TT Electronics (TTG) Trading Update summary

Trading performance and operational challenges

• August trading in North America was weaker than expected due to ongoing operational efficiency issues at two sites, leading to significant product rework and higher costs, impacting both revenue and profitability.

• Second half 2024 revenue is expected to be £15–20 million lower than previously anticipated, with North American operating profit down by £13–18 million.

• Group adjusted operating profit for full year 2024 is now expected in the range of £37–42 million, well below the prior consensus of £54–56.8 million.

• Order intake for 2024 in the higher margin components business has been materially weaker, with most new orders weighted for 2025 delivery, resulting in a slow and steady recovery.

• Free cash flow will be reduced, with net debt to adjusted EBITDA expected to be at or slightly above the top end of the 1–2x range by December 2024.

Operational improvement initiatives

• Plans are in place to address North American site issues, including root cause corrective actions, improved factory planning, and layout changes, but full mitigation is not expected in FY24.

• Project Dynamo initiatives are being implemented at a faster pace to address identified inefficiencies and deliver required operational changes.

• Additional cost reduction and Project Dynamo improvement actions are planned for Q4, aiming to benefit the 2025 cost base.

• Remedial actions are being accelerated, with a new leadership team in North America focused on operational improvements.

• No evidence that restructuring or workforce reductions have worsened operational issues; instead, the reorganization is helping to identify and address challenges.

Outlook and medium-term targets

• The board remains confident in achieving a 12% operating margin by 2026, with recovery in the components business expected to be gradual.

• The rest of the group, particularly in Asia and Europe, is performing broadly in line with expectations, with the main issues isolated to North America.

• An update on 2025 revenue outlook and North American site rectification will be provided in November.