TT Electronics says sales rates have almost caught up

TT Electronics PLC (LON:TTG) said sales have almost caught up with last year after improving trends continued in the final two months of the year.

Full-year revenue is expected to be roughly £432mln for 2020, down 9% on a constant currency basis, the group said in a trading statement, but with revenue in November and December down just 4% excluding acquisitions.

TT, which makes engineered electronic components from everything from flight controls and smart surgical tools to intelligent vehicle charging, said adjusted profit before tax is expected to be in line with analyst expectations of £20.6mln-£22.5mln.

Strong cash generation was reported for the second half of the year, reducing net debt to £84mln by the end of the year, including leases.

As flagged when August’s interim dividend was held back, the board intends to restart dividends at the time of its final results, having repaid all furlough funding received from the government.

Chief executive Richard Tyson said: “TT has proven to be resilient in the face of the Covid pandemic, benefitting from the actions we have taken to improve the quality of the business.

“Order intake over the last few months is encouraging as we look into 2021, a year in which we expect to see continued revenue recovery and good profit growth.”

He said internal cost-cutting and end-market growth trends give the board confidence in achieving double-digit margins.

Shares in the company rose 1% to 218p in early trading.

Broker Liberum said: “Although no breakdown is provided, we expect inventory reductions to have played their part, as seen across the sector… with global industrial inventories still towards record lows, we expect a major restocking phase to follow.”

The analysts said that this restocking phase will be combined with a troughing in long-cycle capital expenditure – a event that has occurred only five times since 1970 and has typically preceded a much longer duration industrial boom and an average sector return of at least 130% over a near-three year period.

“Our forecast for double-digit organic growth on average for the sector FY21 and some 8% FY22, combined with our expectations for inflation, support our expectation for an industrial sector earnings boom of a scale not seen for over a decade.”