Tt Electronics Plc · LSE:TTG
Tt Electronics — Investor Day (June 2015)
62 slides from Tt Electronics's investor day presentation, Jun 12, 2015
Slide 1: Capital Markets Day
Capital Markets Day June 12, 2015 0
Slide 2: Key Themes
Key Themes • A good set of businesses • Challenges and complexities, but we have a grip • A clear, realistic and straight-forward plan Turnaround Transportation Sensing and Control Reposition and invest in Industrial Sensing and Control, and Advanced Components Increase the level of penetratio
Slide 3: Agenda
Agenda Introduction • TT Overview Strategic Priorities – Part I • Lean and Agile Organisation • Market Leading Position • Enhanced Customer Focus • Targeted and Efficient R&D Spend Coffee Break Strategic Priorities – Part II • Operational Efficiency • Financial Discipline and Performance Management
Slide 4: What is TT?
What is TT? TT Electronics is a global provider of engineered electronics for performance critical applications A global provider Products in Harsh environment Solve challenging regulated markets applications customer problems 3 TT Electronics plc Capital Markets Day 2015
Slide 5: New corporate structure
New corporate structure Transportation Industrial Sensing and Advanced Sensing and IMS Control Components Control Revenues (2014, £m) £230.5m £58.8m £98.8m £136.2m Operating profit (2014, £m) £1.4m £12.8m £9.5m £5.5m Headcount (2014) 1,783 1,044 1,596 1,669 No of operations 9 6 9 5 (inc. co-located
Slide 6: A well-positioned business
A well-positioned business We operate in multiple end markets and high growth geographies. Revenue by market (2014) Revenue by region (2014) Passenger Car 41% Rest of Europe 49% Industrial 27% UK 16% Aerospace and Defence 12% North America 20% Other transportation 10% Asia 14% Rest of world 1% Medic
Slide 7: Transforming our business performance
Transforming our business performance Six Three Three Sustainable strategic phases outcomes Growth priorities 6 TT Electronics plc Capital Markets Day 2015
Slide 8: Unlocking our potential
Unlocking our potential Three Phases Refocus Rebuild Sustainable Growth Six Strategic Priorities Market Enhanced Targeted and A lean, agile Financial Operational discipline and leading customer efficient and learning performance efficiency position focus R&D spend organisation management Three Outco
Slide 9: An experienced, international and diverse management team
An experienced, international and diverse management team Richard Tyson Mark Hoad Chief Executive Officer Chief Financial Officer Joined in July 2014. Over 20 years of experience Joined in Jan 2015. Chartered Accountant. Held in communications, aerospace and defence finance roles in BBA Aviation plc
Slide 10: Strategic Engagement and Cultural Change
Strategic Engagement and Cultural Change • Organisation with focus • Simpler, clearer decision-making • Fewer layers; directly connected to the sites • Share expertise and develop our TT way people 9 TT Electronics plc Capital Markets Day 2015 A lean, agile and learning organisation
Slide 11: Focus carefully: Market Leading Position
Focus carefully Leverage track record, expertise and understanding of customers Close working relationships with world’s leading OEMs and specialist suppliers 10 TT Electronics plc Capital Markets Day 2015 Market Leading Position
Slide 12: Automotive – positive demand drivers
Automotive – positive demand drivers Global automotive Global automotive sensors market Market trends electronic systems by application • OEMs race to improve demand forecast USD Bn vehicle’s fuel efficiency USD Bn • Increasing value placed on CAGR% safety features and driver 2014-20 assistance capa
Slide 13: Industrial – technology advancements continues to drive demand
Industrial – technology advancements continues to drive demand Growing use of industrial electronics… Market trends Example: Global forecast for • Increasing use of intelligent and smart industrial automation equipment features $250.0 20.0% • Demand for more efficient manufacturing Revenue in Billio
Slide 14: Aerospace – positive market outlook
Aerospace – positive market outlook Aircraft Market Size Aircraft Volume of Market drivers ($bn) Deliveries • Continued advances in – composite materials 16 – fuel-efficient engine technologies 525 – avionics, and 121 – fuel, braking and electric systems 9 331 1,243 • Growing demand for more cost-ef
Slide 15: Market Leading Position
Market Leading Position Example 1: IMS – L3 – Lynx® MultiLink Surveillance System TC Chan EVP, Integrated Manufacturing Services Example 2: Advanced Components – Orion Gareth Mycock EVP, Advanced Components Example 3: Transportation Sensing and Control – Haptic pedal – Advanced Driver Assistance Amr
Slide 16: Market Leading Position: Example 1
Market Leading Position Example 1: IMS – L3 – Lynx® MultiLink Surveillance System TC Chan EVP, Integrated Manufacturing Services 15 TT Electronics plc Capital Markets Day 2015 Market Leading Position
Slide 17: IMS – L3 – Lynx MultiLink Surveillance System
Market Leading Position IMS – L3 – Lynx® MultiLink Surveillance System(MSS) The end solution • Single-box solution for NextGen flight information • Cutting-edge traffic, weather and situational awareness info • Can fully integrate with any existing cockpit Our customer • L3, leading provider of comm
Slide 18: Market Leading Position: Example 2
Market Leading Position Example 2: Advanced Components – Orion Gareth Mycock EVP, Advanced Components 17 TT Electronics plc Capital Markets Day 2015 Market Leading Position
Slide 19: Advanced Components – Orion
Market Leading Position Advanced Components – Orion The end solution • High reliability fixed resistors and microcircuits used in vehicle management computers and the inertial measurement unit • Key component in inertial guidance system of spacecraft Our customer • A multinational industrial and aer
Slide 20: Market Leading Position: Example 3
Market Leading Position Example 3: Transportation Sensing and Control – Haptic pedal – Advanced Driver Assistance Amrei Drechsler EVP, Transportation Sensing and Control 19 TT Electronics plc Capital Markets Day 2015 Market Leading Position
Slide 21: Transportation Sensing and Control – Haptic pedal – Advanced Driver Assistance
Market Leading Position Transportation Sensing and Control – Haptic pedal – Advanced Driver Assistance The end solution • Next-gen active pedal providing sensory feedback • Used in hybrid to warn of need for combustion engine support Our customer • Major global premium automotive manufacturer Our ke
Slide 22: Market Leading Position
Market Leading Position • Ensure reputation as a primary supplier for Tier 1/ world class programmes • Leverage core market positions into attractive markets • Harness global footprint for maximum competitive advantage • Increase share of customer wallet by delivering advanced product capabilities •
Slide 23: A key focus to drive growth: Put the customers first
A key focus to drive growth Understand our customers, listen and capitalise on all opportunities Put the customers first 22 TT Electronics plc Capital Markets Day 2015 Enhanced Customer Focus
Slide 24: Enhanced Customer Focus
Enhanced Customer Focus Example 1: Industrial Sensing and Control – Medical Tim Roberts EVP, Industrial Sensing and Control Example 2: Transportation Sensing and Control – Temperature sensors Amrei Drechsler EVP, Transportation Sensing and Control Example 3: A laboratory analytical instrument and so
Slide 25: Enhanced Customer Focus: Example 1
Enhanced Customer Focus Example 1: Industrial Sensing and Control – Medical Tim Roberts EVP, Industrial Sensing and Control 24 TT Electronics plc Capital Markets Day 2015 Enhanced Customer Focus
Slide 26: Industrial Sensing and Control – Medical
Enhanced Customer Focus Industrial Sensing and Control – Medical The end solutions • Presence detection of medicine dispenser • Potentiometers for ventilator • Presence detection for infusion pump Our customer • Major medical device manufacturer • TT customer for many years; limited direct relations
Slide 27: Enhanced Customer Focus: Example 2
Enhanced Customer Focus Example 2: Transportation Sensing and Control – Temperature Sensor for a Chinese customer Amrei Drechsler EVP, Transportation Sensing and Control 26 TT Electronics plc Capital Markets Day 2015 Enhanced Customer Focus
Slide 28: Transportation Sensing & Control: Temperature sensor for a Chinese customer
Enhanced Customer Focus Transportation Sensing & Control: Temperature sensor for a Chinese customer The end solution • Oil temperature sensor for automatic transmission systems Our customer • A major Chinese transmission manufacturer and ultimately for a state-owned OEM Our key success factors • Pro
Slide 29: Enhanced Customer Focus: Example 3
Enhanced Customer Focus Example 3: A laboratory analytical instrument and software company TC Chan EVP, Integrated Manufacturing Services 28 TT Electronics plc Capital Markets Day 2015 Enhanced Customer Focus
Slide 30: IMS – A laboratory analytical instrument and software company
Enhanced Customer Focus IMS – A laboratory analytical instrument and software company The end solution • Manufacturing of complex mass spectral detector, with 17+ critical parts Our customer • Leading European Medical Analytical Equipment OEM • Bringing new instrument into the market place Our key s
Slide 31: Enhanced Customer Focus
Enhanced Customer Focus • Develop and strengthen engineering-led strategic partnerships • Proactively manage relationships to build and strengthen leading supplier position • Improve regional coverage and local support 30 TT Electronics plc Capital Markets Day 2015 Enhanced Customer Focus
Slide 32: R&D overhaul
Lack of process control R&D overhaul Stronger discipline and focus on the right areas 31 TT Electronics plc Capital Markets Day 2015 Targeted & efficient R&D spend
Slide 33: Targeted and Efficient R&D Spend
Targeted and Efficient R&D Spend Targeted Spend • R&D spend was c.4% of revenue in 2014 • Leverage expertise to target attractive market opportunities • Clear focus on priority areas – Transportation Sensing and Control: fuel efficiency, driving assistance and safety – Industrial Sensing and Control
Slide 34: Targeted and Efficient R&D Spend
Targeted and Efficient R&D Spend Example 1: Transportation Sensing and Control – Adblue Amrei Drechsler EVP, Transportation Sensing and Control Example 2: Thin Film Precision Resistors Gareth Mycock EVP, Advanced Components Example 3: Industrial Sensing and Control – Delta Tim Roberts EVP, Industria
Slide 35: Targeted and Efficient R&D Spend: Example 1
Targeted and Efficient R&D Spend Example 1: Transportation Sensing and Control – Adblue Amrei Drechsler EVP, Transportation Sensing and Control 34 TT Electronics plc Capital Markets Day 2015 Targeted & efficient R&D spend
Slide 36: Transportation Sensing and Control – AdBlue
Targeted and Efficient R&D Spend Transportation Sensing and Control – AdBlue The end solution • Optical fluid sensor for diesel exhaust systems • Helps in reduction of NoX content • In board diagnostics required by law: Euro 6 Our customer • Tier 1 supplier Our key success factors • Recognised leade
Slide 37: Targeted and Efficient R&D Spend: Example 2
Targeted and Efficient R&D Spend Example 2: Thin Film Precision Resistors Gareth Mycock EVP, Advanced Components 36 TT Electronics plc Capital Markets Day 2015 Targeted & efficient R&D spend
Slide 38: Advanced Components – Thin Film Precision Resistors
Targeted and Efficient R&D Spend Advanced Components – Thin Film Precision Resistors The end solution • Reliable water insoluble nitride (WIN) precision chip resistor with outstanding stability and resistance to humid conditions Our customer • An industry leading designer and manufacturer of high re
Slide 39: Targeted and Efficient R&D Spend: Example 3
Targeted and Efficient R&D Spend Example 3: Industrial Sensing and Control – Delta Tim Roberts EVP, Industrial Sensing and Control 38 TT Electronics plc Capital Markets Day 2015 Targeted & efficient R&D spend
Slide 40: Industrial Sensing and Control – Delta
Targeted and Efficient R&D Spend Industrial Sensing and Control – Delta The solution • • Phase diode array for rotary position sensing; used in automation e.g. robotic arms Our customer • Leading Taiwanese manufacturer; power electronics and industrial automation ($7.5bn sales) • One of the largest
Slide 41: Targeted and Efficient R&D Spend
Targeted and Efficient R&D Spend • Focus on areas where we have competitive advantage and attractive market dynamics • Focus on developing product families with potential for scale • Ensure disciplined R&D spend and project management • Leverage the expertise in the network to increase our chance of
Slide 42: Coffee Break
Coffee Break 41 TT Electronics plc Capital Markets Day 2015
Slide 43: Agenda
Agenda Introduction • TT Overview Strategic Priorities – Part I Coffee Break Strategic Priorities – Part II Richard Tyson, CEO • Operational Efficiency • Financial Discipline and Performance Management Concluding Remarks and Q&A 42 TT Electronics plc Capital Markets Day 2015 42
Slide 44: Supporting competitiveness to improve chance of new business success
Supporting competitiveness to improve chance of new business success Continual focus on efficiency and cost base improvement Sharing best practices across the group Provide a safe and accident free working environment 43 TT Electronics plc Capital Markets Day 2015 Operational efficiency
Slide 45: Operational Efficiency
Operational Efficiency Operations and Lean Supply Chain Michael Robinson EVP, Operations and Supply Chain 44 TT Electronics plc Capital Markets Day 2015 Operational efficiency
Slide 46: Operations and Lean
Operations and Lean • New TT Operations and Supply Chain in place in Jan ‘15 – Create a safe, accident-free work environment • BE Lean: A programme focusing on – Group-wide Operations Council was improving processes that deliver established customer value – Common metrics: KPIs for safety, quality,
Slide 47: Supply Chain and Procurement
Supply Chain and Procurement • New Supply Chain Council in place Direct Material Cost = £280m – Consolidated review of spend across all sites; cross-BU review Transportation Sensing and Control 54% • Leverage scale of Direct and Indirect spend Industrial Sensing and Control 6% IMS 30% • Best cost/ l
Slide 48: Operational Efficiency
Operational Efficiency • One TT - share and embed best practice in different sites • Embed Lean Operating System and practices • Drive towards a zero-harm environment • Work together to achieve best cost sourcing 47 TT Electronics plc Capital Markets Day 2015 Operational efficiency
Slide 49: Operational Improvement Plan: Progress
Operational Improvement Plan: Progress To Total / OIP (£m) 2015 2016 2017 date Run Rate P&L charge (18.1) (8.6) (3.3) - (30.0) Cash cost (7.2) (17.1) (5.7) - (30.0) Run-rate benefit 1.3 1.3 2.8 3.8 5.5 FPMIII, for a mid-sized luxury car OEM, line • Large, complex project progressing well process app
Slide 50: Financial Discipline and Performance Management
Financial Discipline and Performance Management Financial Discipline and Performance Management Mark Hoad Chief Financial Officer 49 TT Electronics plc Capital Markets Day 2015 Financial Discipline Performanc e Mgt
Slide 51: Financial Discipline
Financial Discipline • Greater emphasis on transparency and challenge – Re-set expectation of behaviours – Monthly and quarterly divisional review meetings • Reducing reporting burden and increasing business insight – Remove unnecessary reports and detail and automate reporting – Free up resource to
Slide 52: Financial Position
Financial Position • Financial position sound • Cash generation being addressed • Capacity to deliver the strategy • Progressive dividend policy • Selective M&A to support strategy execution 51 TT Electronics plc Capital Markets Day 2015 Financial Discipline Performance Mgt
Slide 53: Segmental Restatement: Transportation Sensing and Control
Segmental Restatement: Transportation Sensing and Control Transportation Sensing and Control 2014 2013 Change Change Challenges constant fx • Lack of revenue growth Revenue (£m) 230.5 234.5 (2)% 3% • Inefficient R&D spend Operating profit (£m)* 1.4 8.7 (84)% (80)% • Designed product cost too high O
Slide 54: Segmental Restatement: Industrial Sensing and Control
Segmental Restatement: Industrial Sensing and Control Industrial Sensing and Control 2014 2013 Change Change Challenges constant fx • Lack of revenue growth Revenue (£m) 58.8 50.7 16% 22% • R&D under-investment Operating profit (£m)* 12.8 8.8 45% 53% • Delays in product introduction OP margin* 21.8
Slide 55: Measuring the three outcomes
Measuring the three outcomes Expertise in performance-critical electronics Improved Improved Improved Returns Customer Operational and Cash Performance Performance Generation Financial KPIs Organic revenue Inventory turns EPS growth growth Working capital days Cash Conversion Return on Invested Capi
Slide 56: Transforming our business performance
Transforming our business performance Six Three Three Sustainable strategic phases outcomes Growth priorities 55 TT Electronics plc Capital Markets Day 2015 55
Slide 57: Divisional Focus
Divisional Focus Transportation Sensing and Control • Focus R&D and business development in areas where we are have leading positions • Continue to broaden customer base through driving growth in China, India and North America while stabilising relationships with European customers • Deliver OIP and
Slide 58: Conclusions
Conclusions • A good set of businesses Good market positions Great products and good technology Motivated workforce Significant value potential • Challenges and complexities; but we have a grip • A clear, realistic and straight forward plan Turnaround Transportation Sensing and Control R
Slide 59: Transforming our business performance
Transforming our business performance Six Three Sustainable Three phases strategic outcomes Growth priorities Good improvement in EPS Strong cash conversion Improving Return on Invested Capital Organic growth from 2017 58 TT Electronics plc Capital Markets Day 2015 58
Slide 60: Q&A
Q&A 59 TT Electronics plc Capital Markets Day 2015
Slide 61: Importance Notice
Importance Notice This document has been prepared by the TT Electronics (“the Company”) solely for use at the capital markets day on 12 June 2015. This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase any shares in the Company
Slide 62: Appendix: New corporate structure
Appendix: New corporate structure Transportation Industrial Advanced IMS Sensing and Sensing and Components Control Control Revenues £58.8m £98.8m £136.2m (2014, £m) £230.5m Operating profit £12.8m £9.5m £5.5m (2014, £m) £1.4m Headcount (2014) 1,783 1,044 1,596 1,669 No of sites 9 6 9 5 Key products