A 60 per cent increase in TT Electronics’ full-year dividend failed to win over investors, with shares in the electrical components manufacturer falling by as much as 10 per cent.
TT, which provides emission controls, electric vehicle components and electronic sensors for carmakers such as BMW and Daimler, boosted 2011 pre-tax profit by more than a quarter year on year to £31.8m ($49.8m) on the back of solid sales in the premium car market.
However, the City moved to take profits, dragging down the shares by 10 per cent to 184p in early London trading.
Weakness in Europe has been offset by stronger demand for high-end vehicles in India, China and the US, and several dozen of TT’s sensors are present in cars such as the BMW 5 Series car, worth almost €100 per vehicle.
“We see the market for sensors growing faster than the auto market itself,” Geraint Anderson, TT chief executive, told the Financial Times.
Surrey-based TT also supplies the defence, telecommunications, computing and industrial electronics sectors, and has identified uses for its technology in commercial air travel and medical equipment.
As such, Mr Anderson reiterated his confidence in achieving an operating margin of 8-10 per cent by the end of 2013, up from the 5.8 per cent recorded in 2011.
Scott Cagehin at Numis said: “After major restructuring over the past three years we believe that TT is well positioned to capitalise on good growth opportunities with realistic targets that support significant margin expansion in the coming years.
“We believe given its strategic positioning, further self-help opportunities and attractive valuation multiples the shares look undemanding.”
At TT’s electrical components division, which supplies resistors, power modules and circuitry and earns more than 40 per cent of total group revenues, turnover edged up by 3 per cent to £242.7m.
However, TT warned that the unit would see a fall in demand in the first half of 2012 as customers cut their inventory levels.
Strong cashflow enabled TT to move from a net debt of £9.9m at the 2010 year end to net cash of £15.2m last year. This, Mr Anderson said, opened the door for TT to target acquisitions in Asia and Latin America.
“We have improved our balance sheet strength …and we are looking at companies that will add to our technology portfolio and add to the geographies that we are focusing on, such as Asia,” said Mr Anderson.
TT reported rose up from £555.5m to £591.3m year on year, pre-tax profit that rose from £25.1m to £31.8m, and diluted earnings per share fell from 16.7p to 15.8p.
A final dividend of 3.2p per share was recommended, and when combined with the interim payout of 1.2p brings the 2011 total to 4.4p, up from 2.8p recorded in 2010.
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