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Electronics Production | March 16, 2009

TT electronics affected by recession

TT electronics' performance was noticeably affected by the global economic recession from mid-September. For the year, the Group's turnover was £584.3 million (2007: £544.9 million), with the increase due to foreign exchange and acquisitions, producing operating profit before exceptional items of £27.0 million compared with £37.7 million in 2007.
Finance costs were £5.9 million net (2007: £4.4 million) which comprised £4.1 million of banking and finance interest (2007: £4.5 million) and £1.8 million relating to pension fund accounting (2007: £0.1 million credit). Profit before tax and exceptional items was £21.1 million compared to £33.3 million in 2007. The underlying taxation charge of £6.8 million (2007: £9.3 million) represents an underlying rate of 32 per cent (2007: 28 per cent). Exceptional items relating to the closures of the AB Automotive factory at Cardiff and the AB Electronic facility at Romford were £3.8 million. Headline earnings per share from continuing operations were 9.2 pence compared with 15.5 pence in 2007.

During the year the Group acquired two companies supplying the aerospace and defence industries. In April 2008 we purchased New Chapel Electronics for an initial cash consideration of £4.2 million and deferred consideration capped at £1.0 million. New Chapel Electronics, based at Fairford, Gloucestershire, is a manufacturer of wiring harnesses and connectors for the aerospace and military industries. In August 2008, TT electronics acquired assets comprising the majority of the business of Semelab Limited for £9.7 million. The business, based in Lutterworth, Leicestershire, designs and produces specialised radio frequency and power modules, semiconductors, optoelectronic components and power microcircuits and modules.

During the year costs were incurred in reducing our climate control activities, and closing our facility in Romford, which are reported as exceptional items. TT electronics intends to cease manufacturing electronic systems for automotive climate control products as soon as possible. The Group also announced the closure of their sensor factory in Romford, with the majority of manufacturing transferred to facilities in China and India. The Group is reducing its exposure to the automotive sector progressively.

At 31 December 2008 the Group's net indebtedness was £113.2 million compared with £75.0 million at the previous year end. The borrowings were affected by the acquisition of Semelab and New Chapel Electronics, the fall in sterling against the US dollar and the euro, and the Group's payment of an additional £2.2 million into the pension scheme. The Group's indebtedness remains comfortably within the terms of its committed banking facilities. With our operations and net assets overseas, principally in the US, Europe and the Far East, the adverse movement in sterling has strengthened the balance sheet.

Despite the current difficulties of the market, the strengths of the company's worldwide activities will enable TT electronics to manage the business through this recession and give TT electronics the opportunity to come out of it as a stronger group.

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