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Electronics Production | January 21, 2009

TT electronics plans to lay off 700 this year

The British company announced its inten to focus on components markets this year to counteract the economic slowdown. Trading in 4Q/2008 had been difficult and that this is expected to continue through 2009, TT electronics stated in their latest investors report.
TT Electronics plans to lay off 700 staff as it is restructuring its business. The following decisions have been made in the restructuring scheme:

As announced previously, an exceptional charge has been incurred in 2008 relating to the closures of the AB Automotive climate control facility in Cardiff and the AB Electronic facility at Romford. The total cost incurred in 2008 is now expected to be £4.1m.

During 2009, further steps will be taken to realign the cost base in the European sensors business, resulting in a headcount reduction of over 200. The annualised cost reduction resulting from this programme is expected to be £8.2m and the cost of £7.5m will be charged as an exceptional item.

The decision to withdraw from the AB Automotive business will result in a further charge in 2009 of £3.3m, in addition to the £2.9m charged previously. There will be further restructuring during 2009 across other businesses with a headcount reduction of over 100 at an exceptional cost of £2.0m.

In addition to the exceptional charges outlined above, actions were implemented during 2008 to reduce the cost base further and £2.1m has been charged to 2008 operating profit. Headcount reductions totalling 483 have been made under these programmes and an annualised cost reduction of £7.9m is expected to be realised.

Components
The division will refine its product portfolio with greater emphasis on niche, highly engineered, bespoke solutions targeted at higher growth sectors, including the medical, military and mass transit markets where good margins can be achieved. There will be an increased focus on developing leading positions in additional growth segments such as visible optical, power semiconductors and radio frequency semiconductors. The division will continue to invest in new product development in these areas. The European sales organisation will be reconfigured to enhance customer service and to drive new product design wins. The Board believes that the Components division is capable of delivering double digit operating margins in the medium term.

Sensors
The Group's Sensor business has built strong relationships with the major German automotive OEMs. It has achieved strong market positions for chassis and transmission sensors and the outlook for its high temperature and low pressure sensors is promising. However deteriorating margins in poorly performing segments, including the increasingly commoditised pedal sector, and the high cost base of operations in Germany have adversely affected performance. A major restructuring is underway to focus on core sensor expertise, to broaden market exposure beyond automotive, and to align costs with revenues with a target of double digit operating margins in the longer term.

The proposed closure of the AB Electronic Romford facility, announced in October at an exceptional cost of £1.2m, is underway. Further realignment of the European cost base is also planned for 2009 with a reduction in headcount of over 200. This is expected to realise an annualised cost reduction of £8.2m and the cost of £7.5m will be charged as an exceptional item in 2009.

Secure Power
The newly created Secure Power division comprises Ottomotores, the Mexican manufacturer and distributor of generator sets and uninterruptible power supplies, and Dale Power Solutions, the UK provider of bespoke power solutions. The business, which is performing strongly and growing its export markets, will target sustainable double digit operating margins through focusing on further international development and exploiting opportunities to grow its service business both in the UK and Mexico.

Integrated Manufacturing Services
The electronic manufacturing services businesses have now been integrated under one division, branded as IMS. The strategy for IMS is to offer higher value added services for lower volume, complex build and assembly electronic projects. Already established in the UK, USA, China and Malaysia, the business is now creating a co-ordinated global sales organisation and will target the medical, aerospace and defence and industrial markets. The division is targeting mid to higher single digit operating margins.

General Industrial
We have re-categorised a number of businesses into this division which are unlikely to deliver a material increase in shareholder returns and we intend to manage these for value. The closure of the AB Automotive climate control facility at Cardiff was announced in July 2008 and this is progressing on schedule. The decision has now been taken to withdraw from the AB Automotive business as quickly as possible to limit ongoing losses.

The other General Industrial businesses, which comprise AEI Compounds, Abtest, BAS Components, WT Henley, the Magnetics group, Prestwick Circuits and Wire Systems Technology, are profitable and delivered £6.5m of free cash flow in 2007.

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