TT Electronics PLC (STU:7TT) (Q4 2024) Earnings Call Highlights: Navigating Challenges and ...
Adjusted Operating Profit: Declined by 17% on constant currency; 13% excluding divestments.
Adjusted Operating Margin: Dropped by 60 basis points to 7.1% at constant currency; 7.4% excluding divestments.
Earnings Per Share: Declined by 30% at constant currency.
Free Cash Flow: GBP27.7 million inflow; cash conversion at 117%.
Inventory Reduction: GBP13 million reduction in inventory.
Leverage: 1.8 times, within target range of 1 to 2 times.
Order Intake: Up 9% organically over 2023; book-to-bill ratio at 103%.
Noncash Write-down: GBP52.2 million in goodwill and asset write-down costs.
Adjusted Operating Profit Forecast: Expected to be in the range of GBP32 million to GBP40 million.
Dividend: Final dividend paused due to macroeconomic uncertainty.
Warning! GuruFocus has detected 7 Warning Signs with STU:7TT.
Release Date: April 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
TT Electronics PLC (STU:7TT) reported excellent performance in Europe and Asia, with significant margin improvements driven by operational efficiency.
The company achieved a 9% organic increase in order intake over 2023, with a positive book-to-bill ratio of 103%.
Strong cash flow generation was highlighted, with a cash conversion rate of 117% and a GBP13 million reduction in inventory.
The pension scheme issue was significantly addressed, resulting in a GBP11 million net pension surplus refund.
Project Dynamo has been successful in driving operational efficiency, growth, and innovation across the company.
TT Electronics PLC (STU:7TT) faced significant challenges in North America, with destocking in the components market leading to volume and revenue shortfalls.
Operational issues in Kansas and Cleveland negatively impacted results, leading to noncash goodwill and asset write-down costs of GBP52.2 million.
The company experienced a 13% decline in revenue on a constant currency basis, with a 17% decline in adjusted operating profit.
The Board decided to pause the final dividend for 2024 due to macroeconomic uncertainty and associated business risks.
The company does not expect revenue growth in North America in 2025, partly due to the deferral of some revenues into 2026.
Q: With the change in management, will there be any alterations to Project Dynamo? A: Eric Lakin, Acting CEO, stated that Project Dynamo is a valuable tool for continuous improvement across the business. It encourages initiatives at all levels and helps offset business headwinds, including inflationary pressures. The project will continue as it is beneficial for driving improvement and initiatives.
Q: Can you explain the main components of the profit bridge from 2024 to 2025? A: Mark Hoad, CFO, explained that the Albert divestment, which contributed GBP16 million in revenue in 2024, will have minimal profit impact in 2025. Efficiency improvements in North America and one-off costs in Asia related to moving production from China to Malaysia are expected. Overall, organic growth will depend on market conditions.
Q: How are customer relationships in North America being maintained despite operational issues? A: Eric Lakin noted that customer relationships remain strong due to the complexity and long-term nature of the contracts. The operational issues impact TT Electronics' margins more than customer satisfaction, and no customers have been lost.
Q: What is the percentage of US revenue manufactured domestically versus elsewhere, and how feasible is it to transfer manufacturing? A: Mark Hoad stated that while manufacturing can be moved globally, it takes time. The company is currently transferring production from China to Malaysia. The specific percentage of US-manufactured revenue was not provided, but the company has flexibility in its global operations.
Q: Why is TT Electronics bearing the GBP2 million cost of shifting production from China to Malaysia? A: Mark Hoad explained that the cost is part of a contractual negotiation, and the overall economic benefits of the program justify the expense for TT Electronics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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