Midas share tips: TT Electronics | Kewill

By Joanne Hart for The Mail on Sunday
Updated: 06:23 EDT, 15 November 2009

The Mail on Sunday's share-tipping column reports on a five-year plan at TT Electronics that could deliver results and updates on Kewill Systems. You can also sign up for free additional Midas share tips that will be sent to your inbox once a week.

Savings: TT makes sensors that allow car engines to switch on and off at traffic lights

TT's five-year plan is set to deliver results

TT Electronics delivered profits of £33.3m in 2007. The following year they fell to £21.1m and this year the company is expected to make just a few hundred thousand pounds.

It has been a rough recession for the global electronics business, which makes products for customers including the NHS, the Ministry of Defence and BMW.

Until recently half its customers were car makers and as demand for new vehicles slumped, so did TT's orders.

But even though this year's figures are likely to be poor, the company is well worth a closer look.

In the summer of 2008 TT appointed a new chief executive, Geraint Anderson, and a new finance director, Shatish Dasani.

Weeks later, economies around the world went into meltdown.

Against this backdrop, Anderson and Dasani came up with a three-to-five-year plan to take the company from an over-reliance on car makers and low-margin work to a focus on more stable industries, such as defence and healthcare.

Anderson was also keen to expand into more profitable business areas such as secure power - uninterruptible power supplies for organisations that cannot afford to have the lights go out.

The plan is making progress. More than 20% of the workforce has been cut - 1,600 people - and more jobs are going.

This is never easy but the economic climate has made employees more understanding.

Against that, TT is keen to promote good relations with its remaining staff so it has been investing heavily in training and technology.

Many of the redundancies arose because different parts of the business were doing the same thing for different products.

Anderson aims to streamline the company so there is no duplication of effort or cost.

In many ways, TT Electronics is a business that Britain should be proud of. With its headquarters in Weybridge, Surrey, it operates all over the world and most of the products it makes are extremely complex, such as sensors that allow car engines to turn off automatically at traffic lights and start up again when the accelerator is pressed.

The group also makes parts for hospital equipment, such as brain scanners, components for fighter planes and kinetic energy recovery systems for Formula 1 cars - essentially systems that harness energy and release it all in one go.

Midas verdict: TT shares were more than 240p in January 2007. Today they are 81p. At this level they offer a real opportunity. The company will benefit, like many others, as economic conditions recover, but its own internal improvement programme should deliver additional gains.

Profits of £6.9m are forecast for 2010 and further growth is anticipated in 2011. Supporters believe this stock should double by the end of next year. Buy.