 5% compound per annum, increasing on a straight-line basis to 100% vesting for EPS growth for the year ending 31 December 2024 of
12% compound per annum. The performance condition attached to the other 50% of the award is based on TSR performance against the FTSE SmallCap (excluding Investment Trusts) during the three-year performance period from the date of award. 25% of the 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.
6 The Committee applied its discretion to defer the full 2020 STIP award into shares with 80% vesting on the first anniversary and the 20% vesting on the second anniversary.
7 The market value is the difference between the share price on 31 December 2023 and the option price of 174 pence multiplied by the total number of shares under the option (or £0 if this difference is negative).
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION CONTINUED
The closing middle market prices for an ordinary share of 25 pence of the Company on
30 December 2022 and 29 December 2023 as derived from the Stock Exchange Daily Official
List were 174.0 pence and 156.2 pence respectively. During 2023, the middle market price of
TT Electronics plc ordinary shares ranged between 146.4 pence and 204.0 pence.
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED)
The table below shows the shareholding for each Executive Director as at 31 December 2023.
The Executive Directors are required to build and hold a shareholding of 200 per cent of salary.
Executive Directors must retain 50 per cent of the net of tax value of any vested LTIP/DSBP
shares until the guideline is met.
Beneficially
owned at
1 January
2023
Beneficially
owned at
31 December
2023
Unvested
share awards
subject to
Company
performance
conditions
Unvested
deferred
bonus share
plan awards
Unvested
share buy-
out award
Outstanding
share awards
under all-
employee
share plans
Shareholding
(% of
Salary) 2
Value of
shareholding
(£) 3
n/a
–
479,930
–
226,876
–
34.1%
187,821
779,446
787,799
849,578
77,597
–
–
7,964
330.4% 1,294,781
–
320.7% 1,675,442
Executive Directors
Peter France
Mark Hoad
Former Directors
Richard Tyson 1
1,006,666
1,017,801
–
103,444
1 Shareholding on date stepped down from the Board, 1 October 2023.
2 Shareholding includes beneficially owned shares and shares awards, such as DSBP grants, which are not subject to performance
conditions (net of assumed tax withholding). Shareholding for Peter France and Mark Hoad calculated using the salary at the close
of business on 29 December 2023, shareholding for Richard Tyson reflects his annual salary at his exit date.
3 Calculated using the share price as at close of business on 29 December 2023 of 156.2 pence.
There have been no changes to shareholdings between 31 December 2023 and the date
of this report.
107
– Salary, pension and benefits – Richard Tyson received his contractual salary, pension and
benefits up to cessation of employment and received a payment in lieu of accrued but untaken
holiday. No payment was or will be made in lieu of any unexpired period of notice.
– Short-Term Incentive Plan (“STIP”) – Richard Tyson did not receive any bonus award under
the Company’s STIP in respect of the financial year ended 31 December 2023 or any future
years.
– Long-Term Incentive Plan (“LTIP”) – Richard Tyson’s inflight awards under the LTIP granted
in 2021, 2022 and 2023 lapsed in full on cessation of employment. The vested LTIP awards
granted in 2019 and 2020 remain subject to their respective two-year holding periods which
will continue to apply post cessation. These awards remain subject to malus and clawback
provisions. No further LTIP awards were granted to Richard Tyson.
– Deferred Share Bonus Plan (“DSBP”) – The 2022 and 2023 DSBP awards, which reflect
annual bonus awards earned in 2021 and 2022 respectively, will continue to vest on their
normal vesting dates. Awards will remain subject to malus and clawback provisions with the
net of tax amounts subject to the post cessation of employment shareholding requirement.
No DSBP award will be made in respect of the 2023 financial year or future years.
– ShareSave – Richard Tyson’s outstanding options under the all-employee Save As You Earn
scheme lapsed on cessation of employment.
– Share Ownership Guideline – A two-year post cessation of employment shareholding
requirement applies to Richard Tyson, who will maintain a shareholding of 100% of salary
(or actual eligible holding, if lower).
Richard Tyson did not receive any other remuneration payment in 2023 or payment for loss
of office.
EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
Date of
appointment
Date of current
contract/letter
of appointment
Notice from
Company
Notice from
individual
Unexpired
period of
service contract
02/10/2023
26/07/2023
12 months
12 months Rolling contract
01/01/2015
09/12/2014
12 months
12 months Rolling contract
Post cessation of employment, the Executive Directors are required to hold for two years
the lower of half of the share ownership requirement or the shareholding at cessation.
Peter France
Mark Hoad
PAYMENTS TO PAST DIRECTORS (AUDITED)
No payments were made in 2023.
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
Further to the announcements on 13 April 2023 and 27 July 2023, following a period of support
for the new CEO to ensure a smooth transition of leadership, Richard Tyson stepped down from
the Board as Chief Executive Officer on 1 October 2023 and his employment ended on this date.
In respect of his leaving arrangements:
PAY ACROSS THE ORGANISATION
This section of the report enables our remuneration arrangements to be viewed in the context
of providing:
– a comparison of the percentage change in our Directors’ remuneration with the change in our
UK employees average remuneration;
– a 10 year history of our Chief Executive’s remuneration;
– our TSR performance over the same period;
– the ratio between our Chief Executive’s remuneration and the remuneration of employees; and
– a year-on-year comparison of the total amount spent on employment costs across the Group
and shareholder payments.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 108108
REMUNERATION CONTINUED
PERCENTAGE CHANGE IN REMUNERATION OF DIRECTORS AND EMPLOYEES
The following table compares the percentage change in Director’s salary/fees, benefits and short-term incentive to the average change for all employees of the parent Company for the past four years.
2022 to 2023
2021 to 2022
2020 to 2021
2019 to 2020
Salary/ fees
Benefits
Bonus
Salary/ fees
Benefits
Bonus
Salary/ fees
Benefits
Bonus
Salary/ fees
Benefits
Bonus
Executive Directors
Peter France 1
Mark Hoad
Richard Tyson 2
Chairman
Non-executive Directors
Jack Boyer
Anne Thorburn
Alison Wood
Michael Ord
Wendy McMillan
Average UK TT Electronics parent
company employees 3
n/a
5.0%
n/a
5.0%
5.0%
5.0%
5.0%
n/a
n/a
6.3%
n/a
(1.3)%
n/a
92.9%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.2%
27.9%
n/a
2.5%
2.5%
2.5%
2.5%
2.5%
2.5%
n/a
n/a
9.4%
n/a
5.0%
5.2%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(35.5)%
(35.5)%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
6.7%
6.8%
1.5%
14.9%
8.0%
12.5%
n/a
n/a
n/a
52.0%
48.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
169.4%
169.4%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(5.0)%
(5.0)%
n/a
3.3%
6.0%
(5.0)%
n/a
n/a
n/a
8.0%
5.9%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
(28.5)%
(28.5)%
n/a
n/a
n/a
n/a
n/a
n/a
10.4%
(25.7)%
2.9%
6.8%
108.4%
3.8%
6.1%
(39.4)%
1 Peter France was appointed Chief Executive Officer on 2 October 2023.
2 Richard Tyson stepped down from the Board on 1 October 2023.
3 Average parent Company employee based on employees who were employed throughout each two-year comparison period.
CHIEF EXECUTIVE OFFICER’S REMUNERATION FOR THE LAST 10 YEARS
The total remuneration figures for the Chief Executive Officer during each of the last 10 years are shown in the table below. The total remuneration figures include the short-term incentive based on
that year’s performance and LTIP vesting based on the three-year performance periods ending in the relevant year.
Total remuneration (£’000)
Short-term incentive (% of maximum)
LTIP vesting (% of maximum) 1
2014 2
249
–
39.6
2014 3
401
25.0
–
2015
1,151
90.8
–
2016
1,152
100.0
–
2017
1,794
100.0
50.0
2018
2,189
93.3
100.0
2019
1,430
64.0
86.5
2020
1,003
45.8
50.0
2021
1,306
97.1
18.3
2022
1,194
61.2
27.4
2023 3
453
–
–
2023 4
734
91.7
–
1 LTIP vesting is reflective of the three-year performance periods ending in the relevant year.
2 Relates to Geraint Anderson who was CEO until 30 June 2014.
3 Relates to Richard Tyson who was CEO from 1 July 2014 to 1 October 2023.
4 Relates to Peter France who become CEO on 2 October 2023.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION REMUNERATION CONTINUED
TSR PERFORMANCE
The following graph shows the cumulative TSR of the Company over the last 10 financial years
relative to the FTSE SmallCap Index (excluding Investment Trusts). The FTSE SmallCap Index
has been selected for consistency as it is the index against which the Company’s TSR is
measured for the purposes of the LTIP. In addition, the Company is a constituent of the Index.
The graph shows the value, by 31 December 2023, of £100 invested in TT Electronics plc on
31 December 2013 compared with the value of £100 invested in the FTSE SmallCap Index
(excluding Investment Trusts).
200
175
150
125
100
75
50
25
0
Dec 13
Dec 14
Dec 15
Dec 16
Dec 17
Dec 18
Dec 19
Dec 20
Dec 21
Dec 22
Dec 23
TT Electronics (Re-based to 100)
FTSE SmallCap excluding Investment Trusts (Re-based to 100)
CHIEF EXECUTIVE OFFICER PAY RATIO
109
We continue to use Option B of the available methodologies as permitted under The Companies
(Miscellaneous Reporting) Regulations 2018. Given the complexity of the Group, this approach
enables us to use our existing Gender Pay reporting datasets as the foundation for our
calculations. We determined the hourly rates at each quartile of our 5 April 2023 Gender Pay data
then calculated the average annual salary and total remuneration for representative employees
at each quartile. Representative employees must have been employed on 31 December 2023
and employee data is based on full-time equivalent pay and calculated in accordance with the
single figure of remuneration. Adjustments may be made to ensure that quartiles are
representative, no adjustments were required for 2023.
Across the UK, the majority of the workforce undertake operational roles in our facilities.
The employee lower quartile and median remuneration values are generally reflective of
the roles held by our semi-skilled/skilled operators respectively. The quartile data is broadly
representative of total remuneration across the workforce in the UK.
The change in the median CEO pay ratio is attributable to changes in the remuneration of the
CEO and of the Company’s UK employees as a whole. In line with our remuneration principles,
the majority of the CEO’s remuneration opportunity is performance-related variable pay.
The CEO’s pay ratio is, therefore, heavily dependent on the outcomes of the short-term and
long-term incentive plans and, in the case of long-term share-based awards, share price
movements. As such it is expected that there will be considerable year-to-year changes in
the ratio. The lower CEO pay ratio results from a number of factors: (i) higher UK employee
remuneration from the actions to support employees in managing the impacts of high inflation
through targeted salary increases to lower paid employees, and (ii) lower CEO variable
remuneration from the change in CEO, and low LTIP vesting. The Committee believes that the
pay ratio is appropriate and is reflective of the performance of the Group and the roles undertaken
by employees in the UK. Further context to the CEO total remuneration is set out on in detail in
this report.
For 2023, the salary and single figure of total remuneration for our pay quartiles of UK employees
are as follows:
The Committee is mindful of the relationship between the remuneration of the Chief Executive
Officer and the wider employee population. The table below shows the ratio of the total
remuneration of the Chief Executive Officer to that of the UK employees of the Group for the last
five years. Due to the change in CEO during the year, the CEO’s pay is based on the combined
single figure of remuneration of Peter France and Richard Tyson.
Salary
Single figure of total remuneration
Lower quartile
Median
Upper quartile
£22,951
£25,174
£27,626
£29,357
£41,981
£45,944
Year
2023
2022
2021
2020 1
2019
Methodology used
Lower quartile
Median
Upper quartile
Option B
Option B
Option B
Option B
Option B
47:1
51:1
62:1
54:1
63:1
40:1
43:1
52:1
40:1
55:1
26:1
28:1
34:1
29:1
38:1
1 The 2020 ratio was impacted by COVID-19. Salary and incentive remuneration levels for 2020 include salary reductions taken by the CEO,
included in the single figure of remuneration, and the impact of the UK Government Coronavirus Job Retention Scheme and associated
voluntary furlough salary reductions in the wider UK workforce. Under the chosen method for calculation, the employee ranking and quartile
assessment was based on the April 2020 snapshot date during which time approximately 14% of employees were on furlough.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 110110
REMUNERATION CONTINUED
RELATIVE IMPORTANCE OF SPEND ON PAY
NON-EXECUTIVE DIRECTORS’ FEES
The following table sets out the change in payments to shareholders and the overall expenditure
on pay across the Group.
Staff costs for the Group (£m)
Dividends relating to the period (£m)
Share buyback (£m)
NON-EXECUTIVE DIRECTORS’ REMUNERATION
2023
180.6
12.0
0
2022
164.5
11.1
0
Change
9.8%
8.1%
0%
Non-Executive Directors’ single figure for total remuneration (audited)
The Chairman’s fee, NED base fee and NED additional fees were increased by 5 per cent with
effect from 1 January 2023. The increases were set at a level below those of the wider UK
workforce which averaged 7 per cent.
£’000
Warren Tucker
Jack Boyer 1
Anne Thorburn 2
Alison Wood 3
Michael Ord 4
Former Directors
Wendy McMillan 5
Salary/ fees
Benefits
2023
197
58
58
58
47
43
2022
187
55
55
55
–
–
2023
2022
–
–
–
–
–
–
–
–
–
–
–
–
Total
2023
197
58
58
58
47
43
2022
187
55
55
55
–
–
1 Jack Boyer’s fee comprised his NED base fee and his additional fee as Senior Independent Director.
2 Anne Thorburn’s fee comprised her NED base fee and her additional fee for chairing the Audit Committee.
3 Alison Wood’s fee comprised her NED base fee and her additional fee for chairing the Remuneration Committee.
4 Michael Ord was appointed to the Board on 16 January 2023.
5 Wendy McMillan was appointed to the Board on 16 January 2023 and stepped down from the Board on 24 November. Wendy was paid until
the end of November 2023.
The Chairman’s fee increased by 3 per cent, a level below the average expected increase for the
wider UK workforce. As discussed in the Annual Statement on page 97, both the NED base fee
and NED additional fees have been realigned to reflect the time commitments and expertise
required in the roles. Changes to the fees were effective 1 January 2024.
Chairman
NED base fee
NED additional fees:
Senior Independent Director
Audit Committee Chair
Remuneration Committee Chair
2024
2023
Increase
£202,530
£196,631
£55,000
£49,316
£10,000
£10,000
£10,000
£8,610
£8,610
£8,610
3%
12%
16%
16%
16%
NON-EXECUTIVE DIRECTORS’ SHARE OWNERSHIP
While Non-executive Directors cannot participate in Company share schemes, share ownership
is encouraged to strengthen stakeholder alignment.
NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS (AUDITED)
The table below shows the shareholding for each Non-Executive Director. There have been
no changes to shareholdings between 31 December 2023 and the date of this report:
Chairman
Warren Tucker
Non-executive Directors
Jack Boyer
Alison Wood
Anne Thorburn
Michael Ord
Beneficially owned at
31 December 2023
60,075
95,514
0
60,000
25,000
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 111
REMUNERATION CONTINUED
NON-EXECUTIVE DIRECTORS’ LETTERS OF APPOINTMENT
ADVISERS TO THE COMMITTEE
Date of grant
Date of current
contract/letter of
appointment
Notice from
Company
Notice from
individual
Unexpired
period of
service contract
06/05/2020
02/04/2020
1 month
1 month Rolling contract
10/06/2016
10/06/2016
11/07/2016
11/07/2016
01/07/2019
12/06/2019
16/01/2023
09/01/2023
1 month
1 month
1 month
1 month
1 month Rolling contract
1 month Rolling contract
1 month Rolling contract
1 month Rolling contract
Chairman
Warren Tucker
Non-executive Directors
Jack Boyer
Alison Wood
Anne Thorburn
Michael Ord
SHAREHOLDER VOTING
At the AGM held on 9 May 2023, the proxy votes cast in respect of the resolutions on the
Directors’ Remuneration Policy and Report were as follows:
Number of votes
Date of
AGM
For and
Discretionary
For and
Discretionary
(%)
Against
Directors’ Remuneration Policy
May 2023
131,581,506
90.59%
13,666,522
Against
(%)
9.41%
Withheld
40,262
Directors’ Remuneration Report
May 2023
134,470,777
92.64%
10,678,200
7.36%
139,313
Withheld votes are not counted towards the total percentage of votes cast.
A full schedule in respect of shareholder voting on the above and all resolutions at the 2023 AGM
is available at www.ttelectronics.com.
The Remuneration Committee considers shareholder feedback received in connection with the
AGM each year and at other times of the year. This feedback is considered as part of the Group’s
annual review of the Remuneration Report and Remuneration Policy. In addition, the
Remuneration Committee endeavours to consult directly with the largest shareholders and the
main representative bodies on proposals ahead of significant changes.
During the year, the Committee received support and advice from the Chief Executive Officer,
the Chief Financial Officer, the Group HR Director, the Group Reward Director and FIT
Remuneration Consultants LLP (“FIT”). FIT is the Committee’s appointed independent
remuneration adviser. The Company Secretary is secretary to the Committee.
The Company paid a total fee of £43,477 to FIT in relation to remuneration advice to the
Committee during the year. Fees were determined on the basis of time and expenses.
During 2023, FIT provided the Committee with advice in respect of the Remuneration
Policy review, share plan rules, CEO transition, compliance support for this year’s Directors’
remuneration report and the provision of other advice relating to remuneration governance and
market practice. FIT is a member of the Remuneration Consultants Group and has signed up to
its code of conduct. The Committee is satisfied that the advice it received during the year was
appropriate, objective and independent. FIT did not provide any other services to the Group and
does not have any other connection with the Company or individual Directors.
The Group’s approach to the Chairman’s and Executive Directors’ remuneration is determined
by the Board on the advice of the Remuneration Committee. The Committee considers the
views of the Chairman on the performance of the CEO, and of the CEO on the performance
and remuneration of the other members of the ELT. No Committee members or attendees
take part in any discussions relating to their own remuneration.
STATUTORY REQUIREMENTS
The Committee’s composition, responsibilities and operation comply with the principles of good
governance as set out in the Code and the requirements of the Listing Rules (of the Financial
Conduct Authority) and the Companies Act 2006. The Directors’ remuneration report has been
prepared on the basis prescribed in the Large- and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013.
The Directors’ remuneration report has been approved by the Board and signed on its behalf by:
Alison Wood
Chair, Remuneration Committee
6 March 2024
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 112112
OTHER STATUTORY
DISCLOSURES
This Annual Report and Accounts includes the Directors’ report and the audited financial
statements for the year ended 31 December 2023. Certain information required to be
disclosed in the Directors’ report is provided in other sections of this Annual Report.
This includes the overview, the operating and financial reviews, the Governance and
Remuneration reports and specific elements of the financial statements noted below.
The table below lists items that are relevant to this report, and which are incorporated
by reference, including information required in accordance with the UK Companies
Act 2006 and Listing Rule 9.8.4R:
AGM information
Current and future dividend waiver
Employee engagement
Page 178
Page 113
Page 33
Future developments in the business
Pages IFC to 67
Going concern
Scope 1, 2 and 3 emissions
Section 172 statement
Share capital
Subsidiary undertakings
Viability statement
Page 67
Page 46
Page 57
Page 178
Page 171
Page 67
Results and dividend
The Group’s loss on ordinary activities after taxation was
£6.8 million (2022: £13.2 million loss). The audited financial
statements of the Group and the Company are set out on pages
126 to 172. Further details of the Group’s activities are set out in
the Strategic report on pages IFC to 67 which is incorporated
into the Directors’ report by reference.
Full details of the Company’s dividend policy and proposed final
dividend payment for the year ended 31 December 2023 are
set out on page 25 and Note 9 to the consolidated financial
statements.
Tax principles and strategy
The Group applies a conservative approach to tax and seeks
to comply with the OECD Transfer Pricing guidelines, which
should ensure that profits are taxed where value is created and
business risks are managed. The Group’s full Tax Principles
and Strategy document is published on the Group’s website.
Important events since the end of the financial year
On 4 March 2024 we announced that we had agreed to divest
our business units in Cardiff and Hartlepool, UK and Dongguan,
China for £20.8 million on a cash and debt free basis. These
assets were classified as held for sale at 31 December 2023
and were written down by £32.5 million reflecting fair value and
costs to sell. The disposal is expected to complete by the end
of Q1 2024 and is expected to enhance group margins and
improve leverage.
Auditor
In 2019, the Company undertook a competitive re-tender
exercise for external audit services, following which Deloitte LLP
(Deloitte) was appointed as external Auditor for the financial
year 2020 onwards. Deloitte was appointed by the Company’s
shareholders at the AGM held on 6 May 2020 and have been
reappointed at each subsequent AGM (including the 2023 AGM).
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION OTHER STATUTORY DISCLOSURES CONTINUED
The Auditor’s responsibilities are set out on page 122 and
should be read in conjunction with those of the Directors as
set out at the end of this report.
Significant agreements relating to change of control
The Group has a number of borrowing facilities provided by
various banking groups. The most significant of these facility
agreements (as described below) 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:
PP: In August 2021, the Group agreed a debut issue of
£75 million of private placement fixed rate loan notes with
three institutional investors. The PP transaction completed in
December 2021, whereupon funds were received by the Group,
with the issue being evenly split between seven- and ten-year
maturities with an average interest rate of 2.9%.
RCF: In June 2022, the Group entered into an agreement for
a £147.4 million multi-currency revolving credit facility with a
syndicate of five relationship banks, with a maturity date of
27 June 2026 and a one-year extension option. In June 2023,
this extension option was exercised, with the result that RCF
maturity date is now 27 June 2027. In addition, in February
2023, £15 million of a £32.6 million accordion was exercised
increasing the facility size to £162.4 million.
There are a number of other agreements that may be terminable
upon a change of control of the Company and therefore subject
to renegotiation. No such agreements are considered at present
to be significant in terms of their potential impact on the
business of the Group as a whole, with the exception of the
contract described below:
Anthem Contract: In November 2022, the Group’s GMS
Division entered into a long-term contract with Honeywell,
pursuant to which GMS will provide manufacturing services
to enable Honeywell to bring to market its next-generation
avionics cockpit system. This system is designed to operate
with the next generation of electric aircraft. The long-term
contract has a duration of 12 years and contains market
standard provisions requiring Honeywell’s consent for the
contract to continue in the event of a change of control of
the Company.
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 it maintains high
standards of employee welfare in all its operations, irrespective
of where in the world, and of local market conditions. Together
with many other global companies operating in this sector,
the Group is a member of the Responsible Business Alliance
(formerly the Electronic Industry Citizenship Coalition), a leading
industry organisation promoting best practice in corporate
responsibility, which is committed to raising standards of
employee welfare, (addressing such issues as modern slavery)
in all jurisdictions and at all levels of the supply chain for
electronic products. Further details on the Group’s policies
relating to its employees are given on pages 31 to 40.
Political contributions
The Group made no political contributions during the year.
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 10 May 2024.
During 2023, this authority was used in respect of customary
allotments of shares resulting from the operation of the Group’s
share schemes. As set out in the Notice of Annual General
Meeting which accompanies this report, the Company is
seeking shareholder approval of revised authorities this
year (in resolutions 13 and 14) in line with the updated
Statement of Principles published by the Pre-Emption Group
in November 2022.
Purchase of own shares
At the Annual General Meeting held on 9 May 2023, the
Company was given authority to purchase up to 17,653,356
of its ordinary shares until the date of its next AGM. Other
than market purchases made by the Employee Benefit Trust,
no purchases were made during the year by the Company.
The Directors will be seeking a new authority for the Company
to purchase its ordinary shares at the forthcoming Annual
General Meeting.
113
Further details regarding the authority to allot shares and
disapply statutory pre-emption rights and the purchase of own
shares are set out in the Notice of the Annual General Meeting,
which accompanies this document and is available to view on
the Company’s website.
Shares held by the Employee Benefit Trust
The Company has established an Employee Benefit Trust
(“EBT”), the Trustee of which is Sanne Fiduciary Services
Limited, part of Sanne Group. As at 31 December 2023,
the Trustee held 449,471 shares with a nominal value of
£112,367.75 and an aggregate purchase price of £1.40 per
share, representing 0.253 per cent of the total issued share
capital at that date. These shares will be used to satisfy awards
made under the TT Electronics plc Restricted Share Plan, the
TT Electronics plc Long-Term Incentive Plan or other employee
share schemes. The maximum number of shares held by the
EBT during the year was 1,229,727. The voting rights in relation
to these shares are exercisable by the Trustee. However, in
accordance with investor protection guidelines, the Trustee
abstains from voting. A dividend waiver is in place under which
the Trustee waived its right to receive dividends on the shares
it held during the year, and any future dividends. The Executive
Directors, as employees of the Company, are potential
beneficiaries of shares held by the EBT.
Disclosure of information to the Auditor
To the best of each Director’s knowledge and belief, there is no
audit information relevant to the preparation of the Auditor’s
report of which the Auditor is unaware and each Director has
taken all steps which might be expected to be aware of such
relevant information and to establish that the Auditor is also
aware of that information.
Approved by the Board on 6 March 2024 and signed on its
behalf by:
Lynton Boardman
Company Secretary
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STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Accounts and the
Group and parent Company financial statements in accordance with applicable law
and regulations:
Company law requires the Directors to prepare Group and
parent Company financial statements for each financial year.
Under that law the Directors are required to prepare the Group
financial statements in accordance with UK adopted
international accounting standards in conformity with the
requirements of the Companies Act 2006. The financial
statements also comply with International Financial Reporting
Standards (“IFRS”) as issued by the IASB. The Directors have
elected to prepare the parent Company financial statements in
accordance with UK accounting standards, including FRS 101
Reduced Disclosure Framework.
Under company law, the Directors must not approve the
financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and parent
Company and of their profit or loss for that period. In preparing
each of the Group and parent Company financial statements,
the Directors are required to:
– select suitable accounting policies and then apply
them consistently;
– make judgements and estimates that are reasonable,
relevant and reliable;
– for the Group financial statements, state whether they have
been prepared in accordance with UK adopted international
accounting standards;
– for the parent Company financial statements, state whether
applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained
in the parent Company financial statements;
– assess the Group and parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern; and
– use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent Company or to
cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply
with the Companies Act 2006. They are responsible for such
internal control as they determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report, Directors’ report,
Directors’ remuneration report and Corporate Governance
statement that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES CONTINUED
Responsibility statement of the Directors in respect of the
Annual Report and Accounts
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 profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole; and
– the Strategic report 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.
We consider the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
The coordination and review of Group-wide input into the
Annual Report is a key element of the control process upon
which the Directors rely and is an exercise which spans a period
wider than the timetable for compiling the Annual Report itself.
This control process incorporates the controls the Group
operates throughout the year to identify key financial and
operational issues and includes:
– strategy meetings held as part of most Board meetings,
at which the entire Board is present, resulting in a clear
agreement of the Group’s strategy;
– the identification of the key milestones and the related KPIs
to be monitored and measured throughout the period;
– monthly reviews of business performance conducted by
Executive management (in consultation with divisional
management), supplemented by reports highlighting key
issues and analysis of the main variances from budget
and prior year;
– preparation of a detailed budget, reviewed and agreed by
management and then the Board, which is used to calibrate
strategy implementation and against which actual
performance is measured;
– a timetabled process coordinating input from each division,
identifying significant market issues and key elements of
performance for each business area, and appropriately
incorporating them into the structure of the Annual Report;
– the identification of key risks from the risk management
process, for inclusion within the Annual Report, ensuring
a consistency of approach with regard to the risks and the
ongoing review programme;
– a planned Audit Committee sign-off process which
incorporates meetings of the Chair of the Audit Committee
with the Executive Directors, the Risk and Assurance function
and external Auditor to identify and timetable potential issues
of significance to be addressed; and
– a process for internal distribution and comment on the
Annual Report, including those of the members of the Board,
the ELT, key advisers and external Auditor.
By order of the Board:
Lynton Boardman
Company Secretary
6 March 2024
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
TT ELECTRONICS PLC
Report on the audit of the financial statements
1. OPINION
In our opinion:
– the financial statements of TT Electronics plc (the ‘parent
company’) and its subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s and of the parent
company’s affairs as at 31 December 2023 and of the
Group’s loss for the year then ended;
– the Group financial statements have been properly
prepared in accordance with United Kingdom adopted
international accounting standards and International
Financial Reporting Standards (IFRSs) as issued by
the International Accounting Standards Board (IASB);
– the parent company financial statements have been
properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, including
Financial Reporting Standard 101 “Reduced Disclosure
Framework”; and
– the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements which comprise:
2. BASIS FOR OPINION
– the consolidated income statement;
– the consolidated statement of comprehensive income;
– the consolidated and parent company statement
of financial position;
– the consolidated and parent company statements
of changes in equity;
– the statement of cashflows; and
– the related Notes 1 to 32 of the consolidated financial
statements and the related Notes 1 to 14 of the parent
company financial statements.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law,
United Kingdom adopted international accounting standards
and IFRSs as issued by the IASB. The financial reporting
framework that has been applied in the preparation of the
parent company financial statements is applicable law and
United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described
in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the parent company in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard
as applied to listed public interest entities, and we have fulfilled
our other ethical responsibilities in accordance with these
requirements. We confirm that we have not provided any
non-audit services prohibited by the FRC’s Ethical Standard
to the Group or the parent company.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
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3. SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matters that we identified in the current year were:
– Classification of adjusting items; and
– Classification of assets and liabilities as held for sale.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
The materiality that we used for the Group financial statements was
£2.4 million which was determined based on 6.2% of the adjusted profit
before tax after amortisation.
Our approach to audit scoping included performing audit procedures over
78% of the Group’s revenue, 79% of the Group’s adjusted operating profit
before tax after amortisation and 76% of the Group’s net assets.
Significant changes
in our approach
In the prior year, we identified a key audit matter relating to the impairment
of the IoT Solutions cash generating unit’s (‘CGU’) goodwill.
Following the classification of assets held for sale and the resulting
remeasurement under IFRS 5 relating to non-current assets held for sale
and discontinued operations, the residual CGU goodwill and value in use
calculations performed by management indicate that there is no longer a
reasonably possible change within the IoT Solutions CGU that would give
rise to an impairment of goodwill and therefore, this is no longer a key
audit matter.
A new key audit matter was identified, relating to classification of
the assets and liabilities of the disposal Group as held for sale as at
31 December 2023 and the Group’s assessment that the completion
of the sale within a year was “highly probable” as at that date.
117
4. CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going
concern basis of accounting in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and parent company’s ability
to continue to adopt the going concern basis of accounting included:
– obtaining an understanding of the key processes relating to the Group’s forecasting;
– inspecting loan documents to assess the principal terms and related financial covenants;
– assessing management’s key assumptions underpinning the Group’s forecasts, specifically
the forecast adjusting items expense and cash flows, and the achievability of forecasts; these
were assessed with reference to external data such as market growth rates and industry data;
– assessing the impact of reasonably possible downside scenarios on the Group’s funding
position including forecast financial covenants;
– performing a reverse stress test on the Group’s funding position including forecast
financial covenants;
– comparing forecasts to historical financial information to assess management’s historical
forecasting accuracy;
– assessing the mitigating actions available to the Group in the event of any downside scenarios
and the feasibility of these in the next 12 months; and
– assessing the appropriateness of the going concern disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating
to events or conditions that, individually or collectively, may cast significant doubt on the Group's
and parent company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code,
we have nothing material to add or draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered it appropriate to adopt the going
concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are
described in the relevant sections of this report.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
5. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
5.1. Classification of adjusting items
Key audit matter
description
In addition to the statutory results, the Group presents adjusted performance measures in the consolidated income statement, including adjusted profit.
While the key measure used by management to monitor performance is adjusted operating profit, adjusted profit before tax is also a key measure used by management
in communication with shareholders. The Group’s policy on adjusting items is set out in note 1c to the financial statements.
Judgements made regarding the classification of adjusting costs and income therefore have a significant impact on the presentation of the Group’s results.
Therefore, we identified a key audit matter in respect of the classification of items recorded as adjusting.
In total, adjustments of £44.1 million (2022: £50.5 million) have been made to the statutory operating profit of £8.7 million (2022: £3.4 million operating loss) to derive adjusted
operating profit of £52.8 million (2022: £47.1 million profit).
Adjusting items in 2023 include:
– Held for Sale re-measurement loss (£32.5 million) and related disposal costs (£1.2 million) (2022: £23.1 million – Goodwill and asset impairments);
– Amortisation of intangible assets arising on business combinations (£4.6 million) (2022: £6.0 million);
– Restructuring costs (£2.0 million) (2022: £6.4 million);
– Pension restructuring related costs (£1.9 million) (2022: £13.8 million);
– Ferranti Power and Control integration costs (£1.3 million) (2022: £1.1 million);
– Torotel integration costs (£0.4 million) (2022: £0.1 million); and
– Other costs (£0.2 million).
The identification of adjusting items and the presentation of adjusted operating profit and earnings measures that show a consistent and balanced view of the performance
of the Group involves significant judgement.
Significant judgement is also involved in ensuring that undue prominence is not given to adjusted financial information, as this would be misleading to the readers of the
financial statements.
There is a risk that items may be classified as adjusting which do not meet the Group’s policy, and therefore distort the reported adjusted operating profit, whether due to
fraud or error; this could also impact financial covenants reported and management remuneration, hence this is considered a fraud risk. Consistency in the identification
and presentation of these items is important for the comparability of year-on-year reporting as well as compliance with the ESMA and FRC guidelines on alternative
performance measures.
Explanations of each adjustment are set out in note 7 to the financial statements and also in note 1 to the Group financial statements in relation to the critical judgements
in determining adjusting items. Refer also to page 92 of the Audit Committee Report.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
5.1. Classification of adjusting items continued
How the scope
of our audit
responded to the
key audit matter
We obtained understanding of the Group’s relevant controls over the classification of adjusting items in the financial statements.
We evaluated the appropriateness of the inclusion of items, both individually and in aggregate, within adjusted results. Specifically, our procedures included:
– Assessing the consistency of the Group’s policy and items included year on year, and the application of management’s accounting policy, challenging the nature of these
items by assessing these in comparison to ESMA guidance and the latest FRC guidance on alternative performance measures and challenging in particular the inclusion
of those items that recur annually;
– Challenging management regarding the nature of restructuring and acquisition related adjusting items by evaluating the underlying reason for the item and whether they
fall within management’s accounting policy definition for restructuring and acquisition related costs.
– Testing a sample of adjusting items by agreeing to source documentation and evaluating the classification of the individual costs against the Group’s policy of adjusting
items and assessing whether the disclosures within the financial statements provide sufficient detail for the reader to understand the nature of these items and how
adjusted results are reconciled to statutory results.
Key observations
The value of adjusting items results in a material difference between the statutory and adjusted results. We note that the level of items which are more judgemental such as
restructuring costs are significantly lower than previous periods. Whilst we note that the majority of adjusting items recur from period to period, we have concluded that their
classification and presentation is reasonable and consistent with the Group’s policy and the ESMA and FRC guidelines on alternative performance measure.
5.2. Classification of assets and liabilities as held for sale
Key audit matter
description
In the year, the Group committed to dispose of three businesses (referred to as “the disposal Group”) within the Global Manufacturing Solutions and Power and Connectivity
divisions. The disposal project was authorised and sufficiently advanced as at 31 December 2023 that management determined that the completion of the sale within a year
was “highly probable” as at that date. This determination is inherently judgemental given firm offers were received at the balance sheet date, however the deal was not signed
until 1 March 2024.
Having made this determination, the Group has classified the net assets and liabilities of £19.9 million within the disposal Group as “held for sale” in note 4 to the financial
statements, which is in accordance with IFRS 5 relating to non-current assets held for sale and discontinued operations and IAS 1 relating to Presentation of Financial
Statements. This lead to a remeasurement write down of the net assets and liabilities of £32.5 million to the disposal Group’s fair value less costs to sell.
The significant judgement around the sale being highly probable and the resultant classification of the assets and liabilities as held for sale as at the balance sheet date
has been identified as a key audit matter.
Refer also to page 92 of the Audit Committee report.
We obtained an understanding of the Group’s relevant controls over the classification of assets and liabilities as held for sale in the financial statements.
We have assessed the classification of non-current assets as “held for sale” at the balance sheet date in accordance with the conditions set under IFRS 5. Our work included
specific consideration of the timeline of the transaction, the firm offers received for the business and the conditions attached to those offers. This included assessing the
bidder’s ability to complete the transaction in an appropriate timeline, the Group’s commitment to executing the sales process and the residual work to be completed in
preparing the disposal Group for separation.
How the scope
of our audit
responded to the
key audit matter
Further audit procedures performed included:
– With the involvement of our technical accounting specialists, we assessed the requirements of IFRS 5 and the application of these by management;
– We read the minutes of the Board of Directors which evidenced authorisation and approval of the project; and
– We have assessed management's disclosure in accordance with IFRS 5 and IAS 1, to ensure that disclosures are appropriate.
Key observations
We determined the accounting for assets and liabilities held for sale to be appropriate based on our audit procedures.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
6. OUR APPLICATION OF MATERIALITY
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of our audit work and in evaluating
the results of our work.
Based on our professional judgement, we determined materiality for the financial statements
as a whole as follows:
Materiality
Basis for
determining
materiality
GROUP FINANCIAL STATEMENTS
PARENT COMPANY
FINANCIAL STATEMENTS
£2.4 million (2022: £2.1 million)
£0.8 million (2022: £0.7 million)
6.2% (2022: 6.1%) of adjusted profit
before tax after amortisation. We
considered other measures such as
revenue, adjusted profit before tax
and statutory profit before tax.
Materiality for the current year
represents:
Parent company materiality
equates to 0.3% (2022: 0.2%)
of net assets which is capped
at 50% of Group performance
materiality (2022: 60%), in order
to address the risk of aggregation
when combined with other
businesses.
Rationale for the
benchmark applied
Adjusted PBT after
amortisation £38.4m
Group materiality
– 0.4% of revenue (2022: 0.3%);
– 5.6% of adjusted profit before tax
(2022: 4.5%); and
– 0.9% of net assets (2022: 0.7%).
We considered the financial measures
that were most relevant to users of the
financial statements and concluded
that the adjusted profit measure
represented the most relevant
metric for the purpose of evaluating
financial performance.
We believe that use of a balance
sheet measure was appropriate
given that the parent company
acts as a holding company.
Group materiality £2.4m
Component materiality range £0.6m–£0.8m
Audit committee reporting threshold £0.1m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that,
in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial
statements as a whole.
Performance
materiality
Basis and rationale
for determining
performance
materiality
GROUP FINANCIAL STATEMENTS
65% (2022: 65%) of Group materiality
PARENT COMPANY
FINANCIAL STATEMENTS
70% (2022: 70%) of parent
company materiality
In determining performance materiality, we considered the
following factors:
– our assessment of the respective complexity of the Group and
the parent company, and nature of the Group’s business model;
– the de-centralised nature of the Group’s control environment
and its variation across the Group; and
– the number of misstatements identified in the previous year.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences
in excess of £120k (2022: £105k), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the financial statements.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment,
including Group-wide controls, and assessing the risks of material misstatement at the Group
and component level.
There are 76 (2022: 72) reporting components in total, each of which is responsible for
maintaining their own accounting records and controls and using an integrated consolidation
system to report to UK head office.
Our Group audit scope focused on audit work at 19 components (2022: 20 components).
We selected 10 (2022: 10) reporting components where we requested component auditors
to perform a full scope audit of the component’s financial information. We also requested
component auditors to audit specified account balances at a further 9 (2022: 10) reporting
components. Coverage from the in-scope components representing 78% (2022: 81%) of the
Group’s revenue, 79% (2022: 87%) of the Group’s adjusted operating profit and 76% (2022: 80%)
of the Group’s net assets.
Each component was set a specific component materiality, considering its relative size and
any component-specific risk factors such as the location of components. The component
materialities applied were in the range £0.6 million to £0.8 million (2021: £0.5 million to
£0.7 million).
We tested the consolidation process at the parent company level and conducted analytical
procedures for entities not subject to detailed audit work to confirm our conclusion that there
was no significant risk of material misstatement in the aggregated financial information.
Revenue
Adjusted operating profit
Net assets
22%
31%
21%
24%
23%
47%
21%
58%
Full audit scope Specified audit procedures Analytical review procedures
53%
7.2. Our consideration of the control environment
The Group include their assessment of the internal control environment under the Risk
Management section of the annual report included on page 61.
With the involvement of our IT specialist, we have obtained an understanding of the control
environment and of the general IT controls, including an understanding of the business processes
and relevant controls within the key areas of the audit. We did not rely on the controls given the
varying systems used across the Group as a result of the de-centralised nature of the Group’s
control environment.
We performed an assessment over the Group’s largest ERP system used by several operating
sites in order to assess the potential to follow a controls reliance approach in future periods.
In some components we have performed testing on controls over the key business cycles such
as revenue and the journal entry approval process.
We have also obtained an understanding of the relevant controls over the areas with associated
key audit matters relating to classification of assets and liabilities as held for sale, the
classification of adjusting items, financial reporting and other deemed relevant controls.
7.3. Our consideration of climate-related risks
Climate change and the transition to a low carbon economy were considered in our audit where
they have the potential to impact, directly or indirectly, key judgements and estimates within
the Group financial statements. The Group continues to develop its assessment of the potential
impacts of climate change as disclosed in the People, Communities and Environment section
of the annual report on page 29. The Group has identified sustainability, climate change and
the environment as a principal risk to the business.
We performed the following procedures to address the climate-related risks:
– held discussions with management to obtain an understanding of the process for considering
the impact of climate-related risks and controls that are relevant to the entity;
– read and understood the work performed by the Group’s engaged third party climate specialists
and assessed the conclusions reached for consistency with the disclosures made in the
financial statements;
– performed a climate-related risk assessment with the involvement of our specialist
Environmental, Social & Governance ("ESG") team;
– considered whether information included in the climate related disclosures in the Annual
Report were materially consistent with the financial statements and our knowledge obtained
in the audit; and
– evaluated the appropriateness of disclosures included in the financial statements in note 1 on
page 133.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT CONTINUED
9. RESPONSIBILITIES OF DIRECTORS
7.4. Working with other auditors
We performed site visits to a number of our significant components to discuss significant
matters of the audit, audit procedures performed, as well as results of work done. The Group
engagement team continued to have online interaction with the Group’s largest and most
complex businesses during 2023 with a particular focus on locations where work was performed
on significant components.
In addition to the above, the Group engagement partner held Group-wide, divisional and individual
planning and close meetings which covered all businesses. Each division has a dedicated senior
member of the Group audit team responsible for the supervision and direction of components,
including where appropriate sector-specific expertise. We included all component audit teams in
our team briefing, discussed and reviewed their risk assessment, and reviewed documentation of
the findings from their work. We also reviewed the audit work papers supporting each component
team’s reporting to us.
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and
the parent company’s ability to continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the parent company or to cease operations, or have no
realistic alternative but to do so.
10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
8. OTHER INFORMATION
The other information comprises the information included in the annual report, other than the
financial statements and our auditor’s report thereon. The Directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to
the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained
in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our objectives are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located
on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditor’s report.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING
IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances of non-compliance with laws and regulations.
We design procedures in line with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud. The extent to which our procedures
are capable of detecting irregularities, including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities,
including fraud and non-compliance with laws and regulations, we considered the following:
11.2 Audit response to risks identified
As a result of performing the above, we identified the classification of adjusting items as a key
audit matter related to the potential risk of fraud. The key audit matters section of our report
explains the matter in more detail and also describes the specific procedures we performed
in response to that key audit matter.
In addition to the above, our procedures to respond to risks identified included the following:
– reviewing the financial statement disclosures and testing to supporting documentation
to assess compliance with provisions of relevant laws and regulations described as having
a direct effect on the financial statements;
– enquiring of management, the Audit Committee and external legal counsel concerning actual
and potential litigation and claims;
– the nature of the industry and sector, control environment and business performance including
the design of the Group’s remuneration policies, key drivers for Directors’ remuneration, bonus
levels and performance targets;
– results of our enquiries of management, internal audit, the Directors and the Audit Committee
about their own identification and assessment of the risks of irregularities, including those that
are specific to the Group’s sector;
– any matters we identified having obtained and reviewed the Group’s documentation of their
policies and procedures relating to:
• identifying, evaluating and complying with laws and regulations and whether they were aware
– performing analytical procedures to identify any unusual or unexpected relationships that may
indicate risks of material misstatement due to fraud;
– reading minutes of meetings of those charged with governance, reviewing internal audit reports
and reviewing correspondence with tax authorities; and
– in addressing the risk of fraud through management override of controls, testing the
appropriateness of journal entries and other adjustments; assessing whether the judgements
made in making accounting estimates are indicative of a potential bias; and evaluating the
business rationale of any significant transactions that are unusual or outside the normal course
of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all
engagement team members including internal specialists and significant component audit
teams, and remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
of any instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have knowledge of any actual,
suspected or alleged fraud;
• the internal controls established to mitigate risks of fraud or non-compliance with laws
and regulations;
– the matters discussed among the audit engagement team including significant component
audit teams and relevant internal specialists, including tax, valuations, pensions, IT, and ESG
regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist
within the organisation for fraud and identified the greatest potential for fraud in the classification
of adjusting items. In common with all audits under ISAs (UK), we are also required to perform
specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the Group
operates in, focusing on provisions of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the UK Companies Act, Listing Rules, pensions
legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect
on the financial statements but compliance with which may be fundamental to the Group’s ability
to operate or to avoid a material penalty.
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INDEPENDENT AUDITOR’S REPORT CONTINUED
Report on other legal and regulatory requirements
12. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
13. CORPORATE GOVERNANCE STATEMENT
In our opinion the part of the Directors’ remuneration report to be audited has been properly
prepared in accordance with the Companies Act 2006.
The Listing Rules require us to review the Directors’ statement in relation to going concern,
longer-term viability and that part of the Corporate Governance Statement relating to the Group’s
compliance with the provisions of the UK Corporate Governance Code specified for our review.
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the strategic report and the Directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
– the strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent company and
their environment obtained in the course of the audit, we have not identified any material
misstatements in the strategic report or the Directors’ report.
Based on the work undertaken as part of our audit, we have concluded that each of the
following elements of the Corporate Governance Statement is materially consistent with
the financial statements and our knowledge obtained during the audit:
– the Directors’ statement with regards to the appropriateness of adopting the going concern
basis of accounting and any material uncertainties identified set out on page 67;
– the Directors’ explanation as to its assessment of the Group’s prospects, the period this
assessment covers and why the period is appropriate set out on page 67;
– the Directors' statement on fair, balanced and understandable set out on page 115;
– the board’s confirmation that it has carried out a robust assessment of the emerging
and principal risks set out on page 62;
– the section of the annual report that describes the review of effectiveness of risk
management and internal control systems set out on page 61; and
– the section describing the work of the Audit Committee set out on page 88.
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Report on other legal and regulatory requirements continued
14. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
16. USE OF OUR REPORT
125
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.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule
(DTR) 4.1.15R – DTR 4.1.18R, these financial statements will form part of the Electronic Format
Annual Financial Report filed on the National Storage Mechanism of the FCA in accordance with
DTR 4.1.15R – DTR 4.1.18R. This auditor’s report provides no assurance over whether the
Electronic Format Annual Financial Report has been prepared in compliance with DTR 4.1.15R
– DTR 4.1.18R.
Robert Knight (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London/United Kingdom
6 March 2024
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit; or
– 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 are not in agreement with the accounting records
and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of Directors’ remuneration have not been made or the part of the Directors’ remuneration report
to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
15. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by the board of
Directors of the Group on 6 May 2020 at the Annual General Meeting to audit the financial
statements for the year ending 31 December 2020 and subsequent financial periods. The period
of total uninterrupted engagement including previous renewals and reappointments of the firm
is 4 years, covering the years ending 31 December 2020 to 31 December 2023.
15.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required
to provide in accordance with ISAs (UK).
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CONSOLIDATED INCOME STATEMENT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2023
£million (unless otherwise stated)
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit/(loss)
Analysed as:
Adjusted operating profit
Restructuring costs
Pension restructuring costs
Asset impairments and measurement losses
Amortisation of intangible assets arising on business combinations
Acquisition and disposal related costs
Finance income
Finance costs
Loss before taxation
Taxation
Loss for the year attributable to the owners of the Company
EPS attributable to owners of the Company (pence)
Basic
Diluted
Note
3
3
7
7
7
7
7
5
5
8
2023
613.9
(466.9)
147.0
(26.9)
(111.4)
8.7
52.8
(2.0)
(1.9)
(32.5)
(4.6)
(3.1)
1.6
(11.4)
(1.1)
(5.7)
(6.8)
for the year ended 31 December 2023
2022
£million
617.0
Loss for the year
(481.5)
Other comprehensive (loss) / income for the year after tax
135.5
Items that are or may be reclassified subsequently to the income statement:
(29.6)
Exchange differences on translation of foreign operations
(109.3)
Tax on exchange differences
(3.4)
Gain/(loss) on hedge of net investment in foreign operations
Gain/(loss) on cash flow hedges taken to equity less amounts recycled
to the income statement
Deferred tax loss on movement in cash flow hedges
Items that will never be reclassified to the income statement:
Remeasurement of defined benefit pension schemes
Tax on remeasurement of defined benefit pension schemes
Total comprehensive loss for the year attributable to the owners of the Company
47.1
(6.4)
(13.8)
(23.1)
(6.0)
(1.2)
2.3
(9.0)
(10.1)
(3.1)
(13.2)
10
10
(3.9)
(3.9)
(7.5)
(7.5)
2023
(6.8)
2022
(13.2)
(17.3)
1.1
1.8
3.5
(0.7)
0.2
(0.1)
(18.3)
26.9
(1.6)
(3.4)
(2.9)
(0.4)
(35.9)
6.5
(24.0)
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127
Note
23
24
2023
384.6
270.5
44.3
24.0
40.7
11.9
149.6
270.5
2022
410.2
297.0
44.1
22.9
55.1
7.3
167.6
297.0
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 December 2023
£million
ASSETS
Non-current assets
Right-of-use assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Derivative financial instruments
Pensions
Total non-current assets
Current assets
Inventories
Trade and other receivables
Income taxes receivable
Derivative financial instruments
Assets classified as held for sale
Cash and cash equivalents
Total current assets
Total assets
LIABILITIES
Current liabilities
Borrowings
Liabilities directly associated with assets classified as held for sale
Lease liabilities
Derivative financial instruments
Trade and other payables
Income taxes payable
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Deferred tax liability
Pensions
Provisions and other non-current liabilities
Total non-current liabilities
12
13
14
15
8
21
22
16
17
21
4
20
4
20, 30
21
18
19
20
20, 30
21
8
22
18, 19
Note
2023
2022
£million
Total liabilities
Net assets
EQUITY
Share capital
Share premium
Translation reserve
Other reserves
Retained earnings
Total equity
19.6
54.8
155.1
53.7
13.2
0.8
31.3
15.8
61.3
140.8
32.7
15.4
0.8
25.3
292.1
328.5
Approved by the Board of Directors on 6 March 2024 and signed on their behalf by:
Peter France
Director
Mark Hoad
Director
143.5
90.2
2.0
5.2
48.0
74.1
363.0
655.1
1.2
28.1
3.8
1.5
127.9
10.9
3.1
176.5
181.9
14.4
0.6
7.0
3.1
1.1
189.2
120.3
1.1
3.1
–
65.0
378.7
707.2
3.7
–
4.4
3.6
173.2
9.6
3.5
198.0
176.6
18.7
0.8
12.4
2.9
0.8
208.1
212.2
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128
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2023
£million
At 31 December 2021
Loss for the year
Other comprehensive income
Exchange differences on translation of foreign operations
Tax on exchange differences
Loss on hedge of net investment in foreign operations
Loss on cash flow hedges taken to equity less amounts recycled to the income statement
Deferred tax on movement in cash flow hedges
Remeasurement of defined benefit pension schemes
Tax on remeasurement of defined benefit pension schemes
Total comprehensive income/(loss)
Transactions with owners recorded directly in equity
Equity dividends paid by the Company
Share-based payments
Deferred tax on share-based payments
New shares issued
Other movements
Dividend to non-controlling interest
At 31 December 2022
At 31 December 2022
Loss for the year
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations
Tax on exchange differences
Gain on hedge of net investment in foreign operations
Gain on cash flow hedges taken to equity less amounts recycled to the income statement
Deferred tax on movement in cash flow hedges
Remeasurement of defined benefit pension schemes
Tax on remeasurement of defined benefit pension schemes
Total comprehensive (loss)/income
Transactions with owners recorded directly in equity
Equity dividends paid by the Company
Share-based payments
Deferred tax on share-based payments
New shares issued
Other movements
At 31 December 2023
1 NCI is an abbreviation of non-controlling interests which was eliminated with a dividend payment in 2022.
Share
premium
Translation
Reserve
Other
reserves
Retained
earnings
Sub-total
328.0
(13.2)
NCI 1
2.0
–
Share
capital
44.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44.1
22.6
–
–
–
–
–
–
–
–
–
–
–
–
0.3
–
–
22.9
33.2
–
26.9
(1.6)
(3.4)
–
–
–
–
21.9
–
–
–
–
–
–
55.1
7.1
–
–
–
–
(2.9)
0.2
–
–
(2.7)
–
4.8
(1.0)
–
(0.9)
–
7.3
44.1
22.9
55.1
7.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
44.3
1.1
–
24.0
(17.3)
1.1
1.8
–
–
–
–
(14.4)
–
–
–
–
–
40.7
–
–
–
3.5
(0.7)
–
–
2.8
–
3.1
(0.1)
–
(1.2)
11.9
221.0
(13.2)
–
–
–
–
(0.6)
(35.9)
6.5
(43.2)
26.9
(1.6)
(3.4)
(2.9)
(0.4)
(35.9)
6.5
(24.0)
(10.2)
(10.2)
–
–
–
–
–
4.8
(1.0)
0.3
(0.9)
–
167.6
297.0
167.6
(6.8)
297.0
(6.8)
–
–
–
–
–
0.2
(0.1)
(6.7)
(17.3)
1.1
1.8
3.5
(0.7)
0.2
(0.1)
(18.3)
(11.3)
(11.3)
–
–
–
–
3.1
(0.1)
1.3
(1.2)
149.6
270.5
Total
330.0
(13.2)
26.9
(1.6)
(3.4)
(2.9)
(0.4)
(35.9)
6.5
(24.0)
(10.2)
4.8
(1.0)
0.3
(0.9)
(2.0)
297.0
297.0
(6.8)
(17.3)
1.1
1.8
3.5
(0.7)
0.2
(0.1)
(18.3)
(11.3)
3.1
(0.1)
1.3
(1.2)
270.5
–
–
–
–
–
–
–
–
–
–
–
–
–
(2.0)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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129
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2023
£million
Cash flows from operating activities
Loss for the year
Taxation
Net finance costs
Restructuring costs and non underlying asset impairments and remeasurements
Acquisition and disposal related costs
Adjusted operating profit
Adjustments for:
Depreciation
Amortisation of intangible assets
Share based payment expense
Scheme funded pension administration costs
Other items
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables and provisions
Adjusted operating cash flow
Reimbursement of pension surplus
Restructuring and acquisition related costs
Net cash generated from operations
Net income taxes paid
Net cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment and government grants received
Capitalised development expenditure
Purchase of other intangibles
Acquisition of business
Net cash flow used in investing activities
Note
2023
2022
£million
Note
2023
2022
(6.8)
(13.2)
Issue of share capital
Cash flows from financing activities
8
7
7
12, 13
15
5.7
9.8
36.4
7.7
52.8
14.0
2.5
3.1
1.6
(0.7)
4.5
10.5
(15.5)
72.8
3.2
(4.0)
72.0
(9.1)
62.9
3.1
6.7
43.3
7.2
47.1
Interest paid
Repayment of borrowings
Proceeds from borrowings
Capital payment of lease liabilities
Other items
Dividends paid to minority shareholders
13.9
Dividends paid by the Company
2.2
4.8
–
0.5
(40.4)
(26.3)
27.9
29.7
–
(11.1)
18.6
(5.9)
12.7
Net cash flow (used in)/from financing activities
Cash transferred to held for sale
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange differences
Cash and cash equivalents at end of year
Cash and cash equivalents comprise:
Cash at bank and in hand
Bank overdrafts
Cash and cash equivalents at end of year
Cash and cash equivalents included within assets classified as held for sale
Cash and cash equivalents at end of year including those within assets classified
as held for sale
23
9
26
26
26
1.3
(10.6)
(26.1)
32.7
(4.4)
(1.2)
–
(11.3)
(19.6)
(3.6)
15.7
61.3
(4.1)
72.9
74.1
(1.2)
72.9
3.6
0.4
(7.5)
(149.3)
174.3
(4.3)
(1.0)
(2.0)
(10.2)
0.4
–
(9.2)
67.2
3.3
61.3
65.0
(3.7)
61.3
–
76.5
61.3
13
15
15
(22.3)
(11.4)
0.5
(1.6)
(0.6)
–
0.3
(2.3)
(0.6)
(8.3)
(24.0)
(22.3)
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130
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
at 31 December 2023
1 Basis of preparation
a) Basis of accounting
TT Electronics Plc (“the Group”) is a public company limited by shares (company number
00087249). The Group is incorporated in the United Kingdom under the Companies Act 2006
and registered in England and Wales. The address of the registered office is ‘TT Electronics Plc,
Fourth Floor, St Andrews House, West Street, Woking, Surrey, GU21 6EB’. The nature of the
Group’s operations and its principal activities by operating segment are set out in note 3 and in
the divisional reviews on pages 22 to 24. The Consolidated Financial Statements of the Group for
the year ended 31 December 2023 were authorised in accordance with a resolution of the
Directors of TT Electronics Plc on 6 March 2024.
These consolidated financial statements are presented in pounds sterling, which is also the
functional currency of the Company. Foreign operations are included in accordance with the
policies set out in note 2.
The consolidated financial statements have been prepared on a historical cost basis modified
by derivatives held at fair value. The consolidated financial statements have been prepared in
accordance with UK adopted international accounting standards in conformity with the
requirements of the Companies Act 2006. The financial statements have also been prepared
in accordance with International Financial Reporting Standards as issued by the IASB.
The financial statements set out on pages 126 to 129 have been prepared using consistent
accounting policies except for the adoption of new accounting standards and interpretations
noted below.
b) Basis of consolidation
The consolidated financial statements set out the Group’s financial position as at 31 December
2023 and the Group’s financial performance for the year ended 31 December 2023.
Subsidiaries are those enterprises controlled by the Group. Control exists when the Group is
exposed, or has rights, to variable returns from its involvement with the subsidiary and has the
ability to affect those returns through its power over the subsidiary. Subsidiaries are consolidated
from the date on which control is transferred to the Group and cease to be consolidated from the
date on which control is transferred out of the Group.
All intercompany balances and transactions, including unrealised profits arising from intra-group
transactions, have been eliminated in full. Unrealised losses are eliminated in the same way as
unrealised gains except that they are only eliminated to the extent that there is no evidence
of impairment.
c) Alternative performance measures
The Group presents Alternative Performance Measures (“APMs”) in addition to the statutory
results of the Group. These are presented in accordance with the guidelines on APMs issued
by the European Securities and Markets Authority (“ESMA”).
Adjusted operating profit has been defined as operating profit from continuing operations
excluding the impacts of significant restructuring programmes, significant one-off items including
property disposals, impairment charges significant in nature and/or value, business acquisition,
integration, and divestment related activity, and the amortisation of intangible assets recognised
on acquisition. Acquisition and disposal related items include the writing off of the pre-acquisition
profit element of inventory written up on acquisition, other direct costs associated with business
combinations and adjustments to contingent consideration related to acquired businesses.
Restructuring includes significant changes in footprint (including movement of production
facilities) and significant costs of management changes.
In addition to the items above, adjusting items impacting profit after tax include:
– The net effect on tax of significant restructuring from strategy changes that are not considered
by the Group to be part of the normal operating costs of the business; and
– The tax effects of adjustments to profit before tax.
These financial statements include alternative performance measures that are not prepared in
accordance with IFRS. These APMs have been selected by the Directors to assist them in making
operating decisions because they represent the underlying operating performance of the Group
and facilitate internal comparisons of performance over time.
The Directors consider the adjusted results to be an important measure used to monitor how the
businesses are performing as this provides a meaningful reflection of how the businesses are
managed and measured on a day-to-day basis and achieves consistency and comparability
between reporting periods.
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In December 2021, the Group issued £75 million of fixed rate loan notes with three institutional
investors; the issue is evenly split between 7- and 10- year maturities with an average interest rate
of 2.9% and covenants in line with our bank facility.
– A leverage ratio (banking covenant defined measure) of 1.7 times at 31 December 2023
compared to the RCF (and PP loan notes) covenant maximum of 3.0 times. Interest cover
(banking covenant defined measure) of 6.1 times compared to the RCF (and PP loan notes)
covenant minimum of 4.0 times.
The Group has prepared and reviewed cash flow forecasts across the business over the twelve-
month period from the date of the approval of these financial statements, considering the
Group’s current financial position and the potential impact of our principal risks on divisions.
The Group’s financial projections contain key assumptions surrounding revenue and operating
profit growth in 2024. Under the Group’s base case financial projections, the Group retains
significant liquidity and covenant headroom throughout the forecast period, with both metrics
improving from the position as at 31 December 2023.
The Group’s financial projections have been stress tested for “business as usual” risks (such
as profit growth, supply chain pressure and working capital variances), and the impact of the
following principal risks: general revenue reduction, contractual risks, research and development,
people and capability, supplier resilience and health and safety (occurring both individually and
in unison). Principal risks which were not specifically modelled were either considered not likely
to have an impact within the going concern period or their financial effect was covered within
the overall downside economic risks implicit within the stress testing. Under the stress tested
modelling, the liquidity headroom within the group remains adequate throughout the forecast
period. Financial covenants continue to be in compliance under the stress tested model and
management have a number of mitigating actions which could be undertaken if required.
1 Basis of preparation continued
These APMs exclude certain significant non-recurring, infrequent or non-cash items that the
Directors do not believe are indicative of the underlying operating performance of the Group
(that are otherwise included when preparing financial measures under IFRS).
Adjusted profit is not a defined term under IFRS and may not be comparable with similarly titled
profit measures reported by other companies. It is not intended to be a substitute for, or superior
to, GAAP measures. All APMs relate to the current year results and comparable periods
where provided.
The Directors consider there to be four main APMs: adjusted operating profit, free cash flow,
adjusted EPS and adjusted effective tax rate.
All APMs are presented on pages 174 to 177 and are reconciled to their equivalent statutory
measures where this is appropriate.
d) Going concern
The Group’s business activities, together with the factors likely to affect its future development,
performance and position are set out within the Strategic Report on pages IFC to 67. The Strategic
Report analyses the financial position of the Group, its cash flows, liquidity position and borrowing
facilities. In addition, note 21 to the financial statements includes the Group’s objectives, policies
and processes for managing its capital; its financial risk management objectives; details of its
financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Group has experienced continued improvement in trading momentum and strong growth
on our 2022 results. We continue to see benefit from our strategic repositioning in our chosen
structural growth markets as well as our focus on building close relationships with our clients
and this can be seen in both the order book and financial performance of the Group.
The Group’s financial position remains strong, at 31 December 2023 it had:
– £2263.3 million of total borrowing facilities available (comprising committed facilities of
£240.7 million and uncommitted facilities of £22.6 million representing overdraft lines and an
accordion facility of £17.6 million). The Group’s primary source of finance is the £162.4 million
committed revolving credit facility (RCF) which was signed in June 2022 and will mature in
June 2027 following the Group exercising an option to extend the previously existing maturity
by one year in May 2023. The RCF includes a £15.0 million committed extension converted
from the existing uncommitted accordion facilities in February 2023. At 31 December 2023
£108.8 million of this facility had been drawn down. The Group’s RCF is payable on a floating
rate basis above GBP SONIA, USD SOFR or EURIBOR depending on the currency of the loan.
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1 Basis of preparation continued
In addition to the stress tests described above the Group’s stress test scenario has been
sensitised for supply chain challenges and capacity constraints which shows a reduction in
revenue and operating profit compared to the latest forecast. Despite this further reduction these
projections show that the Group should remain within its facilities headroom and within bank
covenants for the twelve months following the approval of these financial statements. A “reverse”
stress-test was also modelled to understand the conditions which could jeopardise the ability of
the Group to continue as a going concern including assessing against covenant testing and facility
headroom. The stress testing also considered mitigating actions which could be put in place.
Mitigating actions included limiting capital expenditure and reducing controllable costs including
items such as discretionary bonuses and pay rises. The reverse stress test is deemed to have a
remote likelihood and help inform the Directors’ assessment that there are no material
uncertainties in relation to going concern.
The Group’s wide geographical and sector diversification helps minimise the risk of serious
business interruption or catastrophic reputational damage. Furthermore, the business model is
structured so that the Group is not overly reliant on any single customer, market or geography.
The Directors have assessed the future funding requirements of the Group with due regard to
the risks and uncertainties to which the Group is exposed and compared them with the level of
available borrowing facilities and are satisfied that the Group has adequate resources for at least
twelve months from the date of signing. Accordingly, the financial statements have been prepared
on a going concern basis.
e) New and revised standards and interpretations adopted, not yet adopted and those in issue
but not yet effective
New and revised standards and interpretations adopted during the year
At the date of authorisation of these financial statements the Group has considered the following
revised standards or interpretations, however they were deemed not to have a material effect on
the financial statements:
– IFRS 17 Insurance Contracts
– Amendments to IFRS 17
– Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
– Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments
to IAS 12)
– Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Amendment to IFRS 17)
– Definition of Accounting Estimates (Amendments to IAS 8)
– International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12)
– application of the exception and disclosure of that fact
– International Tax Reform — Pillar Two Model Rules (Amendments to IAS 12)
— other disclosure requirements
New and revised standards and interpretations not yet adopted
The Group does not consider that any standard, amendment or interpretation issued by the IASB,
but not yet applicable, will have a significant impact on the financial statements.
New and revised IFRS Standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following
new and revised IFRS Standards that have been issued but are not yet effective:
– IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
– IFRS S2 — Climate-related Disclosures
– Classification of Liabilities as Current or Non-Current (Amendments to IAS 1)
– Lease Liability in a Sale and Leaseback (Amendments to IFRS 16)
– Non-current Liabilities with Covenants (Amendments to IAS 1)
– Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).
f) Change in accounting policies
Adoption of new and amendments to published standards and interpretations effective for the
Group for the year ended 31 December 2023 did not have any material impact on the financial
position or performance of the Group.
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1 Basis of preparation continued
g) Critical accounting judgements and key sources of estimation uncertainty
In the application of the Group’s accounting policies, which are described in note 2, the Directors
are required to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical experiences and other factors
that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised if the revision
affects only that period, or in the period of revision and future periods if the revision affects both
current and future periods.
The Directors have assessed that there is currently no material impact arising from climate change
on the judgements and estimates determining the valuations within the financial statements.
Key sources of estimation uncertainty
Assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date, that may have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year, are discussed below.
– Note 8 – Taxation. Accruals for tax contingencies require management to make judgements
and estimates in relation to tax authority audits and exposures. Amounts accrued are based
on management’s interpretation of country-specific tax law and the likelihood of settlement.
Tax benefits are not recognised unless the tax positions are probable of being sustained. Once
considered to be probable, management reviews each material tax benefit to assess whether
a provision should be taken against full recognition of the benefit on the basis of potential
settlement through negotiation and/or litigation. These amounts are expected to be utilised or to
reverse as tax audits occur or as the statute of limitations is reached in the respective countries
concerned. The Group’s current tax liability at 31 December 2023 includes tax provisions of
£9.3 million (2022: £8.4 million). The Group believes the range of reasonable possible outcomes
in respect of these exposures is tax liabilities of up to £12.3 million (2022: £11.1 million).
Critical judgements
In the course of preparing the Financial Statements, critical judgements within the scope of
paragraph 122 of IAS 1: “Presentation of Financial Statements” were made during the process
of applying the Group’s accounting policies. These are outlined below.
Assets classified as held for sale and directly related liabilities
Judgement was required in determining the classification of the Group’s assets and directly
associated liabilities classified as held for sale, particularly with the timing of the held for sale
classification as the transaction was not complete by 31 December 2023. It is management’s
assessment that it is highly probable that the transaction will be completed within 12 months
of the balance sheet date. Further details are set out in note 4.
Adjusting items
Judgements were required as to whether items were disclosed as adjusting, with consideration
given to both quantitative and qualitative factors. Further information about the determination
of adjusting items in the year ended 31 December 2023 is included in note 1c.
Critical judgements involving estimates that have had a significant effect on the amounts
recognised in the financial statements are set out below.
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2 Summary of material accounting policies
The following material accounting policies have been applied in the preparation of the
consolidated financial statements. These accounting policies have been consistently applied
across the Group.
a) Revenue
Revenue is measured at the fair value of the right to consideration, usually the invoiced value, for
the provision of goods to external customers excluding value added tax and other sales related
taxes and is recognised when the customer obtains control of goods for revenues which are not
recognised over time. In most cases this is at the point in time of transfer of legal title of the goods;
terms vary by customer, but the two most common arrangements are at the time of dispatch and
at the time of delivery. Where revenue is recognised over time this is recognised with regards to
completion of performance obligation milestones. For sales to customers where a right to return
an item is granted, revenue is recognised to the extent of the consideration to which the Group
ultimately expects to be entitled (i.e. revenue is not recognised for goods expected to be returned).
Where a service warranty is provided to customers, the associated revenue, based upon an
allocation of the overall cost of performance, is recognised over the warranty period. Payment
terms typically range from 30 to 120 days.
b) Finance income
Finance income comprises interest income on funds invested, the calculated interest income on
pensions assets for schemes which are in surplus and net foreign exchange gains or losses on
cash balances and loans receivables. Interest income is recognised using the effective interest
rate. Net foreign exchange gains or losses on other monetary assets or liabilities are recognised
either within other income or cost of sales, depending on what the underlying monetary asset or
liability relates to.
Assets classified as held for sale and directly associated liabilities
An asset is classified as held for sale if it is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets and that it is highly
probable the asset will be sold within one year from the date of classification. Assets held
for sale and directly associated liabilities are remeasured to their fair value less costs to sell.
Any impairment is first applied to non-current assets and then current assets in the order
deemed most appropriate by management
e) Dividends
Dividends are recognised as a liability in the period in which they are approved by shareholders.
Dividends receivable are recognised when the Group’s right to receive payment is established.
f) Business combinations
Business combinations are accounted for using the acquisition method. Goodwill on business
combinations is recognised as the fair value of the consideration, including the full cost of any
derivative financial instruments used to hedge this item, less the fair value of the identifiable
assets and liabilities acquired and is recognised as an asset in the consolidated balance sheet.
Costs directly attributable to business combinations are recognised as an expense within the
income statement as incurred.
Acquisitions and disposals of non-controlling interests that do not result in a change of control are
accounted for as transactions with owners in their capacity as owners and therefore no goodwill is
recognised as a result of such transactions. The adjustments to non-controlling interests are based
on a proportionate amount of the net assets of the subsidiary. Any difference between the price
paid or received and the amount by which non-controlling interests are adjusted is recognised
directly in equity and attributed to the owners of the parent.
c) Finance costs
Finance costs comprise interest expense on borrowings which are not capitalised under the
borrowing costs policy, the calculated interest expense on pension liabilities for schemes which
are in deficit, the interest costs on lease liabilities and net foreign exchange gains or losses on
external loans. Net foreign exchange gains or losses on other monetary assets or liabilities are
recognised either within other income or cost of sales, depending on what the underlying
monetary asset or liability relates to.
If the initial accounting for a business combination is incomplete by the end of the reporting period
in which the combination occurs, the Group reports provisional amounts for the items for which
the accounting is incomplete. Those provisional amounts are adjusted during the measurement
period (which is no longer than 12 months from the acquisition date), or additional assets or
liabilities are recognised, to reflect new information obtained about facts and circumstances that
existed as of the acquisition date that, if known, would have affected the amounts recognised as
of that date.
d) Discontinued operations and assets held for sale
Discontinued operations
The Group reports a business as a discontinued operation when it has been disposed of in a
period, or its future sale is considered to be highly probable at the balance sheet date, and results
in the cessation of a major line of business or geographical area of operation.
g) Property, plant and equipment
Initial measurement
Property, plant and equipment is stated at cost less accumulated depreciation and impairment
losses. The cost of a tangible fixed asset comprises its purchase price and any costs directly
attributable to bringing it into working condition for its intended use. The cost of self constructed
assets includes the cost of materials, direct labour and an appropriate proportion of
production overheads.
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2 Summary of material accounting policies continued
Depreciation
The cost of each item of property, plant and equipment is depreciated over its useful life.
Depreciation is charged to the income statement so as to write-off the cost less estimated
residual value on a straight-line basis over the estimated useful life of the asset. Depreciation
commences on the date the assets are ready for use within the business and the asset carrying
values are reviewed for impairment when there is an indication that they may be impaired.
Freehold land is not depreciated.
The depreciation rates of assets are as follows:
Freehold buildings
Leasehold building improvements
Plant and equipment
50 years
50 years (or over the period of the lease, if shorter)
3 to 10 years
Borrowing costs directly attributable to the acquisition, construction or production of qualifying
assets that take a substantial period of time to get ready for their intended use are capitalised
as part of the cost of the respective asset.
h) Investment property
Property held to earn rental income rather than for the purpose of the Group’s principal activities
is classified as investment property. Investment property is recorded at cost less accumulated
depreciation and any recognised impairment loss. The depreciation policy is consistent with that
described for other Group properties. The assets’ residual values and useful lives are reviewed,
and adjusted, if appropriate, at each balance sheet date.
Investment properties are derecognised when either they have been disposed of or when the
investment property is permanently withdrawn from use and no future economic benefit is
expected from its disposal. The difference between the net disposal proceeds and the carrying
amount of the asset is recognised in the income statement in the period of derecognition.
i) Leases
The Group applies IFRS 16 ‘Leases’ and recognises right-of-use assets and lease liabilities for
most leases (unless the lease term is 12 months or less or the underlying asset has a low value).
The Group recognises a lease liability at the lease commencement date, measured as the present
value of the future lease payments, discounted at the incremental borrowing rate. A corresponding
right-of-use asset is recognised separately on the face of the consolidated balance sheet, net of
accumulated depreciation and impairment losses.
The Group has applied judgement to determine the lease term for contracts that include renewal
options. The assessment of whether the exercise of such options is reasonably certain impacts
the lease term, which affects the amount of lease liability and right-of-use asset recognised.
j) 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.
k) 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. Goodwill is not amortised, and any impairment losses are not
subsequently reversed. On the subsequent disposal or discontinuance of a previously acquired
business, the relevant goodwill is included in the gain or loss on disposal within the consolidated
income statement except to the extent it has been previously impaired.
Negative goodwill arising on the acquisition of a business is credited to the consolidated income
statement on acquisition as part of acquisition costs reported outside adjusted profit.
Cash-generating units to which goodwill has been allocated are tested for impairment annually,
or more frequently when there is an indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than the carrying amount of the unit, the impairment
loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then
to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the
unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
l) 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.
Expenditure on research activities undertaken with the prospect of gaining new scientific or
technical knowledge and understanding is recognised in the income statement as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design
for the production of new or substantially improved products and processes, is capitalised if
the product or process is technically and commercially feasible and the Group has sufficient
resources to complete development. The expenditure capitalised includes the cost of materials,
direct labour and an appropriate proportion of overheads. Other development expenditure is
recognised in the income statement as incurred. Capitalised development expenditure is stated
at cost less accumulated amortisation and impairment losses. The carrying values of intangible
assets are tested for impairment whenever there is an indication that they may be impaired.
Customer relationships and contracts are valued on the basis of the net present value of the future
additional cash flows arising from customer relationships with appropriate allowance for attrition
of customers.
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2 Summary of material accounting policies continued
Acquired computer software licences for use within the Group are capitalised as an intangible
asset on the basis of the costs incurred to acquire and bring to use the specific software. Costs
that are directly associated with the implementation of identifiable and unique software products
controlled by the Group and that will probably generate economic benefits exceeding costs
beyond one year, are recognised as intangible assets. Capitalised software development
expenditure is stated at cost less accumulated amortisation.
The amortisation rates for intangible assets are:
Acquired patents and licences
Product development costs
Customer relationships
Order backlog
Software
up to 10 years
5 years
3 to 22 years
up to 2 years
3 to 5 years
Amortisation is charged on a straight-line basis.
m) 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. No provision
is made for deferred tax which would become payable on the distribution of retained profits by
overseas subsidiaries where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
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 substantively 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.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits
will be available against which the asset can be utilised or that they will reverse. Deferred tax
assets are reduced to the extent that it is no longer probable that the related tax benefit will
be realised.
Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred taxes relate to the same taxable entity and
the same taxation authority.
n) 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. Net realisable value is based on estimated selling price less costs
expected to be incurred to completion and disposal. Provisions are made for obsolescence or
other expected losses where necessary.
o) Financial instruments
Recognition
The Group recognises financial assets and liabilities on its balance sheet when it becomes a party
to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet when
there is a legally enforceable right to set off the recognised amounts and there is an intention to
settle on a net basis, or realise the asset and settle the liability simultaneously.
Measurement
When financial assets and liabilities are initially recognised, they are measured at fair value being
the consideration given or received plus (or minus) directly attributable transaction costs.
Trade receivables are recognised at transaction price (i.e. original invoice price) and subsequently
measured at amortised cost less provision made for loss allowance of these receivables based
upon the expected credit loss model (simplified model). All trade receivables are held to collect
contractual cash flows within a business model and meet the ‘Solely Payments of Principal and
Interest’ (SPPI) test.
Trade payables are carried at the amounts expected to be paid to counterparties and are held
at amortised cost.
Borrowings are initially recognised at the fair value of the consideration received less directly
attributable transaction costs. After initial recognition, borrowings are subsequently measured
at amortised cost using the effective interest method.
Cash and cash equivalents comprise cash at bank and in hand, short-term deposits held on call
or with maturities of less than three months at inception, and highly liquid investments that are
readily convertible into known amounts of cash and are subject to insignificant risk of changes
in value. Within the cashflow statement this definition also includes bank overdrafts that are
repayable on demand and form an integral part of the Group’s cash management. Cash and cash
equivalents are initially recognised at fair value and subsequently are measured at amortised cost
because they meet the SPPI test.
In determining estimated fair value, investments are valued at quoted bid prices on the trade date.
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2 Summary of material accounting policies continued
Derivatives and hedge accounting
The Group uses derivative financial instruments such as forward foreign exchange contracts
and interest rate derivatives to hedge risks associated with foreign exchange fluctuations and
interest rate risk. These are designated as cash flow hedges (CFH). At the inception of the hedge
relationship, the Group documents the relationship between the hedging instrument and the
hedged item, along with its risk management objectives and its strategy for undertaking various
hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the
Group documents whether the hedging instrument that is used in a hedging relationship is highly
effective in offsetting changes in cash flows of the hedged item.
The effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges are deferred in equity. The gain or loss relating to the ineffective portion
is recognised immediately in the income statement.
Amounts deferred in equity are reclassified to the income statement in the periods when the
hedged item is recognised in the income statement, in the same line of the income statement
as the recognised hedged item.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated,
or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred
in equity at that time remains in equity and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected
to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in the
income statement.
When hedging the FX risk on a forecast business combination, the Group includes the
accumulated gains or losses on hedging instruments within goodwill as a ‘basis adjustment’.
Derecognition
A financial asset is derecognised when the Group loses control over the contractual rights that
comprise that asset. This occurs when the rights are realised, expire or are surrendered. A financial
liability is derecognised when it is extinguished. Originated loans and receivables are derecognised
on the date they are transferred by the Group.
Impairment of financial assets – other financial assets
At each reporting date the Group assesses credit risk by considering reasonable and supportable
information that may indicate increases in credit risk. Indicators that an asset carries a higher
credit risk compared to that at inception or that an asset is credit-impaired would include
observable data in relation to the financial health of the debtor: significant financial difficulty of
the issuer or the debtor; the debtor breaching contract; it being probable that the debtor will enter
bankruptcy or financial reorganisation.
The amount of credit risk provision is the difference between the original carrying amount and the
recoverable amount, being the present value of expected cash flows receivable (discounted using
the original effective interest rate). The amount of the provision is recognised in the income
statement within administrative expenses.
Financial assets are written off when there is evidence indicating that the debtor is in severe
financial difficulty and the Group has no realistic prospect of recovery. Receivables written off
are still subject to enforcement activity and pursued by the Group.
p) Income tax
Income tax for the year comprises current and deferred tax. Income tax is recognised in the
income statement except to the extent that it relates to items charged or credited directly to equity,
in which case it is recognised in equity. Current tax expense is the expected tax payable on the
taxable income for the year and any adjustment to tax payable in respect of previous years.
q) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) because
of a past event, it is probable that an outflow of resources will be required to settle the obligation
and a reliable estimate can be made of the amount. If the effect of the time value of money is
material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and, where appropriate,
the risks specific to the liability. Where discounting is used, the increase in the provision due to the
passage of time is recognised as a finance cost.
r) Employee benefits
The Group operates defined benefit post-retirement benefit schemes and defined contribution
pension schemes.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed
contributions into a separate entity and will have no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution pension plans are recognised in
the income statement in the periods during which services are rendered by employees.
Defined benefit plans
The liability recognised in the balance sheet for defined benefit schemes is the present value of
the schemes’ liabilities less the fair value of the 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. Net interest income and expense on net defined benefit assets and liabilities
is determined by applying discount rates used to measure defined benefit obligations at the
beginning of the year to net defined benefit assets and liabilities at the beginning of the year and
is included in finance income and costs. Remeasurements arising from defined benefit plans
comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect
of the asset ceiling (if any, excluding interest).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 138
2 Summary of material accounting policies continued
The Group recognises remeasurements immediately in other comprehensive income and all other
expenses related to defined benefit plans in employee benefit expenses in profit or loss. Surpluses
are recognised where, on wind-up, the Group has unconditional right to any surplus and Trustees
do not have unilateral power to alter members’ benefits.
Termination benefits
Termination benefits are recognised as an expense when the Group is committed demonstrably,
without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment
before the normal retirement date, or to provide termination benefits as a result of an offer made to
encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised
as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer
will be accepted, and the number of acceptances can be estimated reliably.
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided. A liability is recognised for the amount expected to
be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of past service provided by the employee,
and the obligation can be estimated reliably.
Share-based payments
Certain employees of the Group receive part of their remuneration in the form of share-based
payment transactions, whereby employees render services in exchange for shares or rights over
shares (equity-settled transactions). The cost of equity-settled transactions with employees is
measured at fair value at the date at which they are granted. The fair value of share awards with
market-related vesting conditions is determined by an external consultant and the fair value at
the grant date is expensed on a straight-line basis over the vesting period based on the Group’s
estimate of shares that will eventually vest. The estimate of the number of awards likely to vest is
reviewed at each balance sheet date up to the vesting date at which point the estimate is adjusted
to reflect the actual outcome of awards which have vested. No adjustment is made to the fair
value after the vesting date even if the awards are forfeited or not exercised.
s) Own shares
Own equity instruments which are re-acquired (own shares) are recognised at cost and deducted
from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue
or cancellation of the Group’s own equity instruments. Any difference between the carrying
amount and the consideration paid to acquire such equity instruments is recognised within
retained earnings.
t) Foreign currency translation
The functional currency for each entity in the Group is determined with reference to the currency
of the primary economic environment in which it operates. Transactions in currencies other than
the functional currency are initially recorded at the functional currency rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at
the rate of exchange ruling at the balance sheet date. Exchange gains and losses on settlement of
foreign currency transactions translated at the rate prevailing at the date of the transactions, or the
translation of monetary assets and liabilities at period end exchange rates, are taken to the income
statement. Non monetary assets and liabilities denominated in foreign currencies that are stated
at historical cost are translated to the functional currency at the foreign exchange rate ruling at the
date of the transaction.
On consolidation, income statements of subsidiaries are translated into sterling at average rates of
exchange. Balance sheet items are translated into sterling at period end exchange rates. Exchange
differences on the retranslation are taken to equity. Exchange differences on foreign currency
borrowings financing those net investments (which are designated as net investment hedges)
and exchange differences on intercompany loans which will not be repaid in the foreseeable
future (which are treated as quasi equity) are also recorded within equity and are reported in the
statement of comprehensive income. All other exchange differences are charged or credited to
the income statement in the year in which they arise. 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.
u) Impairment of non-financial assets
Property, plant and equipment and intangible assets (excluding goodwill) carrying amounts are
reviewed at each reporting date to determine whether there is any indication of impairment. If any
such indication exists, the recoverable amount of the asset is estimated. Recoverable amount is
the higher of fair value less costs of disposal and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate.
Assets that do not generate largely independent cash flows are assessed based on the CGU to
which the asset belongs. If the recoverable amount of an asset (or CGU) is estimated to be less
than its carrying amount, an impairment loss is recognised in the income statement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 3 Segmental reporting
The Group is organised into three divisions, as shown below, according to the nature of the
products and services provided. Each of these divisions represents an operating segment or an
aggregation of operating segments in accordance with IFRS 8 ‘Operating Segments’. The chief
operating decision maker is the Chief Executive Officer. The operating segments are:
– Power and Connectivity – The Power and Connectivity division designs and manufactures
power application products and connectivity devices which enable the capture and wireless
transfer of data. We collaborate with our customers to develop innovative solutions to optimise
their electronic systems; Power and Connectivity is an aggregation of two operating segments
due to similarities in products and markets served;
– Global Manufacturing Solutions – The Global Manufacturing Solutions division provides
manufacturing services and engineering solutions for our product divisions and to customers
that often require a lower volume and higher mix of different products. We manufacture
complex integrated product assemblies for our customers and provide engineering services
including designing testing solutions and value-engineering; and
– Sensors and Specialist Components – The Sensors and Specialist Components division works
with customers to develop standard and customised solutions including sensors and power
management devices. Our solutions improve the precision, speed and reliability of critical
aspects of our customers’ applications.
The key performance measure of the operating segments is adjusted operating profit. Refer to the
section titled ‘Reconciliation of KPIs and non IFRS measure’ for the definition of adjusted profit.
Corporate costs – Resources and costs of the head office managed centrally but deployed in
support of the operating units are allocated to segments based on a combination of revenue and
operating profit. Resources and costs of the head office which are not related to the operating
activities of the trading units are not allocated to divisions and are separately disclosed, equivalent
to the segment disclosure information, so that reporting is consistent with the format that is used
for review by the chief operating decision maker. This gives greater transparency of the adjusted
operating profits for each segment.
Inter-segment pricing is determined on an arms length basis in a manner similar to transactions
with third parties.
The Group’s geographical segments are determined by the location of the Group’s non-current
assets and, for revenue, the location of external customers. Group financing (including finance
costs and finance income) and income taxes are managed on a Group basis and are not allocated
to operating segments. Goodwill is allocated to the individual cash generating units which may be
smaller than the segment of which they are part.
a) Income statement information
£million
Sales to external customers
Adjusted operating profit
Add back: adjustments made to
operating profit (note 7)
Operating loss
Net finance costs
Loss before taxation
£million
Sales to external customers
Adjusted operating profit
Add back: adjustments made to
operating profit (note 7)
Operating profit
Net finance costs
Loss before taxation
b) Segment assets and liabilities
£million
Power and Connectivity
Global Manufacturing Solutions
Sensors and Specialist Components
Segment assets and liabilities
Pensions
Unallocated
Total assets/liabilities
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
Total
Operating
Segments
169.7
14.3
299.2
27.6
145.0
19.0
613.9
60.9
Corporate
–
(8.1)
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
Total
Operating
Segments
154.2
7.9
323.0
25.2
139.8
21.8
617.0
54.9
Corporate
–
(7.8)
139
2023
Total
613.9
52.8
(44.1)
8.7
(9.8)
(1.1)
2022
Total
617.0
47.1
(50.5)
(3.4)
(6.7)
(10.1)
2023
186.7
148.3
147.3
482.3
25.3
147.5
655.1
Assets
2022
231.0
210.0
148.6
589.6
31.3
86.3
707.2
Liabilities
2022
48.1
118.9
31.0
198.0
2.9
209.3
410.2
2023
37.5
75.0
29.5
142.0
3.1
239.5
384.6
Unallocated assets of £147.5 million (2022: £86.3 million) comprise deferred tax asset of
£15.4 million (2022: £13.2 million), cash and cash equivalents of £74.1 million (2022: £65.0 million),
income tax receivable of £2.0 million (2022: £1.1 million), assets held for sale of £48.0 million
(2022: £nil) and assets associated with the central corporate function of £8.0 million (2022:
£7.0 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
140
3 Segmental reporting continued
Unallocated liabilities of £239.5 million (2022: £209.3 million) comprise borrowings (excluding
leases and overdrafts) of £181.9 million (2022: £176.6 million), overdrafts of £1.2 million (2022:
£3.7 million), deferred tax liability of £7.0 million (2022: £12.4 million), income tax payable of
£10.9 million (2022: £9.6 million), liabilities transferred to assets held for sale of £28.1 million
(2022: £nil) and liabilities associated with the central corporate function of £10.4 million (2022:
£7.0 million).
£million
Power and Connectivity
Global Manufacturing Solutions
Sensors and Specialist Components
Total
Capital expenditure
Depreciation and amortisation
2023
10.5
8.2
5.8
24.5
2022
5.4
2.4
6.5
14.3
2023
5.5
4.4
6.6
16.5
2022
5.5
4.6
6.0
16.1
c) Geographic information
Revenue by destination
The Group operates on a global basis. Revenue from external customers by geographical
destination is shown below. Management monitors and reviews revenue by region rather than
by individual country given the significant number of countries where customers are based.
£million
United Kingdom
Rest of Europe
North America
Asia
Rest of the World
2023
144.7
95.7
225.1
145.5
2.9
613.9
2022 1
130.0
104.3
235.2
144.7
2.8
617.0
1 Revenue by destination in 2022 has been represented following a reclassification of end market for one customer.
Revenue from services is less than 1% of Group revenues. All other revenue is from the sale
of goods.
Non-current assets
The carrying amount of non-current assets, excluding deferred tax assets, derivatives
and pensions, analysed by the geographical area is shown below:
£million
United Kingdom
Rest of Europe
North America
Central and South America
Asia
d) Market information key customers
The Group operates in the following markets:
£million
Healthcare
Aerospace and defence
Automation and electrification
Distribution
2023
80.3
0.1
157.2
4.9
8.1
250.6
2023
146.3
123.5
221.4
122.7
613.9
2022
103.6
0.2
162.6
5.0
11.8
283.2
2022 1
172.1
95.3
237.0
112.6
617.0
1 Revenue by market in 2022 has been represented following a reclassification of end markets for several key customers.
The Group had no customers who contributed greater than 10% of revenues in 2023 (2022: one
customer who contributed 12% and whose revenues were recognised in the Global Manufacturing
Solutions segment).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
141
4 Held for sale
On 4 March 2024 the Group announced the agreement to sell three business operating units
within the GMS and Power and Connectivity segments to the Cicor Group for a cash consideration
of £20.8 million on a cash and debt free basis subject to normal working capital adjustments.
In the prior year an impairment of £17.7 million was recognised to reduce the carrying value
of the IoT Solutions CGU to the recoverable amount as at 31 December 2022 (see note 7).
The assets and liabilities of the disposal group as well as the allocated remeasurement has been
presented below as follows:
The divestment relates to business units in Hartlepool and Cardiff, UK and Dongguan, China which
provide electronics manufacturing services and certain connectivity products, principally to
industrial clients.
£million
ASSETS
The criteria of a highly probable sale were met in December 2023 and the Directors were
committed to the disposal at the balance sheet date. Accordingly, the assets and related liabilities
of the disposal group are shown as being held for sale. The carrying value of assets held for sale
exceeded the fair value less costs to sell and accordingly a measurement loss of £32.5 million has
been recognised within adjusting items of which £22.6 million related to the IoT Solutions CGU and
£9.9 million related to the GMS CGU.
Of the £32.5 million remeasurement, the following assets were fully written down: other intangible
assets (£14.9 million), goodwill (£8.6 million), right of use assets (£4.5 million) and property plant
and equipment (£3.1 million). The remaining write down of £1.4 million was recorded
against inventories.
Derivative financial instruments
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
LIABILITIES
Lease liabilities
Derivative financial instruments
Trade and other payables
Income taxes payable
Provisions
Deferred tax liability
Liabilities directly associated with assets classified as held for sale
Held for sale net assets
Net
0.2
29.5
14.7
3.6
48.0
2.6
0.8
21.4
0.1
1.9
1.3
28.1
19.9
The disposal group does not constitute a major line of business or geographical location and
therefore the results and cash flows continue to be treated as continuing operations as required
by IFRS 5.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
142
5 Finance costs and finance income
£million
Interest income
Net interest income on pension schemes in surplus
Finance income
Interest expense
Interest on lease liabilities
Net interest expense on pension schemes in deficit
Amortisation of arrangement fees
Finance costs
Net finance costs
Within ‘Amortisation of arrangement fees’ is an expense of £nil (2022: £0.5 million) relating to the
acceleration of capitalised loan arrangement fees.
2023
2022
6 Loss for the year
Loss from continuing operations for the year is stated after charging/(crediting):
0.1
1.5
1.6
9.9
0.8
0.1
0.6
11.4
9.8
0.1
2.2
2.3
7.1
0.8
0.1
1.0
9.0
6.7
£million
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets 1
Impairment of goodwill (excluded from adjusted operating profit, note 14)
Impairment of other assets (excluded from adjusted operating profit) 2
Measurement loss of assets classified as held for sale excluded from operating profit (see note 4)
Net foreign exchange losses recognised within operating profit
Cost of inventories recognised as an expense
Research and development
Staff costs (see note 11)
Restructuring costs (excluded from adjusted operating profit)
Pension restructuring costs (excluded from adjusted operating profit)
Acquisition and disposal related costs (excluded from adjusted operating profit)
Remuneration of Group Auditor:
– audit of these financial statements
– audit of financial statements of subsidiaries of the Company
– assurance and other services 3
Government grants
Share-based payments
2023
10.0
4.0
7.2
–
–
32.5
2.2
466.9
11.0
180.6
2.0
1.9
3.1
1.0
1.0
0.1
(0.2)
3.1
2022
9.6
4.3
8.2
17.7
5.4
–
1.1
481.5
10.1
164.5
6.4
13.8
1.2
0.8
0.8
0.1
(0.1)
4.8
1 Included within amortisation of intangible assets is £4.6 million (2022: £6.0 million) reported within items excluded from adjusted
operating profit. The remaining charge is within administrative expenses.
2 Included within impairment of other assets of £5.4 million in 2022 is £2.8 million in respect of inventories, £1.5 million in respect
of property, plant and equipment, £0.8 million in respect of receivables and £0.3 million in respect of capitalised product
development costs.
3 Assurance and other services of £0.1 million relate to the half year review (2022: £0.1 million relating to the half year review).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
143
7 Adjusting items
As described in note 1c, adjusted profit measures are an alternative performance measure used
by the Board to monitor the operating performance of the Group.
£million
As reported
Restructuring costs
Restructuring costs
Pension restructuring costs
Pension restructuring costs
Pension enhanced transfer value exercise
Asset impairments and measurement losses
Goodwill impairment
Asset impairments
Measurement loss on assets classified as held for sale
Amortisation of intangible assets arising
on business combinations
Amortisation of intangible assets arising
on business combinations
Acquisition and disposal related costs
Torotel integration costs
Ferranti Power and Control acquisition and integration costs
Disposal costs
Other
Total items excluded from adjusted measure
Adjusted measure
Operating
profit
8.7
(2.0)
(2.0)
(1.9)
–
(1.9)
–
–
(32.5)
(32.5)
(4.6)
(4.6)
(0.4)
(1.3)
(1.2)
(0.2)
(3.1)
(44.1)
52.8
2023
Tax
(5.7)
0.7
0.7
0.7
–
0.7
–
–
–
–
1.6
1.6
0.1
0.2
0.2
–
0.5
3.5
(9.2)
Operating
profit
(3.4)
(6.4)
(6.4)
(2.0)
(11.8)
(13.8)
(17.7)
(5.4)
–
(23.1)
(6.0)
(6.0)
(0.1)
(1.1)
–
–
(1.2)
(50.5)
47.1
2022
Tax
(3.1)
1.2
1.2
0.4
2.2
2.6
–
1.0
–
1.0
0.3
0.3
–
0.2
–
–
0.2
5.3
(8.4)
Restructuring costs £2.0 million (2022: £6.4 million)
Restructuring costs charged in the period primarily relate to costs associated with the relocation
of production facilities from our USA site in Covina to Kansas (£1.9 million), representing the last
stage of the self-help programme which started in 2020.
Prior year’s restructuring costs of £6.4 million comprise £2.7 million relating to the restructure
of the North America Resistors business, which includes pre-production costs at our new Plano
facility; £2.0 million relating to closure of our site in Lutterworth, UK, £1.5 million relating to the
relocation of production facilities from Covina, USA to Kansas, USA and £0.2 million relating to
the relocation of production facilities from Medina, USA to Minneapolis, USA.
Pension restructuring costs £1.9 million (2022: £13.8 million)
Pension restructuring costs of £1.9 million (2022: £2.0 million relating to costs associated with the
enhanced transfer value exercise) relate to costs associated with scheme buy-outs. Prior period’s
pension enhanced transfer value exercise of £11.8 million represents the settlement cost of a
liability management exercise undertaken ahead of the buy-in completed in 2022.
Amortisation of intangible assets arising on business combinations £4.6 million (2022: £6.0 million)
Amortisation of intangible assets arising on business combinations £4.6 million (2022:
£6.0 million) relate to amortisation of the fair value of acquired order books, acquired customer
relationships and other intangible assets acquired on business combinations.
Asset impairments and measurement losses £32.5 million (2022: £23.1 million)
Measurement loss on assets classified as held for sale of £32.5 million relate to the writing down of
assets held for sale in our IoT Solutions and GMS CGUs, further information is disclosed in note 4.
Prior year asset impairments of £23.1 million comprise £17.7 million to reduce the carrying value of
the IoT Solutions CGU to the recoverable amount and £5.4 million associated with Virolens related
assets both of which were as a result of revised forecasts in the context of a weaker macro-
economic environment and the impact of the evolution of the COVID pandemic on the potential
demand for COVID testing.
Acquisition and disposal related costs £3.1 million (2022: £1.2 million)
Acquisition and disposal related costs charged in the year comprise £1.2 million (2022: £nil)
relating to costs incurred in preparing held for sale assets and liabilities for sale; £1.3 million (2022:
£0.3 million acquisition and £0.8 million integration) of integration costs relating to the acquisition
of the Power and Control business of Ferranti Technologies Ltd based in Oldham, UK and
£0.4 million (2022: £0.1 million) of integration costs of Torotel, Inc.; and £0.2 million relating to
other costs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
144
8 Taxation
a) Analysis of the tax charge for the year
£million
Current tax
Current income tax charge
Adjustments in respect of current income tax of previous year
Total current tax charge
Deferred tax
Relating to origination and reversal of temporary differences
Change in tax rate
Adjustments in respect of deferred tax of previous years
Total deferred tax credit
Total tax charge in the income statement
2023
2022
11.1
1.9
13.0
(2.9)
–
(4.4)
(7.3)
5.7
9.1
(0.5)
8.6
(3.4)
(1.2)
(0.9)
(5.5)
3.1
The enacted UK tax rate applicable from 1 April 2017 to 31 March 2023 was 19%. From 1 April
2023 the UK tax rate increased to 25%. The applicable tax rate for the period is based on the UK
standard rate of corporation tax of 23.5% (2022: 19%). Overseas taxation is calculated at the rates
prevailing in the respective jurisdictions. The Group’s effective tax rate for the year was -518%
(the adjusted tax rate was 21.4%, see section ‘Reconciliation of KPIs and non IFRS measures’).
Included within the total tax charge above is a £3.5 million credit relating to items reported outside
adjusted profit (2022: £5.3 million credit).
b) Reconciliation of the total tax charge for the year
£million
Loss before tax from continuing operations
Loss before tax multiplied by the standard rate of corporation tax in the UK of 23.5% (2022: 19%)
Effects of:
Impact on deferred tax arising from changes in tax rates
Overseas tax rate differences
Items not deductible for tax purposes or income not taxable
Adjustment to current tax in respect of prior periods
Current year tax losses and other items not recognised
Adjustments in respect of deferred tax of previous years
Total tax charge reported in the income statement
2023
(1.1)
(0.2)
0.1
(0.5)
9.6
0.1
(0.8)
(2.6)
5.7
2022
(10.1)
(1.9)
(1.2)
0.8
8.8
(0.5)
(2.0)
(0.9)
3.1
The overall aim of the Group’s tax strategy is to support business operations by ensuring a
sustainable tax rate, mitigating tax risks in a timely and cost-efficient way and complying with
tax legislation in the jurisdictions in which the Group operates. It is however inevitable that the
Group will be subject to routine tax audits or is in ongoing disputes with tax authorities in the
multiple jurisdictions it operates within. This is much more likely to arise in situations involving
more than one tax jurisdiction. Differences in interpretation of legislation, of global standards
(e.g. OECD guidance) and of commercial transactions undertaken by the Group between different
tax authorities are one of the main causes of tax exposures and tax risks for the Group.
In order to manage the risk to the Group an assessment is made of such tax exposures
and provisions are created using the best estimate of the most likely amount to be incurred
within a range of possible outcomes. The resolution of the Group’s tax exposures can take
a considerable period of time to conclude and, in some circumstances, it can be difficult to
predict the final outcome.
The current tax liability at 31 December 2023 includes tax provisions of £9.3 million (2022:
£8.4 million). The Group believes the range of reasonable possible outcomes in respect of these
exposures is tax liabilities of up to £12.3 million (2022: £11.1 million).
c) Deferred tax
The Group completed a five year forward looking strategic plan covering the periods from 2024
to 2028 in which it was forecast that all divisions would show increasing profitability. Therefore,
a deferred tax asset is recognised on the basis that it is considered probable that net taxable
profits will be recognised in the future.
On 22 November 2023, the Government announced that the authorised pension surplus
payments charge would be reduced from 35% to 25% from 6 April 2024. This has not been legally
enacted as at the date of issue of these financial statements and therefore the deferred tax liability
in respect of the retirement benefit obligations has not currently been calculated using the updated
rate. The deferred tax liability has been recognised at 35% (2022: 35%) but we expect this to reduce
should the legislation be enacted as expected, which will result in a reduction in the deferred tax
liability in respect of the defined benefit pension scheme surplus of £2.5 million (based on the
surplus at 31 December 2023).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
8 Taxation continued
The amounts of deferred taxation assets/(liabilities) provided in the financial statements are
as follows:
Deferred tax
Intangible assets
Description
Deferred tax relating to intangible assets created on acquisitions by the Group. This
excludes any internally generated intangibles relating to product development costs.
145
£million
Intangible assets
Property, plant and equipment
Deferred development costs
Retirement benefit obligations
Inventories
Tax losses
Unremitted overseas earnings
Share-based payments
Cash flow hedges
Short-term temporary differences
Net deferred tax asset/(liability)
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset/(liability)
£million
Intangible assets
Property, plant and equipment
Deferred development costs
Retirement benefit obligations
Inventories
Tax losses
Unremitted overseas earnings
Share-based payments
Cash flow hedges
Short-term temporary differences
Net deferred tax asset/(liability)
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset/(liability)
Transferred
to assets
and liabilities
classified as
held for sale
2.7
(1.0)
–
–
–
–
–
–
–
(0.4)
1.3
As at 1 Jan
2023
Continuing
operations
Recognised in
equity/OCI
1.2
(1.2)
0.2
2.1
(0.2)
2.6
1.0
–
–
1.6
7.3
–
–
–
(0.1)
–
–
–
(0.1)
(0.7)
–
(0.9)
(12.4)
0.8
(0.5)
(10.4)
0.9
10.7
(1.8)
0.7
0.1
12.7
0.8
13.2
(12.4)
0.8
Property, plant and equipment
Deferred tax relating to temporary differences in the value of property, plant and
equipment between Group accounting and local accounting and/or tax returns.
Net exchange
translation
As at
31 December
2023
Deferred development costs
Deferred tax relating to deferred development costs.
Retirement benefit obligations
Deferred tax relating to retirement benefit obligations.
–
–
–
–
0.1
(0.2)
–
0.1
–
(0.1)
(0.1)
(8.5)
(1.4)
(0.3)
(8.4)
0.8
13.1
(0.8)
0.7
(0.6)
13.8
8.4
15.4
(7.0)
8.4
Inventories
Tax losses
Deferred tax relating to temporary differences between the local book value and Group
consolidated value of inventory.
Deferred tax relating to recognised tax losses carried forwards for offset against future
profits of the Group. Included within tax losses as at 31 December 2023 is an asset of
£6.6 million (2022: £2.2 million) in respect of capitalised US R&D expenses.
Unremitted overseas earnings
Deferred tax relating to the repatriation of subsidiary profits to the Group's ultimate
holding company.
Share based payments
Deferred tax relating to share based payment.
Cash flow hedges
Deferred tax relating to derivatives designated as cash flow hedges.
Short term temporary differences
Deferred tax relating to temporary differences between Group accounts and local
accounts or tax return arising where a tax deduction is received on payment of an
amount either between Group companies or to external unconnected third parties
rather than on an accounting basis. This includes product development costs.
At 31 December 2023, the gross amount and expiry date of losses not recognised for deferred tax
purposes but available for carry forward are as follows:
As at 1 Jan
2022
Continuing
operations
Recognised on
acquisition
Recognised in
equity/OCI
Net exchange
translation
As at
31 December
2022
£million
Losses for which no deferred tax asset has been recognised
Expiring
within
5 years
0.6
Expiring
within
6–10 years
Unlimited
–
71.2
Total
71.8
Deferred tax is not recognised on these losses because profit projections do not support
the utilisation of these losses.
Tax losses of £58.2 million are subject to substantial limitations in the type of profits they
can be offset against and no such capital disposals are currently anticipated.
(11.4)
1.5
(0.5)
(18.9)
1.1
9.3
(2.3)
1.9
0.5
9.9
(8.9)
11.3
(20.2)
(8.9)
0.9
(0.6)
0.2
1.8
(0.5)
0.9
0.5
(0.2)
–
2.5
5.5
(1.2)
–
–
–
–
–
–
–
–
–
(1.2)
–
–
–
6.5
–
–
–
(1.0)
(0.4)
(1.6)
3.5
(0.7)
(0.1)
(0.2)
0.2
0.3
0.5
–
–
–
1.9
1.9
(12.4)
0.8
(0.5)
(10.4)
0.9
10.7
(1.8)
0.7
0.1
12.7
0.8
13.2
(12.4)
0.8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
146
8 Taxation continued
At 31 December 2022, the gross amount and expiry date of losses available for carry forward were
as follows:
£million
Losses for which no deferred tax asset has been recognised
Expiring
within
5 years
0.6
Expiring
within
6–10 years
Unlimited
–
71.6
Total
72.2
At 31 December 2023, the Group had no other items for which no deferred tax assets have been
recognised (2022: £nil).
9 Dividends
Final dividend paid for prior year
Interim dividend declared for current year
2023
pence
per share
4.30
2.15
2023
£million
7.5
3.8
2022
pence
per share
3.80
2.00
2022
£million
6.7
3.5
The Directors recommend a final dividend of 4.65 pence per share. The Group has a progressive
dividend policy. The final dividend will be paid on 15 May 2024 to shareholders on the register
on 12 April 2024.
10 Earnings per share
Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners
of the Company by the weighted average number of shares in issue during the year.
Adjusted earnings per share:
£million (unless otherwise stated)
Loss for the year attributable to owners of the Company
Restructuring costs
Pension restructuring costs
Asset impairments and measurement losses
Amortisation of intangible assets arising on business combinations
Acquisition and disposal related costs
Tax effect of above items (see note 7)
Adjusted earnings
Adjusted earnings per share (pence)
Adjusted diluted earnings per share (pence)
2023
(6.8)
2.0
1.9
32.5
4.6
3.1
(3.5)
33.8
19.2
19.0
2022
(13.2)
6.4
13.8
23.1
6.0
1.2
(5.3)
32.0
18.2
18.0
The weighted average number of shares in issue is as follows (new shares issued in the year
described in note 23):
million
Basic
Adjustment for share awards
Diluted
2023
175.6
2.6
178.2
2022
175.8
2.0
177.8
11 Employee information
The average number of full time equivalent employees (including Directors) during the year from
continuing operations was:
Pence
Loss per share
Basic
Diluted
2023
2022
(3.9)
(3.9)
(7.5)
(7.5)
Number
By function
Production
Sales and distribution
Administration
As the Group made a statutory loss in 2023 and 2022, diluted statutory EPS for 2023 and 2022
has been calculated using the basic weighted average number of shares because using weighted
average diluted shares would be anti-dilutive.
The numbers used in calculating adjusted, basic and diluted earnings per share are shown below.
Adjusted earnings per share is based on the adjusted profit after interest and tax.
By division
Power and Connectivity
Global Manufacturing Solutions
Sensors and Specialist Components
Total
2023
2022
4,357
311
328
4,996
1,645
1,605
1,746
4,996
4,352
296
324
4,972
1,650
1,567
1,755
4,972
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
11 Employee information continued
Aggregate emoluments, including those of Directors, for the year were:
£million
Wages and salaries
Social security charges
Employers’ pension costs
Defined benefit pension costs
Share based payments expense
Remuneration in respect of the Directors was as follows:
£million
Emoluments
The remuneration of key management during the year was as follows:
£million
Short-term benefits
Pension and other post-employment benefit expense
Share based payments
The Schedule 5 requirements of the Accounting Regulations for directors’ remuneration
are included within the Directors’ remuneration report on pages 102 to 111.
12 Right-of-use assets
2023
135.6
36.8
3.5
1.6
3.1
2022
124.8
30.5
3.2
1.2
4.8
£million
Cost
At 1 January 2022
Additions
Disposals
Business acquired
Net exchange adjustment
180.6
164.5
At 1 January 2023
Additions
Disposals
Transferred to assets held for sale
2023
2.4
2022
2.1
Net exchange adjustment
At 31 December 2023
2023
2022
3.5
–
1.2
4.7
3.5
0.2
2.2
5.9
Depreciation
At 1 January 2022
Depreciation charge
Impairment reversal
Disposals
Net exchange adjustment
At 1 January 2023
Depreciation charge
Disposals
Transferred to assets held for sale
Net exchange adjustment
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
147
Land and
buildings
Other
Right-of-use
assets
41.5
2.3
(0.5)
0.2
2.7
46.2
5.0
(6.1)
(5.4)
(1.5)
38.2
22.6
4.0
(0.2)
(0.5)
0.9
26.8
3.7
(6.1)
(0.9)
(0.6)
22.9
15.3
19.4
2.0
–
(0.1)
–
(0.4)
1.5
0.6
(0.4)
–
–
1.7
1.3
0.3
–
(0.1)
(0.2)
1.3
0.3
(0.4)
–
–
1.2
0.5
0.2
43.5
2.3
(0.6)
0.2
2.3
47.7
5.6
(6.5)
(5.4)
(1.5)
39.9
23.9
4.3
(0.2)
(0.6)
0.7
28.1
4.0
(6.5)
(0.9)
(0.6)
24.1
15.8
19.6
£4.5 million of right of use assets were transferred to assets classified as held for sale (see note 4).
Additions during the year relate to a new lease agreement in Cardiff, UK (£4.4 million) and other
locations throughout the Group (£1.2 million).
The Group only leases land and buildings for use in trading activities. Lease liabilities are disclosed
in note 20. Contractual cashflows for these leases are disclosed in note 21e.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
148
13 Property, plant and equipment
£million
Cost
At 1 January 2022
Additions
Disposals
Business acquired
Net exchange adjustment
At 1 January 2023
Additions
Disposals
Transferred to assets held for sale
Reclassification
Net exchange adjustment
At 31 December 2023
Depreciation and impairment
At 1 January 2022
Depreciation charge
Impairment
Disposals
Net exchange adjustment
At 1 January 2023
Depreciation charge
Disposals
Transferred to assets held for sale
Net exchange adjustment
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
Land and
buildings
Plant and
equipment
Total
196.0
11.4
(21.8)
0.4
13.4
199.4
22.3
(10.3)
(22.3)
–
(8.2)
171.8
9.6
(21.5)
0.4
11.5
171.8
21.3
(9.9)
(20.4)
(0.7)
(7.1)
155.0
180.9
139.3
145.6
8.4
1.5
(21.5)
9.6
137.3
8.4
(9.9)
(18.0)
(5.3)
112.5
42.5
34.5
9.6
1.5
(22.0)
9.9
144.6
10.0
(10.3)
(19.2)
(5.5)
119.6
61.3
54.8
24.2
1.8
(0.3)
–
1.9
27.6
1.0
(0.4)
(1.9)
0.7
(1.1)
25.9
6.3
1.2
–
(0.5)
0.3
7.3
1.6
(0.4)
(1.2)
(0.2)
7.1
18.8
20.3
£3.1 million of property, plant and equipment was transferred to assets classified as held for sale
(see note 4).
Included within land and buildings is one investment property with a carrying value of £nil
(2022: £nil) and a fair value of £0.7 million (2022: £0.7 million). Rental income of £0.2 million
(2022: £0.2 million) was recognised within other income in relation to this property.
14 Goodwill
£million
Cost
At 1 January 2022
Additions
Net exchange adjustment
At 31 December 2022
Transferred to held for sale
Net exchange adjustment
At 31 December 2023
Impairment
At 1 January 2022
Impairment
At 31 December 2022
Transferred to held for sale
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
156.5
5.0
11.3
172.8
(26.3)
(5.7)
140.8
–
17.7
17.7
(17.7)
–
140.8
155.1
£8.6 million of goodwill was transferred to assets classified as held for sale (see note 4).
The £5.0 million addition in goodwill in 2022 arose upon the acquisition of Power and Control
business of Ferranti Technologies Ltd and is considered part of the Power Solutions CGU. In the
year ended 31 December 2023 £8.6 million of goodwill (net of £17.7 million impairment) was
transferred to assets held for sale (see note 4). The amount transferred comprised £6.4 million
(net of £17.7 million impairment) relating to the IoT Solutions CGU and £2.2 million related to the
Global Manufacturing Solutions CGU.
The goodwill generated as a result of acquisitions represents the premium paid in excess of the fair
value of all net assets, including intangible assets, identified at the point of acquisition. The future
improvements applied to the acquired businesses, achieved through a combination of revised
strategic direction, operational improvements and investment are expected to result in improved
profitability of the acquired businesses during the period of ownership. The combined value
achieved from these improvements is expected to be in excess of the value of goodwill acquired.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
14 Goodwill continued
Goodwill, excluding amounts transferred to assets held for sale, is attributed to the following
CGUs in the divisions shown below:
Management has detailed plans in place reflecting the latest budget and strategic growth plan.
The pre-tax discount rates and periods of management approved forecasts are shown below.
The discount rates used in the annual impairment test for the year ended 31 December 2023
are shown below:
149
£million
Power and Connectivity:
Power Solutions
IoT Solutions
Global Manufacturing Solutions:
Global Manufacturing Solutions
Sensors and Specialist Components:
Resistors
Sensors
Impairment Testing
The Group tests goodwill impairment annually or more frequently if there are indications that
goodwill might be impaired the recoverable amounts of the CGUs are determined from value in use
calculations. The key assumptions for the value in use calculations are those regarding the discount
rates, growth rates and operating cash flow projections over a forecast period. The growth rate
assumed after this forecast period is based on long-term GDP projections capped at long term
growth rates (which are approximated as long-term inflation rates) of the primary market for the
CGU, in perpetuity. Long-term growth rates are based on long-term forecasts for growth in the
geography in which the group of CGUs operates. Long-term growth rates are determined using
long-term growth rate forecasts that take into account the international presence and the markets
in which each business operates.
Management estimate discount rates using pre-tax rates that reflect current market assessments
of the Group’s time value of money and the risks specific to the CGU being measured.
In determining the cost of equity, the Capital Asset Pricing Model has been used. Accordingly the
cost of equity is determined by adding a risk premium, based on an industry adjustment, to the
expected return of the equity market above the risk-free return. The relative risk adjustment reflects
the risk inherent in each group of CGUs relative to all other sectors and geographies on average.
The cost of debt is determined using a risk-free rate based on the cost of government bonds,
and an interest rate premium equivalent to a corporate bond with a similar credit rating to
TT Electronics Plc.
The growth rates assume that demand for our products remains broadly in line with the underlying
economic environment in the long-term future. Taking into account our expectation of future
market conditions, we believe that the evolution of selling prices and cost measures put into place
will lead to a sustained improvement in profitability.
2023
2022
63.7
3.5
65.6
9.9
Power Solutions
IoT Solutions
16.7
19.5
Global Manufacturing Solutions
Resistors
Sensors
32.3
24.6
140.8
34.2
25.9
155.1
Pre-tax
discount rate
Long term
growth rate
Period of
forecast (years)
Pre-tax
discount rate
Long term
growth rate
Period of
forecast (years)
2023
2022
13.8%
14.1%
16.5%
13.8%
13.6%
2.0%
1.9%
3.1%
1.9%
2.0%
5
5
5
5
5
13.4%
14.3%
13.8%
13.5%
13.2%
1.7%
1.6%
1.9%
1.6%
1.7%
5
5
5
5
5
The date of the annual impairment test was 30 September 2023 to align with internal forecasting
and review processes. The impairment tests were performed as of September, with an additional
impairment test for IoT Solutions and GMS being tested as of December following the transfer of
part of the CGU to assets classified as held for sale. No impairment losses have been recognised
in the current year in respect of the other CGUs as recoverable amounts exceed carrying value
of assets in respect of those businesses. Sensitivity analysis has been provided in respect of
reasonably possible changes to key assumptions where applicable.
Key assumptions in the value in use test are the projected performance of the CGUs based on
sales growth rates, cash flow forecasts and discount rate. Forecast sales growth rates are based
on past experience adjusted for the strategic direction and near-term investment priorities within
each CGU. The key assumptions include externally obtained growth rates in the key markets
disclosed in note 3 and customer demand for product lines. Cash flow forecasts are determined
based on historic experience of operating margins, adjusted for the impact of changes in product
mix and cost-saving initiatives, including the impact of our restructuring projects and cash
conversion based on historical experience.
The recoverable amounts associated with the goodwill balances which are based on these
performance projections and current forecast information do not indicate that any goodwill
balance is impaired. If a company’s actual performance does not meet these projections this
could lead to an impairment of the goodwill in future periods.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
150
14 Goodwill continued
Sensitivity Analysis
Sensitivity analysis has been performed on the key assumptions; operating cash flow projections,
revenue growth rates and discount rate. Cash flows can be impacted by changes to sales prices,
direct costs and replacement capital expenditure; individually they are not significant assumptions.
The directors have not identified reasonably possible changes in significant assumptions that
would cause the recoverable amount to fall below the carrying value of recognised goodwill.
15 Other intangible assets
£million
Cost
At 1 January 2022
Additions
Disposals
Business acquired
Net exchange adjustment
At 1 January 2023
Additions
Disposals
Transferred to assets held for sale
Net exchange adjustment
At 31 December 2023
Amortisation
At 1 January 2022
Charge for the year
Impairment
Disposals
Net exchange adjustment
At 1 January 2023
Charge for the year
Disposals
Transferred to assets held for sale
Net exchange adjustment
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
Product
development
costs
Patents,
licences
and other
Customer
relationships
Total
18.6
2.3
(0.1)
–
1.4
22.2
1.6
(0.3)
(7.4)
(0.9)
15.2
10.6
1.2
0.3
(0.1)
1.1
13.1
1.8
(0.3)
(3.7)
(0.6)
10.3
4.9
9.1
35.9
0.6
(0.3)
2.3
0.9
39.4
0.6
(0.2)
(1.2)
(0.2)
38.4
33.6
2.8
–
(0.3)
0.9
37.0
1.5
(0.2)
(1.0)
(0.4)
36.9
1.5
2.4
63.6
118.1
–
–
3.0
2.6
2.9
(0.4)
5.3
4.9
69.2
130.8
–
–
(17.7)
(1.4)
50.1
22.2
4.2
–
–
0.6
27.0
3.9
–
(6.7)
(0.4)
23.8
26.3
42.2
2.2
(0.5)
(26.3)
(2.5)
103.7
66.4
8.2
0.3
(0.4)
2.6
77.1
7.2
(0.5)
(11.4)
(1.4)
71.0
32.7
53.7
£14.9 million of intangible assets were transferred to assets classified as held for sale (see note 4).
Included within the amortisation charge for the year is £4.6 million (2022: £6.0 million) included
within items excluded from adjusted profit as the charge relates to intangibles acquired upon
acquisition of businesses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
15 Other intangible assets continued
Customer relationships are intangible assets recognised upon acquisition which are amortised
over long periods of time and are summarised below. The amortisation charge is excluded from
adjusted operating profit as described in note 7. The composition of customer relationships and
the years remaining until they are fully amortised is shown below.
Customer relationships held on the balance sheet are summarised below.
£million
Stadium Group
Aero Stanrew
Torotel
Precision Inc.
Ferranti Power and Control
At 31 December 2023
Net book
value
Years
remaining
1.1
7.8
10.0
4.9
2.5
26.3
9.3
7.0
18.9
8.7
11.0
Following the transfer of activities from Covina, US to Kansas, US intangible assets relating to
Covina have been transferred to Torotel.
£million
Stadium Group
Aero Stanrew
Torotel
Precision Inc.
Covina
Ferranti Power and Control
At 31 December 2022
16 Inventories
£million
Raw materials
Work in progress
Finished goods
Net book
value
Years
remaining
13.4
8.9
7.9
5.8
3.5
2.7
42.2
2023
86.9
36.8
19.8
143.5
10.3
8.0
19.9
9.7
11.2
12.0
2022
130.9
34.8
23.5
189.2
£30.9 million of inventories were transferred to assets classified as held for sale (see note 4).
Inventories are stated after a provision for obsolescence of £17.8 million (2022: £25.8 million).
The directors do not consider there to be a material difference between net book value and
replacement cost for inventories.
17 Trade and other receivables
£million
Trade receivables
Prepayments
VAT and other taxes receivable
Accrued income
Contract assets
Other receivables
151
2023
72.3
8.1
3.4
1.3
0.8
4.3
2022
101.3
8.1
3.4
1.4
1.7
4.4
90.2
120.3
£14.7 million of trade and other receivables were transferred to assets classified as held for sale
(see note 4).
Loss allowance for expected credit losses in respect of trade receivables and amounts owed
by non-controlling interests are shown in note 21d(ii) and note 21d(iii) respectively.
18 Trade and other payables
£million
Current liabilities
Trade payables
Taxation and social security
Accruals
Deferred income
Goods received not invoiced
Other payables
2023
2022
68.5
2.7
27.4
21.0
6.3
2.0
97.0
4.1
27.9
31.3
10.1
2.8
127.9
173.2
£21.4 million of trade and other payables were transferred to liabilities directly associated with
assets classified as held for sale (see note 4).
£million
Non-current liabilities
Accruals
2023
2022
0.1
0.1
Deferred income primarily represents pre-funded inventory which is expected to be converted into
finished goods and sold within 12 months. All the brought forward balance carried over from 2022
was converted into finished goods and sold to the end customer within the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
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19 Provisions
£million
At 1 January 2022
Utilised
Released
Transfer
Arising during the year
Businesses acquired
Exchange differences
At 1 January 2023
Utilised
Arising during the year
Transferred to held for sale
Exchange differences
At 31 December 2023
Property Reorganisation
Legal,
warranty
and other
0.8
–
(0.1)
–
–
–
–
0.7
–
2.2
(1.9)
–
1.0
1.4
(0.3)
–
(0.7)
–
–
–
0.4
(0.2)
–
–
–
0.2
1.1
(1.7)
(0.2)
0.5
0.3
3.0
0.1
3.1
(1.9)
1.8
–
(0.1)
2.9
Total
3.3
(2.0)
(0.3)
(0.2)
0.3
3.0
0.1
4.2
(2.1)
4.0
(1.9)
(0.1)
4.1
£1.9 million of provisions were transferred to liabilities directly associated with assets classified
as held for sale (see note 4).
£million
Non-current
Current
2023
2022
1.0
3.1
4.1
0.7
3.5
4.2
Property
Property provisions of £1.0 million (2022: £0.7 million) relate to dilapidation provisions. £2.2 million
of new provisions arose during the year of which £1.9 million was later classified as part of the held
for sale assets and liabilities.
Reorganisation
Reorganisation provisions relate to committed costs in respect of restructuring programmes,
as described in note 7, usually resulting in cash spend within one year.
£0.2 million (2022: £0.4 million) relate to the integration of the closed Covina, USA, facility into
the Torotel facility in Kansas, USA.
Legal, warranty and other
Legal, warranty and other claims represent the best estimate for the cost of settling outstanding
product and other claims, and warranty provisions created on the disposal of businesses.
£0.7 million (2022: £0.7 million) relate to local warranty provisions of which £0.7 million was
utilised, £0.8 million was charged to the income statement during the year and £0.1m was
recognised within translation reserve in equity.
£1.3 million (2022: £1.9 million) relate to onerous contracts acquired within the Ferranti Power and
Control business of which £0.9 million was utilised and £0.3 million was charged to the income
statement during the year.
£0.2 million (2022: £nil) relate to severance costs which arose as part of the Torotel Inc. acquisition
and were charged to the income statement in year. These costs were excluded from adjusted
operating profit.
£0.2 million (2022: £0.1 million) relate to integration activity payments made following the
acquisition of the Ferranti Power and Control business in 2022. £0.1 million was utilised in the year
with a further charge of £0.2 million relating to integration activity payments following the relocation
to a new purpose built site in Manchester in the year. These costs were excluded from adjusted
operating profit.
£0.5 million (2022: £0.4 million) relates to other provisions with £0.2 million utilised in the year
and a further £0.3 million charged to the income statement in the year.
The Group has, on occasion, been required to enforce commercial contracts and to defend
itself against proceedings brought by other parties. Provisions are made for the expected costs
associated with such matters, based on past experience of similar items and other known factors,
taking into account professional advice received, and represent management’s best estimate of
the likely outcome. The timing of utilisation of these provisions is frequently uncertain, reflecting the
complexity of issues and the outcome of various court proceedings and negotiations. Contractual
and other provisions represent the Directors’ best estimate of the cost of settling future obligations
although there is a higher degree of judgement involved. Unless specific evidence exists to the
contrary, these provisions are shown as current.
No provision is made for proceedings which have been or might be brought by other parties against
Group companies unless management, taking into account professional advice received, assesses
that it is more likely than not that such proceedings may be successful. Contingent liabilities
associated with such proceedings have been identified, but the Directors are of the opinion that any
associated claims that might be brought can be resisted successfully, and therefore the possibility
of any material outflow in settlement in excess of amounts provided is assessed as remote.
The timing of the utilisation of these amounts is uncertain as they are subject to commercial
negotiation and legal process in different jurisdictions. Where possible the Group has purchased
insurance cover to protect itself from these exposures.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
153
Undrawn facilities
At 31 December 2023, the total lease liabilities and borrowing facilities available to the Group net
of £1.9 million of loan arrangement fees (2022: £2.0 million) amounted to £282.4 million (2022:
£288.3 million). At 31 December 2023, the Group had available £56.9 million (2022: £47.4 million)
of undrawn committed borrowing facilities (comprising the main facility £53.6 million (2022:
£43.8 million) and China £3.3 million (2022: £3.6 million)) and £22.6 million (2022: £41.2 million) of
undrawn uncommitted borrowing facilities, representing overdraft lines and the accordion facility.
In February 2023 £15.0 million of accordion was converted from uncommitted into
committed facility.
21 Financial risk management
The main risks arising from the Group’s financial instruments are foreign exchange risk, interest
rate risk, credit risk and liquidity risk. These risks arise from exposures that occur in the normal
course of business and are managed by the Group’s Treasury department in close co-operation
with the Group’s business divisions and operating companies, under the oversight of a Treasury
Committee which is chaired by the Chief Financial Officer. The responsibilities of the Group’s
Treasury department include the monitoring of financial risks, management of cash resources,
debt and capital structure management, approval of counterparties and relevant transaction
limits, and oversight of all significant treasury activities undertaken by the Group. The Group
Treasury department operates as a service centre to the business divisions of the Group and
not as a profit centre.
A Group Treasury policy has been approved by the Board of Directors and is periodically updated
to reflect developments in the financial markets and the financial exposure facing the Group.
The Group’s principal financial instruments comprise borrowings, cash and cash equivalents
and derivatives used for risk management purposes. The Group’s borrowings, surplus liquidity
and derivative financial instruments are monitored and managed centrally by the Group’s
Treasury department.
The Group’s accounting policies with regard to financial instruments are detailed in note 2o.
20 Borrowings and lease obligations
£million
At 31 December 2023
£162.4 million multi-currency revolving credit facility
Unsecured loan note
Unsecured loan note
Overdrafts
Lease liabilities
Loan arrangement fee
Total
At 31 December 2022
£147.4 million multi-currency revolving credit facility
Unsecured loan note
Unsecured loan note
Overdrafts
Lease liabilities
Loan arrangement fee
Total
Maturity
Currency of
denomination
Current
Non-current
Total
2027
2027
2028
2031
2026
2026
2028
2031
GBP
USD
GBP
GBP
GBP
USD
GBP
GBP
68.0
40.8
37.5
37.5
–
14.4
(1.9)
196.3
72.0
31.6
37.5
37.5
–
18.7
(2.0)
195.3
68.0
40.8
37.5
37.5
1.2
18.2
(1.9)
201.3
72.0
31.6
37.5
37.5
3.7
23.1
(2.0)
203.4
1.2
3.8
–
5.0
3.7
4.4
–
8.1
The Group’s primary source of finance is the £162.4 million committed revolving credit facility
(RCF), and an uncommitted accordion facility of £17.6 million, which was signed in June 2022.
The Group’s RCF is payable on a floating rate basis above GBP SONIA or USD depending on
the currency of the loan and will mature in June 2027. As at 31 December 2023, £108.8 million
(31 December 2022: £103.6 million) of the facility was drawn down. Arrangement fees with
amortised cost of £1.9 million (2022: £2.0 million) have been netted off against these borrowings.
The interest margin payable on the facility is based on the Group’s compliance with financial
covenants, net debt / adjusted EBITDA (bank covenant) and is payable on a floating basis above
GBP SONIA, or USD SOFR depending on the currency of denomination of the loan.
In December 2021 the Group issued £75.0 million of unsecured loan notes with £37.5 million
maturing in seven years and £37.5 million maturing in 10 years respectively to a collection of
three counterparties. The average interest rate on the loan notes is 2.9 per cent.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
154
21 Financial risk management continued
a) Derivatives, other financial instruments and risk management
The Group uses derivative financial instruments to manage certain exposures to fluctuations in
exchange rates and interest rates. The Group does not hold any speculative financial instruments.
The Group is exposed to transactional and translation foreign exchange risk. Transactional foreign
exchange risk arises from sales or purchases by a Group company in a currency other than that
company’s functional currency. Translational foreign exchange risk arises on the translation of
profits earned in overseas currencies into GBP and the translation of net assets denominated in
overseas currencies into GBP, the Group’s functional currency.
To mitigate transactional foreign exchange risk, wherever possible, Group companies enter into
transactions in their functional currencies with customers and suppliers. When this is not possible,
hedging strategies are undertaken through the use of forward currency contracts for up to two
years ahead. The forward currency contracts have been designated as cash flow hedges and the
effective portion of the mark to market valuation of these derivatives at 31 December 2023 is
taken to the hedging reserve within equity. Currency basis spread that is not designated is taken
to the income statement.
The Group has designated £40.8 million ($52.0 million) (2022: £31.6 million ($38.0 million)) of loans
in a net investment hedge of USD net assets. No ineffectiveness was recorded (2022: £nil) and a
gain of £1.8 million (2022: £3.4 million loss) was taken to the translation reserve. The amount
accumulated in this reserve in respect of gains/losses arising on hedging instruments designated
in net investment hedges up to 31 December 2023 was an accumulated loss of £1.9 million (2022:
accumulated loss of £3.7 million).
The Group’s interest rate management policy is to maintain a balance between fixed and floating
rates of interest on borrowings and deposits, and to use interest rate derivatives when appropriate
and pre-approved by the Treasury Committee. The interest rate hedging instruments are floating
to fixed rate interest rate swaps used to manage the Group’s interest cost.
Foreign exchange (FX) hedges
31 December 2023
USD:CNY
USD:MXN
USD:GBP
EUR:GBP
USD:MYR
CNY:GBP
CNY:EUR
GBP:USD
Total
31 December 2022
USD:CNY
USD:MXN
USD:GBP
GBP:USD
EUR:GBP
HKD:CNY
USD:MYR
CNY:GBP
CNY:EUR
GBP:EUR
GBP:SEK
Total
At 31 December 2023, the Group had a net derivative financial asset of £3.9 million (2022:
£0.5 million net liability).
CFH is an abbreviation for cash flow hedge.
Notional
Amount
(£m)
Average
Hedged Rate
Fair value
(£m)
Type of hedge
61.1
44.9
21.7
11.3
10.1
7.2
4.6
2.6
163.5
74.2
35.2
31.5
20.1
17.0
10.1
9.7
6.8
4.2
1.9
1.3
212.0
6.76
20.29
1.03
0.87
4.53
0.12
0.13
1.26
6.65
21.95
1.07
1.26
0.87
0.88
4.32
8.57
7.50
1.15
(1.9) CFH – Forward rate
4.9
0.6
–
–
0.2
0.1
CFH – Forward rate
CFH – Forward rate
CFH – Forward rate
CFH – Forward rate
CFH – Forward rate
CFH – Forward rate
–
CFH – Forward rate
3.9
(1.6) CFH – Forward rate
2.1
CFH – Forward rate
(0.9) CFH – Forward rate
0.6
CFH – Forward rate
(0.5) CFH – Forward rate
(0.1) CFH – Forward rate
(0.1) CFH – Forward rate
(0.4) CFH – Forward rate
(0.1) CFH – Forward rate
–
CFH – Forward rate
12.02
(0.1) CFH – Forward rate
(1.1)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
155
21 Financial risk management continued
The most common exchange rate risk is the transaction risk the Group takes when it invoices a
customer or purchases from suppliers in a different currency to the underlying functional currency
of the business. The Group policy is to review transactional foreign exchange exposures and place
contracts on a quarterly basis. To the extent the cash flows associated with a transactional foreign
exchange risk are committed the Group will hedge 100%. The notional values of the hedged
transactions are disclosed in the above table. The group’s policy is to hedge these transactions on
a 1:1 ratio. Foreign currency basis spread of the derivative item is not designated and is therefore
recognised in the income statement. The potential sources of ineffectiveness are timing of forecast
transaction and credit risk. There was no hedge ineffectiveness incurred during the period.
The closing value of the hedging reserve in relation to FX hedges on 31 December 2023 was an
accumulated gain of £3.2 million (2022: accumulated loss of £1.1 million). The transactions that
have been designated as the hedged item in a cash flow hedge relationship are still considered
highly probable forecasted transactions, during the year and at the year end 31 December 2023.
Hedges with a notional amount of £106.6 million (2022: £148.6 million) are due within 12 months
with the remainder maturing within 24 months.
A loss on the movement in fair value of the hedging instruments of £nil (2022: loss of £3.0 million)
was recognised within other comprehensive income.
The closing value of the hedging reserve in relation to interest rate swaps on 31 December 2023
was £nil (2022: credit of £0.6 million). Swaps with a notional value of £19.0 million matured in
November 2023.
No ineffectiveness was recognised through the income statement in 2023 (2022: £nil) or is
expected to be recognised in future periods.
b) Foreign exchange risk
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,
in the main, hedged through forward foreign currency exchange contracts.
The Group’s exposure to foreign currency before the impact of hedging is shown below:
£million
31 December 2023
GBP
USD
Euro
Other
Total
Notional
amount
(£m)
Fair value
(£m)
Type
of hedge
Trade and other receivables
Cash and cash equivalents
–
–
19.0
19.0
–
–
0.6
0.6
Borrowings
N/A
Lease liabilities
Trade and other payables
Net Derivative financial instruments
CFH – SONIA
Total
31 December 2022
Trade and other receivables
Cash and cash equivalents
Borrowings
Lease liabilities
Trade and other payables
Net Derivative financial instruments
Total
–
–
–
–
(0.5)
0.8
0.3
–
–
–
–
(0.7)
(1.8)
(2.5)
17.6
13.8
(40.8)
–
(14.2)
–
(23.6)
23.8
18.6
(32.7)
–
(23.0)
1.2
(12.1)
2.4
2.6
–
–
(1.5)
0.1
3.6
1.9
3.3
–
–
(1.3)
(0.1)
3.8
0.1
0.3
–
(1.0)
(0.9)
3.0
1.5
0.6
1.8
–
(1.6)
(2.8)
(0.4)
(2.4)
20.1
16.7
(40.8)
(1.0)
(17.2)
3.9
(18.3)
26.3
23.7
(32.7)
(1.6)
(27.8)
(1.1)
(13.2)
Interest rate swaps
31 December 2023
GBP
31 December 2022
GBP
During the year, up until their maturity date of November 2023, the Group held interest rate swap
instruments to fix the cost of GBP SONIA on borrowings under the bank facility. Under the terms
of the swaps on the bank borrowings and excluding the bank margin, the Group paid a weighted
average fixed cost of approximately 1.5%.
The average cost of the debt for the Group is expected to be approximately 5.3% over the next
12 months. The interest rate swaps were designated as cash flow hedges and were highly
effective throughout 2023.
The fair value of the contracts as at 31 December 2023 and the prior year is disclosed in the
table above. For the year ending 31 December 2023 an accumulated gain of £0.6 million (2022:
accumulated loss of £0.1 million) was reclassified from the cash flow hedge reserve and included
in the income statement as part of finance costs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
156
21 Financial risk management continued
A 10% strengthening of GBP against the following currencies at 31 December 2023 would have
reduced loss after tax by the amounts shown below. This analysis assumes that all other variables,
in particular interest rates, remain constant. A 10% weakening of GBP against the above currencies
at 31 December 2023 would have had an equal but opposite effect on the above currencies to the
amount shown above, on the basis that all other variables remain constant.
£million
US dollar
Euro
2023
1.7
0.4
2022
Derivative financial instruments
1.8
0.4
Total financial assets
Financial liabilities
A 10% strengthening of GBP against the following currencies at 31 December 2023 would have
decreased equity by the amounts shown below. This analysis assumes that all other variables,
in particular interest rates, remain constant. The Group finances operations by obtaining funding
through external borrowings and, where they are in foreign currencies, these borrowings may be
designated as net investment hedges. This enables gains and losses arising on retranslation of
these foreign currency borrowings to be charged to other comprehensive income, providing a
partial offset in equity against the gains and losses arising on translation of the net assets of
foreign operations. This has been considered in the analysis below.
£million
US dollar
Euro
2023
2.4
(0.4)
2022
(3.0)
–
10% weakening of GBP against the above currencies at 31 December 2023 would have had an
equal but opposite effect on the above currencies to the amount shown above, on the basis that
all other variables remain constant.
c) Interest rate risk
The Group has financial assets and liabilities which are exposed to changes in market interest
rates. Changes in interest rates primarily impact borrowings by changing their future cash flows
(floating rate debt) or their fair value (fixed rate debt) and deposits. The Group’s objective is to
manage this interest rate exposure through the use of interest rate derivatives.
The exposure of the Group’s financial assets and liabilities to interest rate risk is as follows:
£million
Financial assets
Trade and other receivables
Cash and cash equivalents
Borrowings (including overdrafts)
Lease liabilities
Trade and other payables
Derivative financial instruments
Total financial liabilities
£million
Financial assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments
Total financial assets
Financial liabilities
Borrowings (including overdrafts)
Lease liabilities
Trade and other payables
Derivative financial instruments
Total financial liabilities
Floating
rate
Fixed
rate
Non-interest
bearing
2023
total
–
14.7
–
14.7
(110.0)
–
–
–
–
–
–
–
(75.0)
(18.2)
–
–
72.3
59.4
6.0
137.7
1.9
–
(102.3)
(2.1)
72.3
74.1
6.0
152.4
(183.1)
(18.2)
(102.3)
(2.1)
(110.0)
(93.2)
(102.5)
(305.7)
Floating
rate
Fixed
rate
Non-interest
bearing
2022
total
–
19.4
0.6
20.0
(88.3)
–
–
–
–
–
–
–
(94.0)
(23.1)
–
–
(88.3)
(117.1)
101.3
45.6
3.3
150.2
2.0
–
(135.1)
(4.4)
(137.5)
101.3
65.0
3.9
170.2
(180.3)
(23.1)
(135.1)
(4.4)
(342.9)
At 31 December 2023, 41% of borrowings was at a fixed rate when including the effect
of derivatives (2022: 52%).
The interest charged on floating rate financial liabilities is based on the relevant benchmark rate
(such as GBP SONIA and USD SOFR). Interest on financial instruments classified as fixed rate is
fixed until the maturity of the instrument.
Considering the net debt position of the Group at 31 December 2023, any increase in interest rates
would result in a net loss in the consolidated income statement, and any decrease in interest rates
would result in a net gain. The effect on loss after tax of a 1% movement in interest rate, based on
the year end floating rate borrowings, with all other variables held constant, is estimated to be
£0.7 million (2022: £0.6 million). The impact on equity would be materially the same.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
157
21 Financial risk management continued
d) Credit risk
Exposure to credit risk arises as a result of transactions in the Group’s ordinary course of business
and is applicable to all financial assets. Investments in cash and cash equivalents and derivative
financial instruments are with approved counterparty banks and other financial institutions.
Counterparties are assessed prior to, during, and after the conclusion of transactions to ensure
exposure to credit risk is limited to an acceptable level. The maximum exposure with respect to
credit risk is represented by the carrying amount of each financial asset on the balance sheet.
The Group’s major exposure to credit risk is in respect of trade receivables. Given the number and
geographical spread of the Group’s ultimate customers and the solvency of major trade debtors,
credit risk is believed to be limited. 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. The Group
regularly monitors its exposure to bad debts in order to minimise this exposure.
The Group has strict procedures in place to manage the credit risk on trade receivables.
Customer credit risk is managed by each operating company within a division but is subject to
Group oversight to ensure that each division’s customer credit risk management system operates
in a prudent and responsible manner. Credit evaluations are performed for all customers and credit
limits are established based on internal or external rating criteria. The credit quality of the Group’s
significant customers is monitored on an ongoing basis. Letters of credit or payments in advance
are obtained where customer credit quality is not considered strong enough for open credit.
The Group operates the expected credit losses model when applying credit risk to receivables.
During the year there was a £0.3 million impairment of trade receivables as at 31 December 2023
(2022: £0.4 million) recognised within admin expenses. The solvency of the debtor and their ability
to repay the receivables were considered in assessing the impairment of such assets. The Group
performed an expected credit loss model at 31 December 2023 and a general provision of £nil
(2022: £nil) was required.
(i) Risk for trade receivables by geographical regions
The maximum exposure to credit risk for trade receivables at 31 December by geographic
areas was:
£million
Europe (including UK)
North America
Asia
Rest of the World
2023
22.6
35.2
14.3
0.2
72.3
2022
40.2
35.3
25.4
0.4
101.3
(ii) Impairment losses
The ageing of trade receivables at 31 December was:
£million
Not past due
Past due 1 – 60 days
Past due 61 – 120 days
More than 120 days
Gross
63.0
7.4
2.1
0.4
72.9
2023
Impairment
–
–
(0.2)
(0.4)
(0.6)
Gross
90.1
9.9
1.1
2.3
103.4
2022
Impairment
–
–
–
(2.1)
(2.1)
The movement in the provision for impairment in respect of trade receivables during the year
was as follows:
£million
At 1 January
Charged to income statement
Utilised
At 31 December
2023
2022
2.1
0.3
(1.8)
0.6
2.1
0.4
(0.4)
2.1
(iii) Credit risk related to other financial assets and cash deposits
Credit risk relating to the Group’s other financial assets, principally comprising cash and cash
equivalents and derivative financial instruments arises from the potential default of counterparties.
Credit risk arising from balances with banks and financial institutions is monitored by the Group’s
Treasury department. The Group’s policy on investment of cash and deposits are to only hold cash
deposits with banks with a credit rating of investment grade and are reviewed on a regular basis to
take account of developments in financial markets. Currently the Group has 12 counterparties to
which it has credit risk exposure. The credit risk of the counterparties is between AA- and A- on the
S&P’s long term credit risk scale. The same process is undergone for counterparts with which the
Group enters into hedging agreements. As such credit risk on these financial assets (cash and
cash equivalents and derivatives) is calculated as £nil.
The expected credit risk model was applied to other receivables as described in note 2o where
the credit risk was deemed immaterial.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
158
21 Financial risk management continued
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at 31 December was:
£million
Cash and cash equivalents
Derivative financial instruments
2023
74.1
6.0
2022
65.0
3.9
e) Liquidity risk
The Group maintains a balance between availability of funding and maximising investment return
on cash balances through the use of short-term cash deposits, credit facilities and longer-term
debt instruments. Management regularly reviews the funding requirements of the Group.
The Group’s policy is to centrally manage debt and surplus cash balances.
At 31 December 2023, the Group had £56.9 million of undrawn committed borrowing facilities
(2022: £47.4 million) and £22.6 million (2022: £41.2 million) of undrawn uncommitted borrowing
facilities.
Contractual cashflows of financial liabilities
The following are the contractual maturities of financial liabilities including contractual future
interest payments and commitment fees:
£million
31 December 2023
Carrying
value
Contractual
Cash Flows
On
demand
Under 3
months
3 to 12
months
1 to 2
years
2 to 3
years
3 to 4
years
4 to 5
years
Over 5
years
Borrowings (excl overdrafts)
181.9
219.9
Overdrafts
Lease liabilities
Trade and other payables
Derivatives settled gross
31 December 2022
1.2
18.2
102.3
2.1
305.7
1.2
21.9
102.3
82.5
427.8
–
1.2
–
1.6
–
1.1
– 100.4
–
10.3
1.2
113.4
Borrowings (excl overdrafts)
176.6
208.9
Overdrafts
Lease liabilities
Trade and other payables
Derivatives settled gross
Interest rate swaps
3.7
23.1
135.1
4.4
(0.6)
3.7
26.8
135.1
148.3
–
–
3.7
–
–
–
–
1.0
–
1.2
131.8
6.8
–
3.4
1.9
41.8
53.9
5.5
–
3.8
3.3
8.4
–
3.9
–
30.4
42.7
6.0
–
4.8
–
28.4
75.8
44.1
–
–
–
8.4
114.1
39.7
40.9
–
3.9
–
–
–
1.8
–
–
–
1.3
–
–
–
6.5
–
–
12.3
115.9
41.0
47.4
6.0
107.7
–
3.7
–
–
–
–
3.2
–
–
–
2.2
–
2.1
–
–
–
80.5
–
8.0
–
–
–
f) Fair value of financial assets and liabilities
IFRS 13 “Fair Value Measurement” requires an analysis of those financial instruments that are
measured at fair value at the end of the year in a fair value hierarchy. In addition, IFRS 13 requires
financial instruments not measured at fair value but for which fair value is disclosed to be analysed
in the same fair value hierarchy:
– Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
– Level 2 – inputs other than quoted prices included within level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
– Level 3 – inputs for the asset or liability that are not based on observable market data
(i.e. unobservable inputs).
Set out below is a comparison by class of the carrying amounts and fair value of the Group’s
financial instruments that are carried in the financial statements.
£million
Held at amortised cost
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Borrowings (excluding unsecured loan notes)
Unsecured loan notes
Held at fair value
Derivative financial instruments (assets)
Derivative financial instruments (liabilities)
Assets classified as held for sale and associated
liabilities
Held at depreciated cost
Investment properties
At 31 December 2023
At 31 December 2022
Fair value
hierarchy
Carrying
value
Fair
value
Carrying
value
Fair
value
n/a
n/a
n/a
2
3
2
2
3
3
74.1
72.3
(102.3)
(108.1)
(75.0)
6.0
(2.1)
74.1
72.3
(102.3)
(108.1)
(61.2)
6.0
(2.1)
19.9
19.9 –
–
0.7 –
65.0
101.3
(135.1)
(105.3)
(55.1)
3.9
(4.4)
–
–
0.7
65.0
101.3
(135.1)
(105.3)
(55.1)
3.9
(4.4)
–
–
0.7
The fair value of the financial assets and liabilities are included at the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The following methods and assumptions were used to estimate
the fair values:
– cash and cash equivalents, trade and other receivables, trade and other payables approximate
to their carrying amounts largely due to the short-term maturities of these instruments;
– the fair value of borrowings is estimated by discounting future cash flows using rates currently
342.3
522.8
3.7
162.4
88.4
54.9
9.7
110.9
4.3
88.5
available for debt and remaining maturities.
– the fair value of derivative financial instrument assets (£6.0 million) and liabilities (£2.1 million)
are estimated by discounting expected future cash flows using current market indices such as
yield curves and forward exchange rates over the remaining term of the instrument (level 2); and
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
159
21 Financial risk management continued
– the fair value of investment properties are based on market valuations obtained through third
party valuations (level 3).
– The fair value of unsecured loan notes has been derived from available market data for
borrowings of similar terms and maturity period.
g) Capital management
The overriding objectives of the Group’s capital management policy are to safeguard and support
the business as a going concern through the business cycle and to maintain an optimal capital
structure by reducing the Group’s overall cost of capital. The Board considers equity shareholders’
funds as capital.
The Group maintains a balance between availability of funding and maximising investment return
on cash balances through the use of short-term cash deposits, credit facilities and longer term
debt instruments, and management regularly reviews the funding requirements of the Group.
Dividends are paid when the Board consider it appropriate to do so, taking into account the
availability of funding. The Group has a progressive dividend policy.
The Group has net debt of £126.2 million (2022: £138.4 million). Included within the debt facilities
are certain financial covenants related to IFRS (excluding IFRS 16 update, and after the application
of other covenant defined adjustments) net debt divided by adjusted EBITDA. Adjusted EBITDA
is EBITDA adjusted to exclude the items not included within adjusted operating profit/net finance
charges for which compliance certificates are produced on a 12 month rolling basis every half
year. All financial covenants were fully complied with during the year and up to the date of approval
of the financial statements.
22 Retirement benefit schemes
Defined contribution schemes
The Group operates 401(k) plans in North America and defined contribution arrangements in the
rest of the world. The assets of these schemes are held independently of the Group and are not on
its balance sheet. The total contributions charged by the Group in respect of defined contribution
schemes were £3.5 million (2022: £3.2 million).
Defined benefit schemes
At 31 December 2023 the Group operated one defined benefit schemes in the UK (the TT Group
(1993) Pension Scheme) and one overseas defined benefit scheme in the USA. These schemes
are closed to new members and the UK scheme is closed to future accrual.
The TT Group scheme commenced in 1993 and increased in size in 2006, 2007 and 2019 through
the mergers of former UK schemes following a number of acquisitions. The parent company is the
sponsoring employer in the TT Group scheme. The TT Group scheme is governed by TTG Pension
Trustees Limited (the “Trustee”) that has control over the operation, funding and investment
strategy in consultation with the Group.
In November 2022, the Trustees of the TT Group Scheme entered into a bulk annuity insurance
contract with an insurer in respect of the liabilities of the defined benefit scheme (‘buy-in’). The
insurer will pay into the Scheme cash matching the benefits due to members. The Trustee is of the
opinion that this investment decision is appropriate, reduces the risks in the Scheme and provides
additional security for the benefits due to members of the Scheme. The Trustee continues to be
responsible for running the Scheme and retains the legal obligation for the benefits provided under
the Scheme.
As the buy-in policy is a qualifying insurance asset, the fair value of the insurance policy is deemed
to be the present value of the obligations that have been insured. The policy secured matches the
benefits due to Scheme members under the Scheme’s Trust Deed and Rules.
Since the assets of the Scheme were greater than the premium required to secure the liabilities
through the buy-in, the Scheme Is in a net asset position at 31 December 2023 of £25.3 million.
A ‘true-up premium/refund’ may be payable to/from the insurer during 2024, subject to a data
cleanse exercise to formally agree the final benefits that are covered by the buy-in contract.
Prior to the buy-in, the TT Group scheme exposed the Group to a number of actuarial risks such as
longevity risk, currency risk, inflation risk, interest rate risk and market (investment) risk. The buy-in
mitigates the majority of these risks and the principal risk remaining is the credit risk associated
with the insurer, which is assessed to be very low. The Group is not exposed to any unusual, entity
specific or scheme specific risks, but given the material nature of the TT Group scheme, the Group
has developed a comprehensive strategy covering the following areas to manage the financial risk
associated with it:
– Maintaining a long term working partnership with the Trustee to ensure strong governance of
risks within the TT Group scheme. The TT Group scheme is a long term undertaking and is
managed accordingly, in order to provide security to members’ benefits and value for money
to the Group.
– Following the buy-in the Scheme’s financial and demographic risks are now fully hedged by
the insurer. There will be no material impact on the reported accounting position in future of
a change in interest rates, inflation, or a change in life expectancies, in relation to the Scheme’s
liabilities and matching insurance policy asset. However, a small amount of residual investment
risk remains within the surplus assets held by the Trustee.
– The Scheme’s investment strategy has been assessed as being low risk as the insured asset
matches changes in the assessed value of the Schemes liabilities due to changes in interest
rates, inflationary expectations and longevity expectations. The buy-in policy therefore matches
the term and nature of the liabilities.
The Trustee, in conjunction with the Group, has a duty to ensure that the TT Group scheme has an
appropriate funding strategy in place that meets any local statutory requirements. The objective,
which has been negotiated and agreed between the Group and the Trustee, is that the TT Group
scheme should target and then maintain 100% funding on a basis that should ensure benefits can
be paid as they fall due. Any shortfall in the assets relative to the funding target will be financed
over a period that ensures the contributions are reasonably affordable to the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 160
22 Retirement benefit schemes continued
The weighted average duration of the TT Group scheme defined benefit obligation is around
11 years.
The Group is aware of the High Court ruling in the case of Virgin Media Ltd v Pension Trustees II
Ltd and is waiting for the outcome of the appeal, scheduled for June 2024 as well as confirmation
from the UK Government regarding whether it will issue new regulations in response to this issue.
The principal assumptions used for the purpose of the actuarial valuations for the Group’s primary
defined benefit schemes were as follows:
%
Discount rate
Inflation rate (RPI)
Increases to pensions in payment (LPI 5% pension increases)
Increases to deferred pensions (CPI)
TT Group
2023
TT Group
2022
4.80
3.20
2.95
2.70
5.00
3.30
3.05
2.65
The mortality tables applied by the actuaries at 31 December 2023 for the TT Group (1993)
Scheme were S3 tables (‘Middle’ for females) with 107% (male)/104% (female) weighting for
pensioners and 114% (male)/107% (female) weighting for non-pensioners with a 1.5% long-term
rate of improvement in conjunction with the CMI 2022 projection model. The assumptions are
equivalent to life expectancies as follows: Current pensioner aged 65: 86 years (male), 88 years
(female). Future retiree currently aged 45: 87 years (male), 90 years (female).
UK legislation requires the Trustee to carry out a statutory funding valuation at least every three
years and to target full funding against a basis that prudently reflects the TT Group scheme’s
risk exposure.
The last triennial valuation of the TT Group scheme as at April 2022 showed a net surplus
of £45.4 million against the Trustee’s statutory funding objective.
Due to the favourable funding position the Trustee and Company have agreed that there was no
requirement for any further funding contributions to the TT Group scheme. In December 2023 an
initial £5.0 million refund of the surplus was paid to the group out of scheme assets by the Trustee
(£3.2 million after tax suffered by the scheme).
The Trustee and Company agreed that the Trustee should undertake an exercise during 2022,
whereby deferred members were offered an enhanced transfer value option. In the year ended
31 December 2022 a £11.8 million settlement cost was recognised within items excluded from
adjusted operating profit as a result of this exercise.
In the year ended 31 December 2022 the Trustees of the Southern & Redfern Ltd Retirement
Benefits Scheme completed a buy-out of the scheme with a leading insurer, securing the pensions
of members for the future. As a result, the assets (£0.6 million) and liabilities (£0.6 million) of the
scheme were derecognised. The subsequent wind-up of the Southern & Redfern Ltd Retirement
Benefits Scheme was completed in October 2023.
An actuarial valuation of the USA defined benefit schemes was carried out by independent
qualified actuaries in 2023 using the projected unit credit method. Pension scheme assets are
stated at their market value at 31 December 2023. In the year ended 31 December 2023 the
Trustees of the BI Technologies Corporation Retirement Plan, one of the US defined benefit
schemes in the USA, completed a partial buy-out and a bulk settlement exercise, extinguishing
gross liabilities of £5.5 million in total.
An analysis of the pension surplus/(deficit) by scheme is shown below:
£million
TT Group (1993)
USA schemes
Net surplus
At 31 December 2023
At 31 December 2022
25.3
(3.1)
22.2
31.3
(2.9)
28.4
Given the nature of the Group’s control of the TT Group under the Scheme rules, the Group
considers that it has an unconditional right to refund of surplus in the event of the Scheme’s
wind-up. Based on these rights, any pension surpluses have been recognised in full under IFRIC 14.
The ongoing expenses of running the Scheme are now met from the remaining Scheme assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 22 Retirement benefit schemes continued
Risk and sensitivity
Following the buy-in, changes in actuarial assumptions will impact the liabilities and insured asset
to the same extent, with no overall impact on the net reporting position. A decrease in the discount
rate by 0.1% per annum increases the liabilities and assets by approximately £4 million. An increase
by 0.1% per annum in the inflation rate increases the liabilities and assets by approximately
£2 million. An increase in the life expectancy of 1 year increases the liabilities and assets by
approximately £11 million.
The sensitivities above consider the impact of the single change shown, with the other
assumptions unchanged. The inflation sensitivities allow for the consequential impact on the
relevant pension increase assumptions. The sensitivity analyses have been determined based
on a method that extrapolates the impact on the defined benefit obligation as a result of
reasonable changes in key assumptions occurring at the end of the reporting period.
The amounts recognised in respect of the pension surplus in the consolidated balance sheet are:
£million
Equities
Government bonds
Corporate bonds
Cash and cash equivalents
Insured assets
Other
Fair value of assets
Present value of defined benefit obligation
Net surplus recognised in the consolidated balance sheet
2023
1.2
–
–
24.5
336.9
0.9
363.5
(341.3)
22.2
2022
4.8
15.4
1.0
14.0
357.9
3.7
396.8
(368.4)
28.4
The schemes’ assets are unquoted unless otherwise stated and do not include the Group’s
financial instruments, any property occupied by, or other assets used by the Group. All of the
funds included in the asset split are pooled investment vehicles for which due diligence has been
completed. We have classified all of the Scheme’s investments other than the cash held at the
custodian, government bonds and the exchange traded funds (ETFs) as unquoted assets.
161
Amounts recognised in the consolidated income statement are:
£million
Scheme administration costs
Net loss on pension projects (excluded from adjusted operating profit)
Net interest credit
2023
(1.9)
(1.3)
1.4
2022
(1.2)
(13.8)
2.1
Amounts recognised in the consolidated statement of comprehensive income are a gain of
£0.2 million (2022: loss of £35.9 million) which comprises of; the actual return on scheme
assets excluding interest income, a loss of £18.3 million (2022: loss of £215.3 million) and the
remeasurement of the schemes obligations, a gain of £18.5 million (2022: gain of £179.5 million).
Changes in the present value of the defined benefit obligation are:
£million
Defined benefit obligation at 1 January
Past service charge and settlements
Interest on obligation
Remeasurements:
Effect of changes in demographic assumptions
Effect of changes in financial assumptions
Effect of experience adjustments
Benefits paid
Exchange
Defined benefit obligation at 31 December
TT Group (1993)
USA schemes
2023
368.4
(5.5)
17.7
(9.7)
6.0
(15.0)
(20.2)
(0.4)
341.3
336.9
4.4
341.3
2022
577.4
(20.3)
11.9
(0.5)
(197.2)
18.2
(22.6)
1.5
368.4
357.9
10.5
368.4
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
162
22 Retirement benefit schemes continued
Changes in the fair value of the schemes’ assets are:
£million
Fair value of schemes’ assets at 1 January
Interest income on defined benefit scheme assets
Return on scheme assets, excluding interest income
Contributions by employer
Return of pension surplus 1
Pension scheme expenses
Settlements
Benefits paid
Exchange
Fair value of schemes’ assets at 31 December
24 Other reserves
2023
396.8
19.1
2022
651.9
14.0
£million
At 1 January 2022
Share based payment charge
Awards made to employees
(18.3)
(215.4)
Deferred tax on share based payments
0.2
(5.0)
(3.2)
(5.5)
(20.2)
(0.4)
363.5
1.3
–
(1.2)
(32.1)
(22.6)
Funding of employee benefit trust
Loss on cash flow hedges taken to equity less
amounts taken to income statement
Deferred tax on movement in cash flow hedges
Other movement
0.9
At 1 January 2023
396.8
Share based payment charge
1 During the year the TT Group (1993) Pension Scheme returned £3.2 million of pension surplus as cash to the Group. This was net of
£1.8m of tax paid directly by the scheme to HMRC.
Share Based
Payment
Reserve
Employee
Benefit
Trust
Share
options
reserve
Hedging
Reserve
1.3
4.8
(0.8)
(1.0)
–
–
–
–
4.3
3.1
(1.0)
(0.1)
–
–
–
(0.3)
–
0.4
–
(0.5)
–
–
–
(0.4)
–
1.1
–
(1.3)
–
–
1.0
4.8
(0.4)
(1.0)
(0.5)
–
–
–
3.9
3.1
0.1
(0.1)
(1.3)
–
–
5.7
2.7
–
–
–
–
(2.9)
0.2
–
–
–
–
–
–
3.5
(0.7)
2.8
Merger
reserve
3.4
–
–
–
–
–
–
–
3.4
–
–
–
–
–
–
3.4
Total
7.1
4.8
(0.4)
(1.0)
(0.5)
(2.9)
0.2
–
7.3
3.1
0.1
(0.1)
(1.3)
3.5
(0.7)
11.9
Awards made to employees
Deferred tax on share based payments
Funding of employee benefit trust
Loss on cash flow hedges taken to equity less
amounts recycled to income statement
2023
2022
Deferred tax on movement in cash flow hedges
At 31 December 2023
6.3
(0.6)
23 Share capital
Share capital
£million
Issued and fully paid
177,371,049 (2022: 176,486,627) ordinary shares of 25p each
44.3
44.1
During the period the Company issued 884,422 ordinary shares as a result of share options being
exercised under the Sharesave scheme and Share Purchase plans.
The performance conditions of the Restricted Share Plan awards issued in 2020, 2021 and 2022
were met and shares were allocated to award holders from existing shares held by an Employee
Benefit Trust for £nil consideration. The performance conditions of the Long-term Incentive Plan
awards issued in 2020 were not met and therefore no new shares were issued to award holders.
The aggregate consideration received for all share issues during the year was £1.3 million
which was represented by a £0.2 million increase in share capital and a £1.1 million increase
in share premium.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
163
2023
2022
Number of
share awards
Number of
share awards
3,958,289
5,379,293
1,238,163
650,871
(2,931,224)
(1,614,554)
–
(457,321)
2,265,228
3,958,289
–
–
25 Share-based payment plans
The Company has the following share-based payment plans in operation at 31 December 2023:
a) Long-term Incentive Plans
Details of the LTIP awards outstanding during the year are as follows:
At 1 January
Granted
Forfeited/Lapsed
Exercised/Vested
At 31 December
Exercisable at 31 December
– Long-term Incentive Plan (“LTIP”) for senior executives;
– Restricted Share Plan (“RSP”) for certain senior executives; and
– Sharesave plans for UK employees and a Share Purchase plan for US employees.
The LTIP and RSP schemes have been classified as equity settled schemes. The terms of the LTIP
and RSP schemes state that the Group has the right as to how to settle these awards and it is the
Group’s intention to settle these with equity. At the date of vesting the Group will settle the awards
either with new issue shares or shares purchased on the market at an earlier point in time.
The Group offers the employees the option for the Group to settle the tax liability, which the
employee would incur upon receipt of the award, on behalf of the employee with the relevant tax
authority. In this circumstance the Group may choose to pay, in cash, the tax liability due on behalf
of the employee to the tax authority and the employee would receive the remaining value of their
award in equity. In 2023 the Group paid £0.5 million to settle the employees’ tax liabilities (2022:
£0.9 million). The Group estimates that the future cashflows associated with the above would
remain consistent with the 2023 outflows. The Group also offers the employee the option for the
Group to sell the remaining shares on the employees’ behalf and to forward that cash to the
employee, although the Group is not compelled to do so no matter what the employee chooses.
In 2023 £0.1 million was used for these purposes (2022: £nil). The Group estimates that the future
cashflows associated with the above would remain consistent in future years with the 2023
outflows. These arrangements do not change the assessment that the share-based payments
are equity settled.
The Sharesave scheme has also been classified as an equity settled scheme. The rules of this
scheme state that the participant must always be paid in equity and that neither party can request
settlement in any other way.
During 2023 grants of awards were made under the LTIP for the issue of shares in 2026. An 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
require the achievement of earnings per share (‘EPS’) and total shareholder return (‘TSR’) targets
as detailed in the Directors’ Remuneration Report on page 105.
The fair value of the shares was estimated at the grant date using a Monte Carlo simulation model,
considering the terms and conditions upon which the shares were granted. This model simulates
the TSR and compares it against the group of comparator companies. It considers historic
dividends and share price fluctuations to predict the distribution of relative share price
performance.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
164
25 Share-based payment plans continued
The table below lists the awards which were made during the year the inputs to the model:
Grant date
2023
14 March 2023
2 October 2023
2022
14 March 2022
Number of
awards
Fair value at
grant date
Share price at
grant date
Exercise
price
Expected
volatility
Vesting period
(years)
758,233
479,930
135.1p
117.8p
183.0p
171.0p
650,871
164.9p
202.5p
£nil
£nil
£nil
38%
38%
37%
3.0
3.0
3.0
The award of shares is not affected by the risk free rate of interest since no investment is required
by the recipient, and therefore no interest could be earned elsewhere. Expected volatility is based
on historical share price movements.
The performance conditions of the LTIP grants made in 2020 that reached the end of their
performance periods in 2023 were not met and no shares were allocated to award holders.
b) Restricted Share Plan
During the year the Group granted 1,530,984 shares (2022: 1,219,914) under the restricted plan.
Awards are typically subject to continuing employment with no other vesting criteria.
Details of the restricted share plan awards outstanding during the year are as follows:
At 1 January
Granted
Forfeited/Lapsed
Exercised/Vested
At 31 December
Exercisable at 31 December
2023
2022
Number of
share awards
Number of
share awards
2,289,873
1,530,984
2,193,182
1,219,914
(123,745)
(476,619)
(786,612)
(646,604)
2,910,500
2,289,873
–
–
During the year 76,536 (2022: 59,874) notional RSP share awards were granted to senior
managers which will ultimately be settled in cash.
The performance conditions of the RSP grants made in 2020, 2021 and 2022 that reached the
end of their performance periods in 2023 were partially met and shares were allocated to award
holders from existing shares held by an Employee Benefit Trust for £nil consideration.
The table below lists the awards which were made during the year the inputs to the model:
Grant date
2023
16 March 2023
3 August 2023
2 October 2023
Grant date
2022
10 January 2022
14 March 2022
14 March 2022
6 June 2022
20 June 2022
21 November 2022
Number of
awards
Fair value at
grant date
Share price at
grant date
Exercise
price
Expected
volatility
Vesting period
(years)
1,247,648
56,460
226,876
183.0p
153.0p
172.0p
183.0p
153.0p
172.0p
£nil
£nil
£nil
38%
38%
38%
3.0
3.0
3.0
Number of
awards
Fair value at
grant date
Share price at
grant date
Exercise
price
Expected
volatility
Vesting period
(years)
14,053
948,429
107,413
49,342
60,677
40,000
264.0p
202.5p
202.5p
200.5p
187.0p
170.0p
264.0p
202.5p
202.5p
200.5p
187.0p
170.0p
£nil
£nil
£nil
£nil
£nil
£nil
37%
37%
37%
37%
37%
37%
3.0
3.0
3.0
3.0
3.0
3.0
All of the above awards are subject to continuing employment with the Group.
c) Sharesave schemes
The Group operates a Sharesave scheme for participating employees in the UK under a three-year
plan. Employees may purchase the Group’s shares at a 20% discount to the market price on the
day prior to the commencement of the offer up to a maximum contribution value of £6,000 in
any one year. Monthly contributions are saved with Lloyds Bank plc, via Equiniti Ltd, the Registrars,
in the employee’s share savings plan and will only be released to employees who remain in the
Group’s employment for a period of three years from commencement of the savings contract.
Options become exercisable on completion of the three-year term or within six months of leaving
in certain circumstances. All Sharesave scheme awards are accounted for as equity settled.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
165
25 Share-based payment plans continued
Details of the save as you earn share plan awards outstanding during the year are as follows:
2023
2022
26 Reconciliation of net cash flow to movement in net debt
Net cash of £76.5 million (2022: £61.3 million) comprises cash at bank and in hand of £74.1 million
(2022: £65.0 million), overdrafts of £1.2 million (2022: £3.7 million) and cash within assets held for
sale of £3.6 million.
At 1 January
Granted
Forfeited/Lapsed
Exercised
At 31 December
Exercisable at 31 December
The fair value of the shares at grant date was as follows:
Date price set
30 August 2020
7 September 2021
6 September 2022
5 September 2023
Number of
share awards
Number of
share awards
£million
3,749,876
2,465,154
At 1 January 2022
1,292,868
1,930,800
Cash flow
(908,159)
(601,348)
Businesses acquired
(682,620)
(44,730)
Repayment of borrowings
3,451,965
3,749,876
Proceeds from borrowings
303,407
507,668
Payment of lease liabilities
Market
price
187.0p
271.0p
149.3p
174.1p
Option
price
151.0p
226.0p
119.5p
139.4p
Fair
value
Options
outstanding
84.0p
110.9p
67.5p
66.5p
304,474
263,887
1,625,595
1,258,009
New leases
Net movement in loan arrangement fees
Exchange differences
At 31 December 2022
Cash flow
Transferred to held for sale
Repayment of borrowings
Proceeds from borrowings
Payment of lease liabilities
New leases
The Group operates a Stock Purchase Plan for participating US employees. Under the plan
employees may purchase the Group’s shares at a 15% discount to the market price at the date
of acquisition, up to a maximum of $6,500 per annum. Employees save on a monthly basis and
shares are purchased each quarter.
The total share-based payment charge for the year excluding a social security debit of £0.1 million
(2022: £0.2 million credit) arising from the above share scheme plans was £3.1 million (2022:
£4.8 million).
Net movement in loan arrangement fees
Exchange differences
At 31 December 2023
Included within assets classified as held for sale and associated
liabilities
At 31 December 2023
Net cash Lease liabilities
Borrowings
Net debt
67.2
(9.2)
–
–
–
–
–
–
3.3
61.3
19.3
(3.6)
–
–
–
–
–
(4.1)
72.9
3.6
76.5
(22.6)
–
(0.2)
–
–
4.3
(2.3)
–
(2.3)
(23.1)
–
2.6
–
–
4.4
(3.4)
–
1.3
(147.1)
(102.5)
–
–
149.3
(174.3)
–
–
0.7
(5.2)
(9.2)
(0.2)
149.3
(174.3)
4.3
(2.3)
0.7
(4.2)
(176.6)
(138.4)
–
–
26.1
(32.7)
–
–
(0.1)
1.4
19.3
(1.0)
26.1
(32.7)
4.4
(3.4)
(0.1)
(1.4)
(18.2)
(181.9)
(127.2)
(2.6)
(20.8)
–
1.0
(181.9)
(126.2)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
166
27 Changes in liabilities arising from financing activities
£million
At 1 January 2022
Cash movements
Cash flows
Non cash movements
Fair value movements
Business acquired
Interest accrued
Net movement in loan arrangement fees
New leases
Exchange differences
At 1 January 2023
Cash movements
Cash flows
Non cash movements
Transferred to held for sale
Interest accrued
Net movement in loan arrangement fees
New leases
Exchange differences
At 31 December 2023
Included within liabilities associated with assets classified as held
for sale
At 31 December 2023
Lease liabilities
Borrowings
Interest rate
swaps
Liabilities
arising from
financing
activities
28 Contingent liabilities
The Group is subject to claims which arise in the ordinary course of business. Other than those
for which provisions have been made and included within note 19, the Directors consider the
likelihood of any other claims giving rise to a significant liability to be remote.
(22.6)
(147.1)
(0.3)
(170.0)
29 Capital commitments
5.1
(17.9)
0.1
(12.7)
£million
Contractual commitments for the purchase of property, plant and equipment
2023
2.7
2021
3.1
–
(0.2)
(0.8)
–
(2.3)
(2.3)
–
–
(7.1)
0.7
–
(5.2)
0.8
–
–
–
–
–
0.8
(0.2)
(7.9)
0.7
(2.3)
(7.5)
(23.1)
(176.6)
0.6
(199.1)
5.2
3.3
(0.6)
7.9
2.6
(0.8)
–
(3.4)
1.3
–
(9.9)
(0.1)
–
1.4
(18.2)
(181.9)
(2.6)
(20.8)
–
(181.9)
–
–
–
–
–
–
–
–
2.6
(10.7)
(0.1)
(3.4)
2.7
(200.1)
(2.6)
(202.7)
30 Leases
The total cash outflow for leases is £5.1 million (2021: £4.7 million) comprising lease repayments
of £4.3 million (2021: £3.9 million), interest on lease liabilities of £0.8 million (2021: £0.8 million).
Interest on lease liabilities is shown in note 5, the maturity of the lease liabilities is shown in note
21(e) and the corresponding assets to which the lease liabilities relate are shown in note 12.
31 Related party transactions
Transactions between the Company and its subsidiaries have been eliminated on consolidation
and are not disclosed in this note.
No related party transactions have taken place in 2022 or 2021 that have affected the financial
position or performance of the Group.
Key management personnel and Directors’ emoluments are disclosed in note 11.
32 Subsequent events
On 4 March 2024 the Group announced the agreement to sell three business operating units
within the Global Manufacturing Solutions and Power and Connectivity segments to the Cicor
Group for a cash consideration of £20.8 million on a cash and debt free basis subject to normal
working capital adjustments. The assets and related liabilities of the disposal group are shown
as being held for sale as at 31 December 2023 as detailed in note 4.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDTT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF CHANGES IN EQUITY
at 31 December 2023
£million
Non current assets
Right-of-use assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax asset
Pensions
Debtors
Total fixed assets
Current assets
Debtors
Cash at bank and in hand
Total current assets
Current liabilities
Lease liabilities
Creditors: amounts falling due within one year
Total current liabilities
Net current assets
Non current liabilities
Lease liabilities
Deferred tax liability
Total non current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Share options reserve
Merger reserve
Profit and loss account
Shareholders’ funds
Note
2023
2022
2
2
2
3
11
10
4
4
13
6
5
6
11
7
7
8
9
0.4
0.3
0.8
126.4
3.4
25.3
128.1
284.7
27.6
1.4
29.0
0.2
18.6
18.8
10.2
0.3
8.4
8.7
0.5
0.5
0.9
126.4
2.8
31.3
121.2
283.6
20.5
0.5
21.0
0.2
9.0
9.2
11.8
0.5
11.0
11.5
286.2
283.9
44.3
24.0
5.8
3.4
208.7
286.2
44.1
22.9
3.9
3.4
209.6
283.9
at 31 December 2023
£million
At 1 January 2021
Loss for the year
Other comprehensive income
Remeasurement of defined benefit
pension schemes
Tax on remeasurement of defined
benefit pension schemes
Total comprehensive income
Transactions with owners recorded
directly in equity
Dividends paid by the Company
Share-based payments
Deferred tax on share-based payments
Other movements
New shares issued
At 31 December 2022
Profit for the year
Other comprehensive income
Remeasurement of defined benefit
pension schemes
Tax on remeasurement of defined
benefit pension schemes
Total comprehensive income
Transactions with owners recorded
directly in equity
Dividends paid by the Company
Share-based payments
Other movements
New shares issued
At 31 December 2023
The Company reported a profit for the financial year ended 31 December 2023 of £10.2 million
(2022: loss of £38.2 million).
Approved by the Board of Directors on 6 March 2024 and signed on their behalf by:
Peter France
Director
Mark Hoad
Director
Share
premium
Merger
reserve
Share options
reserve
Profit and loss
account
22.6
–
3.4
–
288.7
(38.2)
167
Total
359.8
(38.2)
1.0
–
–
–
–
4.8
(1.0)
(0.9)
–
3.9
–
–
–
–
3.1
(1.2)
–
5.8
(37.5)
(37.5)
6.8
(68.9)
6.8
(68.9)
(10.2)
(10.2)
–
–
–
–
209.6
10.2
4.8
(1.0)
(0.9)
0.3
283.9
10.2
0.3
0.3
(0.1)
10.4
(0.1)
10.4
(11.3)
(11.3)
–
–
–
3.1
(1.2)
1.3
208.7
286.2
Share
capital
44.1
–
–
–
–
–
–
–
–
–
44.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
22.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.4
–
–
–
–
–
–
–
–
3.4
0.2
44.3
1.1
24.0
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
168
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 Material accounting policies
a) Basis of preparation
The financial statements of TT Electronics plc (the “Company”) were prepared in accordance
with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).
In preparing these financial statements, the Company applies the recognition, measurement and
disclosure requirements of International Financial Reporting Standards, but makes amendments
where necessary in order to comply with Companies Act 2006 and has set out below where
advantage of the FRS 101 disclosure exemptions has been taken.
In these financial statements, the Company has applied the exemptions available under FRS 101
in respect of the following disclosures:
– a cash flow statement and related notes;
– disclosures in respect of transactions with wholly owned subsidiaries;
– disclosures in respect of capital management;
– the effects of new but not yet effective IFRSs;
– disclosures in respect of the compensation of key management personnel;
– comparable movement tables for tangible and intangible fixed assets; and
– disclosures in respect of leases
The accounting policies set out in note 2 of the Consolidated financial statements have, unless
otherwise stated, been applied in the preparation of the Company financial statements.
Change in accounting policy
There have been no changes to accounting policies during the year. Adoption of new and
amendments to published standards and interpretations effective for the Group for the year ended
31 December 2023 did not have any impact on the financial position or performance of the Group.
b) Estimation uncertainty
During the year there were no judgements made by the Directors, in the application of the adopted
accounting policies, deemed to have a significant effect on the financial statements nor were there
any estimates deemed to carry a significant risk of material adjustment in the next year.
Details of the Directors’ assessment of the Company’s ability to continue in operational existence
for at least twelve months from the date of signing these financial statements are shown in Note 1
of the Consolidated financial statements and in the Strategic Report on page 67.
c) Investments
Fixed asset investments in subsidiaries are carried at cost less provision for impairment.
d) Own shares held by Employee Benefit Trust
Transactions of the Company-sponsored Employee Benefit Trust are treated as being those of
the Company and are therefore reflected in the Company’s financial statements. In particular,
the Trust’s purchases of shares in the Company are debited directly to equity.
2 Non Current Assets
£million
Cost
At 1 January 2022
Disposals
Additions
At 31 December 2022
Disposals
Additions
At 31 December 2023
Depreciation
At 1 January 2022
Disposals
Depreciation charge
At 31 December 2022
Disposals
Depreciation charge
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
Intangible
Assets
Plant,
equipment and
vehicles
Right-of-use
assets
19.4
(1.6)
0.2
18.0
–
0.4
18.4
17.8
(1.6)
0.9
17.1
–
0.5
17.6
0.8
0.9
1.2
–
–
1.2
–
–
1.2
0.6
–
0.1
0.7
–
0.2
0.9
0.3
0.5
1.2
–
–
1.2
(0.1)
–
1.1
0.6
–
0.1
0.7
(0.1)
0.1
0.7
0.4
0.5
Intangible assets solely relate to software.
Disposals in the prior year relate to redundant intangible assets which held a carrying value of £nil
at the start of the year.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
3 Investments
£million
Cost
At 1 January 2022
Disposals
At 31 December 2022
At 31 December 2023
Provisions
At 1 January 2022
Impairment
At 31 December 2022
At 31 December 2023
Net book value
At 31 December 2023
At 31 December 2022
During the prior year an impairment of £46.8 million was recognised to reduce the investment
in IoT Solutions UK Limited to its carrying value of £nil (2022: £46.8 million).
The Company’s subsidiary undertakings and their locations are shown in note 14. Shareholdings
are held indirectly for all principal operating subsidiary undertakings.
Subsidiary undertakings
£million
5 Creditors
Amounts falling due within one year
253.0
Trade creditors
(1.0)
Amounts owed to subsidiary undertakings
252.0
252.0
78.8
46.8
125.6
125.6
126.4
126.4
Taxation and social security
Accruals and deferred income
6 Lease obligations
£million
At 31 December 2022
Capital repayments
At 31 December 2023
7 Share capital
£million
Issued, called up and fully paid
169
2023
2022
2.6
8.7
0.9
6.4
18.6
Current lease
liabilities
Non-current
lease liabilities
0.2
–
0.2
0.5
(0.2)
0.3
2.0
1.4
1.4
4.2
9.0
Total
0.7
(0.2)
0.5
2023
2022
4 Debtors
£million
Current debtors
Amounts owed by subsidiary undertakings
Prepayments, accrued income and other receivables
Amounts due within one year
Non Current debtors
Amounts owed by subsidiary undertakings
Amounts due later than one year
Total
‘Amounts owed by subsidiary undertakings’ have been considered for impairment using the
12 months expected credit loss model because there was no change in credit risk since initial
recognition. The expected credit loss is considered immaterial because the probability of default
is negligible.
As at 31 December 2023 £128.1 million (2022: £121.2 million) of debtors have been classified as
non current due to management’s expectation that these will not be settled within 12 months.
177,371,049 (2022: 176,486,627) ordinary shares of 25p each
44.3
44.1
2023
2022
During the period the Company issued 884,422 ordinary shares as a result of share options being
exercised under the Sharesave scheme and Share Purchase plans.
25.7
1.9
27.6
128.1
128.1
155.7
19.4
1.1
20.5
121.2
121.2
141.7
The performance conditions of the Restricted Share Plan awards issued in 2020, 2021 and 2022
were met and shares were allocated to award holders from existing shares held by an Employee
Benefit Trust for £nil consideration. The performance conditions of the Long-term Incentive Plan
awards issued in 2020 were not met and therefore no new shares were issued to award holders.
The aggregate consideration received for all share issues during the year was £1.3 million which was
represented by a £0.2 million increase in share capital and a £1.1 million increase in share premium.
8 Share-based payments
Details of share-based payments are shown in note 25 of the Consolidated financial statements.
Any charge associated with share-based payments made to employees of subsidiaries are
recharged out to the relevant subsidiaries within the same financial year.
9 Profit for the year
As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present
its profit and loss account for the year. The profit after tax of the Company for the year was
£10.2 million (2022: loss of £38.2 million). The auditor’s remuneration for audit services is
disclosed in note 6 to the Consolidated financial statements.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
170
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
10 Pension schemes
Defined benefit scheme
In November 2022, the Trustees of the TT Group Scheme entered into a bulk annuity insurance
contract with an insurer in respect of the liabilities of the defined benefit scheme (‘buy-in’). The
insurer will pay into the Scheme cash matching the benefits due to members. The Trustee is of the
opinion that this investment decision is appropriate, reduces the risks in the Scheme and provides
additional security for the benefits due to members of the Scheme. The Trustee continues to be
responsible for running the Scheme and retains the legal obligation for the benefits provided under
the Scheme.
As the buy-in policy is a qualifying insurance asset, the fair value of the insurance policy is deemed
to be the present value of the obligations that have been insured. The policy secured matches the
benefits due to Scheme members under the Scheme’s Trust Deed and Rules.
Since the assets of the Scheme were greater than the premium required to secure the liabilities
through the buy-in, the Scheme is in a net asset position at 31 December 2023 of £25.3 million.
A ‘true-up premium/refund’ may be payable to/from the insurer during 2024, subject to a data
cleanse exercise to formally agree the final benefits that are covered by the buy-in contract.
The last triennial valuation of the TT Group scheme as at April 2022 showed a net surplus of
£45.4 million against the Trustee’s statutory funding objective.
Due to the favourable funding position the Trustees and Company have agreed that there was
no requirement for any further funding contributions to the TT Group scheme. In December 2023
an initial £5.0 million refund of the surplus was paid to the group out of scheme assets by the
Trustees (£3.2 million after tax suffered by the scheme).
The Trustee and Company agreed that the Trustee should undertake an exercise during 2022,
whereby deferred members were offered an enhanced transfer value option. In the year ended
31 December 2022 a £11.8 million settlement cost was recognised within items excluded from
adjusted operating profit as a result of this exercise.
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 are incurred. The total contributions charged by the Company including employee
salary exchange contributions in respect of the year ended 31 December 2023 were £0.6 million
(2022: £0.5 million).
11 Deferred tax
The deferred tax asset of £3.4 million comprises £0.7 million asset in respect of share-based
payments (2022: £0.7 million asset); £1.2 million in respect of non-current assets (2022:
£1.4 million asset) the movement in which has been recognised in profit and loss (£0.2 million);
and £1.5 million in respect of tax losses (2022: £0.7 million) the movement in which has been
recognised in profit and loss (£0.8 million).
The deferred tax liability of £8.4 million is in respect of the pension asset (2022: £11.0 million
liability), the movement in which has been recognised in equity (debit to equity of £0.1 million)
and the income statement (credit to income statement of £2.7 million).
12 Employee information
The average number of full time equivalent employees (including Directors) during the year
was 80.
13 Related party transactions
During 2023 and 2022, the Company did not have any related party transactions other than
with wholly owned subsidiaries.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
14 Subsidiary undertakings
The following entities are 100% owned with only ordinary shares in issue, unless otherwise stated.
The country of incorporation matches the country in which the registered office/principal place
of business is located.
Name of subsidiary undertaking
Dongguan Arlec Electrical Products Co. Limited (capital contribution)
TT Electronics Integrated Manufacturing Services (Suzhou) Co., Ltd
Ying Si Ke Electrical Products Co. Limited (capital contribution)
TT Electronics SAS
TT Electronics GmbH
Stadium Asia Limited
STMC Limited
TT Electronics Srl
BI Technologies Corporation SDN BHD (ordinary and preference shares)
BI Technologies S.A. de C.V.
Optron de Mexico S.A. de C.V.
TT Electronics Asia Pte Ltd
TT Electronics Sweden AB
AB Connectors Limited
AB Electronic Components Limited
Abtest Limited 2
Aero Stanrew Group Limited (ordinary and preference shares) 1,2
Aero Stanrew Limited
Automotive Electronic Systems Limited 1
BI Technologies Limited 2
Commendshaw Limited 2
Controls Direct Limited 2
Crystalate Electronics Limited
Dale Electric International Limited 1,2
Deltight Washers Limited 2
Ferrus Power Limited 2
Fox Industries Limited 2
Hale End Holdings Limited 2
Kingslo Limited 2
KRP Power Source (UK) Limited 2
Linton and Hirst Group Limited 2
Midland Electronics Limited
MMG Linton and Hirst Limited 2
Nulectrohms Limited 2
Registered office/principal
place of business
(1)
(2)
(1)
(3)
(4)
(5)
(6)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(15)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
Name of subsidiary undertaking
Roxspur Measurement & Control Limited
Semelab Limited
Sensit Limited 2
Stadium Electrical Holdings Limited 2
Stadium Electronics Limited 2
Stadium IGT Limited
Stadium Power Limited 2
Stadium United Wireless Limited 2
Stadium Wireless Devices Limited 2
Stadium Zirkon UK Limited 2
Stontronics Limited 2
The Brearley Group Limited 2
TT Asia Holdings Limited
TT Automotive Electronics Limited 2
TT Electronics Europe Limited 1,2
TT Electronics Fairford Limited
TT Electronics Group Holdings Limited 1
TT Electronics Holdco Limited
TT Electronics Integrated Manufacturing Services Limited
TT Electronics IoT Solutions Limited 1
TT Electronics Power Solutions (UK) Limited
TT Group Limited 2
TT Power Solutions Limited 2
TTE Trustees Limited 1,2
TTG Investments Limited 1
TTG Nominees Limited 1,2
TTG Pension Trustees Limited 1,2
TTG Properties Limited 1
Valuegolden Limited 2
Welwyn Components Limited
Welwyn Electronics Limited 2
Wolsey Comcare Limited 2
Zirkon Holdings Limited 2
AB Interconnect, Inc.
Apsco Holdings, Inc
BI Technologies Corporation
Cletronics N.A. Inc,
International Resistive Company Inc
171
Registered office/principal
place of business
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(16)
(13)
(13)
(14)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(13)
(17)
(13)
(13)
(13)
(18)
(18)
(18)
(19)
(18)
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 172
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
14 Subsidiary undertakings continued
Name of subsidiary undertaking
International Resistive Company of Texas, LLC
Optek Technology Inc
Power Partners, Inc
Precision, Inc
Torotel, Inc
Torotel Products, Inc
TT Electronics Integrated Manufacturing Services, Inc
TT Electronics Power Solutions (US), Inc
TT Group Industries, Inc.
Registered office/principal
place of business
(20)
(18)
(21)
(22)
(23)
(23)
(24)
(19)
(19)
UK Registered Subsidiaries exempt from audit
The following UK subsidiaries will take advantage of the audit exemption set out within section
479A of the Companies Act 2006 for the year ended 31 December 2023. The following entities
are 100% owned and have a single class of ordinary share with a nominal value of £1, unless
otherwise stated. All subsidiaries below are registered at Fourth floor, St Andrews House,
West Street, Woking GU21 6EB, United Kingdom.
Name of subsidiary undertaking
AB Electronic Components Limited
Automotive Electronic Systems Limited 1
Crystalate Electronics Limited
Midland Electronics Limited
TT Asia Holdings Limited
TT Electronics Group Holdings Limited 1, 2
Company number
00578077
01518303
00691591
00675333
02464046
00299275
06649272
(1) 4th Building, F Zone, Zheng Wei Science Park, Dongkeng Town, Dongguan City,
Semelab Limited
1 Shares held directly by TT Electronics plc
2 Single class of ordinary share with a nominal value of £0.25.
Guangdong, China
(2) 158-24 Hua Shan Road, Snd Suzhou, 215129, China
(3) 4 place Louis Armand, 75012 Paris, France
(4) Max-Lehner-Strasse 31, 85354, Freising, Germany
(5) Unit A, 3/F, Bamboos Centre, 52 Hung To Road, Kwun Tong, Kowloon, Hong Kong
(6) Via Santa Redegonda N. 11, Milano, Italy
(7) Lot 6.05, Level 6, KPMG tower, 8 First Avenue, Bandar Utama 47800 Petaling Jaya,
Selangor, Darul Ehsan, Malaysia
(8) Ave Circulo de la Amistad No.102, Parque Industrial Mexicali IV, Mexico
(9) Ave Rio Bravo 1551-a, Parque Industrial Rio Bravo, CD. Juarez Chihuahua, Mexico
(10) 2 Shenton Way, #18-01 SGX Centre 1, 068804, Singapore
(11) Gullfossgatan 3, 164 40 Kista, Sweden
(12) Abercynon, Mountain Ash, Rhondda Cynon Taff, CF45 4SF, Wales
(13) Fourth Floor, St Andrews House, West Street, Woking, Surrey, GU21 6EB, England
(14) Unit 1, Tregwilym Industrial Estate, Rogerstone, Newport, Gwent, NP10 9YA, Wales
(15) Unit 1 Gratton Way, Roundswell Business Park, Barnstaple, Devon, EX31 3AR, England
(16) London Road, Fairford, Gloucestershire, GL7 4DS, England
(17) Welwyn Electronics Park, Bedlington, Northumberland, NE22 7AA, England
(18) Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, United States
(19) CT Corporation System, Corporation Trust Center, 1209 Orange Street, Wilmington,
DE 19801, United States
(20) Corporation Service Company, 211 East 7th Street, Suite 620, Austin,
TX 78701-3218, United States
(21) 155 Northboro Road, Suite #9, Southborough, MA 01772, USA
(22) 1700 Freeway Boulevard, Minneapolis, MN 55430, United States
(23) 520 N Rogers Road, Olathe, KS66062, United States
(24) CT Corporation System, 4400 Easton Commons Way, Suite 125, Columbus,
OH43219, United States
1 Shares held directly by TT Electronics plc
2 Dormant UK subsidiary
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 173
FIVE YEAR RECORD
£million (unless otherwise stated)
Revenue
Operating profit
Adjusted operating profit 1
(Loss)/profit before taxation
Adjusted profit before taxation 1
(Loss)/earnings (continuing)
Adjusted earnings 1
(Loss)/earnings per share – continuing (pence)
Adjusted earnings per share (pence) 1
Dividends – paid and proposed 2
Dividend per share – paid and proposed (pence) 2
Average number of shares in issue
Net debt 3
Total equity
2023
613.9
8.7
52.8
(1.1)
43.0
(6.8)
33.8
(3.9)
19.2
12.0
6.8
175.6
126.2
270.5
2022
617.0
(3.4)
47.1
(10.1)
40.4
(13.2)
32.0
(7.5)
18.2
11.1
6.3
175.8
138.4
297.0
2021
476.2
19.3
34.8
16.0
31.5
12.8
25.3
7.3
14.5
9.9
5.6
174.8
102.5
330.0
2020
431.8
2019
478.2
6.6
27.5
2.9
23.8
1.3
19.5
0.8
11.7
8.2
4.7
166.5
83.9
298.0
16.9
38.1
13.2
34.4
12.4
29.0
76.0
17.8
11.4
7.0
163.1
69.1
268.0
1 Adjusted operating profit, profit before taxation, adjusted earnings and adjusted earnings per share exclude the impact of
restructuring costs, asset impairments and acquisition and disposal related costs.
2 2023 shows the cashflows/value of the proposed 2023 dividend. 2022 and before shows the cashflows/value of the actual
dividends relating to that particular year.
3 Net (debt)/funds includes cash and overdrafts within assets and liabilities held for sale.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 174
RECONCILIATION OF KPIS AND NON IFRS MEASURES
In accordance with the Guidelines on APMs issued by the European Securities and Markets
Authority (ESMA), additional information is provided on the APMs used by the Group below.
To assist with the understanding of earnings trends, the Group has included within its financial
statements APMs adjusted operating profit and other adjusted profit measures. The APMs used
are not defined terms under IFRS and therefore may not be comparable to similar measures used
by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.
Management uses adjusted measures to assess the operating performance of the Group, having
adjusted for specific items as detailed in note 7. They form the basis of internal management
accounts and are used for decision making, including capital allocation, with a subset also forming
the basis of internal incentive arrangements. By using adjusted measures in segmental reporting,
this enables readers of the financial statements to recognise how incentive performance is
targeted. Adjusted measures are also presented in this announcement because the Directors
believe they provide additional useful information to shareholders on comparable trends over time.
Finally, this presentation allows for separate disclosure and specific narrative to be included
concerning the adjusting items; this helps to ensure performance in any one year can be more
clearly understood by the user of the financial statements.
Alternative
Performance
Measure
Adjusted
earnings
per share
Closest
equivalent
statutory
measure
Earnings
per share
Adjusted
diluted
earnings
per share
Diluted
earnings
per share
Income statement measures:
Organic
revenue
Revenue
See note APM 1
Alternative
Performance
Measure
Adjusted
operating
profit
Closest
equivalent
statutory
measure
Operating
profit
Note reference to
reconciliation to
statutory measure Definition and purpose
Adjusting items
as disclosed
in note 7
Adjusted operating profit has been defined as operating profit from
continuing operations excluding the impacts of significant restructuring
programmes, significant one-off items including property disposals,
impairment charges significant in nature and/or value, business
acquisition, integration, and divestment related activity; and the
amortisation of intangible assets recognised on acquisition. Acquisition
and disposal related items include the writing off of the pre-acquisition
profit element of inventory written up on acquisition, other direct costs
associated with business combinations and adjustments to contingent
consideration related to acquired businesses. Restructuring includes
significant changes in footprint (including movement of production
facilities) and significant costs of management changes.
To provide a measure of the operating profits excluding the impacts of
significant items such as restructuring or acquisition related activity
and other items such as amortisation of intangibles which may not be
present in peer companies which have grown organically.
Adjusted operating profit as a percentage of revenue.
To provide a measure of the operating profits excluding the impacts of
significant items such as restructuring or acquisition related activity
and other items such as amortisation of intangibles which may not be
present in peer companies which have grown organically.
Adjusted
effective
tax charge
Effective
tax charge
See note APM 2
None
See note APM 3
Return on
invested
capital
Adjusted
operating
margin
Operating
profit margin
Adjusting items
as disclosed
in note 7
Note reference to
reconciliation to
statutory measure Definition and purpose
See note 10
for the
reconciliation
and calculation
of adjusted
earnings
per share
See note 10
for the
reconciliation
and calculation
of adjusted
diluted earnings
per share
The profit for the year attributable to the owners of the Group adjusted
to exclude the items not included within adjusted operating profit divided
by the weighted average number of shares in issue during the year.
To provide a measure of Earnings per Share excluding the impacts of
significant items such as restructuring or acquisition related activity
and other items such as amortisation of intangibles which may not be
present in peer companies which have grown organically.
The profit for the year attributable to the owners of the Group adjusted
to exclude the items not included within adjusted operating profit divided
by the weighted average number of shares in issue during the year,
adjusted for the effects of any potentially dilutive options.
To provide a measure of Earnings per Share excluding the impacts of
significant items such as restructuring or acquisition related activity
and other items such as amortisation of intangibles which may not be
present in peer companies which have grown organically.
This is the percentage change in revenue from continuing operations
in the current year compared to the prior year, excluding the effects of
currency movements, acquisitions and disposals. This measures the
underlying growth or decline of the business.
To provide a comparable view of the revenue growth of the business from
period to period excluding acquisition and foreign exchange impacts.
Tax charge adjusted to exclude tax on items not included within
adjusted operating profit divided by adjusted profit before tax, which
is also adjusted to exclude the items not included within adjusted
operating profit.
To provide a tax rate which excludes the impact of adjusting items such
as restructuring or acquisition related activity and other items such as
amortisation of intangibles which may not be present in peer companies
which have grown organically.
Adjusted operating profit for the year divided by average invested capital
for the year. Average invested capital excludes pensions, provisions, tax
balances, derivative financial assets and liabilities, cash and borrowings
and is calculated at average rates taking twelve monthly balances.
This measures how efficiently assets are utilised to generate returns
with the target of exceeding the cost to hold the assets.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION RECONCILIATION OF KPIS AND NON IFRS MEASURES CONTINUED
Statement of financial position measures:
Statement of cash flows measures:
175
Closest
equivalent
statutory
measure
Cash and cash
equivalents
less
borrowings
and lease
liabilities
Note reference to
reconciliation to
statutory measure Definition and purpose
Reconciliation
of net cash flow
to movement in
net debt (note 26)
Net debt comprises cash and cash equivalents and borrowings including
lease liabilities.
This is additional information provided which may be helpful to the user
in understanding the liquidity and financial structure of the business.
Alternative
Performance
Measure
Adjusted
operating
cash flow
Closest
equivalent
statutory
measure
Operating
cash flow
Note reference to
reconciliation to
statutory measure Definition and purpose
See note APM 5
Adjusted operating profit, excluding depreciation of property, plant and
equipment (depreciation of right-of-use assets is not excluded) and
amortisation of intangible assets (amortisation of acquisition intangibles
is not excluded) less working capital and other non-cash movements.
An additional measure to help understand the Group’s operating
cash generation.
Alternative
Performance
Measure
Net debt
Leverage
(bank
covenant)
Net capital
and
development
expenditure
(net capex)
None
See note APM 11 Leverage is the net debt defined as per the banking covenants (net debt
None
See note APM 4
(excluding lease liabilities) adjusted for certain terms as per the bank
covenants) divided by EBITDA excluding items removed from adjusted
profit and further adjusted for certain terms as per the bank covenants.
Provides additional information over the Group’s financial covenants to
assist with assessing solvency and liquidity.
Purchase of property, plant and equipment net of government grants
(excluding property disposals), purchase of intangibles (excluding
acquisition intangibles) and capitalised development.
A measure of the Group’s investments in capex and development to
support longer term growth.
Adjusted
operating
cash flow
post capex
Working
capital
cash flow
Free
cash flow
Dividend
per share
Dividend
per share
Not applicable
Amounts payable by dividend in terms of pence per share.
Provides the dividend return per share to shareholders.
Operating
cash flow
See note APM 6
Adjusted operating cash flow less net capital
and development expenditure.
An additional measure to help understand the Group’s operating
cash generation after the deduction of capex.
See note APM 7 Working capital comprises of three statutory cashflow figures:
(increase)/decrease in inventories, increase/(decrease) in payables
and provisions, and (increase)/decrease in receivables.
To provide users a measure of how effectively the group is managing
its working capital and the resultant impact on liquidity.
See note APM 8
Free cash flow represents cash generated from trading after all costs
including restructuring, pension contributions, tax and interest payments.
Cashflows to settle share based payment schemes are excluded.
Cashflow –
inventories
payables,
provisions and
receivables
Net increase/
decrease in
cash and
cash
equivalents
Free cash flow provides a measure of how successful the company is
in creating cash during the period which is then able to be used by the
Group at its discretion.
Adjusted operating cash flow post capex (less any property disposals
which were part of restructuring programmes) divided by adjusted
operating profit.
Cash conversion measures how effectively we convert profit into
cash and tracks the management of our working capital and capital
expenditure.
Cash
conversion
None
See note APM 9
R&D cash
spend as a
percentage
of revenue
None
See note APM 10 R&D cash spend and R&D investment as a percentage of revenue
excludes Global Manufacturing Solutions which is a manufacturing
services business and therefore has no R&D.
To provide a measure of the company’s expenditure on R&D relative to
its overall size which may be helpful in considering the Group’s longer
term investment in future product pipeline.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 176
RECONCILIATION OF KPIS AND NON IFRS MEASURES CONTINUED
Non-financial measures:
APM 2 – Effective tax charge:
£million
Adjusted operating profit
Net interest
Adjusted profit before tax
Adjusted tax
Adjusted effective tax rate
APM 3 – Return on invested capital:
£million
Adjusted operating profit
Average invested capital
Return on invested capital
APM 4 – Net capital and development expenditure (net capex):
£million
Purchase of property, plant and equipment
Proceeds from sale of investment property, plant and equipment and capital grants received
Capitalised development expenditure
Purchase of other intangibles
Net capital and development expenditure
2023
52.8
(9.8)
43.0
(9.2)
2022
47.1
(6.7)
40.4
(8.4)
21.4%
20.8%
2023
52.8
440.0
12.0%
2023
(22.3)
0.5
(1.6)
(0.6)
(24.0)
2022
47.1
448.6
10.5%
2022
(11.4)
0.3
(2.3)
(0.6)
(14.0)
Alternative
Performance
Measure
Employee
engagement
Closest
equivalent
statutory
measure
Note reference to
reconciliation to
statutory measure Definition
Not applicable Not applicable
We use our employee survey to measure how our employees feel about
working in TT using a scale of 1 (low) to 7 (high) against eight factors
(as surveyed by Best Companies Ltd). A company is awarded between
zero and three stars based on the employee feedback.
Provides a measure of employee sentiment and engagement.
Safety performance is defined as the number of occupational injuries
resulting in three or more days’ absence per 1,000 employees. This KPI
allows us to compare our performance with that of our peers. We use a
UK benchmark published by the Health and Safety Executive and apply
this to all our facilities worldwide, reflecting our commitment to raising
standards globally.
Provides users additional information about the Group’s commitment
and achievements in the area of health and safety.
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
169.7
154.2
(0.4)
153.8
10%
299.2
323.0
(10.9)
312.1
-4%
145.0
139.8
–
139.8
4%
Power and
Connectivity
Global
Manufacturing
Solutions
Sensors and
Specialist
Components
154.2
7.9
146.3
140.2
7.2
147.4
(1%)
323.0
–
323.0
220.1
15.4
235.5
37%
139.8
–
139.8
115.9
8.9
124.8
12%
Total
613.9
617.0
(11.3)
605.7
1%
Total
617.0
7.9
609.1
476.2
31.5
507.7
20%
Safety
performance
Not applicable Not applicable
APM 1 – Organic revenue:
£million
2023 revenue
2022 revenue
Foreign exchange impact
2022 revenue at 2023 exchange rates
Organic revenue increase (%)
£million
2022 revenue
Acquisitions
2022 revenue (excluding acquisitions)
2021 revenue
Foreign exchange impact
2021 revenue at 2022 exchange rates
Organic revenue increase (%)
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION RECONCILIATION OF KPIS AND NON IFRS MEASURES CONTINUED
APM 5 – Adjusted operating cash flow:
£million
Adjusted operating profit
Adjustments for:
Depreciation
Amortisation of intangible assets
Share based payment expense
Reimbursement of pension surplus
Other items
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables and provisions
Adjusted operating cash flow
Special payments to pension funds
Restructuring and acquisition related costs
Net cash generated from operations
Net income taxes paid
Net cash flow from operating activities
APM 6 – Adjusted operating cash flow post capex:
£million
Adjusted operating cash flow
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment and government grants received
Capitalised development expenditure
Purchase of other intangibles
Adjusted operating cash flow post capex
APM 7 – Working capital cashflow:
£million
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables and provisions
Working capital cashflow
2023
52.8
14.0
2.5
3.1
1.6
(0.7)
4.5
10.5
(15.5)
72.8
3.2
(4.0)
72.0
(9.1)
62.9
2023
72.8
(22.3)
0.5
(1.6)
(0.6)
48.8
2023
4.5
10.5
(15.5)
(0.5)
2022
47.1
APM 8 – Free cash flow:
£million
Net cash flow from operating activities
Net cash flow from investing activities
13.9
Add back: Acquisition of business
2.2
4.8
–
0.5
(40.4)
(26.3)
27.9
29.7
–
(11.1)
18.6
(5.9)
12.7
2022
29.7
(11.4)
0.3
(2.3)
(0.6)
15.7
2022
(40.4)
(26.3)
27.9
(38.8)
Payment of lease liabilities
Interest paid
Free cash flow
APM 9 – Cash conversion:
£million
Adjusted operating profit
Adjusted operating cash flow post capex
Cash conversion
APM 10 – R&D cash spend as a percentage of revenue:
£million
Revenue (excluding GMS)
R&D cash spend
R&D cash spend as a percentage of revenue
APM 11 – Leverage:
£million
Adjusted operating profit
Depreciation
Amortisation
EBITDA
Adjustment to align with covenants
EBITDA (covenants)
Net debt as per note 26
Less: leases
Net debt excluding leases
Adjustment to align with covenants
Net debt (covenants)
177
2023
62.9
(24.0)
–
(4.4)
(10.6)
23.9
2023
52.8
48.8
92%
2023
314.7
10.8
3.4%
2023
52.8
14.0
2.5
69.3
(5.3)
64.0
126.2
20.8
105.4
1.2
106.6
2022
12.7
(22.3)
8.3
(4.3)
(7.5)
(13.1)
2022
47.1
15.7
33%
2022
294.0
11.0
3.7%
2022
47.1
13.9
2.2
63.2
(5.1)
58.1
138.4
23.1
115.3
(0.1)
115.2
Leverage
(1.7)
(2.0)
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION
178
SHAREHOLDER
INFORMATION
Ex-dividend date for final dividend
11 April 2024
Record date for final dividend
12 April 2024
AGM and trading update
10 May 2024
Final dividend payment
15 May 2024
2024 half-year results
8 August 2024
DIVIDENDS
SHARE CAPITAL
See page 25 for details on the dividend amount per share.
ANNUAL GENERAL MEETING (AGM)
The next AGM will be held on 10 May 2024 at 11.30 a.m.
Details of the AGM procedure for 2024 are set out in detail
in the Notice of Annual General Meeting available at
www.ttelectronics.com/investors/agm-gm/
Preliminary announcement of 2024 results
March 2025
ARTICLES OF ASSOCIATION
Annual Report 2024
April 2025
The Company’s Articles of Association may only be amended
by special resolution approved at a general meeting of
the shareholders.
The Company’s issued share capital comprises a single class
of share capital divided into ordinary shares of 25 pence each.
All issued shares are fully paid. The share capital during the year
is shown in Note 23 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, a
copy of which can be obtained from Companies House in the
United Kingdom or by writing to the Group General Counsel and
Company Secretary. Subject to applicable statutes, shares may
be issued with such rights and restrictions as the Company
may decide by ordinary resolution, 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,
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION SHAREHOLDER INFORMATION CONTINUED
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.
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. You can find further details
regarding voting at the Annual General Meeting in the Notice
of the Annual General Meeting which accompanies this
document. None of the ordinary shares carries 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 their
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 the refusal
does not prevent dealings in shares in the Company from taking
place on an open and proper basis.
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 grounds 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 or the Market Abuse Regulations 2015); 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 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
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.
179
SHARE DEALING SERVICES
Shareview Dealing is a telephone and internet service provided
by Equiniti. It offers a simple and convenient way of buying
and selling TT Electronics plc shares.
Log on to www.shareview.co.uk/dealing or call 03456 037 037
between 8.00 a.m. and 4.30 p.m., Monday to Friday (except
bank holidays), for more information about this service and
for details of the rates and charges. Please note that telephone
lines remain open until 6.00 p.m. for enquiries.
A daily postal dealing service is also available and a form,
together with terms and conditions, can be obtained by calling
0371 384 2248*. Commission is 1.90 per cent with a minimum
charge of £70.
SHAREGIFT
ShareGift is a charity share donation scheme for shareholders,
administered by The Orr Mackintosh Foundation. It 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.
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 180
SHAREHOLDER INFORMATION CONTINUED
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.
If you would like any multiple accounts combined into one
account, please write to Equiniti Limited at the address given
on this page.
Blackrock, Inc
FIL Limited
Aberforth
BennBridge Limited
Slater Investments Ltd
M&G plc
Chelverton Asset Management Ltd
Schroders plc
Polar Capital LLP
Aberdeen Asset Management Ltd
NN Group N.V.
Franklin Templeton
SUBSTANTIAL SHAREHOLDING NOTIFICATIONS
SHAREHOLDER ENQUIRIES
The Company had been notified of the following voting rights
attaching to TT Electronics plc shares in accordance with the
Disclosure and Transparency Rules at 5 March 2024 and
31 December 2023.
Registrar
The Company’s Registrar is Equiniti Limited.
Equiniti provide a range of services to shareholders.
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.
Extensive information including many
answers to frequently asked questions
can be found online.
Use the QR code to register for FREE at
www.shareview.co.uk
5 March 2024
31 December 2023
Equiniti’s registered address is:
Number
23,340,490
17,651,300
14,832,779
8,984,103
8,915,000
8,764,166
8,797,581
8,672,794
8,539,130
7,835,077
7,815,000
7,590,000
%
13.15
12.03
9.10
5.10
5.06
5.00
4.98
4.91
4.88
4.83
4.78
4.64
Number
21,453,542
17,651,300
14,832,779
8,984,103
8,915,000
8,764,166
8,797,581
8,672,794
8,539,130
7,835,077
7,815,000
7,590,000
%
12.13
12.03
9.10
5.10
5.06
5.00
4.98
4.91
4.88
4.83
4.78
4.64
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA.
Equiniti offers a range of shareholder information online at
www.shareview.co.uk
WEBSITE
Information on the Group’s financial performance, activities
and share price is available at www.ttelectronics.com
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION GLOSSARY
Advanced Air Mobility
Annual General Meeting
Alternative Performance Measure
A TT employee performance initiative
Basis point
Command, Control, Communications, Computers,
Integration, Surveillance and Reconnaissance
Capital Markets Day
Compound annual growth rate
Carbon Disclosure Project
Chief Operating Officer
Chief Executive Officer
Chief Financial Officer
Cash Generating Unit
Consumer Prices Index
Certificateless Registry for
Electronic Share Transfer
Customer Relationship Management
Climate Related Risks & Opportunities
Defined Benefit
Driving the Electric Revolution
Deferred Share Benefit Plan
Employee Assistance Programme
Earnings Before Interest, Taxes,
Depreciation and Amortisation
Employee Benefit Trust
Economic, Cultural and Governance
Equality, Diversity and Inclusion
Electronics Industry Citizenship Coalition
Executive Leadership Team
Electro-Magnetic
Earnings Per Share
Electric Power Steering
Enterprise Resource Planning
Environmental, Social and Governance
European Union
Fair, Balanced and Understandable
Financial Conduct Authority
Future Combat Air Systems
Financial Reporting Council
Financial Reporting Standards
AAM
AGM
APM
BE Inspired
bps
C4ISR
CMD
CAGR
CDP
COO
CEO
CFO
CGU
CPI
CREST
CRM
CRR&O
DB
DER
DSBP
EAP
EBITDA
EBT
ECG
ED&I
EICC
ELT
EM
EPS
EPS
ERP
ESG
EU
FBU
FCA
FCAS
FRC
FRS
Financial Times Stock Exchange
Foreign Exchange
Financial Year
Generally Accepted Accounting Principles
Pounds Sterling (£)
Gross Domestic Product
Greenhouse Gas
Global Manufacturing Solutions
Global Positioning System
Gigawatt hour/Kilowatt hour
Health and safety
Half (year)
Human Resources
Health Safety & Environmental
International Accounting Standards
International Accounting Standards Board
International Energy Agency
Institute of Environmental Management
and Assessment
International Financial Reporting Standards
Internet of Things
Intellectual Property
Intergovernmental Panel on Climate Change
Investor Relations
International Organisation for Standardisation
Information Technology
Key Performance Indicator
Light Emitting Diode
London Interbank Offered Rate
Lost Time Incident
Limited liability partnership
Long-Term Incentive Plan
Mergers and Acquisitions
Million
Magnetic Resonance Imaging
Morgan Stanley Capital International
Megawatt-hour
Non-Executive Director
New Product Initiatives
Net Zero Emissions
Original Equipment Manufacturer
FTSE
FX
FY
GAAP
GBP
GDP
GHG
GMS
GPS
GWh/KWh
H&S
H
HR
HSE
IAS
IASB
IEA
IEMA
IFRS
IoT
IP
IPCC
IR
ISO
IT
KPI
LED
LIBOR
LTI
LLP
LTIP
M&A
M/m
MRI
MSCI
MWh
NED
NPI
NZE
OEM
On time in full
Power & Connectivity
Profit Before Tax
Public Limited Company
Purchasing Managers’ Index
The TT Remuneration Policy
Private Placement
People, Social, Environmental and Ethics
Quarter (year)
Questions & Answers
Research and Development
Responsible Business Alliance
Revolving Credit Facility
Chinese Yuan
Regulatory News Service
Return On Capital Employed
Return on Invested Capital
Retail Price Index
Restricted Share Plan
Sensors & Specialist Components
Sustainable Aviation Funds
Save As You Earn
Science Based Targets initiative
Senior Independent Director
Senior Leadership Team
Surface Mount Technology
Stated Policies Scenario
Short-Term Incentive Plan
Science, Technology, Engineering
and Mathematics
Size, Weight, Power and Cost
Tonne
Task Force on Climate-related
Financial Disclosures
TT Management Board
The Board of Directors of TT Electronics plc
UK Corporate Governance Code
TT Electronics plc
The Directors of TT Electronics plc
TT Electronics plc and its subsidiaries
Total Shareholder Return
TT Electronics plc
TT’s values
United Kingdom of Great Britain
and Northern Ireland
United Nations
Underlying Earnings Before Interest, Taxes,
Depreciation and Amortisation
Weighted Average Cost of Capital
181
OTIF
P&C
PBT
PLC
PMI
Policy
PP
PSEE
Q
Q&A
R&D
RBA
RCF
RMB
RNS
ROCE
ROIC
RPI
RSP
S&SC
SAF
SAYE
SBTi
SID
SLT
SMT
STEPS
STIP
STEM
SWaP-C
t
TFCD
TMB
the Board
the Code
the Company
the Directors
the Group
TSR
TT
TT Way
UK
UN
Underlying EBITDA
WACC
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023STRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATIONSTRATEGIC REPORT GOVERNANCE & DIRECTORS’ REPORTFINANCIAL STATEMENTSADDITIONAL INFORMATION 182
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023 183
TT ELECTRONICS PLC | ANNUAL REPORT AND ACCOUNTS 2023 184
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TT Electronics plc
Fourth Floor
St Andrews House
West Street
Woking
Surrey
GU21 6EB
Tel +44(0) 1932 825300
Fax +44(0) 1932 836450
For more information on
our business please visit
www.ttelectronics.com