TT Electronics Reports Operational Turnaround and Strong Cash Generation in Full Year 2025 Results

Cash is king: inventory squeeze drives stellar conversion

Cash conversion hit 150% thanks to £14.8 million of underlying inventory reductions and tighter working capital control. Free cash flow rose to £29.9 million. Net debt excluding leases dropped to £50.3 million, pulling leverage down to 1.1x. That is well inside banking covenants and gives management room to manoeuvre.

The Revolving Credit Facility has been extended to June 2028 and resized to £105.0 million, which fits the slimmer footprint and lower leverage profile.

Why adjusted EPS fell even as trading improved

Adjusted EPS fell to 6.9p despite higher adjusted profit. The culprit is tax: the adjusted effective tax rate jumped to 57.1% because TT cannot currently recognise a deferred tax asset for US losses. Management notes that if recognition had been possible, adjusted EPS would have been 12.0p with a 25.4% tax rate. In short, this is an accounting headwind, not a cash one, but it still matters for reported earnings.

One-offs and clean-up costs: taking the medicine

Statutory results were dragged by £65.4 million of adjusting items, mostly non-cash. These included £41.4 million of impairments in North America, £15.2 million of restructuring (Plano closure and Cleveland support), £2.6 million of acquisition-related amortisation and £4.3 million of costs linked to the aborted Cicor approach and other M&A activity. The clear intent is to reset the base, fix underperforming assets, and focus capital where returns are strongest.

2026 game plan: divisional realignment and cost-out

• New structure: moving to Power, EMS and Components divisions to align with customers and capabilities.
• Cost reduction: c.£3 million net benefit expected in 2026, with medium-term annualised savings at roughly double that.
• Sales transformation: investment in people, pricing discipline and CRM has already lifted H2 order intake; the priority is EMS in North America and Asia.
• Components strategic review: options include a potential disposal, guided by value and market conditions.

Guidance is cautious but steady: the Board expects 2026 revenue and adjusted operating profit to be in line with company compiled consensus of £477.1 million to £487.1 million for revenue and £31.9 million to £37.6 million for adjusted operating profit.

My take: what’s good, what’s not, and why it matters

Positives

• Cash discipline is excellent. 150% cash conversion and leverage at 1.1x give strategic flexibility.
• Europe is delivering high-quality margin in attractive A&D markets, and order intake is strong.
• North American execution is improving, with Cleveland stabilising and the Plano drag removed.
• Book to bill at 109% signals rebuilding momentum after a reset year.
• Return on invested capital improved to 13.3% from 10.0%.

Watch-outs

• Statutory losses and large non-cash impairments highlight how much heavy lifting is still required in North America.
• EMS demand remains mixed, particularly in North America and Asia, which could cap near-term growth.
• No dividend for 2025. Management says it will keep this under review, but cash will first support operational progress and balance sheet strength.
• Adjusted tax rate remains elevated until US profitability is clearer; EPS is sensitive to this accounting call.

What to watch in 2026

• Cleveland’s path to sustainable profitability and order growth to lift utilisation.
• Kuantan’s volume ramp following the Suzhou transfer and broader Asia-for-Asia wins.
• Delivery of c.£3 million net cost saves and evidence of improved EMS margins.
• Outcome of the Components review, including any disposal and proceeds redeployment.
• Order intake staying above revenue, especially in A&D, to keep book to bill above 100%.

Overall, TT Electronics looks more controlled and better capitalised after a tough reset. If the operational improvements bed in and A&D strength persists, 2026 should show steadier margins and solid cash again. The equity debate now shifts from survival and clean-up to delivery and optionality.