TTGPF (TTGPF) Q2 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to our interim results presentation for 2026. I am Eric Lakin. CFO-- CEO, rather, get that right. And I am joined this morning by Ian Ashton, who joined us as chief financial officer at the end of June. This is Ian's first set of results with TT. And it is great to have him alongside me today. Also like to thank Richard David Robert Webb, who has very effectively served as interim CFO since May last year. I wish him well for the future. Ian's appointment is 1 of a number of changes to the board this year. Phil Swash joined as Chairman in May, and I am pleased to say he is in the room with us today any of you wish to meet him afterwards. Also, Mark Waldner joined last week as senior independent director and chair of the audit committee. Together, these appointments significantly strengthen our experience as we progress in this next phase of TT's journey, and I am delighted to serve with them on the Board. Today, we will update you on the progress we have made, the actions we have taken our priorities for the second half and beyond. When we spoke in March, I described 2025 as a year of transition. It was a year in which we faced real operational challenges, took decisive action to address them, and rebuilt the foundations of the business to deliver sustainable, profitable growth. I also said that our focus for 2026. would shift from stabilizing the business to executing against a clearly established value creation plan. 6 months on, this is what has happened. The first half has been about disciplined execution, and delivery, and I am pleased to report this is now translating into tangible results. The headlines for the half are a material improvement in profitability. Margin expansion and stronger commercial momentum, reflecting the actions we took during 2025. Improved execution, and the delivery of our strategic priorities in the first half. Adjusted operating profit was up 37% to £18.5 million with operating margin up 32 basis points to 8.1% compared to the first half last year. There are 3 drivers behind the profit improvement: First, the benefits of the operational actions we took in EMS Cleveland turnaround has been implemented, and the site delivered consistent profitability throughout the period. Second, the return of our Components business to profitability. Driven by underlying business improvement and by the closure of the site at Plano. Which has significantly loss-making in the first half of last year. And third, our strategic priorities are delivering. The divisional realignment has been implemented, The cost reduction program is substantially complete and we have seen strong momentum in order intake right across the group. That order momentum was broad based across multiple sectors and it gives us good visibility of revenue coverage into the second half. To illustrate that, our order book at the end of June was approximately £550 million, which is 20% higher than the same point last year. Reflecting that momentum, and the benefits of our cost program building through the second half, the Board now expects adjusted operating profit for the year to be ahead of current market expectations. In short, we have moved from operational turnaround to disciplined execution and delivery. Let me take you through the framework driving that progress. At the full year, we set out 4 clear priorities that would define our next phase. Divisional realignment, our cost reduction program sales transformation, and portfolio optimization. This morning, I want to report what they have delivered over the past 6 years with each of these 4 initiatives now driving tangible benefits to the group. First, divisional realignment. The transition to a product led organization structure was completed in April. The group is aligned around 3 clear divisions. Power, which includes power control, conversion and distribution technologies EMS, or Electronic Manufacturing Services, with a focus on engineering-led high mix, low volume PCB, and high level assemblies. And components, which as the name implies, supplies individual components including a wide range of resistors, potentiometers and optoelectronics. This structure aligns sites with common technologies and production characteristics. And also better reflects how we engage with our customers. To give an example, there are several situations in which we have a new or existing EMS customer can be supported across multiple EMS sites and we can adapt to their evolving regional supply chain needs as a recent transfer from China to Malaysia, manufacturing, or support requirements for localization. In power, we have focused investments in our technology road map, including next generation silicon carbide power modules and additive layer manufactured products. Both of which were showcased at the recent Farnborough Air Show. The creation of these technology platforms as well as our R&D center of excellence has strengthened global collaboration and our sales pipeline. We are already seeing the benefits. Teams are working more effectively and collaboratively across our global footprint. And we have secured new customer wins spanning multiple sites, and the result is a more agile, customer focused organization. Second, our cost reduction program. This was substantially completed during the first half, it is progressing as planned. The costs associated with the program of approximately £3 million were recognized within our operating profit in the first half, and were effectively self funded during the period. So the costs are behind us while the financial benefits will be delivered in the second half. We are therefore on track to deliver the previously announced £3 million of net savings during 2026. And from 2027 onwards,, the annualized benefit is expected to be more than £6 million. This gives us a leaner organization enables a more devolved operating model with clearer accountability at the operating company level. It also provides a strong, more resilient platform for continued margin expansion. it is important to note that the cost reductions have been at the administrative levels. it is vital that we continue to preserve and invest in the crucial capabilities that customers value and provide sustainable competitive advantage including specialist engineering skills, operational and supply chain excellence, and commercial talent with relevant domain knowledge to understand customer needs. The 3rd component of the framework is sales transformation, which is the priority I am perhaps most encouraged by it is the 1 that shifts TT from recovery back to growth. During the period, we continued to invest in our commercial organization. Expanding business development resource, especially in North America and China, improving capabilities and strategic selling driving consistency in pricing in the bid review process, improved deployment of our CRM and strengthened pipeline management. These initiatives are beginning to deliver, greater commercial discipline, that involves a focus on market segments and applications in which we can add most value and the right to win. Is driving stronger order intake with a book to bill ratio of 112% for the group and a stronger order book across all 3 divisions. We have seen improved conversion of the opportunities in our pipeline, and encouraging new customer logos and NBO wins I will come on to later. I will come back to those wins in more detail shortly because they tell important story about the breadth of demand for our technologies. There remains further work to do here, we are building a more disciplined and more effective commercial organization and the benefits are coming through. Finally, portfolio optimization. Following the completion of the strategic review of the components business announced with our full year results, We have tested market interest in acquiring the business and we have received an encouraging number of indications of interest. The Board is now evaluating a potential divestment and I will reemphasize what we said at the full year Any decision to execute a transaction will remain subject to value and there can be no certainty as to the outcome at this stage. We have been very encouraged by the return to profitability of Components during the period, The business is performing better in a growing market and that strengthens our position whichever route we ultimately take. Alongside this, disciplined capital allocation remains a priority, balancing selective investment opportunities to strengthen our core business with further deleveraging and future capital returns. Taken together, these 4 priorities are doing what they said would do. Driving margin expansion, sharpening our focus, and building a platform for sustainable growth and delivering improving financial performance. With that, I will hand over to Ian, who will take you through the financial results in more detail.

Can you turn yours back? Thank you, Eric, and good morning, everybody. I am very pleased and privileged to be here as CFO of TT. This is a business with great opportunities, in very good markets. And it is already getting very firmly back on track. That was my belief before I joined, and my first 2 months in the business of more than confirmed it. So I am excited at what is ahead. it is been great to meet many people across the group already. To start to benefit from their knowledge and to see their passion for the business and their own excitement at what is possible, in the future. Also, word of thanks, from me to Richard, who has done a lot of sterling work in his time as interim CFO and has been extremely helpful in enabling a smooth and very effective handover. So the key financial metrics for the half. I will not talk through all of these during the presentation, and some I will look at in more detail in later slides. But for now, revenue in H1, showed a modest decline of 2.7% versus the prior year, but that was affected by 2 significant 1-off factors that have been flagged previously. And absent these, sales grew around 4%. We expect to see positive organic growth with or without any adjustments in H2. Operating profit grew by £5 million or 37%. The key drivers were the strong turnaround in the Cleveland site, going from loss making to profit and the benefits of closing the underperforming Plano site. As a consequence, the other profitability metrics are also very positive versus the prior year. With substantial percentage increases in PBT and EPS. And I have referenced on here that these reported numbers are despite an unusually high effective tax rate, that is due to the fact we cannot yet recognize a deferred tax asset. In respect of US tax losses. Finally, I would also highlight ROIC at 18%,, which is a healthy number, and leverage at 1.1x, flat on the 2025 full year after some modest inventory build in H1 but well down on where we were a year ago. Revenue. This business has great opportunities. And, importantly, capacity to grow the top line, and that will, of course, be the biggest sustainable driver of value in the future. The headline for H1 was a 2.7% decline at constant currency, as I mentioned, but the underlying picture was positive. This slide shows a simple year over year bridge with the movements by division. Power was flat over the prior year, Aerospace and defense, which will be very positive long term drivers, represent around 2-thirds of that business. But as noted on here, there were some customer driven delays, which held the headline revenue number back a bit in the half. Conversely, we expect H2 to be positive. Power sales into industrials and health care were positive in the half. EMS's headline number, a decline of 8%,, was by the well flagged product transfers from Suzhou to Kuantan in the period. Absent that 1 off impact, the business grew quite healthily at around 7%. Finally, components delivered growth of 6%,, despite the approximately 5% impact of the Plano closure. This slide summarizes that 37% constant currency profit growth, over and above a very small currency benefit of £0.5 million you can see there. I will talk through the divisional results in a moment, but you can see good year over year in improvement in EMS and components driving the group improvement in H1. The former due to the strong progress in Cleveland, as I mentioned. Power is our highest margin business and generated £14 million profit in the half, albeit it was slightly down on the prior year due to the sales phasing. As I said, we are confident that will come back in H2. So I will now look briefly at the 3 divisions' performance in the period. Firstly, power, I have mentioned the key drives of the sales results. As I said, we expect h 2 to be stronger. Agreements recently signed provide good momentum and confidence about the near and longer term. With the near term outlook corroborated by the robust book to bill ratio and the longer term by the strong macro outlook, in A&D in particular. The Power operating margin of 14% was slightly down on prior year, due to the flat sales in the period, but it remains healthy. And we think there is certainly, still scope to improve it over time. Eric will give some more detail on some of the commercial successes in the period that give us confidence for h 2 and beyond. In EMS, the top line was distorted by the customer transfer as we said, but showed encouraging robust growth absent that 1 off factor. And the operating margin is up to 8%,, not where it needs to be yet, but showing very solid progress. The key driver of that improvement has been the turnaround in Cleveland. I have been to that site myself, and the management team under new leadership have clearly done an excellent job over the last 6 to 12 months. There is, as always, more that can and needs to be done, and I am confident it will be done there. But the site was profitable throughout the half and is very much back on track. As with almost all of our sites, they have existing capacity to cope with substantially increased demand. Components was also a positive story in the half, growing well and back to profit. The sales growth is being driven by better markets and better execution on our part, we expect the positive momentum to continue. That top line growth along with the benefits of closing the Plano site, had driven the division back to profitability. We are confident the top line momentum will continue to help drive the margin upwards. And Eric's already commented on the status of the strategic review of the business. I thought it would be helpful to also include the group sales split by end market and by geography. A&D is the largest segment weighted heavily to power, followed by auto and electrification, I. E. Industrials, and then health care. The sales through distribution are largely in the components about 80% of that 16% on the chart. So we are well exposed to some strong macro tailwinds. Geographically, we have good diversification, and we are notably well exposed to the currently stronger growing regions of The US and Asia. So some very good opportunities for growth, Eric will talk further on what we are doing to ensure we get after those as effectively and quickly as possible. This slide shows the key elements of the cash flow during the period. The high profit was, of course, a positive factor in the half leading to EBITDA of £24 million. Of the items between that and the free cash flow, the key 1 is working capital, as highlighted on the slide, which this period saw an outflow of around £13 million This was driven by increases in inventory in Power ahead of some of the delayed revenue already mentioned, and in EMS at the Kuantan site as they build inventory to support the new business that has been transferred there from Sujo. Of the other items, the only 1 I will highlight is the £3.8 million cash spent on exceptional items, the majority of that related to the Plano closure. And also the closure of the small EMS plant in Mexicali. Due to the lower cash conversion in H1, free cash flow was nil in the period. Certainly expect it to be positive in h 2 and, therefore, the year as a whole. I would also emphasize that on an LTM basis, I. E, June to June, the cash conversion was at 108%, and free cash inflow was £23 million. Free cash flow generation is, of course, the key long term value driver of business, and I believe that is well understood by all of the management teams. It will remain front and center in all of our decision making. As an aside, in the appendix to the slide deck, there are some more detailed guidance points covering some of the full year 2026 numbers. Including obviously a few pertaining to cash flow. A quick recap of the key balance sheet metrics and also our current financing. Net debt, excluding leases, was £52 million at the period end. were broadly flat on 2025 year end and well down on a year ago. Leverage at 1.1 times is at a very manageable level, nevertheless, we do expect to reduce this further in the second half. We also have good levels of financing in place, The RCF of £105 million was almost all undrawn at the half year. As Eric and Richard reported in Mark, during Q1, this facility was extended to June 2028. The private placement notes have maturity dates of 2028 and 2031, both at similar rates that amount to 3.65% on average. We, of course, very much value our lenders' ongoing support, we will, of course, be starting to plan for the 2028 maturity dates well ahead of time. But in short, the group is in robust shape as regards to financing. Finally, from me, this slide shows the board's current and, in certain respects, initial thinking on capital allocation, we thought it would be useful to share. To be clear, at this stage, our focus is on the left hand side of this slide, I e, ensuring the business is generating sustainable and increasing levels of free cash flow. That will, in turn, allow any organic investment that is needed to drive the business further forwards. So pretty basic. We want and intend to get into a virtuous-- a virtuous upward spiral of ever improving organic profit and cash performance. How we would think about the other ways of deploying cash whether from organic performance or, for example, a component's disposal if that were to happen, is shown on the rest of the slide. Firstly, absent anything more transformational that might be considered in the medium or longer term, we aim to keep leverage below 1.5x. Obviously, we are below that level today, and it may also go bit lower in H2, always keep that under close review and ensure we are doing the right thing for the long term health of the business. Secondly, dividend. We do not currently expect to reinstate the dividend for the 2026 financial year, but we will, of course, keep that under very close review. We know it is rightly important for some shareholders. it is fair to say that if and when we do reinstate the dividend, we would expect to start at a prudent level and build from there. Thirdly, portfolio. We have discussed components. Proceeds of a sale will give us options. Flexibility beyond what we have today. But the priorities for deploying any proceeds would be as I have just described and as shown starting from the left. The other aspect of portfolio, i.e., bolt-on M&A opportunities, is something we intend and need to look at. As part of longer term value creation, to be clear, it is not an immediate priority. The board will provide greater clarity in the future on its approach to M&A, and selective bolt on acquisitions, including the discipline criteria that would underpin any future activity. In summary, our capital allocation framework will help ensure a very disciplined focus on unlocking and maximizing the substantial value we believe exists in the business. And with a clear goal of delivering superior returns to shareholders over time. That concludes my section, and so I will now hand it back to Eric.

Thank you, Ian. 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. What I would like to do now is spend a few minutes on the commercial side of the business and point to some clear examples of our strategy working in action. Our investment in the commercial organization is translating into a stronger pipeline and increasing rate of customer wins and a growing order backlog. During the period, we secured material contract awards with blue chip customers across several end markets, And post period end, we signed a significant multiyear agreement with Rolls Royce which I will come back to in a moment. In EMS, we won 2 new logos in scientific and analytical instruments. And in Power, we secured a new contract to supply Power Electronics for subsea oil and gas applications. The commercial pipeline continues to strengthen. We have signed a letter of intent with MBDA leading European defense company, based on our credentials in ruggedized power electronics. That could drive significant long term value. Our Power business is engaged on the future combat air system, which has a potential to be 1 of Europe's largest next generation defense programs. We are also engaged on major armored vehicles, including boxer and challenger, through Rheinmetall BAE Systems, and we continue to support the Typhoon and F-35 air defense platforms. Against the backdrop of defense investment across Europe and The US, and an accelerating focus on delivering critical capability TT is well positioned to support our customers through the next phase of production growth. What I want to highlight here is the breadth new customer wins for EMS and health care. And a return to growth in the wafer fab capital markets segment. Demonstrate commercial traction extending beyond aerospace and defense and these wins span each of our 3 divisions. And provide broad based momentum. I want to bring 2 of these relationships to life, starting with Rolls Royce. Shortly after the period end, we signed a significant multi year agreement with Rolls Royce to supply high reliability solutions for all of their wide body civil aircraft engines throughout their operational lifetime. The content is mission critical power electronics and precision magnetics that support the performance and reliability of those engines. This is not a new relationship. It builds on more than 4 decades of collaboration between our 2 businesses. What the agreement does is formalize and extend that partnership and reinforce TT's position as a trusted design and manufacturing partner for 1 of the most demanding customers in aerospace. For us, the significance is twofold. It provides attractive long-term revenue visibility, and it demonstrates our ability to convert deep engineering relationships into strategic long dated commercial agreements. The second example is a program rather than a customer. We have supported the Eurofighter Typhoon program for almost 30 years, through production, upgrade and in service support. The kind of longevity that provides real long term revenue visibility. During the first half, we secured further material contract awards on the program, reinforcing our position on 1 of Europe's leading air defense platforms. What makes Typhoon a useful case study is what comes next. As I mentioned just now, we are engaged on the Future Combat Air System known as FCAS supporting the transition from today's Typhoon platform to Europe's next generation combat aircraft. The capability we have built over 3 decades is precisely what positions us for the programs that follow. That capability sits across our sites in Manchester, Barnstable, Beddington and Fairford. Highly skilled engineering teams that create a strong foundation for future defense programs. As you can see, targeted investment in technology and business development capabilities is leading to rising commercial prospects and gives us the confidence to support new aerospace and defense contracts in the future. Finally, turning to the outlook. We enter the second half with improving momentum, and with increasing pace and effectiveness in execution across the group. Starting with revenue and our markets. We expect revenue to return to organic growth in the second half. Supported by a strong order book. Which at the end of June is 20% above the same point last year. And demand in aerospace and defense continues to provide a strong foundation for the group supported by increasing defense investment and a healthy pipeline of program opportunities. Within EMS, we are encouraged by increasing commercial activity improving conditions in health care and life sciences, the successful transition of customer production in Asia, and order growth in the semiconductor supply chain. Regarding operational performance, our drive for productivity improvements combined with a lean cost structure is supporting profitable growth and margin expansion. Strategically, our focus remains on commercial execution and operational excellence, and we continue to optimize the portfolio. The Board is evaluating a potential divestment of the Components division. With any transaction remaining subject to value. With respect to the balance sheet, cash generation is expected to strengthen significantly in the second half with further deleveraging expected for the full year. Reflecting this momentum, together with the benefits of our cost reduction program building through the second half, the Board now expects adjusted operating profit for this year to be ahead of current market expectations. The progress we have made over the past 12 months has transformed TT into a stronger, more resilient business with a clearer strategic focus. Last year, we were fixing operational problems. To date, we are executing against a clearly defined strategy with improving margins stronger balance sheet, genuine commercial momentum. I want to use this opportunity to acknowledge that this is a team sport and the execution of the turnaround would not be possible without the support commitment and expertise of the many great people we have throughout the business which I am very thankful. Remains a lot more to do. And continuous improvement remains a mantra But as I said earlier, we have moved from stabilizing the business to executing against a clearly established value creation plan. We are increasingly seeing evidence that our strategy is delivering, and that gives us confidence in our ability to deliver growth and long term value for our shareholders. Thank you very much for your time this morning. Ian and I are very happy to take your questions. Good morning, gents. it is Joel Spungin from Investec. I have just got 2 questions. First of all, on your guidance and you talk about a return to organic growth in the second half, presumably against the minus 2.7%,, are there any sort of is there any noise in the second half still either from the customer that transferred to the Kuantan site? Is that now completely out the numbers for the second half or and anything related to Plano just to sort of help us frame that comment? Yeah. Sure. So I will I will pick up on that, and you can-- Okay. You can add or augment indeed.

So with the customer transfer, it is complete in the sense that production ceased in Suzhou, China. At the end of last year. Required by the customer. And so all of the capability and the drawings and the manufacturing first articles have all been successfully deployed. The next phase is to ramp up to more consistent production volumes. And so it is that ramp up phase in this first half, which meant against a high comparative period, we have had some impact in the second half in the first half. In the second half, there is still a ramp up to be done, and there is obviously always with the orders there, there is always an execution risk with any manufacturing business. But we are quite confident of the trajectory and therefore we will not expect noise as such or to make any such adjustments in the second half to effectively have an adjusted underlying growth. We expect the headline growth to be there. Even taking into account Plano. So Plano obviously is roughly £10 million of sales in total last year. They are not in the numbers this year, but we anticipate even with taking that into account, we expect to return to growth in the second half. So that £14 million effect in the first half the customer transfer is going to be significantly lower in the second half? Correct. Much less negligible noise year over year from that. So you can sort of take the 4% that we referenced for h 1 as a sort of underlying number as a sort of reasonable steer as to sort of broadly where we might expect to see H2.

And then just a sort of more strategic question. Really just obviously, you have announced there is a review of components underway, and that is gonna be resolved 1 way or another in the next few months. But I was wondering if you could talk about the synergies between the 2 remaining businesses, power and EMS. Like, how closely knit are they? What benefits do you have from having them under the same roof? Or would it make sense for them to be separate?

Yeah. Excellent. Yeah. Great question. And it is something I have spent quite a lot of time getting my arms around since joining. And there is no question in my mind, there is a strong synergy and fit between EMS and power. Which is different from components we have talked about in the past, very different characteristics. And there is limited cross selling. But for me, 1 of the tests is you look at the intercompany transfers, and it is quite material within between power and EMS sites. To illustrate the point, there is 1 our Kansas site, power site in The US Their biggest supplier is Cleveland. there is a real advantage and we are seeing that with new opportunities and new customer wins. it is a real advantage particularly in aerospace and defense and ITAR compliant sites and so on, where we can offer a full package. We look at a typical power conversion box DC converter, it will have PCBAs within it. And having that vertically integrated supply can be give a real edge in terms of the design authority the speed to manufacture quality control. So, meaningful. And we are also looking at opportunities where there are you are speaking to a customer, and we are doing some cross selling, where we there could be a power customer or EMS they, oh, I did not appreciate fully that actually you also got capability an adjacent area. So, it is relevant. Already and increasingly so in the future. Thank you. Yeah. Good morning. it is Harry L-C from Singer. Just a couple of queries on the sort of new business wins, new contract wins. First of all, the, you know, the roles 1, obviously, you have been partners with them for a long time. Was that the end of a previous multiyear arrangement and that then you won a renewal for or was it was there any sort of different way in which you are doing business with them? Bit of both. So with Rolls Royce, say, 4-decade partnership, and typically it is been a rolling sort of 3 to 5-year contract up upgrade. And this time around is different in that under Tufan's leadership with critical sole source suppliers, like us with their engines. They are keen to get life of type arrangements. So the support, whilst there is still at least 2 units produced a year of an engine. So this is a, you know, could run this run for multi decades from now. And so for us, we are very keen to enter that very long term relationship, but with the right terms. it is really important we get the visibility, adjust for inflation, our own material supply. And as part of that, you might expect there was appropriate discussions around pricing. And so we have it is a true win. I do not always see that in business, which is why Rolls Royce had a very unusual step of having a sort of joint signing with us and us as a strategic supplier because it is a really good relationship it is good for us, it is good for them. Addition to that, it opens up the path to potential new business as well and new products beyond what we are supplying already. it is currently from 2 sites Bedlington and Barnstable, but we could do more with them. And I referenced earlier the potential for crossing EMS. that is a good example of that. Sort of extending that into the other new business wins, just trying to see what the link is between the sales transformation and how you are actually fundamentally going to win new business. What how much of it is just because you know, those end markets are really strong at the moment, and you have got a good enough position to win new business. Or a combination of the 2, I guess, you know, clearly, dispense has been it is a it is a common for sure, it is a combination of the 2. Think we have I mean, it is a real clearly, real driver for future growth is getting top line growth. it is 1 thing doing divisional realignment, taking out costs and improving the bottom line, but we need to return back to growth. So there is been a huge amount of focus there is a whole range of initiatives within that, and I gave an example of some of those during the voiceover. And it is deliberately, despite taking out cost adding to our business development team. We had, for example, we had no dedicated BD people in China whatever, until a few months ago. And now we do. And not only that, we are going to exhibitions, we are getting significant leads from going to China exhibitions on the medical device sector, in industrials, so, we are getting tangible see the benefits going from leads, to qualified opportunities to order intake. Now, that would be much harder in a difficult market, so by combining that with the market improvement, we are seeing the benefit. The same story, particularly in The US. And then Components is another example. You will see that market is recovering. It has the last sort since the beginning of this calendar year, which is great. And our peers are seeing a similar recovery in high book to bill. You have not taken the action around getting our pricing right, improved marketing, some product innovations, would not have captured the benefits in that rising market as we would have done. So, it is certainly a combination of the 2. Thanks. Morning. Toby Thorrington from excuse me, Equity Development. 3 from me, please. 2 on contracts, 1 on tax, I think. So following on from Harry's comment, regarding the Eurofighter Yeah. Material award, could you again clarify whether that is incremental in terms of product supplied? Is it incremental in terms of length of contracts? A bit more detail on that would be helpful, please. Yes. So with Eurofighter, it is an extension of the existing contracts we have with Eurofighter, we sell through Tier 1s, typically like BAE Systems. And so it is an extension of that. And anyone following the defense market would may not be surprised with the continuation of a very quite an old platform but there is often developments and enhancements. So, for this example, with the power electronics, there is always ongoing improvements in the weight, in the form factors, in efficiency and we incorporate those. So it is effectively, although the airframe is very similar, it is an upgrade within that. So, we are providing in effect, it is new products. So, some of our design engineering is supporting that, but it means we can continue with the platform. And keep the competition at bay, if you will. And in the presentation, you briefly mentioned wins in the subsea oil and gas sector. I know you had Baker Hughes on the slide. I would be interested to hear a bit more about that, please. Yeah. I mean, highlight that just because it shows the diversity of our end markets. And is actually quite a quite a significant win for us, of multimillion dollar win. And we have it shows and it is with our Magnetics businesses, so it just highlights there is a lot of quite sophistication in some segments you would not necessarily associate with power electronics, but the sort of sensors and controls needed for the subsea sector. Is it actually lends itself quite well to what we do And there are what I like about it is it is a good reference logo, but there are other customers out there in their sector that we do not serve and we are talking to today. Very high growth sector. Yes. Yeah. Yeah. Okay. Thanks.

And tax, 1 for Ian. Perhaps you can help us out. So small refund in the cash flow in H1. The liability is £20 million. Payable on the balance sheet at the end of the first half. You just give us some kind of steer as to what you think the cash tax might Without getting too much into the weeds, the reason for the China, in particular, is the driver of that, where we get we get refunds for reasons, which, frankly, I, you know, probably do not want to get into right now. But there is just there is a timing issue there predominantly in China, which means that, as you say, very, very modest inflow, in fact, the first half and then about £6 million outflow in the second half. Okay. And normal cash tax relative to P and L tax annual, do you think? Yes. I mean broadly, yes. Yeah. Exactly. Yeah. Lovely. Thank you.

Hi. I am Mark Fielding from RBC. Couple of questions, please. Firstly, on EMS. Think Ian, when you were talking and you were at the presentation, you have referenced the margin improvement, but there was still more to do. I mean, assuming that there is not been a material shift versus what was GMS before, and advise me if I am wrong on that, on that then, I mean, it did not send much sustainable period of time above sort of 8% margins historically. So I am curious, you know, just what is the potential and the opportunity on that 1?

Yeah. Maybe just start with that. Should I pick that 1 up, Ian. Listen. So, first part, it is broadly the same as GMS, The 1 difference is Fairford before the cable harness business was now part of Power. it is more naturally fitted within Power and its common customers. So, EMS is the 3 sites that do PCBA assembly, high level assembly, and box build. So that is Suzhou, Kuantan and Cleveland. If you look at the EMS peers, particularly some very high volume companies Flex, Jabil, Plexus, And typically, it is a high single digit margin EBIT business. But they are higher volume, sort of more high volume, lower mix. Than us. So I will not give any forecast, but I think it will always be a lower margin business in Power. Because it does not have as much design or engineering content. it is more outsourced manufacturing, but the flavor we have, the high mix engineering led, should mean that we have got the potential to have higher margins than our peers, even though some of the listed peers have much more volume. Hopefully it gives you a flavor of what is possible, but it is never going to reach to the levels of power that we see today.

Great. I said the same thing about power. We see this margin opportunity in both of those businesses. And you know, not least driven by volume. You know, there is capacity there to drive more volume and just the operating leverage that comes from that. And just secondly, just on cash flow and cash conversion. Obviously, looking at 70% to 80% this year. I mean, yeah. there is been a lot of moving parts in the group the last couple of years. So suppose just how do we think about the normalization of cash flow, the normalization of cash conversion now? Yeah. I mean, I about that, let's say, 70, 80% we think is I mean, clearly, as the business grows, that will drag a little bit of working capital along with it. But 80% is, we think is a sort of sensible assumption going forward. There will always be sort of the odd, you know, spike up or down, but I think that is that is a reasonable assumption for the medium term. And if we do that, we are clearly throwing off sustainable free cash flow and which gives us some of the options that we talked about.

Richard-Hill from Jefferies. Just 1 from me. I just want to kind of narrow in on the a and d and looking at your kind of contracts you have pulled out, the JV between BAE and Rheinmetall, the Boxer Challenger. I wondered if those are quite UK centric, although they have brought in European partners. Is there an opportunity there to kind of explore onto the continent and kind of access some of the larger growth that is there. You know, with the UK budget constraints, etcetera, that we kind of see here.

Great question. Yes. Yes. I think 1 of the we do have, it is fair to say, U. K.-based and U. S.-centric proportion of A and D customers and business. I mean, I within the defense supply chain, so for example, we serve JSF through a U. K.-based Tier 1, and they supply the prime in The U. S. There are some challenges with accessing European defense programs because of work share arrangements and such like. So, in some cases, we will need to consider partnerships. And it could be commercial arrangements or it could mean some form of some sort of footprint in Europe. To do that. So, 1 of the reasons we highlighted MBDA partnership and announced that is that is 1 such example of how we could potentially access very large sizable future defense program in Continental Europe. Without necessarily having sort of physical manufacturing presence. Locally. So we are looking to do more of that So, watch this space, but think there is the potential to do more than we currently do. Okay. Thank you. Harry Fielding. Obviously, a quick follow-up question. In terms of that, strong order book momentum, I suppose, how do we think about the delivery timeline of the order book and, you know, at times in the past, it was quite elongated, sort of multiyear orders, or is this more you know, immediate conversion type stuff? Yeah. Very great. it is it is it is a whole range. So, for example, components and order intake has been very significant Typical lead time 10 weeks. So that gives us visibility for 3 months typically. For EMS and Power, they are more similar It can vary a lot. I mean, lead times can be more like 6 months, also depends on the product. It could be if it is engineering led, some can be much longer than that, some can be shorter if it is existing. Existing products. And the order book can include everything from deliveries in a few weeks to multi year. A real range. But I would say probably a useful way of looking at it is we have got very good visibility of this year. Through the calendar year. So we effectively for EMS and Power got we can see we have got the order book coverage for our revenue expectations for the year. So, it is all about delivery. there is no book and ship risk. there is a little element around the components type business, as you expect, but that is that is closing as the year progresses. So and then you look at there is a tale of orders that go into next year and beyond. So it is quite a range of durations within that Thank you.

Harry, Andy Simms from Berenberg.

Eric, you mentioned talent getting people into the business, both in the engineering side, but also on the sort of the sales and domain knowledge side. Yes. How is that going? it is a competitive space, I suppose from the point of view of what TT offers now is as a place to work and the offering, How is that evolving now? Yeah. that is a great question. I mean, it is certainly helps when we have a bit of a skip in our step and we get improved results because any ambitious capable recruit will look at a business and think if they want to be part of that journey. And so, we have had some good successes in attracting talent around the world. In particular, as I mentioned, the focus on BD, in particular, has been in The U. S. And China, but engineering has been throughout. I think 1 of the selling points-- well, first of all, it is an interesting business. We cover multiple sectors we have talked about, whether it is healthcare, semiconductor, CapEx, A and D, So, exciting programs. But the size of the business is quite interesting. And it is a similar discussion I had with a number of customers at the Farnborough Air Show. So, it seemed to resonate. We are big enough that we have got really interesting diverse footprint. We have got 20 sites around the world, 16 manufacturing bases. A lot of capabilities we can draw across regions and across different locations. So, engineering depth, so we can support a U. S. Aircraft company in The U. S. With engineering R&D capability in The UK, etcetera. So it is quite compelling. But we are small enough to be agile and responsive. So on a customer point of view, I will ensure that you know, I am I am meeting the appropriate people. They get senior level airtime, and responsiveness. They would not get from others. And they are definitely getting feedback from them around, you know, comparison multibillion companies that do not necessarily adapt to the needs. And that also applies for individual hiring. They can join a lot typically, I am seeing is people coming from large companies and they do not necessarily get the sort of time or visibility that they would otherwise get, and they can join us. A recent person joined, another BD professional in China that joined from a very large EMS 1 of the top 3 EMS companies in China, really capable he felt he can make much more of a difference with us And also, we get the right comp and bends incentive plans as well together. So, not completely straightforward. The US TT brand is not that well known. Some of the sub brands are, to an extent. But we are making good progress on that. And I have seen a couple of examples of engineering engineers recently. So in Kansas, you have got a couple of big firms down the road, including Garmin and others. A couple have gone and then realized the culture is not what they want and they have come back again. So, I think we are it is an area we are focused on and getting things on LinkedIn, you might see, but so making good progress there. But more to do because it is really important. it is our lifeblood engineering sales, operations and supply chain. Okay.

Okay. I think we are all done.

Well, thank you very much for coming again and really appreciate the questions and happy to chat to you afterwards. Thank you. All right. Thank you.