Stockwatch: I’m sticking with this turnaround and takeover candidate
There’s fresh optimism around this smaller company which analyst Edmond Jackson has backed before. Now he thinks it’s a much better-positioned business, including a partnership with Rolls-Royce.
4th September 2026 11:00
by Edmond Jackson from interactive investor
Out of a convoluted situation it appears the CEO of small-cap TT Electronics (LSE:TTG) since April 2025 is honing a worthwhile recovery situation.
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This is a longstanding share that originated as the 19th century Tyzack & Turner toolmakers, listing in 1948 and focusing on electronics from the 1990s. TT’s banner would appear to convey relative earnings stability versus regular component distribution. It’s focused on “the design and manufacture of advanced electronic components, power management systems and complex solutions for performance-critical applications”.
Yet its chart from the early 1990s has been a volatile-sideways affair. You could even say it’s been in modest overall decline considering inflation. TT’s best run was from 57p in 1990 to 360p by 1997, only to slump to 120p by May 2000 with the bursting of the tech bubble. Following the 2008 crisis, it fell to 20p by mid-2009, then rallied to over 150p, reaching 280p in August 2021 amid speculation generally during Covid lockdowns.
More recently it has been a tricky share to call. I drew attention to it at 168p in November 2022 after two bullish updates, for example that year’s interim results citing 10% revenue growth with orders more than doubled since pre-pandemic years and up 55% year-on-year. I concluded that “if recessionary indicators fail to deepen as feared in months ahead, then buy”.
I should therefore exercise the utmost care after last Wednesday’s half-year results came across as if TT and its shares are again well-positioned.
From 2022, the price fell ultimately to 75p, although I would note the appearance of a firm “double bottom” reversal pattern with lows in November 2024 and April 2025:
Source: TradingView. Past performance is not a guide to future performance.
Interims show results of new CEO
The first half of 2026 scored for profit recovery: adjusted organic operating profit up 37.0% to £18.5 million as the margin rose from 5.8% to 8.1%, although organic revenue slipped 2.7% to £228.1 million, said to be significantly affected by one-off factors.
It certainly improves on 2022 to 2025 losses amid severe operational and market challenges in the US, high restructuring costs and soft demand in TT’s electronics manufacturing services division (EMS).
Despite a modest £240 million valuation, this company has true international reach: the Americas generated 36% of revenue, EU 25%, UK 22% and Asia 16%. Fears over US tariffs therefore have also not helped sentiment and coincided with the second chart low in April 2025.
TT Electronics - financial summary
year-end 31 Dec
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
| Turnover (£ million) | 333 | 360 | 430 | 478 | 432 | 476 | 617 | 614 | 521 | 481 |
| Operating margin (%) | 5.7 | 5.6 | 3.8 | 3.5 | 1.5 | 4.1 | -0.6 | 0.5 | -4.5 | -5.9 |
| Operating profit (£m) | 18.8 | 20.0 | 16.5 | 16.9 | 6.6 | 19.3 | -3.4 | 3.0 | -23.5 | -28.2 |
| Net profit (£m) | 16.7 | 47.7 | 13.4 | 15.8 | 1.3 | 12.8 | -13.2 | -11.3 | -53.4 | -50.6 |
| EPS - reported (p) | 7.3 | 8.4 | 7.8 | 7.5 | 0.8 | 7.2 | -7.5 | -6.4 | -30.1 | -28.5 |
| EPS - normalised (p) | 7.5 | 13.8 | 18.3 | 20.7 | 13.6 | 17.6 | 22.2 | 18.1 | -4.4 | 8.3 |
| Operating cashflow/share (p) | 16.4 | 17.7 | 15.1 | 21.6 | 16.8 | 8.0 | 7.2 | 33.8 | 28.9 | 28.1 |
| Capital expenditure/share (p) | 8.3 | 9.1 | 11.5 | 11.2 | 8.0 | 9.6 | 8.1 | 14.0 | 5.2 | 5.2 |
| Free cashflow/share (p) | 8.1 | 8.6 | 3.6 | 10.4 | 8.8 | -1.6 | -0.9 | 19.8 | 23.7 | 22.9 |
| Dividends per share (p) | 5.6 | 5.8 | 6.5 | 2.1 | 4.7 | 5.6 | 6.3 | 6.8 | 0.0 | 0.0 |
| Covered by earnings (x) | 1.3 | 1.5 | 1.2 | 3.6 | 0.2 | 1.3 | -1.2 | -0.9 | 0.0 | 0.0 |
| Return on total capital (%) | 5.3 | 7.3 | 4.4 | 4.2 | 1.4 | 3.7 | -0.7 | 0.6 | -6.4 | -11.0 |
| Cash (£m) | 49.8 | 46.5 | 44.7 | 69.8 | 70.2 | 68.3 | 65.0 | 74.1 | 69.2 | 38.7 |
| Net debt (£m) | 55.4 | -45.9 | 41.7 | 69.1 | 83.9 | 103 | 138 | 127 | 97.4 | 64.7 |
| Net assets (£m) | 231 | 267 | 278 | 266 | 296 | 328 | 297 | 266 | 195 | 148 |
| Net assets per share (p) | 143 | 164 | 170 | 162 | 170 | 186 | 168 | 150 | 110 | 82.6 |
Source: historic company REFS and company accounts.
Lest TT comes across as a fundamentally troubled business, there have quite recently been takeover approaches by Volex (LSE:VLX) (late 2024), Swiss group Cicor Technologies Ltd (SIX:CICN) and also private equity group DBay (both in late 2025), and last July DBay also raised its stake from 27.1% to 29.0%, a trade that is working out well with the shares up 28% to 150p since. This is partly why I double down to take TT seriously.
The CEO pitches with four key initiatives, improving TT’s risk/reward profile:
Divisional re-alignment: where the three key divisions of Power (custom supplies and conversion systems), EMS (high-reliability products for original equipment manufacturers), and Components (resistors, optoelectronics and sensors for special environments) are aligned with common technologies and client needs. There is now strengthened global collaboration and new products in the pipeline.
Cost reduction: a programme substantially completed in the first half at circa £3 million cost albeit a £6 million annualised benefit going forward. This has targeted administrative levels rather than those critical to the business.
Sales transformation: he says, shifting TT from a “recovery to growth” phase. There is further work to do but is already driving stronger order intake. The book-to-bill ratio – comparing total value of new orders (bookings) to revenue – has improved to 112%, marking a 20% year-on-year increase.
“Material contract awards were secured with blue-chip customers across all sectors, including Rolls-Royce” and into the second half there has also been a letter of intent with MBDA, a European defence multinational. TT’s partnership with Rolls-Royce Holdings (LSE:RR.) is regarded as a game-changer.
Portfolio optimisation: where it sounds as if the previously loss-making Components side is being groomed for possible sale (according to value) after a Texas facility has closed. If a useful price is achieved, it could draw attention to a “sum of parts” value, further improve investment in sales and development, and bring forward a return to dividends.
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Such actions look as if they can conflate well unless a stubborn US/Iran war further exacerbates inflation, resulting in a global downturn. However well-attuned TT’s electrical businesses are, I suspect they cannot shrug off an aspect of cyclicality. The group comprises 34% electronics’ distribution, 27% automotive electronics, 23% aerospace & defence, and 16% healthcare.
Might profits continue to surprise on the upside?
With the interim results, management also guided 2026 adjusted operating profit ahead of expectations. To the extent this can become a trend, the global economy will be significant, but considering the results presentation TT stands a good chance.
Consensus has anticipated £15.7 million net profit this year and £25.6 million in 2027, for normalised earnings per share (EPS) of 9.5p and 14.6p respectively – hence a 2027 price/earnings (PE) ratio just over 10x. While this would be a sharp turnaround from annual losses, normalised EPS was 18p to 22p over 2021 to 2023. So, might 25p become feasible on a two-to-three-year view given that they say in presentations that they have “transformed the business into one with a strong strategic focus”? Return on invested capital has leapt from 10% to near 18%.
A stronger second half is expected in Power, EMS should benefit from sales initiatives, and Components grew at 11% in the first half excluding the Texas plant closure. Overall, “improving momentum” is cited, also in cash generation.
However, first-half net finance costs of £2.7 million took 28% of operating profit, as net debt (excluding leases) remained flat at £52 million for net gearing of 34%.
While consensus has anticipated a return to dividends this financial year, interims say the board will decide its overall capital allocation priorities when the full-year results are known.
Share price recovery to prior bid takeover levels
A blot on the board’s record is how only last November they unanimously recommended a cash offer at 150p per share (with a share alternative) from Cicor Technologies. This failed because (then) 24.5% holder DBay said that they did not support the bid. The irony is that DBay itself had variously proposed offers worth 122p-130p per share, then withdrew.
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DBay is notable as a specialist in value investing and public-to-private transactions. It has acquired three AIM companies - Alliance Pharma for £362 million, bakery Finsbury Food for £143 million and Anexo, an integrated credit hire and legal services specialist, for £71 million.
In terms of material recent share dealings, last 9 June the chair bought £119,000 of shares at 119p and on 6 August a US Investor, SP Strategic Holdings LLC, became a disclosed shareholder with just over 3.0%.
A medium-term value and event-driven investment
A behavioural economist would say that DBay’s positioning and actions should be taken seriously, and various share accumulations affirm what management is saying with its interim results. So long as the global economy doesn’t stall, there are sound reasons to re-consider TT nowadays as a much better-positioned business, hence “buy”.
Edmond Jackson is a freelance contributor and not a direct employee of interactive investor.
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