TT Electronics: From Turnaround to Growth, Anchored by Rolls-Royce
H1 profit up 37%, order book up 20%, and a life-of-type deal with Rolls-Royce mark the shift from stabilization to execution.
TTG.L · Earnings Call · 2026-09-02
From Turnaround to Execution
When Eric Lakin took the stage for TT Electronics' interim results on September 2, he was explicit that the narrative had changed. “We have moved from operational turnaround to disciplined execution and delivery,” he said. The numbers bear that out. “Adjusted operating profit was up 37% to £18.5 million” — Eric Lakin, Chief Executive Officer · 2026-09-02, with “the operating margin up 32 basis points to 8.1%” — Eric Lakin, Chief Executive Officer · 2026-09-02. Crucially, the order book at the end of June stood at about £550 million, 20% higher than the same point last year, and the board now expects full-year adjusted operating profit to be “ahead of current market expectations.” That guidance itself is the strongest signal. For a company that spent 2025 “fixing operational problems,” the tone has shifted to growth. The drivers are well-rehearsed: the Cleveland site has moved from loss-making to consistent profitability, and the closure of the loss-making Plano facility has removed a drag. These were the structural moves flagged in prior earnings calls. In March 2026, Lakin had described the year ahead as “executing against a clearly established value creation plan,” but the first half evidence suggests that plan is now actually delivering. The CFO, Richard Ian Ashton, new in the role, summed up the mood: “This is a business with great opportunities… and it is already getting very firmly back on track.”The Growth Engine: Defense and Aerospace
What makes this report more than a routine turnaround tick-up is the emerging growth story, driven by commercial transformation and a strengthening defense backdrop. Lakin highlighted a divisional realignment implemented in April, aligning sites around Power, EMS, and Components, and a sales transformation that is yielding tangible results: a group book-to-bill ratio of 112%, new customer wins across all three divisions, and a robust pipeline. The most significant commercial development came right after the period end: a multi-year agreement with Rolls Royce. The deal covers “high reliability solutions for all of their wide body civil aircraft engines throughout their operational lifetime.” This is not a new relationship—it builds on four decades of collaboration—but the framing is distinct. As Lakin explained in the Q&A, “under Tufan's leadership with critical sole source suppliers, like us with their engines, they are keen to get life of type arrangements,” meaning the revenue visibility extends for decades given engine production continues. In fact, the agreement formalizes TT's position as a “trusted design and manufacturing partner” and importantly opens doors to adjacent cross-selling – for example, power electronics for the same customer's newer platforms. The defense momentum is broader than one OEM. Lakin referenced engagements on the Future Combat Air System (FCAS), major armored vehicle programs through Rheinmetall and BAE, and sustained support for Eurofighter and F-35. The company has also signed a letter of intent with MBDA, the European defense group, for ruggedized power electronics. These are not just pipeline items; they underline a structural tailwind from rising European and U.S. defense budgets.Portfolio: The Components Question
The other principal theme is the future of the Components division. Following a strategic review announced with the full-year results, management has now tested market interest. Lakin reported that “we have received an encouraging number of indications of interest” and the board is evaluating a potential divestment. However, he was careful to stress that any transaction remains “subject to value” and there is “no certainty as to the outcome.” This is a measured approach, and the company has clearly improved the business ahead of any decision—Components returned to profitability in the half, growing 6% despite the Plano closure. The strategic logic is obvious. Components, with its high mix of resistors and optoelectronics, has different characteristics from Power and EMS, which show clear synergies—particularly in aerospace and defense where vertically integrated supply chains matter. As Lakin noted, the Kansas site's biggest supplier is Cleveland, and “having that vertically integrated supply can give a real edge.” If the sale proceeds, the proceeds would be deployed under a disciplined capital allocation framework, with leverage kept below 1.5x, no dividend for 2026, and selective bolt-on M&A only after free cash flow is sustainably positive.That flexibility is the quiet driver behind the story. Net debt ex-leases was £52 million, leverage at 1.1x, and the revolving credit facility almost undrawn. The CFO expects free cash flow to be positive in H2, with cash conversion normalizing to 70–80% on a medium-term view. This is a balance sheet that can fund organic growth, support a divestment process, and eventually reward shareholders. The prior calls had already set the scene. In March 2026, Lakin had said, “we're not expecting to see growth in EMS this year” (a now-contradicted caution given the underlying growth of ~7% ex-transfers in H1), and in September 2025 he had described the Asian softness as “temporary,” insisting “we're not losing business.” This time, the confidence feels less defensive and more earned. What changed at TT in the first half of 2026? The company has transitioned from a restructuring story to a growth story, backed by a visibly stronger order book and a landmark Rolls-Royce agreement. The potential divestment of Components adds a strategic catalyst that could unlock further value. It is early days, but the direction of travel is clear, and the market is likely to sit up and take notice.I think what Ian has just taken you through is a materially stronger financial position significantly improved profitability better margins, and a balance sheet that is increasingly giving us more flexibility.