TT Electronics plc

Annual Report and Accounts 2022

WINNING IN

GROWTH

MARKETS

“We are a global provider of design-led,

advanced electronics technologies for

performance-critical applications in

specialised markets.

We solve technology challenges for

a sustainable world. We do this by

delivering solutions for our customers

that enable products that are cleaner,

smarter and healthier, and that will

benefit our planet and people. Our

positioning and offering to customers

in markets that are growing well, and

our differentiated customer service,

are driving strong top line growth for

the Group.”

Richard Tyson

CEO

TT ELECTRONICS

Strategic report

In this Annual Report IFC

TT at a glance 2

Chairman’s statement 4

Executive Leadership Team Q&A 6

Our business model 12

Our markets 14

• Healthcare 14

• Aerospace & defence 16

• Automation & electrification 18

Our strategy 20

CFO review 22

Key performance indicators 34

Engaging with our stakeholders 36

Our people, environment and communities 38

Section 172 statement 63

Risk management 66

Principal risks and uncertainties 69

Going concern 73

Non-financial information statement 74

Governance and Directors’ report

Governance at a glance 76

Board of Directors and Company Secretary 78

Chairman’s introduction to governance 81

Leadership and Company purpose 84

Nominations Committee report 90

Audit Committee report 95

Remuneration Committee report 101

Our executive remuneration at a glance 105

Remuneration Policy overview 108

Annual report on remuneration 122

Other statutory disclosures 136

Statement of Directors’ responsibilities 138

Financial statements

Independent auditor’s report 140

Consolidated income statement 149

Consolidated statement

of comprehensive income 150

Consolidated statement of financial position 151

Consolidated statement of changes in equity 152

Consolidated statement of cash flows 153

Notes to the Consolidated financial statements 154

Company statement of financial position 209

Company statement of changes in equity 210

Notes to the Company financial statements 211

Five year record 219

Reconciliation of KPIs and non IFRS measures 220

Shareholder information 227

Glossary 229

IN THIS REPORT

CONTENTS

Read more on page 38

OUR PEOPLE, ENVIRONMENT

ANDCOMMUNITIES

We are committed to having a positive impact on the world

around us through our products and the way we do business.

Read more on page 38

OUR CUSTOMERS

Our customers range from start-up businesses to

global multi-nationals operating in the healthcare,

aerospace, defence, automation, electrification,

electronics and energy sectors. We aim to work as part

of the customer’s team, driving solutions, and with our

products and services integral to customers’ designs.

Read more on page 50

TT AT A GLANCE

WHO

WE ARE

OUR GLOBAL REACH

We service our global

markets from 26 design

and manufacturing

facilities and offices in

the UK, NorthAmerica,

Sweden and Asia.

Global breakdown

North America: 9 primary locations

38% of Group revenue

United Kingdom: 10 primary locations

21% of Group revenue

Asia: 6 primary locations

24% of Group revenue

Rest of Europe: 1 primary location

17% of Group revenue

Pie chart and figures above represent revenue by destination

TT Electronics plc Annual Report and Accounts 20222

STRATEGIC REPORT | TT AT A GLANCE

POWER

We design and

manufacture

customised, highly

efficient power

management devices.

CONNECTIVITY

Our products support

the digitisation of

industrial processes,

smart infrastructure

andautomation.

SENSING

Our solutions improve

the precision, speed

and reliability of critical

aspects of customer

applications.

Healthcare

We provide design and

manufacturing solutions

for a range of diagnostic,

surgical and direct patient

care devices critical to the

identification, treatment and

prevention of disease.

Power and Connectivity

P&C designs and

manufactures power

application products for

power efficiency and

connectivity devices which

enable the capture and

wireless transfer of data to

optimise electronic systems.

Automation & electrification

Customers rely on us to

help solve their toughest

automation and electrification

challenges, streamlining their

supply chains, increasing their

efficiency, and helping them

bring smart, new products

tomarket.

Sensors and Specialist

Components

S&SC works with customers

to develop high-specification,

standard and customised

solutions including sensors

and power management

devices that improve the

precision, speed and reliability

of applications.

Aerospace & defence

We provide solutions for high-

reliability applications across

a broad range of platforms

operating on land, air and sea.

Global Manufacturing

Solutions

GMS provides manufacturing

services and engineering

solutions for our product

divisions and to customers

that often require a lower

volume and higher mix

of products, including

complex integrated product

assemblies and engineering

services such as value-

engineering and designing

testing solutions.

% OF GROUP REVENUE

Our market breakdown

28% – Healthcare

15% – Aerospace & defence

37% – Automation &

electrification

20% – Distribution sales

channel

% OF GROUP REVENUE

Our market breakdown

25% – Power and

Connectivity

52% – Global

Manufacturing Solutions

23% – Sensors and

Specialist Components

TARGET MARKETS Read more about our target markets on page 14

OUR DIVISIONS Read more about our divisions on page 26

OUR KEY CAPABILITIES

TT Electronics plc Annual Report and Accounts 2022 3

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

“TT’s strong performance

in 2022 and our confidence

going into 2023 derive from

the positions we have built

in growing markets and our

reputation and relationships

with customers. Teams

across TT have also delivered

exceptionally well in a year

characterised by significant

volatility. The Board is

extremely proud of what

has been achieved and the

expert, ‘can do’ and supportive

culture we have nurtured in

theorganisation.”

Warren Tucker

Chairman

Our focus on realigning the business to

structurally growing, higher added-value

markets has transformed TT and its

future potential. Our three target markets

– healthcare, aerospace & defence

and automation & electrification –

continue to grow well, driven by enduring

megatrends including the Net Zero and

climate agenda. Our teams are experts

in these markets and passionate about

designing solutions that respond to

customer needs and delivering on their

expectations. Our top 40 customers

now account for 58% of revenue, but

without overdue concentration, which

is testament to the strong relationships

we have built and our reputation in

themarket.

CHAIRMAN’S STATEMENT

WINNING

IN GROWTH…

What makes us different?

Our target markets have strong,

long-term structural growth

potential supported by the

megatrends we are aligned to:

cleaner, smarter, healthier.

We have a culture of expertise and

our teams are passionate about

finding solutions to the world’s

toughest technology challenges.

We are focused on design-led

technology, creating bespoke

technology solutions for customer

applications.

Our success has been built

on engaging deeply with our

customers and becoming real

partners.

See our markets on page 14 and

our business model onpage 12

STRATEGIC REPORT | CHAIRMAN’S STATEMENT

TT Electronics plc Annual Report and Accounts 2022

As leaders we have set the stage, but

credit for our achievements goes to TT’s

employees. We have again asked a lot of

them this year and they have absolutely

risen to the challenge, working tirelessly

to meet strong demand and supporting

each other while doing so. The Board is

conscious that times have been difficult

for many in 2022 and we are pleased

to have overseen significant growth in

employee support activities – at both

site and Group level – including on

remuneration, financial support, physical

and mental health, and equality, diversity

and inclusion.

I am also delighted to report significant

progress in our environmental

performance. Not only are our

technologies addressing resource

scarcity, improving energy efficiency and

supporting renewables, we are delivering

on our ambitious agenda to reduce our

environmental footprint and carbon

emissions. We have hit our Scope 1 & 2

GHG emissions reduction target a year

early and are poised to move forward

with collecting data and setting targets

for our relevant and measurable Scope 3

emissions in the very near future.

The Board would like to thank every

member of the TT team for their

contribution this year.

2022 PERFORMANCE

Top line growth in 2022 was excellent

aswe executed on our record order book

and consolidated a significant number

of new customer wins, incremental

business opportunities with existing

customers and market share gains. With

continued book-to-bill well above 100%,

our forward order book has continued to

break records, giving us unprecedented

visibility over almost all of our expected

2023 revenue. Some of this is the fruit

of increased collaboration between our

divisions such as our expanded position

on the UK military’s Boxer vehicle. Our

adjusted operating margin moved ahead

to 7.6% and our double-digit margin

target is in view following the completion

of our self-help programme. All this has

been achieved in a year where we have

faced continuing supply chain issues

andcost inflation.

Our strategy is designed to generate

optimum returns for stakeholders while

maintaining strong capital discipline,

delivering strong cash generation,

and careful use of the balance sheet

to facilitate continued investment.

Weprioritise organic investment, with

a focus on R&D and capital spending

to firmly embed us with customers

and meet the challenges they set us.

This year our R&D cash investment

was £11 million and our pipeline of new

products continued to grow, particularly

in power conversion technologies

and surgical navigation and robotics.

Margin enhancement faced a temporary

headwind this year due to the pass

through of significant cost inflation but

the actions we have taken underpin

our confidence in continuing margin

progression in the future. The integration

of Ferranti Power and Control has been

successful, and we continue to monitor

an active pipeline of opportunities while

we focus on free cash flow generation

and leverage reduction to generate

scope to deliver future M&A. Our fourth

strategic priority to integrate ESG and

sustainability matters into decision-

making continues to move at pace as

demonstrated by the work we have

been doing in our communities, to

support our people, and to accelerate

thedecarbonisation of our operations.

PEOPLE AND CULTURE

Our TT culture drives the whole company

and has played an important role in 2022

when we have pulled together to satisfy

strong business growth. Our people care

about what they do and about each other

and work and behave in line with our TT

Way values. This gives us competitive

advantage and is an important factor

in enabling us to attract and retain the

talent we need. We, in turn, care for our

employees by treating them with respect

and creating safe and supportive work

environments where they are valued and

backed to reach their full potential.

Highlights this year have been continued

improvement in our safety record, the

introduction of more support for mental

and financial health, and the launch

of our inaugural Women’s Leadership

Programme. The Board is pleased to be

able to support an increased budget for

our 2023 salary reviews, with distribution

weighted to lower paid employees,

and a cost of living payment to all UK

employees on salaries up to £40,000.

BOARD AND GOVERNANCE

There were no changes to the Board

or its principal Committees in 2022,

but we were delighted to welcome two

new Non-executive Directors to the

Board at the beginning of 2023. Wendy

McMillan will join the Nominations and

Audit Committee and Michael Ord will

join the Nominations and Remuneration

Committees. Both have had outstanding

careers and bring relevant knowledge

and skills from their current and former

executive roles.

We have robust governance practices

at TT which have enabled us to grow

significantly while minimising risk in

a year that has presented a number

of business challenges. We have

navigated safely and thoughtfully, and

I thank members of the Board for their

dedication and counsel. I believe that

wehave a terrific team in place to steer

the Group successfully into the future.

DIVIDEND

Given the strong trading performance

in2022 and our positive outlook for 2023

and beyond, the Board is proposing a

final dividend of 4.3 pence per share.

This, when combined with the interim

dividend of 2.0 pence per share, gives

anincrease of 12.5% in our total dividend

to 6.3 pence for the year.

OUTLOOK

As described in the Q&A with our

Executive Leadership team from page 6

the Board believes that TT’s alignment

with global megatrends, our strong

customer relationships and exceptional

visibility on our order book position

us strongly for 2023. We are therefore

confident we will continue to deliver

progress.

Warren Tucker

Chairman

7 March 2023

...MARKETS

TT Electronics plc Annual Report and Accounts 2022 5

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

RICHARD TYSON, CEO

What are you most proud of in 2022?

2022 has been another year of great

progress for TT. Our positioning with

customers who are succeeding in

markets that are growing well, and our

differentiated customer service are

evidenced by our strong top line growth.

We delivered organic, constant currency

revenue growth of 20% and we also

started 2023 with excellent visibility given

a strong order book and with business

in markets providing multi-year product

revenue streams.

Our teams across the Group have

executed exceptionally well in a year

which brought with it significant

volatility and ongoing supply chain

issues characterised by lengthy lead

times, material availability issues and

cost inflation. At the same time, we

have completed our programme of site

rationalisation, with additional benefits

still to come through. I could not be

more proud of my team and how they

have delivered for their customers and

shareholders.

Here at TT we prioritise how we take

care of our teams around the world as

they face these daily challenges and,

particularly, in the last twelve months,

when we have focused additional efforts

and resource on their welfare, not just

physical but also financial through a

range of schemes. As a leadership team

we know that times are difficult, so this

has been important to us.

Our strategy is working and we continue

to unlock the potential of the Group. We

have been winning new customers and

developing relationships that are longer

term and more collaborative. We have

also progressed well on our sustainability

agenda, which has remained central to

strategic decision-making, particularly

when we consider the opportunities

presented by the move to a lower

carbonworld.

Finally, I am delighted that we completed

a buy-in of our UK pension scheme.

Seepage 25 for more information.

“I could not be more

proud of my team and

how they have executed

for customers this year.”

Richard Tyson

CEO

EXECUTIVE LEADERSHIP TEAM

Q&A

STRATEGIC REPORT | CHIEF EXECUTIVE’S Q&A

TT Electronics plc Annual Report and Accounts 2022

What is driving the growth you are

seeing?

The strategic expansion of our

capabilities into attractive, structurally

growing end markets with customers

offering partnership and market share

growth is delivering excellent results

for the Group. Our positioning in these

markets with customers that are winning

means demand for our products and

services continues at attractive levels.

The order book reflects our success on

multi-year programmes, our customers

providing more order book visibility

dueto longer lead times, and our ability

to win new work.

We have a growing list of large, blue chip

customers with whom we are gaining

further traction and are well positioned

to take a greater share of spend. Our top

40 OEM customers now account for 58%

of Group revenue. As we become more

embedded as strategic partners we

have built greater trust and deeper and

broader relationships, including more

collaboration on solution design.

Demand from our customers is robust

as this focus on building relationships

delivers a longer list of new business

opportunities and a healthy pipeline.

Weare delighted that a number of these

have been successfully converted to

50significant wins in the year which

willproduce over £125 million of multi-

year revenues, and ongoing growth and

visibility of our order book. We believe

medium-term market growth rates will

be higher than the CAGR rates we have

historically seen for the totality of our

endmarkets.

A STRONG TEAM

Our Executive Leadership Team

The Executive Leadership Team (ELT) is the principal decision-making body below the Board. We are experienced and

passionate leaders, focused on building on TT’s strong foundations to create a great company and continue to deliver value

for all our stakeholders.

1 2 3 4 5

Richard Tyson

Chief Executive Officer

Joined: 2014

Relevant skills and

experience:

Richard has an extensive

portfolio of leadership,

managerial and operational

capabilities developed

during his 30-year career

in global engineering

technology businesses.

He previously held senior

positions at Cobham plc.

See full biography

on page 78

Mark Hoad

Chief Financial Officer

Joined: 2015

Relevant skills and

experience:

Mark is a chartered

accountant and has a

deep understanding of

finance and operational

activities. He has 25 years

of experience in finance

roles in global industrial

businesses, including being

CFO at BBA Aviation plc.

See full biography

on page 78

Lynton Boardman

General Counsel and

Company Secretary

Joined: 2012

Relevant skills and

experience:

Lynton qualified as a

lawyer with Simmons &

Simmons. He was formerly

head of legal at Syngenta

Crop Protection (EMEA)

and General Counsel and

Company Secretary at

QinetiQ Group plc.

See full biography

on page 78

Michael Leahan

Chief Operating Officer

Joined: 2017

Relevant skills and

experience:

Michael has over 30 years

of experience in operational

roles in the aerospace &

defence industry including

holding senior positions at

Marotta Controls, Lucas

Aerospace and Fairchild

Controls.

Sarah Hamilton-Hanna

Chief People Officer

Joined: 2019

Relevant skills and

experience:

Sarah has spent

nearly 20 years in HR

and is experienced in

business transformation,

organisational development

and talent management.

She was formerly global

HR lead for the food and

beverage solutions division

of Tate & Lyle.

TT Electronics plc Annual Report and Accounts 2022 7

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

The success of our Business

Development Council in driving cross-

selling opportunities is also continuing

to deliver results, as an increasing

number of our customers build

relationships across more than one of

our capabilities. A great example of this

in action is Honeywell. Historically we

did business with Honeywell from our

S&SC division, but we have recently been

selected as a strategic manufacturing

partner to provide engineering support,

manufacturing and full systems

integration for Anthem – Honeywell’s

new integrated cockpit avionics suite.

TT now has around 40 customers each

delivering over £2m revenue per annum.

MICHAEL LEAHAN, COO

Can you give us your 2022 operational

performance highlights?

GMS has performed incredibly well

in 2022 with strong growth from our

existing customer base, particularly

from our healthcare and automation &

electrification end markets.

In our S&SC business we are really proud

of our growth and margin performance

which demonstrates the commercial

attractiveness of our offering and our

ability to combat input cost inflation

with price increases and efficiencies.

The current S&SC order book length

provides much improved visibility against

typical visibility of 8-12 weeks inthis

division. As you would expect, weare

closely monitoring stock levels in our

distributors to look to manage overall

consistency of demand from the broader

customer base.

Our operational performance in P&C has

been impacted by lower revenues due

to timing issues on some key aerospace

& defence programmes, as well as the

ramp up of capacity linked to our site

move from Lutterworth to Bedlington

and bringing on additional capacity in

the Minneapolis clean room. We remain

confident that this business can reach

the scale needed to get the operational

leverage benefit given the magnitude

ofrecent contract wins.

As part of the self-help programme, we

closed six sites and consolidated the

Covina site into the Torotel site at Kansas

City to create one power business in

North America. The programme moves

were completed at the back end of

2022 and the full benefits of the actions

will be realised in 2023. Our new S&SC

facility at Plano, Texas completed its

high volume product qualifications in

December 2022. This process took

longer than anticipated due to the need

to prioritise higher than anticipated levels

of customer demand and we expect to

be operating at higher and more efficient

levels of production in 2023.

We are really pleased with the Ferranti

acquisition, which has contributed well

during its first 12 months with the Group.

The operation will move to new bespoke

facilities, as planned, during 2023.

TT’s Power and Connectivity

division secured an initial multi-year

development contract with major

defence prime RBSL for Boxer, the

main UK army vehicle programme

in 2021. The contract covers two

types of high-reliability primary

power assemblies on the infantry

vehicle, with TT leading the design,

production and delivery of the battery

control units and the command

display units providing signalling

and communications functionality.

Subsequently, TT was awarded a

package of electrical cable harnesses

on the same programme.

The Boxer programme will run for

10-20 years and TT has successfully

expanded its involvement in the

vehicle to the GMS division in 2022

through a contract to design and

manufacture printed circuit board

assemblies (PCBAs).

The Boxer is a great example of

TT’sability to cross-sell opportunities

between divisions based on strong

customer relationships.

TT EXPANDS WORK ON UK ARMY VEHICLE PROGRAMME INTO GMS

Electrical cable harnesses

Battery control and

command display units

PCB Assemblies

TT Electronics plc Annual Report and Accounts 20228

STRATEGIC REPORT | CHIEF EXECUTIVE’S Q&A

What are your ambitions for the GMS

business?

In our GMS business we undertake

low-volume, high-mix manufacture of

complex electronic assemblies to our

customers’ designs and provide added

value through design for manufacture

and test capability. The business delivers

an already best-in-class margin, which

is good evidence of our move away

from commoditised manufacturing to

collaborating with customers and our

focus on growing key accounts and

moving to more complex, high-level

assemblies. The GMS margin was

around 4 per cent just five years ago.

It is now consistently around 8 per cent.

GMS historically had a customer churn

rate of 30 per cent but our increasingly

complex work, with greater engineering

content and some IP in test engineering,

has reduced this to c.10 per cent.

We aim to add further IP to achieve

greater value, for example by developing

products in P&C and manufacturing

in GMS and we want to build the

contribution from our new product pull-

through from customers attracted by our

speed to market.

This high ROCE business has been a

great engine of organic growth for TT.

We see this continuing as long lead times

and an uncertain supply chain situation

mean healthcare and aerospace &

defence customers are continuing to

commit production to us to lock in the

capacity they need forthelonger term.

Is your Voice of the Customer

programme maturing?

Since 2020 our proactive customer

feedback programme ‘Voice of the

Customer’ has made real progress

(a key aspect of which is the NPS or

Net Promoter Score). All divisional

participation scores have significantly

increased and continuous improvement

plans have been implemented where

wehave had low-scoring areas.

As you would expect, extended

lead times and supply chain issues

impacting component availability, and

tricky conversations on pricing as we

push through our cost increases, are

reflected in current customer data;

but we know through our surveys that

our communication, transparency

andcommitment is highly valued.

RICHARD TYSON, CEO

What are your thoughts on China

and repatriation of supply chains/re-

shoring capabilities?

At TT we benefit from the geographical

diversity of our footprint. This will

be particularly beneficial given the

resurgence of more localised supply

chains as some companies seek

further diversification of their supply

chains. Improved productivity will be

a fundamental enabler of this, and

companies will need to replicate capacity

in an efficient manner. This is where

the strength of our global footprint and

capabilities provides a clear opportunity

to manage the changing dynamics.

We have already implemented a natural,

de-risk strategy with our move into

Malaysia, so while the business in China

has been growing, export growth has

come out of our Malaysia facility.

Furthermore, our North American

manufacturing facilities and innovation

speed are differentiators and are

expected to drive further growth as a

result of geopolitical concerns.

How are you managing to stay ahead

of cost inflation, particularly given the

longevity of the order book?

We continuously review our pricing to

ensure we recover the inflationary cost

increases we are experiencing, though

there is inevitably a lag in some areas

of the business. We estimate that we

experienced circa £40 million of cost

inflation in 2022, which we have fully

recovered and with inflation being an

ongoing dynamic, so is the process of

pricing and price recovery.

We are mindful that order books in parts

of the business now extend into 2024

and have sought to price in estimated

cost inflation, including for energy and

labour inflation for 2023.

Are you still on track for double digit

margins?

We are confident of achieving our

10 percent Group operating margin

milestone as we see a gradual reversal

of the pass-through revenue impact on

margin will eliminate inefficiencies and

deliver operational leverage on growth.

Our S&SC business contributes mid-

teens margins as our teams become

even more commercially smart to get

the best value for our technology.

GMS has made incredible progress in

delivering a step change in its margin

profile over recent years, reflecting

thevalue of the service we bring to

ourcustomers, reliability, and the value

engineering and testing capability we

offer. We believe the GMS margin can

improve incrementally with growth.

In P&C we operate slightly more

fragmented, smaller facilities that are

set up for higher volumes, including for

the anticipated recovery in commercial

aerospace. The drop in its revenues has

therefore impacted margins here more

noticeably, but with growth we should

see strong recovery.

How resilient are your end markets in

these tougher economic conditions?

We have deliberately driven TT’s end

market exposure towards markets

exhibiting supportive, structural growth

trends. Our primary focus areas for

growth and investment are healthcare,

aerospace & defence, and automation

& electrification. In these markets we

provide components for products that

address resource scarcity, improve

energy efficiency, support renewables

and drive productivity, connectivity

andhealth.

Historically, our S&SC business has been

the first to see the impact of tougher

economic conditions. However, given

order book visibility significantly ahead

of the typical 8-12 week lead time, should

market conditions soften we would have

time to take appropriate action.

TT Electronics plc Annual Report and Accounts 2022 9

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

In healthcare markets, there is an

ongoing need to do more with less, and

market forecasts suggest double digit

growth driven by medical technology

innovation for procedures such as

electromagnetic tracking for surgery, and

for kidney, liver and lung procedures. Our

sensors and coil winding products are

key to this technology.

In defence markets we are yet to see

commitments by various governments

in response to the increasing geopolitical

tensions flow through into programme

spend. Defence spend is typically lumpy

and currently more reflective of pull-

through of product in replenishment

orders relating to Ukraine. Commercial

aerospace markets are now starting to

recover.

Ultimately, we believe there are strong

underlying structural growth drivers in

our end markets and, coupled with the

visibility in our order book, this gives us

confidence that in the near term they will

be resilient and in the medium term we

will likely see good growth. That said, we

are not complacent and continue to be

mindful of risks, with our teams keeping

a close watch on key indicators. There

ismore detail on our end markets on

page 14.

MARK HOAD, CFO

What is the cash flow generation

potential of the Group?

TT is a cash generative business, but

leverage is temporarily at the top end

of our range, reflecting the investment

in inventory we have made to execute

our order book and support our high

revenue growth. Longer lead times have

impacted us; we have bought material or

components and we are then holding for

longer, waiting for other parts to arrive to

complete products. We would never have

been able to deliver the growth levels we

have in the past 12 months without this

investment in inventory.

Our leverage position also reflects the

three acquisitions we have completed

over the last two years as we have

successfully deployed capital to

add technology and market reach in

aerospace & defence and the £22.7m

spend on our self-help programme. We

continue to monitor an active pipeline of

opportunities while we focus on free cash

flow generation and leverage reduction to

generate capacity for further M&A.

Our specific actions are driving cashflow

improvement and we are confident in our

trajectory. This was evident in improved

cash generation in the second half

of2022.

As we look into 2023, we expect to

see free cash flow generation improve

materially. Cash spend on the self-help

programme is complete and there will

be no pension payments (historically

running at c.£6m per annum) due to

thebuy-in. Over the next couple of years

we expect to see a steady unwind of

inventory positions as supply chains

start to ease.

Following several years of prototype

development and supply chain

support, TT has been selected as a

strategic manufacturing partner to

support multiple line replaceable units

(LRUs) that comprise the Honeywell

Anthem avionics suite.

Unveiled to the public in late 2021,

the Honeywell Anthem flight deck is

the industry’s first cloud-connected

cockpit system. Anthem is powered

by a flexible software platform that

can be customised for virtually

every type of aircraft, including

large passenger and cargo planes,

business jets, helicopters, general

aviation aircraft, and the rapidly

emerging class of advanced air-

mobility (AAM) vehicles.

TT will be providing engineering

support, manufacturing, and full

systems integration for this next-

generation avionics program over

thenext 12 years.

TT TO PROVIDE GLOBAL MANUFACTURING SOLUTIONS FOR NEXT-GENERATION AVIONICS PROGRAMME

• Distributed processing

module (DPM)

• 8-port switch module

• Remote digital audio unit

(RDAU)

• Surveillance radio (TXD)

• Multi-mode digital radio

(MMDR)

Pilot interface display unit (PIDU)

Touch display unit (TDU)

TT Electronics plc Annual Report and Accounts 202210

STRATEGIC REPORT | CHIEF EXECUTIVE’S Q&A

What are the details of the pension

buy-in?

After many years of improving the

funding position of our UK pension

scheme, we were able to complete a

buy-in with Legal & General for the entire

scheme, removing all related risk for

the Group and our shareholders at no

further cost to TT. This has given us an

immediate £6 million benefit to our free

cash flow in 2022 and an equivalent

annual improvement going forwards.

Importantly, the deal secures the pension

benefits of the circa 5,000 current and

former employees and their dependants.

SARAH HAMILTON-HANNA,

CHIEF PEOPLE OFFICER

People are clearly important to TT.

What are your key achievements

in2022?

We are focused on attracting and

retaining people who are talented and

can contribute to our success and

who share our values. Looking after

our people is critical and we, of course,

focus on safety, talent and leadership

development and providing interesting

work and strong career paths. 2022 has

also been a year where we have really

progressed our welfare and wellbeing,

and diversity and inclusion agendas for

employees. Financial welfare has been

a particular focus as the cost of living

crisis has impacted individuals. We have

asked a lot of our employees this year

– they have risen to the challenge and

it has been our job to take care of them

in return. We are proud of the help and

support we have been able to give.

Our devolved business model allows

our individual sites to tailor their People

approach with support from the centre.

This means that our teams on the

ground have been able to provide a wide

range of support targeted towards local

needs. Support for mental and physical

health ranges from the provision of

medical services onsite to community

efforts that combine fundraising with

mental health awareness. Read more

inthe People section on page 38.

The need for equality and fairness at

work is a given. Going beyond this, we

consider diversity and inclusion to be a

solution to business challenges rather

than a nice-to-have. If our employees feel

confident and happy at work then they

give their best, and if we listen to diverse

viewpoints we get to solutions quicker.

Our sites know this and get involved in

a wide range of awareness and support

efforts over and above what we provide

from the centre. I am particularly proud

of our efforts to celebrate women and

support female talent to grow their

careers at TT.

What progress have you made on your

carbon reduction plans?

We were delighted to hit our near term

carbon reduction target a year early,

having delivered a 54% reduction in our

Scope 1 & 2 emissions this year vs 2019.

All of our sites have contributed to this

outcome through site-specific plans to

reduce energy use. In addition, we saw

a significant benefit from our move to

a new state-of-the-art manufacturing

facility in Texas and a significant change

in grid emissions data in Mexico as

that country decarbonises electricity

supplies. 45% of our global electricity

consumption is now from renewable

sources, up from zero in 2019.

We have also made great progress on

Scope 3 emissions. Having analysed

all categories, we have put in place

preliminary systems and processes to

collect data on our six most significant

and meaningful categories so that we

can report this data in the future and

determine a route to Net Zero. This has

been a significant piece of work for us.

We recognise that we have work to do

in2023 on our TCFD disclosures.

Other environmental focus areas include

reducing single-use plastics and waste

to landfill. Read more on these in the

Environment section on page 50.

RICHARD TYSON, CEO

What are your priorities as you look

into 2023?

Our top priority is the execution of the

order book to deliver on the growth we

currently see in all of our end markets.

There is an opportunity for margin

improvement across all of our divisions,

although we expect that technical

headwinds to margin, given the pass-

through costs, will persist in our GMS

business through 2023.

With the self-help programme moves

now complete, we will ensure we reap

the rewards of site rationalisation. In

2022 we worked through site closures,

moving production lines, printers and

furnaces to new facilities and achieving

component and product qualifications.

Our priority in 2023 will therefore be

to see stability in our operations, drive

efficiency and growth while realising

the remaining benefits of the self help

programme.

We will continue to focus on our safety

performance and developing and

supporting our people. After making

significant progress in 2022, we are

committed to further reducing our Scope

1 & 2 emissions and will begin to collect

data on six Scope 3 categories.

TT can continue to deliver strong organic

growth from its existing footprint and we

are therefore focused on improving our

ROIC and continuing to reduce leverage.

While conscious of the wider economic

environment, I believe we are well

positioned to deliver further growth

in2023 and improved margin and cash

performance.

TT Electronics plc Annual Report and Accounts 2022 11

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

OUR BUSINESS MODEL

CREATING WINNING

SOLUTIONS

We do the

right thing

We bring out the

best in each other

We achieve

more together

We champion

expertise

We get the job

done… well

OUR ASSETS

Engineering and manufacturing capability

− We have deep domain knowledge in our markets

and years of experience.

− We have a particular skill in product design and

manufacture to make customers’ end products

smaller, lighter and more energy efficient.

− We specialise in low-volume and high-mix products,

enabling us to offer the customisation and flexibility

our customers require.

− Our global footprint enables us to serve customers

around the world.

Research and development

− We have R&D capability around the world with IP

and specialist product development skills.

− Our agile development model enables us to bring

new products to market quickly.

− We have the know-how and experience to comply

with complex regulatory approvals.

Access to our customers

− We have excellent customer credibility,

oftenworking in partnership with customers over

many years.

− We seek out customers who value what we do and

with whom we can work long term to add value.

− We have a business development organisation that

fosters inter-Group collaboration and cross-selling.

People and culture

− Our people are talented designers, engineers and

manufacturing experts passionate about what they do.

− Our teams are caring, supportive and service-driven.

− Behaviour is shaped by the TT Way values which

guide how we work with each other and our

stakeholders.

WHAT MAKES US DIFFERENT

Four key themes differentiate us from

competitors, and we are focused on

extending this differentiation:

Cleaner, smarter, healthier

Our target markets of healthcare,

aerospace & defence, and automation

& electrification have strong long-term

structural growth potential. This growth

is supported by megatrends pushing for

the development of cleaner, smarter and

healthier products and applications as we

move towards a more sustainable world.

Culture of expertise

Our teams are passionate about finding

solutions to the world’s toughest

technology challenges and delivering

forcustomers. We champion knowledge,

skills, innovation, problem solving

and service in four key areas: power,

connectivity, sensing, and manufacturing

and engineering. We set out to attract,

promote and retain the best, diverse,

talented people and we are focused

on developing expertise at all levels of

theorganisation.

Design-led technology

We design and manufacture bespoke

technology solutions for specific customer

applications, creating one-off solutions;

customising and packaging products;

and creating modular platforms built

for customisation. We work from initial

concept to production at scale, and from

single component to complete device

manufacture. We seek single source and

designed-in development opportunities

that enable us to move up the value chain

and create long-term revenue streams.

Real partners

Our success has been built on engaging

deeply with our customers and becoming

real partners. Customer intimacy enables

us to leverage our capabilities to respond

to their unique requirements and become a

critical contributor to their teams and their

products. We retain a flexible approach

that enables us to support customers as

and when they need us.

TT Electronics plc Annual Report and Accounts 202212

STRATEGIC REPORT | OUR BUSINESS MODEL

THE VALUE WE CREATE

Customers and suppliers

− We help our customers succeed

by providing critical products

and services and solving tough

technologychallenges.

− £81.3 million investment in R&D

since2015.

− We treat our suppliers fairly in line

withour TT Way values.

Our people

− Employee safety and wellbeing

(physical, mental and financial) is

atthetop of our agenda.

− We invest in our people to grow

theirskills and experience and create

new opportunities.

− We view equality, diversity and

inclusion (ED&I) as a positive business

driver and we are committed to

creating a work environment where

everyone can be themselves every day.

Environment and our communities

− Our solutions contribute to cleaner,

smarter and healthier products.

− 54% reduction in Scope 1 & 2

emissions in three years.

− Targeting Net Zero Scope 1 & 2

emissions by 2035.

− We are committed to social

responsibility and ethical business

practices.

− We have a fundraising culture and

support our teams to undertake

STEM educational outreach in their

communities.

Shareholders

− 18.2p adjusted earnings per share.

− Increased ROIC by 140bps to 10.5%

− Medium-term target of double-

digit annual adjusted earnings per

sharegrowth.

− 6.3p dividend per share.

Read more about our strategy on page 20

MARGIN ENHANCEMENT

through portfolio change,

operational leverage and

self-help actions

TECHNOLOGY AND

CAPITAL INVESTMENT

SUPPORTING R&D

and new programmes to drive

growth and consolidate

customer positions

TARGETED AND

COMPLEMENTARY M&A

to expand technology

capabilities and customer

and market reach

INTEGRATION OF ESG

and sustainability matters

into decision-making and

business practices, from product

development torecruitment

OUR

STRATEGIC

PRIORITIES

We are a business with high-quality assets and a

differentiated market offer, aligned with key global

megatrends. We are creating value by helping our

customers to succeed in growing markets, inventing

products that support sustainability and that are

more sustainable themselves, investing in and

creating opportunities for our people, and doing

business responsibly.

OUR STRATEGY

Our strategy is designed to leverage our assets and differentiators to

generate optimum returns for all our stakeholders while maintaining

strong capital discipline, a focus on cash generation, and careful use

ofthe balance sheet to facilitate continued investment in the quality

ofour assets and TT’s exposure to long-term growth markets.

TT Electronics plc Annual Report and Accounts 2022 13

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

diagnostics, monitoring and surgical

products. COVID placed a renewed

emphasis on the importance of the

biotech and pharma industries and we

therefore continue to expect favourable

shifts in product mix towards high-

value, high-margin devices suited to

our capabilities. These dynamics are

supported by continued increases in life

expectancy, with the world’s population

of over 60s expected to double by 2050.

Our response

The pandemic created an opportunity

to demonstrate to customers the extent

of TT’s agility by maintaining quality

standards while rapidly and flexibly

scaling production of urgently needed

products. We continue to capitalise on

that positive momentum. Our strategy

has been tailored to bolster our technical

expertise and capability in areas which

OEMs find most complex to navigate,

such as where significant engineering

precision is required, or there are

constraints due to regulatory compliance.

We are continuing to expand our

involvement in life sciences and

laboratory equipment, supporting

new ultra-low temperature freezers

and gaining momentum in automated

sample storage systems as well as

surgical devices, medical implants and

diagnostics. In line with our purpose,

we are energised by the tangible

contributions we can make to health and

quality of life in society. By supporting our

life sciences partners, we are collectively

improving laboratory automation

systems and enabling samples to be

collected and analysed with minimal

human intervention, the benefits of which

are improved data reliability and accuracy,

less waste, and time-efficient results.

TT sensors attached to surgical

instruments provide real-time positioning

and orientation information and we are a

market leader in the smallest EMmicro-

Public health is vital to the smooth

functioning of society. Efforts to improve

healthcare infrastructure continue to

intensify globally, with wellness and

longevity a top priority for consumers.

These forces serve to accelerate the

pace of innovation within the healthcare

ecosystem. Electronics play a central

role in advancing progress of medical

technology.

Our power, connectivity and sensor

technologies span the modern

surgical suite, from patient monitoring

and therapeutic devices to surgical

navigation, diagnostic equipment and

life sciences. Our products also help

deliver therapy directly to patients

during minimally invasive procedures,

through implantable devices, such

as pacemakers and defibrillators.

Implantables are now also competing

with pharmaceutical solutions for issues

like hypertension and sleep apnoea and

support other external applications that

require high-reliability power and sensor-

enabled communication.

Market trends and drivers

The global medical device manufacturing

market is expected to have grown by

around 5% in 2022. The healthcare

market has a relatively inelastic demand

profile, such that there will be an

ongoing need for medical procedures

and monitoring regardless of recession

or pandemic. The medium- and long-

term outlook for the global medical

device manufacturing market is equally

optimistic, with an expected CAGR of

6-8% to 2026.

Notable drivers include the growing

importance of digitalisation, the rising

disease burden of an ageing and

growing population and increasing

patient awareness. We are well placed

to capitalise on increasing demand for

high-complexity products driven by

technological advancement such as

OUR MARKETS: WINNING SOLUTIONS IN

HEALTHCARE

CONTRIBUTION TO GROUP

28%

of Group revenue

MARKET REVENUE BY DIVISION

11% – Power and Connectivity

88% – Global Manufacturing Solutions

1% – Sensors and Specialist Components

We provide design and manufacturing solutions for a range

ofdiagnostic, surgical and direct patient care devices critical

totheidentification, treatment and prevention of disease.

coil sensors for these applications.

By supporting the development of

smaller, lighter and more precise surgical

devices, we are enabling reduced size

of incisions, shortened recovery times,

and improving overall patient outcomes.

Our resistors team is working with major

OEMs to provide non-contact Hall-effect

sensors, optical switches and optical

arrays that can detect the presence of

objects, fluidlevels and position sensing

as well.Our sensors are incorporated in

products that promote earlier detection

of disease and better monitoring of

cancer, cardiac, neurological and

musculoskeletal disorders.

While there is emphasis on addressing

supply chain challenges across

the Group, the urgency of ensuring

healthcare products are delivered in

a timely manner is critical and we are

proactively working with customers to

mitigate global shortages and extend

visibility into future demand. We are able

to leverage our global manufacturing

footprint to mitigate local issues and can

innovate to provide quicker solutions.

We believe that enhanced dialogue and

continued performance under adversity

has deepened our relationships with key

healthcare and life science customers.

TT Electronics plc Annual Report and Accounts 202214

STRATEGIC REPORT | OUR MARKETS

TT ELECTRONICS IN ACTION

Direct patient care and

monitoring

− Patient monitoring equipment,

including remote applications

− Anaesthesia machines

− Surgical lighting

− Cardiopulmonary perfusion

equipment

− Ventilators and defibrillators

− Fluid monitoring

− Wearable technologies

Advanced interventional and

surgical devices

− Surgical navigation technology for

ablation and resection procedures

− Implantable pacemakers and

defibrillators

− Neuromodulators

− Implant programmers and chargers

− Ventricular assist systems

− Robotic assisted surgery

Innovative diagnostic and

imaging

− Ultrasound, X-ray and MRI

machines

− Radiotherapy equipment for cancer

treatment

− Sensor-enabled diagnostic devices

Laboratory and life sciences

− Therapeutic drug monitoring

− Gene sequencing

− Immuno-assay

− Pill counting and dispensing

− Portable hemodialysis systems

− Scientific instrumentation

WHAT WE DO

Our power, connectivity and

sensor technologies span

the modern surgical suite;

from patient monitoring

and therapeutic devices

to surgical navigation,

diagnostic equipment

andlifesciences.

Our products help deliver

therapy directly to patients

during minimally invasive

procedures, as well as in

implantable devices and

other external applications

that require high-reliability

power and sensor-enabled

communication.

TECHNOLOGY

SHAPING THE FUTURE

OF HEALTHCARE

EXPECTED MARKET GROWTH

6-8

Healthcare market 2022-26 CAGR

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT

TT Electronics plc Annual Report and Accounts 2022 15

ADDITIONAL INFORMATION

research predicts that this growth will

continue to accelerate over the next 2-3

years as we get back to pre-pandemic

levels. Air traffic is forecast to reach

97%of 2019 levels by the end of 2023,

but demand for small- and medium-

sized aircraft is not expected to recover

to pre-COVID levels until 2024-5. We

areplanning for a strong civil aerospace

recovery in the next two to four years,

driven primarily by narrowbody aircraft

deliveries, of at least double-digit

CAGRgrowth.

Fundamentally, the need for safer, more

efficient and more environmentally

friendly aircraft remains. This drives

demand for increasingly advanced

electronic systems and applications, and

supports our capabilities. We anticipate

further tailwinds given a growing, global

middle-class population who exhibit

greater propensity to travel.

Our response

In commercial aerospace we are

focused on supporting increasing

electronic content of aircraft. In the

near term, this means opportunities lie

in helping customers with the adoption

ofhybrid models, mid-life electrification

initiatives and electronics updates.

Presently, we are growing capabilities in

electrical power conversion and related

sub-systems. We are collaborating

with aerospace companies in the

development of high efficiency, high

power density converters as well as

technologies for the next generation

of higher voltage platforms. Recently,

we completed qualification on a Power

Supply unit for the Digital Flight Control

System (DFCS) on the Dassault Falcon

6X aircraft, and we are now working on

the equivalent unit for a new programme.

Our ultimate ambition is in broadening

our position as a supplier of choice in

Market trends and drivers

In 2022 the global defence electronics

manufacturing market is expected to

have expanded by around 3%. This is a

pace reflective of the past seven years, all

of which have seen consistent, moderate

expansion, as governments invest to

maintain state-of-the-art capabilities.

With Russia’s invasion of Ukraine, it is

likely that there will be a pickup in growth

from here, with estimates suggesting an

additional $2trillion of defence spending

over the next decade, and a $1 trillion

investment in R&D, mostly in the US

and Europe. Despite recessionary fears,

heightened geopolitical tensions mean

forecasts for growth in the defence

market of c.5% per annum are possible –

higher than the CAGR of 3-4% we have

previously cited.

A central long-term growth driver is

the desire of governments to maintain

capabilities. In the US, investment in

R&D and long-term projects such as

the fifth generation F-35 Joint Strike

Fighter and the B21 are driving growth.

The US Department of Defense budget

is set to increase by 14% to $817 billion

in 2023 and it is expected that the global

defence budget will continue to grow

despite inflationary pressures, record

high deficits and fiscal consolidation.

Weremain optimistic that our exposure

to the defence market will provide

growing, high-margin business for

decades to come. Recently, we were

awarded a contract from long-term

partner Honeywell Aerospace to support

the design of a new power supply for

next-generation inertial navigation units.

Throughout 2022 the commercial

aerospace market has shown steady

recovery from pandemic levels with the

gradual alleviation of travel restrictions

and release of pent-up demand. Industry

the increasing electrification of aircraft

and aircraft systems. As technology

progresses, we believe that we are

well positioned to support customers

throughout this transition.

In defence, we are focused on next

generation requirements for high-

density power electronics and electrical

machines through the development

of technologies that reduce size,

weight, power and cost (SWaP-C),

while simultaneously enhancing

command, control, communications,

computing, intelligence, surveillance and

reconnaissance (C4ISR) capabilities. We

have recently found success in providing

more integrated, design-led solutions.

Inthese products we have demonstrated

greater capacity to deliver SWAP-C

improvements, and this is resonating

with customers. A recent example is the

delivery of a significant increase in the

power density of DC-DC converters for

a major prime. We expect this to drive

favourable shifts in our product mix

moving forward.

OUR MARKETS: WINNING SOLUTIONS IN

AEROSPACE

& DEFENCE

CONTRIBUTION TO GROUP

of Group revenue

We provide solutions for high-reliability applications across a

broad range of platforms operating on land, air and sea. Growth

for TT is driven by increasing electrification of these platforms,

which supports fuel efficiency and safety.

MARKET REVENUE BY DIVISION

67% – Power and Connectivity

27% – Global Manufacturing Solutions

6% – Sensors and Specialist Components

TT Electronics plc Annual Report and Accounts 202216

STRATEGIC REPORT | OUR MARKETS

PERFORMANCE-

ENHANCING SOLUTIONS

FOR SAFE FLIGHT

EXPECTED MARKET GROWTH

4-5

Aerospace & defence market

2022-26 CAGR

TT ELECTRONICS IN ACTION

Cockpit avionics and

flightcontrols

− Avionics and display units

− Flight controls

− Landing gear

− Joystick controls

− Wing de-icing

Precision guidance and

defensive aids systems

− Laser targeting and inertial

navigation systems

− Precision guidance systems

− Radar jammers

Engine controls and

fuelsystems

− Engine control units

− Fuel distribution systems

− Engine ice protection

− Auxiliary power units

Communication, navigation

andradar systems

− Global positioning systems (GPS)

− Radar systems

− Communications, navigation and

identification

Aircraft interiors

− Passenger Control Units

− Cabin signage

− Mood and ambient lighting

WHAT WE DO

From cockpit displays to

engine controls and defence

systems, our solutions

optimise performance and

reliability in the harshest and

most demanding conditions,

while our interior solutions

enhance the passenger

experience.

Our products provide size,

weight and efficiency

benefits for applications

such as power conversion,

actuation and control for

mission-critical systems

on a broad range of

military and commercial

platformsglobally.

TT Electronics plc Annual Report and Accounts 2022 17

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

powering industrial systems is a key

imperative for organisations looking

to reduce their carbon footprints.

Additionally, the increasing digitisation

of industrial processes and proliferation

of connected devices in areas such

as smart infrastructure, robotics and

automation is promoting improved

energy management, efficiency and

reliability. As many of our products are

enabling devices, the demand profile is

highly attractive. This is reflected in the

market outlook, with a CAGR of 5-6%

expected to 2026.

Our response

We are continuing to invest in

developing capabilities which exemplify

our low-volume, high-mix approach

to address the needs of high-end

industrial and connectivity markets.

Within automation, we are focusing

on products which will enable the full

potential of innovation in this space.

Irrespective of the final form industrial

processes take, we are positioning our

business to become embedded within

the fabric of this technology transition.

Industrial automation and infrastructure

is a major portion of the Sensors &

Specialist Components division serving

market leaders like Schneider, Siemens,

Rockwell Automation and Delta

Electronics. Our focus is to provide niche

and application-specific components

that make our customers’ applications

safer, greener and smarter.

A key area is enhancing our

optoelectronic sensors offering.

TT sensor products improve the

connectivity of manufacturing

operations, promoting access to

information throughout supply chains

and supporting the collection of quality

real-time data. Within electrification, our

priority is to develop capabilities which

support increasing energy efficiency

andconnectivity. Core focus areas

include complex systems integrations

and AC and DC power conversion

technologies. We are increasingly able

todevelop complete, high-value products

and durable components featuring

higher voltage throughput. These are

supporting our customers by improving

legacy designs and enhancing their

ability to meet complex, high-bandwidth

requirements

Automation & electrification markets

continue to show encouraging signs

ofrecovery from the disruption caused

by the pandemic, and we support the

increased demand for digitalisation

through design and manufacture of

connectivity solutions. Given the wide

scope of these markets, performance

correlates strongly with global economic

growth, with key indicators being GDP

growth and the Purchasing Managers’

Index (PMI), but the digitisation

and proliferation of electronics and

electrification means markets will

growfaster than these indicators.

Market trends and drivers

The electronics manufacturing market

is estimated to have grown by over

10% globally in 2022. Our positioning in

sub-segments such as electrification

and industrial automation are good

contributors to growth. Furthermore,

the increasing trend to the re-shoring

of manufacturing capability, or moves

to regions with less expensive labour,

will increase the demand for Artificial

Intelligence, Augmented Reality, the

Internet of Things, and other aspects of

digitalisation. We see the key drivers of

IoT connectivity being cost efficiency,

better supply chain insight, smart

buildings, fleet management, smart

manufacturing and inventory tracking,

and monitoring and diagnostics, and

believe these structural growth drivers

are aligned with our capabilities.

A key force underpinning growth

in automation & electrification

markets is an increasing focus on

sustainability. With the backdrop

of increasingly stringent regulation

to reduce environmental impacts

across supply chains, sustainability

is a significant positive trend. Shifting

towards electricity as the major fuel

OUR MARKETS: WINNING SOLUTIONS IN

AUTOMATION &

ELECTRIFICATION

CONTRIBUTION TO GROUP

of Group revenue

Customers rely on us to help solve their toughest automation

and electrification challenges; streamlining their supply chains,

increasing their efficiency, and helping them bring smart, new

products to market.

MARKET REVENUE BY DIVISION

24% – Power and Connectivity

61% – Global Manufacturing Solutions

15% – Sensors and Specialist

Components

TT Electronics plc Annual Report and Accounts 202218

STRATEGIC REPORT | OUR MARKETS

EMPOWERING SMART

INFRASTRUCTURE TO

STREAMLINE PROCESSES

AND IMPROVE LIVES

EXPECTED MARKET GROWTH

5-6

Automation & electrification

market 2022-26 CAGR

WHAT WE DO

From clean energy and smart

home applications to more

efficient factory equipment

and connected asset

tracking, our technologies

enable the Internet of Things

(IoT) and innovations that

are creating a smarter and

cleaner world.

TT ELECTRONICS IN ACTION

Factory automation and

electrification

− Industrial robotics and automation

equipment

− Power monitoring

− Industrial safety and security

controls

− Smart packaging and labelling

equipment

− Electric vehicle inverter technology

Clean energy and smart cities

− Renewable energy generation and

smart grid metering

− Power management and energy

control systems

− Water and wastewater

measurement and monitoring

− Smart lighting, security systems

and fire detection

− Secure access and safety controls

− Energy-efficient home appliances

Smart infrastructure and

industrial connectivity

− Transportation communication

systems

− Railway signalling systems and

temperature control

− Rolling stock power systems

− Asset tracking and inventory

management systems

− Communication and cloud service

connectivity

− Electric vehicles and charging

stations

TT Electronics plc Annual Report and Accounts 2022 19

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

OUR STRA TEGY

BUILDING STRENGTH

TECHNOLOGY AND CAPITAL

INVESTMENT SUPPORTING R&D

and new programmes to drive growth and

consolidate customer positions

TARGETED AND

COMPLEMENTARY M&A

to expand technology capabilities and

customer and market reach

INTEGRATION OF ESG

and sustainability matters into decision-

making and business practices, from

product development to recruitment

MARGIN ENHANCEMENT

through portfolio change, operational

leverage and self-help actions

OUR

STRATEGIC

PRIORITIES

STRATEGIC PRIORITY 2022 ACHIEVEMENTS 2023 ACTIONS

Technology and capital investment

supporting R&D and new programmes

to drive growth and consolidate

customer positions

We prioritise organic investment in the

business, including R&D to maintain and

drive our differentiation in the market and

our offer to customers. R&D is critical if

we are to stay ahead of customer needs

and continue to meet the challenges

theyset us.

– £22.7 million investment in technology

and capital to support higher-growth,

innovative and sustainable products.

R&D investment at 3.7% of revenue.

– 50 significant contract awards and

very strong growth from 40 largest

keyaccounts.

– Collaboration with a world leader in

aircraft electrical systems on power

supplies for electric and hybrid electric

aircraft.

– Enabling the expansion of the use

of electromagnetic tracking for new

medical procedures through TT

sensor technology.

– Investment in clean rooms at

Minneapolis and Bedlington to

consolidate customer positions in

healthcare and defence.

– The culmination of several years of

prototype development resulted in

our selection as one of two strategic

manufacturing partners to support

theHoneywell Anthem avionics suite.

– Continue to focus on investment

in new product initiatives and

development to build pipeline and

enable customers to meet their

sustainability agendas.

– Maintain target level of c.5% R&D

investment in the P&C and S&SC

businesses.

– Continue support for life science

partners on laboratory automation

andefficiency.

– Ongoing development of products

supporting smaller, lighter and more

precise surgical devices and surgical

navigation.

– Capital investment to support growth

opportunity in new programmes and

products across all divisions.

AND CREATING VALUE

Our strategy is designed to leverage

our assets and differentiators to

generate optimum returns for all

our stakeholders while maintaining

strong capital discipline, a focus on

cash generation, and careful use

of the balance sheet to facilitate

continued investment in the quality of

our assets and growing our exposure

to long-term growth markets.

TT Electronics plc Annual Report and Accounts 202220

STRATEGIC REPORT | OUR STRATEGY

OUR STRA TEGY

BUILDING STRENGTH

STRATEGIC PRIORITY 2022 ACHIEVEMENTS 2023 ACTIONS

Margin enhancement through portfolio

change, operational leverage and

self-help actions

We are focused on activities which

will enable the Group to consistently

achieve double-digit operating margins

in the medium term. This has included

increasing the proportion of higher-

margin products in the portfolio,

drop-through from organic revenue

growth, and restructuring and footprint

rationalisation.

– Completion of self-help programme,

including completing Covina business

integration into Torotel.

– New Plano facility completed final

product qualifications.

– Continued supply chain management

and inventory investment to mitigate

supply chain challenges and ensure

pass on of costs.

– Re-pricing of contracts and pass-

through.

– Deliver final cost savings from the self-

help programme; expected annual run

rate of £13-14m by the end of 2023.

– Operational improvements to achieve

efficiencies, whether through an

easing of the supply chain, an end

toself-help (portfolio rationalisation)

orautomation improvements.

– Ongoing management and

collaboration with customers on

costheadwinds.

– Identify further automation and

efficiency improvement activities

through Group operations team.

– Ramp up production through Plano

and within new clean rooms at

Minneapolis and Bedlington.

Targeted and complementary M&A

toexpand technology capabilities

andcustomer and market reach

We seek to maintain an M&A pipeline

tobuild scale, expand our capabilities to

increase our exposure to market sectors

with high growth potential and higher

margins, and enhance value.

– Successfully completed the

acquisition and integration of the

Ferranti Power and Control business.

– Maintained pipeline of M&A

opportunities.

– Continue to reduce financial

leverage to create capacity for M&A

opportunities.

– Organic investment opportunities

totake market share and support

ourgrowing customer base.

– Complete relocation of the Ferranti

business to a new flagship Power

Solutions facility.

– Continue to monitor pipeline of M&A

opportunities.

Integration of ESG and sustainability

matters into decision-making and

business practices, from product

development to recruitment

We are well positioned to benefit from

and support sustainability megatrends.

Our products address resource scarcity,

improve energy efficiency, support

renewables and drive productivity,

connectivity and health. We aim to

produce them more sustainably with

a focus on ethical sourcing practices

and the work we are doing to reduce

the impact of our operations on the

environment.

We maintain a strong governance

framework and processes across

the organisation and seek to have a

wider positive impact on society by

understanding and prioritising employee

needs, doing business responsibly and

reaching out to our local communities.

– Continued focus on building out

technology and product opportunities

that support energy transition and zero

carbon global goals.

– Significant efforts to support health

and wellbeing (physical, mental and

financial) of employees.

– Salary increases and support

payments targeted towards lower

paid employees. Launched UK salary

finance programme.

– Inaugural Women’s Leadership

Programme.

– Deployed 15 global health, safety and

environmental minimum standards.

– Achieved Scope 1 & 2 emissions

reduction target vs 2019 a year early.

– 45% of electricity now from renewable

sources.

– Significant progress on assessment

ofScope 3 emissions.

– Continue to focus on developing

technology and product opportunities

that support energy transition and zero

carbon global goals.

– Deployment of employee wellbeing

framework to all sites.

– Divisional and site leadership teams

required to identify one important

equality, diversity and inclusion (ED&I)

objective to work towards for the year.

– Continue to pursue onsite solar

projects where appropriate and

possible.

– Formalise Scope 3 measurement

and build infrastructure to collect

meaningful data and enable target

setting.

– Undertake climate risk and

opportunities scenario analysis.

TT Electronics plc Annual Report and Accounts 2022 21

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

CFO REVIEW

STRONG

PROGRESS

OVERVIEW

Revenue for the year was £617.0 million.

This was 22 per cent higher than the

prior year at constant currency and

20per cent higher on an organic basis,

witha significant acceleration of growth

in the second half of the year. Adjusted

operating profit increased by 35 per

cent and by 19 per cent on a constant

currency basis compared to 2021,

reflecting the benefits of volume growth

and our self-help programme. A much

improved second half performance was

in part driven by the expected recovery

in our P&C division. The business

performance in GMS was ahead of

expectations and S&SC produced

outstanding results over the year.

We continue to experience supply chain

challenges with extended lead times,

component shortages and notable cost

inflation. Through our collaboration with

customers, our investment in inventory

and our actions to source some

components on an expedited basis,

organic revenue growth accelerated

to 31% in the second half of 2022. We

estimate that cost inflation in the year

amounted to circa £40 million. This was

fully recovered by re-pricing our offerings

and working collaboratively with our

customers. Of the increase circa £28

million was cost pass-through. This

relates to materials where there has

been very significant cost inflation which

is being transparently passed on to

customers with no margin mark-up. Even

excluding these pass-through revenues,

organic growth was still an excellent

14per cent.

“There has been exceptionally

strong order intake across the

Group, reflecting underlying

growth in our markets and

new customer wins, as well as

customers committing earlier

to secure capacity and give us

greater visibility.”

Mark Hoad,

Chief Financial Officer

There has been exceptionally strong

order intake across the Group, reflecting

underlying growth in our markets

and new customer wins, as well as

customers committing earlier to secure

capacity and give us greater visibility.

Customer demand remains robust,

but we are vigilant to any changes in

demand. Order intake for 2022 was

118per cent of revenues, which we grew

20per cent organically. We secured over

50 significant contract wins that will

deliver over £125 million of multi-year

revenues. Our collaborative approach to

deliver solutions based on our technical

expertise has been a key factor in

winning new orders. We are focused on

leveraging expertise across the Group

to pursue cross-selling opportunities

and deepening our relationships with

our top customers. Much of this effort is

led by the GMS division which is integral

to converting these opportunities and

increasingly showcases the capabilities

of the P&C division.

Adjusted operating profit was £47.1

million, 19 per cent higher than the prior

year at constant currency. The adjusted

operating margin was 7.6 per cent.

Excluding zero margin pass-through

revenues, adjusted operating margin was

8.1 per cent. After the impact of adjusting

items, including restructuring, pension,

acquisition and disposal costs, and

non-cash asset impairment, the Group’s

full year statutory operating loss was

£3.4 million. The non-cash impairment

of £23.1 million is shown within the

Power and Connectivity division and is

linked to an increase in discount rates,

coupled with revised forecasts for the

Connectivity business in the context of

a weaker macro-economic environment

and the impact of the evolution of

the COVID pandemic on the potential

demand for COVID testing. Cashflow

impacting adjusting items totalled

£11.1million.

Adjusted EPS increased to 18.2 pence

(2021: 14.5 pence) reflecting the

improved adjusted operating profit in the

period. Basic earnings per share was a

loss of 7.5 pence (2021: profit 7.3 pence).

The increase in adjusted operating profit

was more than offset by the increase in

non-cash adjusting items.

During the year we completed the cash

spend on our self-help programme to

support margin improvement. We also

invested in inventory to support our

high levels of growth, our increased

customer order book and supply chain

constraints on certain component parts.

Cash conversion of 33 per cent (2021:

65 per cent) reflected this investment

and included a working capital outflow

totalling £38.8 million. The working

capital outflow was mainly a result

of investment in inventory to support

the significant growth in order intake.

This was exacerbated by material cost

inflation and high value pass-through

materials secured with customer

agreement. We had anticipated a modest

improvement in the second half, but

this was adversely impacted by higher

than anticipated receivables due to the

exceptionally strong organic revenue

growth as well as a small number of

larger value receivables which arrived

post year-end.

In 2022 we completed the buy-in of our

UK defined benefit pension scheme. This

buy-in secures pension benefits for circa

5,000 members and their dependents.

The Scheme’s circa £360 million

of liabilities are now matched by an

insurance policy, and TT no longer bears

any investment, longevity, interest rate

orinflation risk in respect of the scheme.

There was a benefit to the Group’s 2022

free cash flow of £6 million and there

is an equivalent annual improvement

to free cash flow in future years. On a

statutory basis, cash flow from operating

activity was £12.7 million (2021: £14.3

million). There was a free cash outflow

of£13.1 million (2021: £1.3 million

outflow). Dividend payments totalled

£10.2 million (2021: £11.4 million). We

ended the year with net debt of £138.4

million (2021: £102.5 million), including

IFRS 16 lease liabilities of £23.1 million

(2021: £22.6 million).

At 31 December 2022 leverage was

2.0 times (2021: 1.7 times), within the

Board’s target leverage range of 1-2

times, and down 0.4 times from June

2022, as anticipated. We are confident

this downward trajectory will continue

as EBITDA increases and as we deliver

a material step-up in free cash flow

in2023.

Our return on invested capital was 10.5

per cent in 2022, increasing by 140 basis

points due to the growth in adjusted

operating profit, even with the additional

investment in working capital.

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022

£million (unless otherwise stated)

Adjusted results

Statutory results

2022 2021 Change

Change

constant FX 2022 2021

Revenue 617.0 476.2 30% 22% 617.0 476.2

Operating profit/(loss) 47.1 34.8 35% 19% (3.4) 19.3

Operating profit margin 7.6% 7.3% 30bps (20)bps (0.6)% 4.1%

Profit/(loss) before taxation 40.4 31.5 29% 13% (10.1) 16.0

Earnings/(loss) per share 18.2p 14.5p 26% 11% (7.5)p 7.3p

Return on invested capital 10.5% 9.1%

Cash conversion 33% 65%

Free cash flow

(13.1) (1.3)

Net debt

138.4 102.5

Leverage

1.98x 1.74x

Dividend per share 6.3p 5.6p

1 Throughout the Annual Report we refer to a number of Alternative Performance Measures which have been adopted by the Directors to provide further information on underlying

trends and the performance and position of the Group. Details of these APMs and a reconciliation to statutory measures can be found on pages 220 to 226.

TT Electronics plc Annual Report and Accounts 2022 23

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

FINANCIAL REVIEW

Revenue

Group revenue was £617.0 million (2021:

£476.2 million). This included a £7.9

million contribution from acquisitions

and currency translation benefit of £31.5

million. Group revenue was 22 per cent

higher than the prior year at constant

currency and 20 per cent higher on an

organic basis. Excluding the zero margin

pass-through revenues, organic growth

was still 14 per cent, split approximately

11 per cent volume growth and 3 per

cent pricing. Sales volumes across our

key markets have been buoyant and

the strength of our order book, and the

pipeline of new business opportunities,

gives us confidence that growth will

continue. Our order book reached record

levels in the second half of 2022.

Operating profit and margin

The Group’s adjusted operating profit

was £47.1 million (2021: £34.8 million)

and statutory operating loss was £(3.4)

million (2021: £19.3 million profit) after a

charge for items excluded from adjusted

operating profit of £50.5 million (2021:

£15.5 million) including:

– Restructuring and other costs of £20.2

million (2021: £7.8 million) comprising:

• Restructuring costs of £6.4 million

(2021: £8.1 million) including £2.7

million relating to the restructure

of the North America Resistors

business (including pre-production

costs at our new Plano facility),

£2.0million relating to the closure of

our Lutterworth site, and £1.7 million

relating to relocation of production

facilities in the USA, as part of our

self-help programme; and

• Pension costs of £13.8 million

(2021: £0.3 million credit) relating

to pension projects which included

£11.8 million non-cash settlement

costs for the enhanced transfer value

exercise and £2.0 million of cash

costs associated with this exercise

and the scheme buy-in project.

– Acquisition and disposal costs

totalled £7.2 million (2021: £7.7 million)

comprising £1.2 million (2021: £2.6

million) of integration and acquisition

costs relating primarily to the Ferranti

acquisition, which completed

early in 2022. Amortisation of

intangible assets arising on business

combinations was £6.0 million (2021:

£5.1 million).

– Non-cash impairment costs totalled

£23.1 million (2021: £nil) being an

impairment in respect of the IoT

Technology Products business,

including £5.4 million of assets

associated with the Virolens project.

This impairment is shown within the

Power and Connectivity division and is

linked to an increase in discount rates,

coupled with revised forecasts for the

business in the context of a weaker

macro-economic environment and

impact of the evolution of the COVID

pandemic on the potential demand

forCOVID testing.

The adjusted operating margin of 7.6

per cent (2021: 7.3 per cent) reflects

the benefits of growth and our self-help

programme. We successfully offset

increases in input costs through price

increases.

Finance costs and taxation

The net finance cost was £6.7 million

(2021: £3.3 million) with the increase

being mainly due to a combination of

higher base rates and higher drawn debt

levels. The Group’s overall tax charge was

£3.1 million (2021: £3.2 million), including

a £5.3 million credit (2021: £3.0million

credit) on items excluded from adjusted

profit. The adjusted tax charge was £8.4

million (2021: £6.2 million), resulting in

an effective adjusted tax rate of 20.8 per

cent (2021: 19.6 per cent).

Earnings per share

Adjusted EPS increased to 18.2 pence

(2021: 14.5 pence), reflecting the

improved adjusted operating profit in the

period. Basic earnings per share (EPS)

was a loss of 7.5 pence (2021: profit

7.3 pence). The increase in adjusted

operating profit was more than offset by

the increase in non-cash adjusting items

set out above.

Cashflow

Adjusted operating cash inflow after

capex was £15.7 million (2021: £22.7

million inflow). Improved profitability was

more than offset by a working capital

outflow of £38.8 million (2021: £14.7

million outflow), including a £40.4 million

investment in inventory to support the

strong order book and impacted by

supply chain constraints. Capital and

development expenditure of £14.0 million

(2021: £16.8 million) reflected investment

to support growth and as part of the

self-help programme. This resulted in

adjusted operating cash conversion of

33 per cent (2021: 65 per cent). On a

statutory basis, cash flow from operating

activity was £12.7 million (2021: £14.3

million).

There was a free cash outflow of

£13.1million (2021: outflow £1.3 million),

net of £11.1 million of restructuring

and acquisition related costs (2021:

£5.9 million), relating to the self-help

programme and acquisition costs

associated with the Ferranti acquisition.

There were no pension contribution

payments in the year (2021: £5.5 million)

due to the buy-in of the UK scheme as

detailed below.

Investments in acquisitions totalled

£8.3million (2021: £0.5 million) relating

to the Ferranti Power and Control

acquisition in January 2022. Dividend

payments totalled £10.2 million (2021:

£11.4 million).

TT Electronics plc Annual Report and Accounts 202224

STRATEGIC REPORT | CFO REVIEW

Net debt

At 31 December 2022 the Group’s net

debt was £138.4 million (31 December

2021: £102.5 million). Included within net

debt was £23.1 million of lease liabilities

(31 December 2021: £22.6 million).

Pension buy-in

In November 2022, the Trustee of the

TT Electronics Pension Scheme (the

“Scheme”) purchased a bulk annuity

insurance policy from Legal & General

Assurance Society Limited, covering all

liabilities required to pay all future defined

benefit pensions for the Scheme’s

circa 5,000 members and any eligible

dependents. The purchase of this

insurance policy was the successful

culmination of extensive work over the

last few years by TT and the Scheme

Trustees. The insurance policy was

purchased using existing assets held

within the Scheme, without the need for

TT to make any additional contributions.

TT is not required to make any future

contributions into the Scheme regarding

defined benefit liabilities and the buy-in

delivers greater security to the Scheme’s

members. The Scheme’s circa £360

million of liabilities are now matched by

the insurance policy, and TT no longer

bears any investment, longevity, interest

rate or inflation risk in respect ofthe

Scheme. There was an immediate

benefit to the Group’s current year cash

flow of £6 million in 2022 and there is

anequivalent annual improvement to

free cash flow in future years.

Outlook

2022 was a year of strong operational

and financial progress. We delivered

excellent top line growth for the Group

aswe executed on our record order

book, which reflected a significant

number of new customer wins,

incremental business opportunities

withexisting customers, and market

share gains. Our teams across the

Group have performed exceptionally

wellin a year characterised by significant

volatility, ongoing supply chain issues

and cost inflation. At the same time, we

have completed our programme of site

rationalisation and finalised the buy-in

ofour UK pension scheme.

TT is well-aligned with global

megatrends, driving demand from high

growth markets. While we are mindful

of the wider macro environment, we

enter 2023 with good momentum

underpinned by a strong order book.

This unprecedented visibility, coupled

with further benefits of our self-help

programme mean we are confident in our

ability to deliver further progress in 2023.

CASHFLOW, NET DEBT AND LEVERAGE

£ million 2022 2021

Adjusted operating profit 47.1 34.8

Depreciation and amortisation 16.1 16.1

Impairment of intangibles – –

Net capital expenditure

(11.7) (14.9)

Capitalised development expenditure (2.3) (1.9)

Working capital (38.8) (14.7)

Other 5.3 3.3

Adjusted operating cash flow after capex. 15.7 22.7

Adjusted operating cash conversion 33% 65%

Net interest and tax (13.4) (8.7)

Lease payments (4.3) (3.9)

Restructuring, acquisition and disposal related costs

(11.1) (5.9)

Retirement benefit schemes – (5.5)

Free cash flow (13.1) (1.3)

Dividends (10.2) (11.4)

Lease payments 4.3 3.9

Equity issued/acquired 0.4 1.4

Acquisitions & disposals

(8.3) (0.5)

Other (3.0) (0.5)

Increase in net debt (29.9) (8.4)

Opening net debt (102.5) (83.9)

New, acquired, modified and surrendered leases (2.3) (10.8)

Borrowings acquired (0.2) –

FX and other (3.5) 0.6

Closing net debt (138.4) (102.5)

1 In 2021 Restructuring, acquisition and disposal related costs comprised proceeds on surplus property disposals of £9.1 million.

TT Electronics plc Annual Report and Accounts 2022 25

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

CFO REVIEW CONTINUED

POWER AND

CONNECTIVITY

Adjusted operating profit increased by

£0.1 million to £7.9 million (2021: £7.8

million). Included within this was a profit

contribution of £1.9 million from the

Ferranti acquisition and there was a

£0.9million foreign exchange benefit. The

organic reduction in operating profit was

mainly driven by reduced revenues and

site inefficiencies including the impact

of COVID disruptions in the first half.

The operating profit contribution from

the division stepped up materially from

£2.1 million in the first half to £5.8 million

in the second half as anticipated. The

adjusted operating margin was 5.1per

cent (2021: 5.6 per cent) for the full year

and 6.8 per cent in the second half.

Order intake has been good in the year,

running well ahead of revenues, giving

us confidence of a return to growth in

2023 which will support further margin

improvement. With the consolidation

of activities into the Kansas City site,

following the closure of the Covina

site, combined with the transfer of

activity from Lutterworth to Bedlington

now completed, we are well placed

to benefitfrom these operational

efficiencies in2023.

OVERVIEW

Revenue increased by £14.0

million to £154.2 million

(2021: £140.2 million) and

includes a £7.9 million revenue

contribution from Ferranti

Power & Control which we

acquired in January 2022 and a

currency benefit of £7.2 million.

Organic revenue was 1 per

cent lower dampened by the

timing of programme revenues,

the closure of the Akron, Ohio

facility and the transfer of

activity from Lutterworth to

Bedlington.

REVENUE BREAKDOWN

Revenue by market (%)

13% – Healthcare

40% – Aerospace & defence

35% – Automation & electrification

12% – Distribution sales channel

Revenue by geography (%)

34% – UK

39% – North America

14% – Rest of Europe

13% – Asia/ROW

of Group revenue

Primary locations

1,612

Employees

FINANCIAL HIGHLIGHTS

2022 2021 Change

Change

constant fx

Revenue £154.2m £140.2m 10% 5%

Adjusted operating profit

£7.9m £7.8m 1% (9)%

Adjusted operating

profit margin

5.1% 5.6% (50)bps (80)bps

1 Adjusting items are not allocated to divisions for reporting purposes. For further discussion of these items please

refer to Note 7.

TT Electronics plc Annual Report and Accounts 202226

STRATEGIC REPORT | CFO REVIEW

There have been some notable contract

awards during the year, including:

– We were awarded a contract from

long-term partner Honeywell

Aerospace to support the design of a

new power supply for next-generation

inertial navigation units. This

partnership highlights TT’s market

responsiveness, innovation and

long-standing expertise in demanding

defence and military applications.

– Our work on the Boxer programme (the

main UK army vehicle programme)

has expanded with significant

additional contracts wins. Following on

from the power electronics assembly

contract and the subsequent award

for the design and development of

electrical cable harness systems for

the Challenger 3 upgrade project, we

have recently cross sold our expertise

into GMS. We are already contracted

to provide complex, high-reliability

power electronics assemblies to

the Boxer vehicles and will lead the

design, production and delivery of

the battery control units enabling

increased efficiency of the vehicle

power management system as well as

the command display units providing

signalling and communications

functionality on every Boxer vehicle.

– Recent significant advances have

allowed electromagnetic tracking to

become an emerging technology of

choice for new clinical applications.

This adoption is leading to an upsurge

in related procedure volume. Working

with a new customer, a medical

equipment manufacturer, on its

electromagnetic (EM) tracking system,

which incorporates TT’s EM micro-coil

sensors, we have taken the system

from prototype to full launch and

this tracking system is now used for

diagnosing certain cancers.

– Environmental innovation from

ZapCarbon in combination with

our electronics technology and

IoT powered monitoring expertise

brought to the mass market the

Healthy Homes Sensor. This sensor is

designed for use in social housing as

a means to combat fuel poverty and

unhealthy living conditions. Our battery

operated, cellular connected sensor

can detect unsafe humidity conditions

long before mould occurs thus

improving the health for occupants

of social housing and preventing the

need for costly remediation work.

In January 2022 we completed the

£8.3million acquisition of Ferranti

Power and Control, based in Greater

Manchester, which designs and

manufactures mission-critical complex

power and control sub-assemblies for

blue chip customers in high-reliability

and high-performance end markets,

primarily aerospace and defence. One of

the principal benefits of the acquisition

is that it brings the skills to provide

full-service capabilities from design,

assembly, manufacturing, and testing

including environmental stress screening

and inspection through to service.

Ferranti adds further technology

capability, IP and scale to our Power

business. It brings valuable long-term

customer relationships and programmes

with leading global aerospace, defence

and industrial OEMs operating in highly

regulated markets with significant

barriers to entry through necessary

industry accreditations and customer

approvals.

Ferranti is a mid-teens operating

margin business, and in this, our first

year of ownership, the acquisition has

generated a return on invested capital in

excess of the Group’s WACC. We expect

to generate cost synergies of circa

£0.4million by year three.

TT Electronics plc Annual Report and Accounts 2022 27

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

CFO REVIEW CONTINUED

GLOBAL

MANUFACTURING

SOLUTIONS

There was strong growth in all

geographic regions. Pass-through

revenue was around £32 million which

has created a technical head wind to

margin progression. Excluding this pass-

through revenue the operating margin

was 8.7 per cent.

This division has again performed

incredibly well in 2022, as momentum

built reflecting the targeted move

towards customers who are winners

in their own markets and provide

opportunity to grow share of wallet.

Work on positioning GMS as a partner to

customers to win long-term incremental

business is reflected in our order book

growth. The addition of GMS capability

to the Kuantan site in Malaysia, back

in 2020, has added value through the

expansion of our high-level assembly

capabilities to a variety of key customers.

of Group revenue

Primary locations

1,550

Employees

REVENUE BREAKDOWN

Revenue by market (%)

47% – Healthcare

8% – Aerospace & defence

43% – Automation & electrification

2% – Distribution sales channel

Revenue by geography (%)

21% – UK

38% – North America

15% – Rest of Europe

26% – Asia/ROW

FINANCIAL HIGHLIGHTS

2022 2021 Change

Change

constant fx

Revenue £323.0m £220.1m 47% 37%

Adjusted operating profit

£25.2m £18.3m 38% 23%

Adjusted operating

profit margin

7.8% 8.3% (50)bps (90)bps

1 Adjusting items are not allocated to divisions for reporting purposes. For further discussion of these items please

refer to Note 7.

OVERVIEW

Revenue increased by £102.9

million to £323.0 million (2021:

£220.1 million) including a

currency benefit of £15.4

million, with organic revenue

37 per cent higher. The organic

revenue performance reflects

strong growth from our existing

customer base, particularly

from our healthcare and

automation & electrification end

markets.

TT Electronics plc Annual Report and Accounts 202228

STRATEGIC REPORT | CFO REVIEW

The division’s planned revenues for 2023

are fully covered for 2023 and it has

started to secure revenue for 2024.

Given the significant increase in revenues

in 2022, GMS will make incremental

capital investment in 2023 to enhance

capacity in existing facilities.

Adjusted operating profit increased by

£6.9 million to £25.2 million (2021: £18.3

million), including a £2.2 million foreign

exchange benefit. The constant currency

increase reflects operational leverage on

the organic growth and the full recovery

of inflationary costs. The adjusted

operating profit margin was 7.8 per cent

(2021: 8.3 per cent), impacted by the

pass-through revenues, without which

margins would have been 8.7 per cent.

The order book growth has been

underpinned by several multi-million-

pound wins, a number of which extend

beyond 12 months. We continue to

see that our power customers require

manufacturing capability and so our

GMS and P&C divisions are partnering to

provide this solution. Packages secured

on the Boxer programme illustrate how

we are able to expand our involvement

in a programme from initial work within

Power and Connectivity to providing

PCBAs through GMS. We continue to

improve our understanding of how to

leverage these opportunities from the

customer perspective.

In late December, TT was delighted

to receive an award for best-in-class

performance as one of AMI’s top

performing suppliers for outstanding

technical and operational achievements

in areas including quality, service, lead

time, delivery, cost and responsiveness.

We believe this award reinforces our

reputation as a trusted partner across

multiple geographies.

Overall, the GMS division is in excellent

shape, the order pipeline is stronger

than ever, and our enhanced customer

relationships and business development

initiatives are delivering revenue and

order book growth. GMS has achieved

a step change in its margin profile over

recent years, reflecting the value of

the service we bring to our customers,

reliability, and the value engineering and

testing capability we offer. We believe

GMS margins can improve incrementally

with growth.

In 2022, a key component of the revenue

and order book growth reflected large,

ongoing programmes with our blue-chip

customers in healthcare and automation,

in addition, there have been a number of

significant new customer awards which

will impact future years. Some examples

include:

– TT has been awarded a substantial

five year agreement with a leading

systems integrator in commercial

aerospace worth circa £50 million,

for the manufacture of complex

electronic assemblies for aircraft

braking systems. This award further

strengthens our longstanding

collaboration with this customer and

reflects its confidence in our expertise

in demanding military and aerospace

applications.

– Following several years of prototype

development and supply chain support,

TT has been selected as a strategic

manufacturing partner to support

multiple line replaceable units (LRUs)

that comprise the Honeywell Anthem

avionics suite. Unveiled in late 2021,

the Honeywell Anthem flight deck is

the industry’s first cloud-connected

cockpit system. Anthem is powered by

a flexible software platform that can

be customised for virtually every type

of aircraft, including large passenger

and cargo planes, business jets,

helicopters, general aviation aircraft

and the rapidly emerging class of

advanced air-mobility (AAM) vehicles.

TT will be providing engineering

support, manufacturing, and full

systems integration for this next-

generation avionics programme over

the next 12 years.

– 2022 saw strong revenue growth

on a number of new projects for a

world-leading life sciences customer.

These included high level assemblies

for a Gas Chromatography Mass

Spectrometer. Such machines are

used in spectrometry elemental

isotope analysis to understand

the chemistry and composition of

materials and healthcare and life

sciences. Other key projects with this

customer include a DNA sequencer

and high-end analytical instruments

for radiation detection.

TT Electronics plc Annual Report and Accounts 2022 29

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

CFO REVIEW CONTINUED

SENSORS AND

SPECIALIST

COMPONENTS

This business is in the sweet spot of

enabling our customers to reach their

sustainability goals with components

forsmart energy & city infrastructure and

factory automation.

Historically, order visibility has been very

limited, but more recently the order book

has increased significantly reflecting

strong underlying demand and also

customers committing orders further

ahead to protect their supply chains

and responding to lead time extensions.

We have been careful to adjust our

commercial terms, where possible,

toorders that are non-cancellable,

non-refundable and in some cases,

non-reschedulable.

Adjusted operating profit increased by

£5.4 million to £21.8 million (2021: £16.4

million) with a currency benefit of £1.7

million. The constant currency operating

profit growth reflects the benefits of our

of Group revenue

Primary locations

1,809

Employees

REVENUE BREAKDOWN

Revenue by market (%)

1% – Healthcare

4% – Aerospace & defence

24% – Automation & electrification

71% – Distribution sales channel

Revenue by geography (%)

7% – UK

37% – North America

26% – Rest of Europe

30% – Asia/ROW

FINANCIAL HIGHLIGHTS

2022 2021 Change

Change

constant fx

Revenue £139.8m £115.9m 21% 12%

Adjusted operating profit

£21.8m £16.4m 33% 20%

Adjusted operating

profit margin

15.6% 14.2% 140bps 110bps

1 Adjusting items are not allocated to divisions for reporting purposes. For further discussion of these items please

refer to Note 7.

OVERVIEW

Revenue increased by

£23.9million to £139.8 million

(2021: £115.9 million) including

a currency benefit of £8.9

million. Organic revenue

was 12 per cent higher, with

stronggrowth through the

division’s distribution partners

akey driver.

TT Electronics plc Annual Report and Accounts 202230

STRATEGIC REPORT | CFO REVIEW

self-help programme and the strong

operational leverage on our revenue

growth. We have benefited from our

agility in adapting our pricing strategies

to offset material and freight cost

increases.

At our new facility in Plano, Texas we

have invested in capacity and having

substantially completed qualification, are

now improving yields which is enabling

volumes to be produced at higher rates.

We are very focused on improving our

customer experience.

There were a number of favourable

developments during the year which

willbenefit the business, including:

– We secured repeat business with a

major US defence prime, for a sole

source, opto isolator used on power-

up boards installed as safety critical,

precision navigational aids, for guided

defence systems for a major defence

customer

– The US team secured two different

optical sensor opportunities with a

medical device company, for use in

a blood analyser. These sensors are

used in the disposable test vessel

cartridges designed for the Werfen

GEM 5000 blood gas analyser. The

sensors are critical to detect the

proper loading of the cartridge as its

alignment with the analyser optics, for

spectral measurements, is essential

for proper execution of the test.

– Schneider Electric – We secured

a contract to provide a thick-film

resistor that met the high-reliability

requirements of a Schneider Gas-

insulated switchboard utilised

in electricity distribution. The

end customer for this product is

France’s main electricity distribution

companywhich supplies 95 per cent

of the market.

TT Electronics plc Annual Report and Accounts 2022 31

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

CFO REVIEW CONTINUED

DIVIDEND POLICY AND DIVIDEND

The Board has a progressive dividend

policy, which primarily takes into account

adjusted earnings cover, but also sees

beyond this to take into account other

factors such as the expected underlying

growth of the business, its capital and

other investment requirements, and its

pension obligations. The Group’s balance

sheet position and its ability to generate

cash are also considered.

The Board considers these factors in the

context of the Group’s Principal risks,

which are set out on pages 69 to 72, and

the overall risk profile of the Group.

The Group’s ability to pay a dividend is

impacted by the distributable reserves

available in the parent Company, which

operates as a holding company, primarily

deriving its net income from dividends

paid by its subsidiary companies. At 31

December 2022, TT Electronics plc had

£202.8 million (2021: £251.2 million) of

distributable reserves, sufficient to pay

dividends for the foreseeable future.

Theparent Company Balance Sheet

isset out on page 209.

Given our strong trading performance

in2022 and the positive outlook for 2023

and beyond, the Board is proposing a

final dividend of 4.3 pence per share.

Thetotal cash cost of this dividend will

be approximately £7.6 million. This, when

combined with the interim dividend of 2.0

pence per share gives an increase of 13

per cent in the total dividend to 6.3 pence

(2021: 5.6 pence per share). Payment

of the dividend will be made on 26 May

2023, to shareholders on theregister at

28 April 2023.

PENSIONS

In November 2022, the Trustee of the

TT Electronics Pension Scheme (the

“Scheme”) purchased a bulk annuity

insurance policy from Legal and General

Assurance Society Limited, covering all

liabilities required to pay all future defined

benefit pensions for the Scheme’s

circa 5,000 members and any eligible

dependents.

The Group has one significant defined

benefit scheme in the UK and some

much smaller defined benefit schemes

in the US. All the Group’s defined benefit

schemes are closed to new members

and to future accrual.

In November 2022, the TT Group

Scheme entered into a bulk annuity

insurance contract with an insurer in

respect of the liabilities of the defined

benefit scheme. This type of deal is also

known as a ‘buy-in’. The insurer, Legal &

General, will pay into the scheme cash

matching the benefits due to members.

This investment decision reduces

the risks in the scheme and provides

additional security for the benefits due

tothe members.

The total net accounting surplus under

the Group’s defined benefit pension

schemes was £28.4 million (2021: £74.5

million). The main driver of the decrease

was the remeasurement loss following

the buy-in of the UK scheme’s assets

and the completion of an exercise

whereby deferred members were offered

an enhanced transfer value (ETV)

option. The effect of the ETV exercise

was recognition of a £11.8 million

settlementcost.

Net accounting pension surplus

Prior to the buy-in, the TT Group scheme

exposed the Group to a number of

actuarial risks such as longevity risk,

currency risk, inflation risk, interest rate

risk and market (investment) risk. The

buy-in mitigates the majority of these

risks and the principal risk remaining

isthe credit risk associated with Legal

& General, which is assessed to be

verylow.

The assets and liabilities of the Group’s

UK defined benefit schemes are

summarised below, together with the

Group pension surplus:

£million 2022 2021

Fair value of assets 396.8 651.9

Liabilities 368.4 577.4

UK scheme (surplus) 31.3 78.4

Overseas schemes (deficit) (2.9) (3.9)

Total Group surplus 28.4 74.5

The next triennial valuation of the

TTGroup scheme, as at April 2022, is

expected to be completed by July 2023

and will take account of the new buy-in

policy held by the Trustee.

Further details of the Group’s defined

benefit schemes are in Note 22 on

page 196 of the Consolidated Financial

Statements.

FINANCIAL RISK MANAGEMENT

ANDTREASURY POLICIES

The Group’s Treasury activities are

managed centrally by the Group

Treasury Function, which reports to the

Chief Financial Officer. The Treasury

Function operates within written policies

and delegation levels that have been

approved by the Board.

The Group’s main financial risks relate

to funding and liquidity, interest rate

fluctuations and currency exposures.

The overall policy objective is to use

financial instruments to manage financial

risks arising from underlying business

activities and therefore the Group does

not undertake speculative transactions

for which there is no underlying

financial exposure. The Group manages

transactional foreign exchange positions

by hedging a minimum of 75 per cent

ofexpected net cash flow exposures

forthe next 12 months and 50 per cent

of expected net cash flow exposures

forthe period from 12 to 24 months.

More details of the Group’s Treasury

operations are set out in Note 21 on

page 187 of the Consolidated Financial

Statements.

FUNDING AND LIQUIDITY

The Group’s operations are funded

through a combination of retained

profits, equity and borrowings.

Borrowings are generally raised at Group

level from a group of relationship banks

and lent to operating subsidiaries. The

Group maintains sufficient available

committed borrowings to meet any

forecasted funding requirements.

TT Electronics plc Annual Report and Accounts 202232

STRATEGIC REPORT | CFO REVIEW

NET DEBT AND GEARING

At 31 December 2022 the Group’s net

debt was £138.4 million (31 December

2021: £102.5 million). Included within net

debt was £23.1 million of lease liabilities

(31 December 2021: £22.6 million).

Consistent with the Group’s borrowing

agreements, which exclude the impact

of IFRS 16 Leases, leverage ratio was

2.0 times at 31 December 2022 (31

December 2021: 1.7 times). Net interest

cover was 7.4 times (31 December 2021:

13.5 times). The Group’s debt covenants

state that the leverage ratio must not

exceed 3.0 times and that interest cover

must be more than 4.0 times.

At 31 December 2022 the Group had

available undrawn committed facilities

of£47.4 million. In addition, the Group

had available uncommitted facilities of

£41.2 million. The group’s borrowings are

in the form of a multi-currency Revolving

Credit Facility (RCF) and private

placement fixed rate loan notes (PP). The

RCF matures in June 2026 and the PP

notes, issued in December 2021, are split

between 7- and 10- year maturities with

covenants in line with our bank facility.

The Group’s leverage is usually

expressed in terms of its net debt/

adjusted EBITDA ratio. The Group’s main

financial covenants in its RCF and PP

notes states that net debt must be below

3.0 times adjusted EBITDA, and adjusted

EBITDA is required to cover interest

charges, excluding interest on pension

schemes by at least 4.0 times.

Leverage ratio

The Group’s year end leverage ratio

of2.0 times is within the Group’s target

range of 1-2 times. Under the Group’s

borrowing agreements, the figure for

net debt used in the calculation of the

net debt/adjusted EBITDA gearing ratio

calculation is translated at an average

foreign exchange rate, with IFRS 16 lease

liabilities and other IFRS 16 impacts

excluded. In addition, there are other

adjustments including the exclusion

ofcertain specified items from EBITDA.

TT’s capital allocation policy is set within

the framework of a target Group net

debt/EBITDA gearing ratio that lies within

a range of 1-2 times in current market

conditions.

A further summary of the Group’s

borrowings and maturities are set out in

Note 20 on page 186 of the Consolidated

Financial Statements.

FOREIGN CURRENCY

TRANSLATION

The following are the average and

closing rates of the foreign currencies

that have the most impact on the

translation into sterling of the Group’s

Income Statement and Balance Sheet:

£million 2022 2021

Income Statement Average rate

$/£ 1.23 1.38

RMB/£ 8.32 8.90

Balance Sheet Closing rate

$/£ 1.20 1.35

RMB/£ 8.36 8.63

Foreign exchange translation exposure

arises on the earnings of operating

companies based in the US and China,

with additional lesser exposures

elsewhere in the world.

INTEREST RATES

The Group monitors its exposure to

interest rates to bring greater stability

and certainty to its borrowing costs. The

policy is to have between 25 per cent and

75 per cent of the Group’s debt subject to

a fixed interest rate.

GOING CONCERN

See page 73 for the Going concern

statement.

TT Electronics plc Annual Report and Accounts 2022 33

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

HOW WE ARE PERFORMING

OUR KPIS

FINANCIAL

KPI DESCRIPTION AND

WHY ITISIMPORTANT

MEDIUM-

TERM

TARGET

FIVE-YEAR

PERFORMANCE

CHART

2022 PROGRESS LINK TO

STRATEGY

Organic revenue growth (%)

The percentage change in revenue from

continuing operations in the current year

compared to the prior year, excluding the

effects of currency movements, divestments

and acquisitions. This measures thelike-

for-like growth or decline ofthe business.

Sustainable organic revenue growth is

an indicator of value creation. It reflects a

combination of conditions in our markets

and our success in gaining market share

from serving our customers better.

4-6% organic

revenue

growth

annually over

the medium

term

20%

2021: 10%

Organic revenue growth

doubled to 20%, reflecting

a significant number

of new customer wins,

incremental business

withexisting customers

and continued market

share gains.

‒ TECHNOLOGY

INVESTMENT

AND R&D

2022

2021

2020

2019

2018

(12)%

10%

20%

Adjusted operating profit margin (%)

Adjusted operating profit as apercentage of

revenue. Adjusted operating profit margin is

an indicator of our ability over the longer term

to extract fair value from our products and

services, driven by a mixture of increasing

revenue and an optimised cost base.

Double-digit

margin

7.6%

2021: 7.3%

Adjusted operating

profit margin was 7.6%,

reflecting the benefits

of growth and the

self-help programme.

Excluding zero margin

pass-through revenues,

adjusted operating

marginwas8.1%.

‒ TECHNOLOGY

INVESTMENT

AND R&D

‒ MARGIN

ENHANCEMENT

2022

2021

2020

2019

2018

7.6%

7.3%

6.4%

8.0%

7.8%

Adjusted earnings

per share (pence)

The profit for the year attributable to

shareholders excluding items not included

within adjusted operating profit divided

by the weighted average number of

shares in issueduring the year. Adjusted

EPS summarises the overall financial

performance of the Group, including revenue

growth, operating margin, the cost of debt

finance, and the rate of underlying taxation.

Double-digit

adjusted

EPS growth

annually at

constant

currency over

the medium

term

18.2p

2021: 14.5p

Adjusted EPS increased

to 18.2p, reflecting the

improved adjusted

operating profit.

‒ TECHNOLOGY

INVESTMENT

AND R&D

‒ MARGIN

ENHANCEMENT

‒ TARGETED AND

COMPLEMENTARY

M&A

2022

2021

2020

2019

2018

18.2p

14.5p

11.7p

17. 8 p

16.2p

Cash conversion (%)

Adjusted operating cash flow including

capital expenditure, divided by adjusted

operating profit. Cash conversion measures

how effectively profit is converted into cash

and, within this, reflects the management of

working capital and capital expenditure. A

high level of cash conversion aids investment

in the business, enables the Group to deliver

increased returns for shareholders and

supports a strong balance sheet.

90%+ cash

conversion

annually over

the medium

term

33%

2021: 65%

Cash conversion of

33%reflected investment

in inventory to support

high levels of growth,

the increased customer

order book and supply

chain constraints on

certain component parts

(£38.8million working

capital outflow).

‒ MARGIN

ENHANCEMENT

2022

2021

2020

2019

2018

65%

33%

130%

103%

88%

Our KPIs include a number of Alternative Performance Measures (APMs) which have been adopted by the Directors to provide further information on underlying trends and the performance

and position of the Group. Details of these APMs and a reconciliation to statutory measures can be found on pages 220 to 226.

TT Electronics plc Annual Report and Accounts 202234

STRATEGIC REPORT | KEY PERFORMANCE INDICATORS

FINANCIAL

KPI DESCRIPTION AND

WHY ITISIMPORTANT

MEDIUM-

TERM

TARGET

FIVE-YEAR

PERFORMANCE

CHART

2022 PROGRESS LINK TO

STRATEGY

Return on invested capital

Adjusted operating profit for the year

divided by average invested capital for the

year. Average investedcapital excludes

pensions, provisions, tax balances, derivative

financial assets and liabilities, cashand

borrowings. Itis calculated at average rates

taking into account monthly balances.

Return on invested capital is a measure

of how efficiently the Group is utilising its

assets, relative to profitability, in generating

shareholder returns.

Exceed the

cost of holding

assets with

year-on-year

increases

10.5%

2021: 9.1%

ROIC increased by 140bps

due to the growth in

adjusted operating profit,

even with the additional

investment in working

capital.

‒ TECHNOLOGY

INVESTMENT

AND R&D

‒ MARGIN

ENHANCEMENT

‒ TARGETED AND

COMPLEMENTARY

M&A

2022

2021

2020

2019

2018

9.1%

10.5%

7.7%

10.8%

11.5%

* Excluding IFRS 16 impacts.

NON-FINANCIAL

KPI DESCRIPTION AND

WHY ITISIMPORTANT

MEDIUM-

TERM

TARGET

FIVE-YEAR

PERFORMANCE CHART

2022 PROGRESS LINK TO

STRATEGY

R&D investment as a % of sales

R&D cash investment as a percentage of

revenue. This metric excludes GMS which is

a manufacturing services business and has

no R&D. A consistent and sustainable level

of R&D investment enables us to introduce

new products that increase our revenue and

deliver on our purpose to solve technology

challenges for a sustainable world.

Maintain R&D

investment

at around

5 per cent

of revenue

annually over

the medium

term

3.7%

2021: 4.5%

R&D cash investment was

£11.0 million, representing

3.7% of aggregate revenue

of the product businesses.

Total investment in

technology and capital

to support new product

growth was £22.7 million.

‒ TECHNOLOGY

INVESTMENT

AND R&D

2022

2021

2020

2019

2018

4.5%

3.7%

4.8%

5.1%

Safety performance (number of

three-day lost-time incidents)

The number of workplace health and

safety incidents that resulted in employees,

contractors or visitors needing to be off

work for three days or more. The number

of incidents measures how well we are

executing on our commitment to raise safety

standards globally and protect our people

onour journey to zero harm.

Year-on-year

reduction in

incidents,

ultimately

leading to

zeroharm

2021: 5

2022

2021

2020

2019

2018

Safety performance

improved significantly,

reflecting our continued

focus on global safety

standards and procedures

which included the

implementation of 15

global HSE standards

during the year.

‒ INTEGRATION

OFESG

Employee engagement score

Results from a Best Companies Ltd third-

party survey which gathers anonymous

employee feedback and scores against eight

success factors. Having engaged employees

is crucial to attracting and maintaining the

talent we need to execute our strategy.

Survey-

on-survey

increase in

the Group’s

engagement

scoreover the

medium term

2021: 718.5

Interim pulse surveys

2022

2021

2020

2019

2018

718.5

694.8

678.8

* No employee engagement survey

was undertaken in 2019 or 2022

We undertake an

employee engagement

survey every 12-18

months. We did not

undertake a survey in

2022.

‒ INTEGRATION

OFESG

Scope 1 & 2 emissions

Total amount of carbon dioxide equivalent

tonnes (tCO

e) of Scope 1 & 2 emissions

from operations. Details of thecalculation

method are set out on page 54. Reducing our

Scope 1 & 2 emissions is a critical part

of reducing our environmental footprint.

Annual

reductions

vs our 2019

baseline.

50% reduction

by2023 vs

2019 and Net

Zero by 2035

54%

reduction since

2019

2022

2021

2020

2019

26,657

20,875

15,740

12,166

Data available from 2019 only.

We made excellent

headway on Scope 1 &

2 emissions, hitting our

reduction target a year

early. Primary drivers of

the 23% fall during the

year were the transfer

to Plano, site energy

reduction initiatives and

Mexico grid emissions.

‒ INTEGRATION

OFESG

TT Electronics plc Annual Report and Accounts 2022 35

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

STAKEHOLDER

OUR ACTIVITIES THAT

AFFECT THEM

HOW WE ENGAGE AT

BOARD LEVEL

HOW WE ENGAGE ACROSS

THE GROUP

HOW WE DELIVERED

ON FEEDBACK THIS YEAR

Engagement with our

stakeholders is key to the long-

term success of our business.

We use the knowledge and

feedback gained from our

stakeholders to push our

business forward and respond

to key requirements and

challenges in the industries

inwhich we operate.

The Board fully understands its role

in this process and regularly reviews

the Group’s key stakeholders and

the impacts our activities have on

these groups. The Board encourages

open and purposeful engagement so

that they can use clear and honest

feedback to assist in their decision-

making processes. The nature of Board

meetings allows information about

our stakeholders to flow from the

workforce, through commercial teams

and senior management to the Board

and back down the organisational

structure. TheBoard also actively seeks

feedback from external advisers to help

form its strategic decisions.

This section shows how the Board

engages with stakeholders. More

information on the Board’s approach to

S172 can be found on page 63, which

sets out examples of decisions taken

by the Board on priority strategic topics

in 2022.

CUSTOMERS

AND SUPPLIERS

– R&D and new product introduction

– Products, including those supporting

environmental sustainability

– Operations and production pipeline

– Safety, environmental quality control

and reliability

– Legal and regulatory compliance

– Payment practices/prompt payment

– Inventory management

– Responsible business practices

– Supply chain management

– Modern slavery review

– CEO and Board regularly receive

reports from divisions and internal

Councils on key customer and

supplier initiatives.

– The Board reviews and approves

payment times and practices.

– The Board reviews and approves

responsible business practices

andtargets.

– Discussions with customers on

funding of working capital

– Day-to-day contact on supply

chain, products and service.

– R&D partnerships.

– Collaboration across divisions to

meet customer needs including

through our Business Development

and Supply ChainCouncils.

– Voice of the Customer formal

feedback.

– Supplier assessments.

– Continued focus on cleaner, smarter and

healthier solutions.

– New product launches and new contract

wins including Honeywell (see page 10).

– Continued review of Voice of the Customer

programme (seepage 9).

– Acquisition of Ferranti Power and Control.

– Longer-term collaborative relationships.

– Monitoring of supplier payment times,

global supply chain, inventory management

and export risks.

EMPLOYEES

– Culture and purpose

– TT Way values and conducting

business with integrity

– Safety and wellbeing

– Employee Assistance Programme

– Training and development

– Group employment policies

– Engagement activities

– ED&I

– Environmental sustainability

– Pensions

– Oversight of Group culture.

– HSE updates at each Board

meeting.

– Board , CEO, CFO & ELT site visits.

– CEO and SID are members of the

PSEE Committee.

– Employee engagement

– Oversight of ED&I roadmap.

– Support for Employee Assistance

Programme

– Employee forums on Executive

Remuneration

– Approval of environmental

sustainability targets.

– Specific focus on pensions and

RCF initiatives.

Read more on page 38

– Various Board/NED visits to TT sites in

US/UK.

– Leadership development workshops.

– Driving new ED&I strategy at Group and

sitelevel.

– Mindfulness and wellbeing activities.

– Investment in sales and business

development capability.

– Ambitious environmental sustainability

targets.

– Board diversity policy to complement

theGroup policy.

– Changes to site footprint.

– Pension buy-in transaction.

INVESTORS

– Financial performance

– Leadership

– Governance and transparency

– Sustainability/ESG

– Reputation

– Communication

– Pensions buy-in

– RCF extension

– Regular report to the Board on

investor views including ESG.

– Committee Chair consultations/

Chairman engagement

– Remuneration consultation

activities (see page 101).

– Results, Annual Report and AGM

Read more on page 38

– Ambitious environmental sustainability

targets.

– Implementation of global reporting tool

foremissions across all sites.

– Continued focus on cleaner, smarter

andhealthier solutions.

– New product launches that support

efficiency and sustainability.

– Site switches to renewable energy.

– Driving ED&I strategy at Board, Group and

site level.

– Deployment of HSE minimum standards

forauditing across TT sites.

– InTTernship, graduate programme

andapprentices.

ENGAGING WITH OUR

STAKEHOLDERS

TT Electronics plc Annual Report and Accounts 202236

STRATEGIC REPORT | STAKEHOLDER ENGAGEMENT

STAKEHOLDER

OUR ACTIVITIES THAT

AFFECT THEM

HOW WE ENGAGE AT

BOARD LEVEL

HOW WE ENGAGE ACROSS

THE GROUP

HOW WE DELIVERED

ON FEEDBACK THIS YEAR

Engagement with our

stakeholders is key to the long-

term success of our business.

We use the knowledge and

feedback gained from our

stakeholders to push our

business forward and respond

to key requirements and

challenges in the industries

inwhich we operate.

The Board fully understands its role

in this process and regularly reviews

the Group’s key stakeholders and

the impacts our activities have on

these groups. The Board encourages

open and purposeful engagement so

that they can use clear and honest

feedback to assist in their decision-

making processes. The nature of Board

meetings allows information about

our stakeholders to flow from the

workforce, through commercial teams

and senior management to the Board

and back down the organisational

structure. TheBoard also actively seeks

feedback from external advisers to help

form its strategic decisions.

This section shows how the Board

engages with stakeholders. More

information on the Board’s approach to

S172 can be found on page 63, which

sets out examples of decisions taken

by the Board on priority strategic topics

in 2022.

CUSTOMERS

AND SUPPLIERS

– R&D and new product introduction

– Products, including those supporting

environmental sustainability

– Operations and production pipeline

– Safety, environmental quality control

and reliability

– Legal and regulatory compliance

– Payment practices/prompt payment

– Inventory management

– Responsible business practices

– Supply chain management

– Modern slavery review

– CEO and Board regularly receive

reports from divisions and internal

Councils on key customer and

supplier initiatives.

– The Board reviews and approves

payment times and practices.

– The Board reviews and approves

responsible business practices

andtargets.

– Discussions with customers on

funding of working capital

– Day-to-day contact on supply

chain, products and service.

– R&D partnerships.

– Collaboration across divisions to

meet customer needs including

through our Business Development

and Supply ChainCouncils.

– Voice of the Customer formal

feedback.

– Supplier assessments.

– Continued focus on cleaner, smarter and

healthier solutions.

– New product launches and new contract

wins including Honeywell (see page 10).

– Continued review of Voice of the Customer

programme (seepage 9).

– Acquisition of Ferranti Power and Control.

– Longer-term collaborative relationships.

– Monitoring of supplier payment times,

global supply chain, inventory management

and export risks.

EMPLOYEES

– Culture and purpose

– TT Way values and conducting

business with integrity

– Safety and wellbeing

– Employee Assistance Programme

– Training and development

– Group employment policies

– Engagement activities

– ED&I

– Environmental sustainability

– Pensions

– Oversight of Group culture.

– HSE updates at each Board

meeting.

– Board , CEO, CFO & ELT site visits.

– CEO and SID are members of the

PSEE Committee.

– Employee engagement

– Oversight of ED&I roadmap.

– Support for Employee Assistance

Programme

– Employee forums on Executive

Remuneration

– Approval of environmental

sustainability targets.

– Specific focus on pensions and

RCF initiatives.

Read more on page 38

– Various Board/NED visits to TT sites in

US/UK.

– Leadership development workshops.

– Driving new ED&I strategy at Group and

sitelevel.

– Mindfulness and wellbeing activities.

– Investment in sales and business

development capability.

– Ambitious environmental sustainability

targets.

– Board diversity policy to complement

theGroup policy.

– Changes to site footprint.

– Pension buy-in transaction.

INVESTORS

– Financial performance

– Leadership

– Governance and transparency

– Sustainability/ESG

– Reputation

– Communication

– Pensions buy-in

– RCF extension

– Regular report to the Board on

investor views including ESG.

– Committee Chair consultations/

Chairman engagement

– Remuneration consultation

activities (see page 101).

– Results, Annual Report and AGM

Read more on page 38

– Ambitious environmental sustainability

targets.

– Implementation of global reporting tool

foremissions across all sites.

– Continued focus on cleaner, smarter

andhealthier solutions.

– New product launches that support

efficiency and sustainability.

– Site switches to renewable energy.

– Driving ED&I strategy at Board, Group and

site level.

– Deployment of HSE minimum standards

forauditing across TT sites.

– InTTernship, graduate programme

andapprentices.

TT Electronics plc Annual Report and Accounts 2022 37

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

A POSITIVE

IMPACT

We are committed to having

apositive impact on the world

around us: creating value

and enhancing sustainability

through our products; the way

we do business, including how

we look after our employees

and interact with our

communities; and by reducing

our environmental footprint.

This commitment is described

in our purpose and embedded

in our strategy as one of our

four strategic priorities.

Environment, social and governance

(ESG) and sustainability matters are

integrated into our strategy and day-

to-day decision-making at all levels of

the organisation. This way of operating

reduces risk and provides significant

opportunities to develop our business

model.

Our activities in these areas are critical

to our stakeholders, particularly our

customers, communities and our

employees. We want our teams to feel

proud of our culture and enjoy working

for T T.

Read more about governance in the

Governance and Directors’ report

frompage 76

OUR PURPOSE

We solve technology

challenges for a

sustainable world

We do this by delivering solutions

for our customers that enable

products that are cleaner,

smarter and healthier and that

will benefit our planet and people.

See page 20 for our strategic

priorities

TT Electronics plc Annual Report and Accounts 202238

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

ALIGNMENT WITH THE UN SUSTAINABLE DEVELOPMENT GOALS

Our business activities and the way we operate are closely aligned to six of the UN’s 17 Sustainable Development Goals.

UN SUSTAINABLE

DEVELOPMENT

GOALS OUR CONTRIBUTION

– Our products help to diagnose and treat disease earlier, contributing to better life outcomes

for patients.

– We are committed to the safety, health and wellbeing of our employees and are focused on physical

health, mental health and financial health.

– We contribute to the wellbeing of our local communities through our community activities.

– We are committed to equal opportunities for all persons. We have 53% women in our organisation,

and we prioritise the recruitment and development of female leaders.

– We are actively working on ED&I and education initiatives to attract more women into our sector

and support women to progress in their careers.

– Our products are enabling customers to accelerate cleaner energy technologies including electric

vehicles, offshore wind and micro turbines.

– 45% of our electricity comes from renewable sources and we are committed to moving to green

electricity where it is available.

– We are a global employer of talented design, engineering and manufacturing experts.

– We are passionate about encouraging young people to consider STEM careers and, in turn,

make their own contribution to industry and innovation in the future.

– Our products are enabling our customers to operate more efficiently and to develop smart

infrastructure that is changing the way we live.

– We conduct business with integrity, transparency and professionalism.

– We are driven by the concept of zero harm in terms of the safety of our people and our approach

tomanaging our impact on the environment.

– We are reducing our consumption of single-use plastics and waste sent to landfill.

– We develop, design, engineer and manufacture our products to use raw materials and other

resource inputs in the most efficient way, including using recycled materials.

– We are targeting Net Zero for Scope 1 & 2 emissions by 2035. We have met our short-term emissions

reduction target a year early.

– We are focused on moving to renewable electricity at all sites and investing in projects that will

contribute to meaningful reductions in usage and self generation.

– We have identified and are beginning to measure our most significant indirect emissions (Scope3).

– Our products are enabling customers to meet their own climate goals.

TT Electronics plc Annual Report and Accounts 2022 39

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

“We believe that embedding the

right culture in the business is

critical to our ability to deliver

sustainably over time. Our

TT Way values underpin the

behaviours we encourage and

live by every day. Our culture

and values have played an

exceptionally important role

in 2022 when we have asked

alot of our employees in order

tosatisfy strong business

growth and customer needs.”

Sarah Hamilton-Hanna,

Chief People Officer

The TT culture is very important

and drives the whole company. TT

businesses have a similar heart – our

people are proud to work for us and

care about what they do and about

each other. This gives us competitive

advantage and makes TT a great

company to work for and with, enabling

OUR CULTURE AND VALUES

In January 2022, TT completed the acquisition of Ferranti

Power and Control (Ferranti) based in Oldham, UK. The

acquisition stepped up TT’s aerospace & defence power

capabilities in Europe and created a platform for growth

inthe Power and Connectivity division through its specialist

capabilities and attractive customer positions. For this

reason, it was critically important from the outset that

the highly skilled and long-serving team of this relatively

small business could see the benefit and opportunities

ofbecoming part of a larger business and feel positive

aboutjoining us.

From the pre-acquisition legal consultation, through the

integration process and, finally, planning relocation to a

new flagship facility six miles away, the integration team

has focused on engaging with the Ferranti team proactively

andmeaningfully, acting transparently and with integrity,

anddemonstrating TT’s culture and values.

As a result of the integration team’s work, all critical

members of the Ferranti team chose to join TT and the

business is now successfully operating within the Group

andprogressing its site move in 2023.

Engagement and onboarding activities:

– Legal consultation and TUPE process sessions

– Site leadership team selected from the Ferranti team

– Employee pulse survey conducted in February 2022 using

similar questions to our global engagement survey

– Survey results discussed openly with employees and

theemployee forum and improvement action taken

– Implementation of new processes and reporting protocols

– Executive Leadership Team visit

– Other TT team visits

– Invitations to Ferranti team to visit other TT sites

– Board visit

– Annual UK HR meeting held at Oldham with Gemba-type

walk to talk to team members about what was working

and if more support was needed for integration

– Second pulse survey conducted in October 2022 –

majority of scores increased

– Recruitment need identified and actioned to deal with

increased reporting requirements

– Regular meetings with employees to plan relocation

anddesign of the new facility

– Change workshops to ready the team for the move

– New apprentice hires to spread skill base and ready

thebusiness for expansion

us to attract and retain talented people

and build strong partnerships with our

customers. Our culture is overseen and

supported by the Board. While some

aspects of our culture, such as ethics

and safety, are aligned and reinforced

by policy, others are governed by

frameworks originated at the centre

which empower our sites to work

appropriately in their jurisdictions and

according to local needs and norms.

For the purposes of the UK Corporate

Governance Code, Jack Boyer is the

designated Non-executive Director for

engagement with the workforce. Read

more on the Board’s oversight of culture

matters on page 85.

Our TT Way values connect us all

and guide how we work with each

other and stakeholders every day.

We hold ourselves to high ethical

and business standards, conducting

business with integrity, transparency

and professionalism and building

relationships based on trust. This is

supported by our internal focus on

performance and knowledge to drive

innovation, operate more efficiently and

provide excellent service to customers.

We have a duty of care to our employees.

Their safety and wellbeing are at the top

of our agenda, with health and wellbeing

being a big focus for the company during

2022. We treat employees with care

and respect and strive to create work

environments where people are valued,

can be themselves, and where they are

supported to achieve their ambitions.

Our TT Way values

We do the

right thing

We bring out the best

in each other

We achieve

more together

We champion

expertise

We get the job

done… well

PEOPLE

OUR CULTURE IN ACTION – INTEGRATION OF FERRANTI

TT Electronics plc Annual Report and Accounts 202240

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

The fundamental principles of fairness,

honesty and common sense lie at the

heart of our corporate standards. We

have one ethical standard worldwide

which seeks to create an environment

where our business can flourish within

an appropriate compliance and risk

management framework and in line

withour TT Way values.

Our Statement of Values and Business

Ethics Code sets out these standards

and covers a wide range of ethical

matters including the working

environment, standards of behaviour,

avoiding conflicts of interest, hospitality

and entertainment, bribery, intellectual

property protection and fair competition.

We do not tolerate fraud, corrupt

practices or behaviour not in line with

our standards and have in place effective

systems and processes to detect and

deal with contraventions of the Business

Ethics Code.

Any concerns relating to matters

covered by the Business Ethics Code

and behaviour more generally can be

reported, either to management or by

using our anonymous, multi-lingual

whistleblower reporting facility by

telephone or on our ethics and integrity

portal. Reports are investigated in

detail and any significant concerns are

reported to the Audit Committee. Our

Whistleblowing Policy describes how

employees should raise matters of

concern, our approach to dealing with

concerns, and examples of the types

of issue employees should bring to

ourattention.

Day-to-day oversight of ethical matters

is undertaken by our People, Social,

Environmental and Ethics (PSEE)

Committee. An Ethics Committee made

up of the TT Executive Leadership Team

can also be convened on an as-needed

basis. Mandatory ethics training is

provided for relevant employees on

an annual basis. This covers different

aspects of ethics including anti-bribery

and corruption, IT and cyber security,

export controls and information

management.

Regulatory requirements are different

around the world, so we have a core

structure which Group businesses

comply with, beyond which they are

empowered to tailor their approach to

local needs. The nature of our business

and the markets we work in means that

legal and regulatory compliance is a

principal risk for TT.

Read more on page 72

Human rights

Upholding human rights is the

responsibility of everyone at TT and,

aspart of our ethics framework, human

rights are treated as an equal priority

to other business issues. Our Human

Rights Code is taken from the industry

standard (Responsible Business Alliance

Code of Conduct) and covers expected

standards for the treatment of all

workers associated with TT. The Code is

supported by our Modern Slavery Policy.

Supply chain

We procure from a wide network of

suppliers and distributors through global

supply chains. It is important to us that

our suppliers share our values and our

approach, and we seek out those that do.

Our Corporate and Social

Responsibilities – Supplier Expectations

policy sets out our required standard

with regard to supplier social and

environmental practices, including

modern slavery and the need for

environmental improvement plans. The

policy is provided to all suppliers with

purchase orders. We carry out regular

assessments of our suppliers to ensure

compliance with our requirements and

we will not do business with suppliers

that violate them.

Our Supply Chain Council forum meets

on a monthly basis and comprises

a senior group of executives with

responsibility for global purchasing

and supply chain activities across TT.

The Council considers ethical matters

including modern slavery as part of

itsremit.

Modern slavery

We recognise that the rights of individual

workers can, potentially, be violated

within our supply chain and other

partnerships. We have had a Modern

Slavery Policy since 2016 which applies

to all persons working for TT and its

subsidiaries or acting on its behalf in

anycapacity.

Our approach to addressing the

challenge of modern slavery is to

ensure that there is transparency in

our own business and throughout our

supply chains. We expect the same

high standards from all our contractors,

suppliers, distributors and other business

partners, consistent with our obligations

under the Modern Slavery Act 2015.

We include specific prohibitions in our

contracting processes against the use

offorced, compulsory or trafficked

labour, or any other activity that amounts

to an unreasonable restriction on the free

movement of workers, and we expect

that our suppliers will hold their own

suppliers to the same high standards.

We may terminate our relationship with

any third party if they are found to be

inbreach of this policy.

We also publish a Modern Slavery

Statement which, along with our Modern

Slavery Policy, is available on our website.

ETHICS

TT Electronics plc Annual Report and Accounts 2022 41

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Engaging employees by continuously

building our culture, communicating,

listening and supporting is an important

part of what we do every day. We are

one team, and this has been especially

important during 2022 when there has

been high demand on the business at

the same time as a difficult economic

environment for our employees.

We communicate frequently and

openly with employees using a range

of methods. These include weekly

email digests, a quarterly newsletter

celebrating success around the Group

translated into all our global languages,

and twice yearly Town Halls with

members of the Executive Leadership

Team at our sites. Members of our

Board also take the time to visit our

sites and visited Oldham, Cleveland and

Minneapolis in 2022.

In October 2022, we launched a new

Group intranet, ConnecTT, which

enables employees to communicate

and to easily find and share resources,

news and Group policies. ConnecTT

has also paved the way for the creation

of a range of employee communities.

Some of these communities relate to

work specialisms, others are employee

resource groups supporting our equality,

diversity and inclusion (ED&I) work and

others, including The Pets of TT, The

Kitchen and TT Green Thumbs, are for

engagement and fun.

Communication is also strong at our

individual sites which have regular all-

hands meetings, Gemba walks which

cover safety and wellbeing topics as

wellas daily tasks and productivity, team

meetings, and social and fundraising

events. Read more about fundraising in

the Communities section on page 61.

Employee engagement survey

We undertake a Group-wide employee

engagement survey every 12-18 months,

and we use pulse surveys to get the

latest feedback and an indication of

progress. Results from these surveys

drive HR and local planning in the form

of targeted action plans created by

site management in response to their

results. Engagement scores also drive a

proportion of management discretionary

incentive payments.

We did not do an engagement survey in

2022 while we focused on implementing

the actions arising from the 2021 survey.

Our most recent survey in October 2021

showed strong levels of engagement,

delivering a score in line with the two

star “outstanding companies to work for”

Best Companies Ltd benchmark. More

than 80% of employees participated.

We will undertake our next all-employee

survey in June 2023.

The employee voice

It is important that the employee

voice is heard at the highest levels of

the organisation. The results of our

engagement surveys are reviewed

by the Board so that findings can be

acted upon and TT’s SID, Jack Boyer,

participates directly in people matters

through his membership of the PSEE

Committee. The strong links described in

the diagram below ensure that the Board

is aware of the views and needs of our

most important stakeholders and can

guide company actions accordingly.

EMPLOYEE ENGAGEMENT AND COMMUNICATION

Board

Employees

Leadership meetings/

conference/divisional reviews

Site Town

Halls,

including

Q&A

Councils

Sustainability,

Sales,

R&D, Ops,

Procurement

Personal

objectives

and

business

targets

Employee

engagement

per site

People, Social, Environmental

and Ethics Committee

ConnecTT

Ask Richard/the Board

NED/Board site visits

Whistleblowing helpline

Engagement survey

TT Electronics plc Annual Report and Accounts 202242

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

At TT we see it as a duty to support our

employees to take care of their health.

It is the right thing to do, but it also

supports business needs by ensuring

that our employees are fit and well to be

at work, are not distracted by worries,

and feel supported to give their best. In

periods of high business demand such

as 2022, and with some sites operating

with mandatory overtime, our focus on

health and wellbeing has been critical.

We see a strong crossover between

all types of health – physical, mental

and, at the current time, financial health

– and we have endeavoured to raise

awareness and make conversations on

these matters normal and expected. We

go out of our way to make sure that our

teams have access to what they need,

especially those things that are not top

of mind, or difficult to find time for or

access such as medical assessments.

We know that this support is highly

valued by our employees and is a core

component of our strong culture.

At the current time much of our activity

is driven at site level, but we have

been working on a wellbeing support

framework in the US which we plan to

pilot in 2023.

Physical health

Our physical health support programmes

centre on preventative measures and fun

activities such as team sports and onsite

exercise classes. During 2022 our sites

have made available a range of support

including health screenings, flu shots,

subsidised gym memberships, weekly

fruitbowls, access to private medical

appointments, and sharing for success

lunch time sessions on subjects such

asstopping smoking and menopause.

Many of our sites undertake Gemba

walks every day. These are led by our

senior teams and often include physical

check-ins with employees to review

temperature, ergonomic environment

and body posture, all of which contribute

to good physical and mental health.

HEALTH, WELLBEING AND SUPPORT

In May, employees at our Kansas City site dressed in green and enjoyed a walk

together. Green is the colour associated with mental health awareness in the

United States, representing hope, strength, support and encouragement for

sufferers. Later in the month, the team invited a speaker from the local public

health department to discuss mental health, how to recognise symptoms in

yourself and others, and when to reach out for help.

Mental health

Mental health is equally important.

Many of our sites have mental health

first aiders who are trained to recognise

triggers and help mobilise support for

employees who may be struggling. Sites

also organise events to raise awareness

of mental health matters and provide

resources covering matters such as

stress management, anxiety and self-

esteem.

For Mental Health Awareness month

inMay 2022, we asked employees from

across TT to share their experiences

ofmental health issues and their tips

for staying well. Across the month sites

organised a range of activities including:

– A fundraising walk in aid of mental

health charity MIND at TT Oldham, UK

– A week of events at TT Juarez, Mexico

which included a ‘gratitude chain’, a

joke contest and karaoke

– The creation of a positivity tree at TT

Bedlington, UK for employees to share

their positive thoughts with peers

Wellbeing framework

TT KANSAS CITY, US EXAMINES MENTAL HEALTH

In May, TT Dongguan, China

organised on-site physical

examinations for all employees.

113employees took advantage of

the opportunity, which included a

liver test, a general X-ray, a blood

test, a stomach ultrasound, a skin

cancer check, and an ECG.

TT Electronics plc Annual Report and Accounts 2022 43

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Wellbeing

Physical

Mental &

Emotional

Financial

Physical work

environment

Rewards and

performance

Manager

effectiveness

Working

relationships

Personal growth

and aspirations

REWARD AND RECOGNITION

Being fairly rewarded and recognised

foryour contributions is an important

part ofour culture.

During 2022 we sought to support our

employees with the increased cost of

living with measures appropriate to their

region. Inflationary pressures on the

cost of living have been most notable

inthe UK, and disproportionately impact

our lower earners. We have undertaken

a variety of pro-active actions, some

of which are described in the financial

wellbeing section above. In the UK,

with the support of the Remuneration

Committee, we reviewed and increased

the 2023 salary review budget, with

distribution once again being weighted

to our lowest paid workers and typical

increases averaging in the range of

6.5 to 7 per cent. We also provided an

additional cost of living support payment

of £300 to all UK employees on salaries

up to £40,000.

Over and above salary we ensure that all

employees are able to participate in site

specific pay-for-performance schemes,

be it our site incentive schemes, or

annual incentive schemes and we

operate attractive all-employee share

plans for UK and US employees.

In line with Corporate Code Provision 41

we piloted reward workforce sessions

in 2021 and continued these in 2022

with refined content and agendas.

The sessions are designed to be open

and transparent and create a safe

environment where participants feel

confident to ask questions. Content

covers TT’s reward principles, the role of

the Remuneration Committee, and how

we achieve alignment of remuneration.

Our BE Inspired recognition scheme

recognises teams and individuals who

demonstrate our TT Way values and

have a positive impact on the business.

Participation is high as our teams are

keen to recognise the successes of their

colleagues. In 2022 the awards attracted

more than 2,300 nominations, with each

winner receiving a sum of money and a

site celebration. We also celebrate long

service and were delighted to be able

to recognise a range of employees who

hadserved more than 30 years with

TTthis year.

HEALTH, WELLBEING AND SUPPORT CONTINUED

Financial health

Concerns about finances can have a

significant impact on mental health

and we have been focused on giving

employees more support in this area

during 2022 as the cost of living crisis

has increased. We have made a big

effort to raise awareness of financial

health and the benefits we have available

to employees such as our Employee

Assistance Programmes, our UK and US

health plans, our UK and US all employee

share plans and pension/retirement

planning. As described in the reward and

recognition section below we have also

targeted support payments and salary

increases towards lower paid employees.

In the UK we have partnered with a

specialist third party not-for-profit

organisation to offer a cohesive support

package of salary finance options to

help strengthen personal financial

fitness and arrangements. The initiative

was launched UK-wide in August 2022

and was developed in response to

findings in our October 2021 Employee

Engagement Survey and workforce

remuneration sessions. Through the

initiative all UK employees now have

access to:

– Online financial wellbeing content

– A debt consolidation service with lower

interest rates than those in the external

market. While payments come directly

from payroll, the service is confidential

and entirely separate from TT

– An advance payment service to

replace the use of payday loans.

Employees are able to borrow half

of what they have earned so far that

month, again confidentially

– Savings vehicles attached to payroll,

removing the hurdles to building rainy

day savings

– The initiative has been widely

publicised and take up indicates that

employees have found the service

beneficial

To support a rapidly growing order book and stand out in a difficult recruitment

market, our Barnstaple, UK team chose to think outside of the box and pilot a

four-day week for the majority of employees. Staff reacted positively to the idea

when consulted in the summer of 2022 and a series of groups and forums were

held to iron out the details before launch in October 2022. The arrangement is

seen as benefiting all parties. Employees gain more work life balance by working

longer days Monday to Thursday with the option of working overtime on Fridays

rather than at the weekend. Those that choose not to work overtime have the

Friday free for themselves for leisure time or to meet other commitments. TT

benefits from increased capacity but with a potential reduction in overhead costs

by opening five rather than seven days.

Take up has been high at 85% and employees say that they really value the

change. The pilot concludes in March 2023 at which point it will be fully

evaluated and the model used at other sites if appropriate.

MOVING TO A FOUR-DAY WEEK AT BARNSTAPLE, UK

TT Electronics plc Annual Report and Accounts 202244

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

2022: 26/28

2021: 28/31*

28/31*

26/31

26/28*

2022

2021

2020

* Includes sites that were closed during the year.

SAFETY

Team safety is a core value for everyone

at TT and our safety framework and

tools have been designed to support

usin our pursuit of zero harm.

Safety performance is a Group KPI

and has improved significantly in

recent years as we have matured our

framework and increased accountability.

Local safety performance drives a

proportion of management discretionary

incentive payments and introducing our

safety practices and standards is a key

activity when we acquire new sites.

Our site HSE (Health, Safety,

Environment) professionals report to

our site general managers with a dotted

line to our VP, Group HSE who leads

progressive HSE programmes and acts

as support for the whole business. Our

VP, Group HSE undertakes a quarterly

safety review with each of our divisional

leaders and our site leaders are required

to participate in site safety tours at least

every quarter. Our HSE dashboards are

submitted to the TT Board in a report

every month.

During 2022 we completed the roll out of

our 15 global minimum safety standards

and supporting toolkits. These standards

are based on ISO 45001 and ISO 14001

requirements and are an obligation for

all of our sites. In 2022 all operating sites

were audited to the first six standards as

a transition towards a full HSE internal

audit programme. In 2023 all operating

sites will be audited to all 15 standards as

part of this programme.

2022 also saw the launch of our new

HSE Training Academy which initially

focused on providing sessions for our

HSE teams and operational leaders

on expectations and successful

implementation of the standards.

Content within the Academy will

expandover time to cover a range

ofHSE core competencies.

All TT sites prepare an annual HSE

improvement action plan to direct

progress. Site regulatory compliance

audits are performed by an external

thirdparty every three years.

To drive further improvements,

we are now focused on safety

leading indicators, deeper employee

engagement in prevention such as

hazard identification and reporting near

misses, and continuously upskilling our

teams in safety matters. We are also

holding targeted safety workshops led by

our occupational health teams and have

designed and implemented a behaviour-

based reporting tool to further improve

our proactive reporting culture.

We have a bespoke analytical safety

reporting tool that provides data on

causation and analysis of hazard,

near miss and behavioural reporting

opportunities. It incorporates an

investigation tool that enables sites

to mitigate issues quickly and, at

Group level, guides the development

of resources including training and

communication materials. Our teams

are able to report hazards and near

misses through our Zero Harm reporting

system in every language and we have

recently introduced a Best in Class

module that enables teams to capture

and share positive health and safety

observations, plans and improvements,

and celebratesuccess.

In 2023 we will audit to all 15 of our

global minimum safety standards.

Wewill also deliver additional training

toour HSE teams worldwide.

Safety performance

Safety performance is quantified as the

number of occupational injuries resulting

in three or more days’ absence for an

employee, contractor or site visitor.

This benchmark is applied to all TT

locations worldwide and is more

stringent than the Lost Time Incident

(LTI) requirement for UK reporting which

is seven days absence.

External certification was achieved/

retained for 12 sites to ISO 14001 and

sixto ISO 45001.

Our Kuantan, Malaysia site celebrated

1,000 days with Zero incidents in May

2022. To maintain positive momentum,

the site has introduced a hazard spotting

reward programme to recognise and

reward employees for their continuous

efforts to spot and resolve hazards in

theworkplace.

Eleven TT operating sites around

the world have passed the 1,000 day

milestone: Oldham, Sheffield, Hartlepool,

Eastleigh, Cardiff and Fairford in the UK;

Kuantan, Suzhou and Dongguan in Asia;

and Kansas City and Denver in the US.

COVID-19

Throughout 2022 we continued with

appropriate COVID safety measures

at our sites including responding to

increased restrictions in Asia. We

identified no site clusters of infection

during the year.

Total number of three-day

lost-time incidents

2022: 2

2021: 5

2022

2021

2020

2019

2018

Number of sites achieving zero harm

(no three-day lost-time incidents)

during the year

TT Electronics plc Annual Report and Accounts 2022 45

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

ZERO

HARM

Investing in the training and development

of our people enables them to do their

jobs well and build long-term careers

at TT. Given competition in every

marketplace for people and skills, we

are highly focused on ‘growing our own’

leaders and innovators by equipping

our people with the right knowledge,

opportunities and clarity on career paths.

It is rare that we say no to any employee

that has the desire to grow, and we take

pride in the fact that anyone, at any level,

will always be given the opportunity,

encouragement and support to move

through the ranks if they have the

willingness and hunger to succeed.

We have a summer internship

programme, a UK graduate programme,

and more of our sites are beginning to

take on young apprentices as well as

offering mature apprenticeships which

sponsor existing employees who wish

totrain for new roles.

Our line managers hold regular career

conversations with their direct reports

and create personal performance

development plans that align with wider

site, division and Group objectives.

Weuse a five-point performance scale

to guide performance conversations

andgive clarity to employees.

Improving line management skills

During 2022, in response to one of

the findings of our October 2021

engagement survey, we launched a new

line management skills programme to

help new and existing line managers

be more effective in that role and better

support those working for them. The

six bite-sized modules were prepared

in consultation with TT’s Divisions to

provide practical and useful material to

support business needs. The modules

are available to all, but are typically

accessed by supervisors, team leaders

and new line managers.

The key principles of the programme are

that it is easy to access, simple, practical,

effective and immediately applicable.

Employees can self-register, sessions are

independent of each other, and they are

recorded and translated for all regions.

There are six modules covering practical

topics for leaders:

– Manager 101 and expectations

– Effective communication (launched

at the beginning of 2023)

– Managing absences and return to

work discussions

– Recruitment

– Performance conversations and

feedback

– Handling difficult conversations

DEVELOPMENT AND CAREERS

“Interns are a critical part of our

talent development strategy.

Seeking to craft meaningful

experiences, we maintain

intentionally small cohorts and

onboard interns immediately

as real, paid team members.

Each intern has the opportunity

to work on impactful projects

and rotate roles across the

business, which enables

them to develop the skills,

knowledge and experience

they need to forge a fulfilling

post-graduate career. In turn,

we gain fresh perspective and a

richer talent pool of individuals

who are eager to bring their

passion to our business. The

success we’ve seen through

this programme has been

incredible.”

Mike Leahan,

Chief Operating Officer

TT Electronics plc Annual Report and Accounts 202246

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

We see equality, diversity and inclusion

(ED&I) as a solution to business

challenges. It is a critical driver of

employee engagement, talent acquisition

and retention as an important and

positive aspect of the employee

experience, and this makes TT a happier

and more productive workplace which

is good for business. We have an

ethnically diverse workforce given

our geographic spread.

The need for equality and fairness is a

given. We believe that everyone should

be treated fairly and have access to

equal opportunities in a workplace that

istolerant, respectful and ensures dignity

for all. As set out in our employment

policies, no employee, applicant,

contractor or temporary worker should

be treated less favourably or victimised

or harassed on the grounds of disability,

sex, marital or civil partnership status,

race, nationality, colour, ethnicity, religion

or similar philosophical belief, sexual

orientation, gender identity, age or any

other distinction other than merit.

Inclusion is fundamental in the

workplace too. When you aren’t able to

be ‘completely yourself’, it’s difficult to

bring your full energy, perspective and

focus as you are hiding a part of your

life that is integral to who you are. When

people feel comfortable and included,

they’re more likely to feel engaged and

happier at work. We want TT to be a

place where people feel included, and

weare proud of the steps we are taking

to get there.

We recognise that it is not always easy

to recruit to increase diversity, so we are

focused on the things that move the dial

for team members – awareness and

understanding, a sense of community,

supporting and celebrating our female

leaders, and creating work environments

where people with disabilities are able

towork safely and effectively.

Our ED&I strategy is led by a special

committee and divisional working

groups, and we have ED&I Councils

at many sites. Our ED&I policy and

roadmap which sets out our approach

to ED&I and expected behaviours has

been circulated to employees and we

report progress through our usual

communication channels, including

aregular page in our Group newsletter.

The policy explains our approach

to equality, diversity and inclusion

including such matters asharassment,

EQUALITY, DIVERSITY AND INCLUSION

victimisation and bullying,recruitment

andpromotion, religious accommodations,

gender confirmation and workplace

adjustments; the expected standards

foremployees and their responsibilities;

and how we will deal with infringements

ofthe policy.

We do not have Group ED&I KPIs, but

we encourage our divisions and sites to

prepare their own, relevant improvement

plans every year. In 2023 our divisional

and site leadership teams will be asked

toidentify one important ED&I objective

towork towards for the year.

Sites are also encouraged to hold ED&I

events appropriate for their locations.

2022 saw an active Pride Month at

many sites, the celebration of Black

History Month in the US, a continued

focus on activities highlighting violence

against women in Mexico, highlighting

of International Disability Month, and

a globalcelebration of International

Women’s Day in March.

TT Electronics plc Annual Report and Accounts 2022 47

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

After successful events in 2021, TT sites in the US were once again eager

to recognise Black History Month in February. TT Kansas City encouraged

employees to support Black-owned local businesses and TT Dallas hosted an art

contest. Members of our Sheffield, UK team also decided to show their support

in February by organising a celebration of Ethiopian culture covering history,

traditions, religious beliefs and food.

TT Dallas proudly sponsored two buckles (given as prizes to winners) in the

Texas Gay Rodeo held in April 2022. Team member Tom Frey, formerly a

participant in the Steer Wrestling competition, volunteered his time as a gate

operator. This rodeo is part of the IGRA (International Gay Rodeo Association)

and is run completely by volunteers.

Training, tools and events

ED&I 101 training was rolled out

to all employees in 2022 and 14

Inclusive Leadership workshops were

held, attended by more than 900

employees. The workshops focused on

understanding what inclusion means

and how to apply the learning at TT.

They started important and sometimes

challenging conversations and gave

participants an opportunity to ask

questions and listen to the experiences

of others. Employees were also given

the opportunity to hear from specialists

at a series of speaker events through

the year:

– 2015 Everywoman Female

Entrepreneur of the Year Sarah

Pittendrigh spoke on the Power of

Failing;

– Former UK Special Forces Solider Ollie

Ollerton spoke about mental limits;

– Former Wales and British Lions rugby

captain and LGBT advocate Gareth

Thomas spoke on inclusive leadership

and inclusive teams;

– Paralympian Lauren Rowles helped

us understand more about mental

resilience by describing her journey

from able bodied teenager to being

paralysed by illness.

Around 250 employees listened live

to each event, and a recording was

distributed afterwards.

TT Juarez, Mexico highlighted a

local day for non-violence against

women with a series of talks

given by the Municipal Institute for

Women. An information module

was also provided to the site by

the Institute with legal and support

resources, as well as emergency

phone numbers.

TT Electronics plc Annual Report and Accounts 202248

STRATEGIC REPORT | TT RUNNING HEADER

GENDER DIVERSITY AT 31 DECEMBER 2022

Employees – full-time equivalents Men Women

Board of Directors 4 2

Executive Leadership Team (ELT) 4 1

ELT and direct reports 25 12

Senior managers (ex-ELT)* 59 18

All employees: 5049

UK and Europe 867 487

USA 456 347

Mexico and Caribbean 524 726

Asia 522 1,120

Total 2,369 2,680

* Senior managers (ex-ELT) includes TT’s Group senior leaders, our divisional and functional leadership teams,

and Directors of subsidiary Companies.

Gender diversity

We are pleased to have three women

Board members and one woman on our

ELT team of five. In total, we have more

women employees than men. We are

keen to see more women in leadership

roles. Our Leadership Programme for

women is an integral part of our ED&I

strategy and includes joint workshops

with senior male leaders as well as

skills, mentoring and advocacy. We also

have a Women’s Business Forum which

supports female leaders in the business.

Our UK Gender Pay Gap report is

published annually on the TT website.

TT Women’s Leadership Programme

Our inaugural Women’s Leadership

Programme kicked off in 2022 with

two main goals. Firstly, to create a safe

space for women to engage with one

another and develop in the areas that

our analysis and research identified as

areas of challenge for women at work.

Secondly, to create a network of male

and female allies across the business

who can sponsor, mentor, attract and

develop women in and into our business.

13 women and 11 men were selected for

the first cohort and our second cohort

will join the programme in the second

half of 2023. The programme is:

Evidence-based

– Based on analysis conducted by TT

onattitudes towards women in 2020

– Underpinned by the ShapeTalent

Barriers for Women framework

– Informed by the latest research about

women in leadership roles

Focused

– On topics that matter the most and

have the biggest impact for women

inorganisations

– On building understanding between

women and between women and men

In 2022 we celebrated March’s International Women’s

Day right across TT, aiming to celebrate women in the

organisation and highlight the importance of ‘Breaking

theBias’ to enable women and minority groups to achieve

their goals, advance their careers and contribute their best.

On the day we shared profiles of a wide range of women in

the business and information about training and resources

aimed at supporting female success.

Many of our sites held their own special celebrations

which included collecting donations for a women’s shelter,

testimonies from women, a Wonder Woman programme,

and a site banner featuring the handprints of female team

members.

Experiential

– Heavy on application and learning

through doing

– Promotes experimentation in

asupportive environment

Includes

– Sponsorship

– Coaching

– Authentic leadership sessions

– Allyship workshop

– Navigating power and politics session

– Listening circles workshop

– Strategic networking session

INTERNATIONAL WOMEN’S DAY

TT Electronics plc Annual Report and Accounts 2022 49

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

SUSTAINABILITY

TT technologies address key

sustainability megatrends

in our target markets and

bring environmental and

social benefits to society. Our

components and, ultimately,

products address resource

scarcity, improve energy

efficiency, support renewables

and drive productivity,

connectivity and health

through their use in customer

applications. We are committed

to developing cleaner, lighter

more efficient and durable

solutions to help combat

climate change, engineering

advanced electronics to benefit

our planet and its people for

future generations.

Our cleaner, smarter, healthier

focus is a key differentiator

of our customer offer and

drives our approach not only

to R&D but to the way we

develop, design, engineer and

manufacture our products and

use raw materials and other

resource inputs in the most

efficient way.

In producing more sustainable

products for our customers

we are also acutely aware that

our own activities come with

an environmental impact. That

is why we are also leading by

example to optimise our own

operations to reduce TT’s

impact on the environment.

Understanding and managing the

impact of our business operations on the

environment and our local communities

is an important part of the way we

do business. We continue to make

excellent headway with our ambitious

commitment to achieving Net Zero

Scope 1 & 2 emissions by 2035.

Find our sustainability data on page 54.

Group sustainability targets

We have targeted a 50% reduction in

Scope 1 & 2 emissions by the close of

2023 against our 2019 Baseline, and

Net Zero for Scope 1 & 2 emissions by

2035, at the latest. Due to the focused

efforts of teams across the Group we

have achieved our 50% reduction target

in 2022, one full year early.

To demonstrate our commitment, Scope

1 & 2 emissions were added to our Group

KPIs in 2020 and they are aligned with

executive remuneration objectives and

flowed through the organisation.

In order to continue our emissions

reduction success story, we have all

sites that are able to purchase electricity

on renewable tariffs either doing so or

planning to switch as soon as possible

in the future. All of our sites have

completed this switch except for two

sites with a mixed energy supply (both

renewable and non-renewable) and

seven sites still with non-renewable

supplies (one of which has low electricity

usage). In the case that we cannot move

to renewable supply in the near-term we

will explore other opportunities, including

electricity generated at source for

instance, through the use of solar panels.

We have one such facility progressing

completion of a significant solar panel

installation.

We will also seek and take action to

reduce emissions through: reductions in

actual energy consumption; elimination

of waste energy; use of alternative energy

sources (for example the replacement

of natural gas for heating); switching to

electric vehicles; increased recycling; and

better use of building space.

To continue to improve and ensure

transparency in our disclosures and

progress in 2022 we undertook an

internal audit of our data, as outlined

in last year’s Annual Report. We have

completed our measurement of ‘other

Green House Gases’ and they are not

included within these figures as they

have been found to be a negligible

proportion of overall emissions.

Scope 3 indirect emissions

We expanded our data collection

capabilities in 2022 to measure nine of

the most significant Scope 3 categories

for TT and define a potential roadmap

to Net Zero for some of them. We

partnered with CDP on the supply chain

element of these emissions. CDP is an

internationally recognised organisation,

working specifically for transparent

carbon disclosure. After conducting

this exercise we eliminated three of

the categories for measurement and,

therefore, six Scope 3 categories will

be measured in 2023 and results and

targets will be published once we have

afull year of data and an internal audit

has been conducted.

Further detail on our Scope 3 ambitions

can be found on page 53.

Governance and risk management

ESG matters including culture, strategy,

compliance, risk and internal controls

are governed as part of our overall

governance and risk management

frameworks, ultimately overseen by

the Board. An update on key health,

safety and environmental (including

sustainability) metrics is provided

at each Board meeting and in-depth

reviews are undertaken on at least

anannual basis.

See our governance structure on

page77.

Environmental and sustainability

governance

Oversight of and decision-making on our

environmental strategy and performance

is provided by the PSEE Committee and

both the Committee Chair and the Non-

executive Director representative on the

Committee report to the Board on these

matters. The Committee is advised by

our Sustainability Director who provides

on-the-ground insight and specialist

advice as well as enabling the sharing of

best practice and ideas across the Group.

Responsibility for local planning and

performance lies with our site managers

who work with our site environmental

champions and employee green teams

to formulate and deliver projects and

engage employees with our local and

global agendas.

ENVIRONMENT

TT Electronics plc Annual Report and Accounts 202250

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

Risk management

Climate and environmental risks are

considered as part of our overall risk

management processes. We identify

environmental risks at site level as part

of our site operational risk assessments.

These risk assessments are reviewed

and consolidated at divisional and then

Group level and significant identified

risks are placed on the Group risk

by the Risk Committee and the Board

ona regular basis.

Sustainability, climate change and

the environment is considered to be a

principal risk for the Group in terms of

reputation in the event that we fail to

appropriately manage the environmental

impact of our operations and our

products, and relationships with our

stakeholders deteriorate as a result.

See page 69 for our principal risks

andmitigating actions.

Climate risk workshop

An initial climate risk and opportunity

workshop has been undertaken which

involved senior leaders from within

TT Electronics and yielded valuable

information on next steps. Additional,

more detailed, climate-related scenario

analysis is planned to be undertaken

during 2023. Should this prompt

additional climate-related disclosures,

these will be made in the Group’s

2023 Annual Report. We have taken

meaningful first steps to quantify the

resilience of the organisation and will

betaking this work forward in 2023.

Task Force on Climate-related

Financial Disclosures (TCFD)

We fully support the need for businesses

to be transparent on climate and

environmental matters as a driver of

change. We set out how our disclosures

comply with the TCFD recommendations

on page 55.

EXTERNAL RECOGNITION

We are pleased to continue to

receive external recognition for

ESG matters.

We received a rating of AA

in the 2022 MSCI ESG Ratings

assessment, placing TT in

the leading companies in its

sector group.

We also participate in CDP’s

annual climate change survey.

We received a C (Awareness level)

rating in 2022 for our 2021 data

submission.

TT Electronics plc Annual Report and Accounts 2022 51

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

We have targeted a 50% reduction in

Scope 1 & 2 emissions, by the close

of2023, against our 2019 Baseline and

Net Zero for Scope 1 & 2 emissions

by 2035, at the latest. Now that we

have put in place preliminary systems

and processes to collect data on our

six most significant categories of

Scope 3 emissions, we will formalise

the collection of this data to establish

baselines on which to base future

reduction targets, including a plan

toreach Net Zero.

In 2022 we moved a significant

production capacity within Texas, USA,

to a modern state-of-the-art facility in

Plano, also Texas. By investing in this

move and choosing modern green

facilities we have reduced our Scope 1 &

2 emissions for this production capability

by a tremendous 2,600 tCO

We achieved a third year in a row growth

in use of renewables for our electricity

supply and this is now at 45% of total

electricity consumption. TT Electronics

is committed to full use of green

electricity wherever it is available.

RENEWABLE ELECTRICITY

2019 2020 2021 2022

% renewables of total 0 6 36 45

We have now switched 11 manufacturing

sites to renewable electricity. Our sites in

Mexico, China and Malaysia do not have

access to these tariffs and will require

investment in alternative solutions. In

2022, we commissioned our first solar

panel project for our site in Kuantan. This

is a major installation that will provide

approximately 1M kWhs per annum for

use in the production of our leading-edge

magnetics products in 2023 and beyond.

Every TT site developed and executed

aplan to reduce electricity consumption

in 2022. These plans also focused on

reducing waste and water consumption.

We have seen a significant dividend on

the hard work from our teams as we

have recorded a reduction in electricity

consumption, in absolute terms, in a

year when activity and revenue grew

by a considerable amount.

TT has significant manufacturing

capability based in Mexico, primarily

because of the talented people we

have in our teams. We monitor long-

term trends in power generation where

our facilities are located as part of

our strategic planning. Mexico has

seen a significant reduction in grid

emissions recently due to a move to

more renewable energy and a shift from

coal to natural gas. This means that our

emissions in Mexico have been reducing

while our activity has grown.

Although we have had a focus on Scope

2 and electricity supply, we have also

taken action to reduce our Scope 1 direct

emissions. Our site in Sheffield has a

large service team using their vehicles

to attend customer sites for thermal

calibration work. The Sheffield team

began replacing vehicles with electric

vehicles two years ago and the latest all

electric service team vehicles have just

arrived. Sheffield also has an EV charging

point available for all staff to use.

SCOPE 1 & 2 EMISSIONS

Net Zero by

2035

Reduction since 2019

54%

50%

reduction targeted by 2023

vs 2019

Figures are for total Scope 1 & 2

emissions and not normalised

torevenue

“We are proud to say that,

thanks to the great efforts of

our teams, we have achieved

a reduction in our Scope 1 & 2

emissions of 23% year on year

and beaten our 50% reduction

target a full year early.”

Vicki Faith,

Group Head of HSE and Sustainability

EXAMPLE PROJECTS

LED lighting in our Suzhou warehouse

Reflective film on windows at Suzhou

Finding air leaks in Juarez

ENVIRONMENTAL PERFORMANCE AND DISCLOSURES

TT Electronics plc Annual Report and Accounts 202252

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

Scope 3 emissions

In 2022 we made significant progress in

the assessment of Scope 3 emissions,

as previously committed.

We assessed all 15 categories and

determined that six categories are not

applicable to TT operations and therefore

will not be measured or reported. These

are: Category 3: Fuel and energy-related

activities; Category 8: Upstream leased

assets; Category 10: Processing of sold

products; Category 13: Downstream

leased assets; Category 14: Franchises;

and Category 15: Investments.

We assessed and made preliminary

measurements on 9 categories and

determined that three of these are

not possible or in any way reasonably

meaningful for us to measure. We will

continue to assess these categories

to ascertain if there might be other

alternative measurement approaches

that could yield meaningful results. As a

result, we will not measure or report the

following categories:

Category 2: Capital goods: In the event

that we make significant capital goods

purchases, we will include the supplier

in our supply chain emissions analysis.

Our capital goods purchases in isolation

are not significant enough to warrant

a specific annual measurement or

reporting.

Category 11: Use of sold products:

We manufacture a very wide range

of products, including high volumes

of electronic components. These

are used in a very large number of

applications and often sold to end users

via a third-party distribution channel.

It is impractical and unrealistic for us

to attempt to measure the emissions

related to these products in use. It should

also be noted that many of our products

do not necessarily consume electricity

themselves during operation.

Category 12: End of life treatment of

sold products: In this instance we face

the same challenge as attempting to

measure emissions due to use of our

products. This is not feasible and would

not yield any meaningful results.

We have assessed and made preliminary

measurements on six categories

that we believe are applicable to our

operations. We commit to formalising

our measurements and building an

infrastructure that allows us to collect

data in a meaningful way that is in line

with the GHG Protocol in 2023. We

will use this data to set a Baseline and

publish emissions reduction targets.

These categories are:

Category 1: Purchased goods and

services

We have implemented a process to

assess and measure our supply chain.

Category 4: Upstream transportation

and distribution

We have partnered with customers,

suppliers and logistics providers to gain

access to emissions data.

Category 5: Waste generated in

operations.

We have constructed a robust system

to measure and report all of our waste

streams at our facilities.

Category 6: Business travel

We have partnered with centralised travel

providers to gain access to emissions

data.

Category 7: Employee commuting

We will calculate these emissions

centrally taking into consideration

employee data and GHG Protocol

guidance.

Category 9: Downstream

transportation and distribution

We have partnered with customers,

suppliers and logistics providers to gain

access to emissions data.

Waste to landfill

We are also reducing our waste to landfill

by reducing overall waste and increasing

the amount we recycle. The majority of

sites are now segregating their waste

streams to increase the amount of waste

that can be recycled, including cardboard,

paper, metal, hazardous waste, wood

and plastic. Our target for all of our sites

is to send zero waste to landfill and three

sites have already achieved this. Waste

management will now be driven through

our Scope 3 initiatives.

Single-use plastics

We are reducing our reliance on single-

use plastics and replacing them with

more sustainable products. The majority

of single-use plastics in our business

are used in packaging products for

shipment to customers and, working

with customers, sites are switching to

recyclable bubble wrap, pallet wrap and

other packaging materials. We do not

purchase single-use plastic bottles at

any of our sites.

Water

While water use is not a key driver of our

environmental footprint, we recognise

that water is a precious global resource

and should be managed as such. We

therefore monitor our water use and

seek to minimise it wherever possible,

as well as directing wastewater to useful

activities such as irrigation.

2022 2021

Total water use m

127,720 104,024

TT Electronics plc Annual Report and Accounts 2022 53

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

2022 2021 2020 2019

Scope 1 tCO

Emissions from activities which the Group owns or controls, including the combustion of

fuel and operation of facilities 897 955 1,259 1,479

Scope 2 tCO

e Emissions from the purchase of electricity, heat, steam and cooling for

own use 11,269 14,785 19,616 25,178

Total gross Scope 1 & 2 emissions tCO

e 12,166 15,740 20,875 26,657

Revenue £m 617 477 432 478

Intensity ratio: Gross Scope 1 and 2 tCO

e/£m revenue 19.7 33 48.3 55.7

2022 ENERGY USE AND SCOPE 1 & 2 EMISSIONS BY SOURCE AND BY GEOGRAPHY

Geographic region

United

Kingdom

Rest of

Europe

North

America

Asia

and ROW

Total

2022

Total

2021

Natural gas (MWh) 2,381 – 1,673 – 4,054 4,110

Fuel in company owned/leased vehicles (MWh) 573 1 20 31 625 818

Electricity (non-renewable) (MWh) 61 – 14,750 11,954 26,765 33,078

Electricity (renewable) (MWh) 12,151 16 9,815 – 21,982 18,738

Total energy (MWh) 15,166 17 26,258 11,985 53,426 56,744

Total scope 1 emissions (tonnes CO

e) 580 0 310 7 897 955

Total scope 2 emissions (tonnes CO

e) 12 – 4,599 6,658 11,269 14,785

Total scope 1 & 2 emissions (tonnes CO

592 0 4,909 6,665 12,166 15,740

Revenue (£million) 130 104 236 146 617 477

Tonnes of carbon dioxide equivalent

per £million of revenue 4.5 0 20.8 45.6 19.7 33

In 2022 the UK was responsible for 28.4% of Group energy use and 4.9% of Scope 1 & 2 emissions.

The primary drivers of our Scope 1 & 2

emissions reductions in 2022 were:

– The transfer of a facility to Plano,

Texas, USA

– A reduction in energy consumption

driven by site improvement activities

– Reduction in Mexico grid emissions

Our results were calculated centrally

from data collected locally. We use the

market-based method for emissions

calculations and, in line with GHG

Protocol guidelines, we use the following

information in this order of priority:

ENERGY USE AND SCOPE 1 & 2 EMISSIONS REPORTING

energy attribute certificates; contracts;

supplier emission rates; residual mix or

grid average emission factors.

Other greenhouse gases are not included

within these figures as they have been

measured and found to be a negligible

proportion of overall emissions. We are

using an operational control boundary for

direct GHG emissions. We have adopted

a cross-sector calculation method in

line with the GHG Protocol Corporate

Standard. For Scope 1 emissions, we

include our total owned and leased

vehicle direct emission impact.

vs 2021 vs 2019

2022 reduction in Scope

1 & 2 emissions tCO

23% 54%

Intensity ratio tCO

e/£m

revenue

40% 65%

TT Electronics plc Annual Report and Accounts 202254

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

Statement of the extent of consistency

with the TCFD framework

At the time of publication, in compliance

with Listing Rule 9.8.6R(8), the Company

has made climate-related financial

disclosures consistent with the TCFD

recommendations and recommended

disclosures against:

– Governance (all recommended

disclosures)

– Risk management (all recommended

disclosures)

With regard to all other recommendations

and recommended disclosures we

are not, at this time, fully consistent.

We have included our explanation for

this, a description of our current status,

examples of our activities, and our plans

to achieve full consistency. These are:

– Strategy (a)

In order to be fully consistent, we

needto expand upon our existing

risk and opportunities analysis,

specifically:granularity, materiality,

andalso to consider geographical

and/or sector relevance. We aim

to do this during 2023.

– Strategy (b)

Our impact assessment needs to

bereviewed once the improvements

are in place for Strategy (a). Until

this is complete, because we are

not consistent with Strategy (a), we

cannot be consistent with Strategy (b).

Thiswill also be concluded in 2023.

– Strategy (c)

Transitional challenges in obtaining

relevant data and embedding relevant

modelling and analytical capabilities

are not yet overcome. However, TT

commits to completion of a climate-

related scenario analysis, and thereby

achieving consistency. We aim to do

this during 2023.

– Metrics and Targets (a)

TT utilises a wide range of climate-

related metrics, however, in order to

achieve full consistency we recognise

the need to include additional

metrics consistent with the cross-

industry, climate-related metric

categories (where applicable and in

consideration of alignment with our

own risks, opportunities and business

processes). We aim to complete this

task in 2023.

– Metrics and Targets (b)

We have considered our preparedness

to report our Scope 3 emissions. We

have made significant progress in

2022 and our approach is laid out

clearly in this Annual Report (see

page 53). However, we have not as yet

disclosed Scope 3 emissions data and,

for this reason, we consider ourselves

to be not consistent with the TCFD

requirements at this stage. During

2023 we will focus on formalising

ourreporting process to enable

futuredisclosure.

– Metrics and Targets (c)

Our targets need to be reviewed

once the improvements are in place

for Metrics & Targets (a). Until this

is complete, because we are not

consistent with Metrics & targets (a),

we cannot be consistent with Metrics

& Targets (c). This will be concluded

in2023.

TT Electronics currently considers

climate-related risk, with currently

available data and analysis, to be

financially immaterial in the context

of the Company’s overall financial

statements.

TCFD

RECOMMENDATION

RECOMMENDED

DISCLOSURE OUR RESPONSE

ANNUAL REPORT

REFERENCE

GOVERNANCE

Disclose the

organisation’s

governance around

climate-related risks

and opportunities.

a. Describe the

Board’s oversight of

climate-related risks

and opportunities.

The Board of Directors is principally responsible for risk management,

supported by the Audit Committee and informed by the executive Risk

Committee. The Board defines risk appetite and monitors the management

of significant risks. Climate-related risks and opportunities are specifically

included in this remit.

Example: During the year the Board performed a horizon scanning exercise

to ensure that all material risks are considered, specifically including climate-

related risks, in the Group risk register.

Page 66 (Strategic report

– Risk management)

The Board receives a regular update (minimum seven times per annum),

in the form of a presentation and supplementary written document, on the

status of Group environmental (including sustainability and climate-related

risks and opportunities) issues and also on the progress made against

targets and ongoing action items.

Example: At each Board meeting there is a Group dashboard containing

data for year-on-year reductions in Scope 1 & 2 emissions vs target

and commentary from the Group Sustainability Director on risks and

opportunities.

Page 87 (Governance

and Directors’ report –

Leadership)

The Senior Independent Director (SID) is a member of the PSEE Committee

with the purpose of receiving information about the Group’s engagement

with its key stakeholders. This specifically includes sustainability and

climate-related risk and opportunity matters as an agenda item. The

SID reports this information directly to the Board following each PSEE

Committee meeting.

Example: The SID received a mid-year update at the PSEE meeting on the

Group progress to Scope 1 & 2 emissions targets and was given an update

on performance against forecast. Any anomalies were noted and actioned.

Page 88 (Governance

and Directors’ report –

Leadership)

Main events in the Board calendar include the review of the multi-year

strategic plan and the approval of the budget. Climate-related risk and

opportunities are specifically included in these review meetings.

Example: The Chair of TT Electronics, in this year’s Annual Report, clearly

notes that a robust position has “allowed us to devote more Board time

to core strategic priorities for the Group and address key operational

imperatives in areas such as Health and Safety, Sustainability and ED&I”.

Page 84 (Governance

and Directors’ report –

Leadership)

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TT Electronics plc Annual Report and Accounts 2022 55

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

TCFD

RECOMMENDATION

RECOMMENDED

DISCLOSURE OUR RESPONSE

ANNUAL REPORT

REFERENCE

GOVERNANCE

CONTINUED

Plans for 2023 Update the Board on the outcome of the climate-related scenario analysis

exercise to be performed. Expand further the inclusion of climate-related

issues for consideration in response to major capital expense, acquisitions

and divestments.

b. Describe

management’s role

in assessing and

managing climate-

related risks and

opportunities.

At the direction of the Board, management are assigned the responsibility

to assess, monitor and manage climate-related risks and opportunities.

Executive management performed a robust assessment of the principal

risks facing the Group. Our management team are fully engaged in the

governance process and monitor progress through monthly reports/

dashboards and more detailed quarterly reviews. We use our existing

structure to manage these processes. In addition, TT has a dedicated

Sustainability Director and has management involvement in the PSEE

Committee, as described in Governance (a).

Example: CEO and CFO participated in a climate-related risk and

opportunities scenario analysis workshop.

Page 67 (Strategic report

– Risk profile)

Risk identification, assessment and mitigation are performed bottom up,

with more detailed assessment at operational level, as well as through top-

down assessment at the Executive management and Board level, including

climate-related risks and opportunities. Managers at all levels are involved.

Example: The Group Sustainability Director, together with a taskforce of our

managers, performed a detailed assessment of Scope 3 supply chain GHG

emissions and their associated risks and opportunities.

Page 66 (Strategic report

– Risk management)

This process includes a bottom-up analysis of key risks and opportunities,

including climate-related, at a divisional level. Risks and opportunities

specific to our divisions are managed in detail.

Example: Our divisions are focused on growth in automation & electrification

markets. They have recognised that shifting towards electricity as the major

fuel powering industrial systems is a key imperative for organisations looking

to reduce their carbon footprints.

Page 67 (Strategic report

– Risk profile)

Plans for 2023 Update management on the outcome of the climate-related scenario

analysis and develop action plans and/or amend business processes.

STRATEGY

Disclose the actual and

potential impacts of

climate-related risks

and opportunities on the

organisation’s businesses,

strategy, and financial

planning where such

information is material.

a. Describe the

climate-related risks

and opportunities

the organisation has

identified over the

short, medium and

long term.

We have identified sustainability, climate change and the environment as

a principal risk. Specifically, our manufactured products or other activities

or decisions of the Group may not be judged by our customers, employees,

communities and investors as being sustainable.

Example: We have stated our Purpose clearly to our Stakeholders, that

is, we solve technology challenges for a sustainable world. We do this by

delivering solutions for our customers that enable products that are cleaner,

smarter and healthier and that will benefit our planet and people for future

generations.

Page 69 (Strategic report

– Principal risks)

Specifically, we recognise that failure to appropriately manage the

environmental impact of our operations and products could cause

reputational impact and potential deterioration in our relationships with

ourstakeholders.

Example : Clear, publicly stated, goal for Scope 1 & 2 emissions reduction

toNet Zero in 2035 to mitigate this.

Page 72 (Strategic report

– Principal risks)

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TT Electronics plc Annual Report and Accounts 202256

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

TCFD

RECOMMENDATION

RECOMMENDED

DISCLOSURE OUR RESPONSE

ANNUAL REPORT

REFERENCE

STRATEGY

CONTINUED

We recognise a wide range of product opportunities based on the fact that

TT technologies address key sustainability megatrends in our target markets

and bring environmental and social benefits to society. Our components and,

ultimately, products address resource scarcity, improve energy efficiency,

support renewables and drive productivity, connectivity and health through

their use in customer applications. We are committed to developing cleaner,

lighter, more efficient and durable solutions to help combat climate change,

engineering advanced electronics to benefit our planet and its people for

future generations. Our cleaner, smarter, healthier focus is a key differentiator

of our customer offer and drives our approach not only to R&D but to the way

we develop, design, engineer and manufacture our products and use raw

materials and other resource inputs in the most efficient way.

Example: Collaboration with a world leader in aircraft electrical systems on

power supplies for electric and hybrid electric aircraft.

Page 50 (Strategic report

– Our people, environment

and communities –

Environment)

Our principal time horizons are short term (rolling 5 years strategic planning),

medium term (2035) and long term (2050).

Example: Clear, publicly stated timeline of 2035 to achieve Net Zero Scope

1 & 2.

Page 50 (Strategic report

– Our people, environment

and communities –

Environment)

Plans for 2023 Increased granularity and materiality of risks and opportunity analysis in

conjunction with the climate-related scenario analysis, to improve upon

the level of granularity and materiality that we already have. Consider

geographical and/or sector relevance.

b. Describe the impact

of climate-related risks

and opportunities on

the organisation’s

businesses, strategy

and financial planning.

The impact on our planning, related to our principal risks, has been a

recognition that our own activities come with an environmental impact

and therefore we have implemented a detailed, and publicly stated, plan to

reduce emissions. That is why we are leading by example to optimise our

own operations to reduce TT’s impact on the environment. Understanding

and managing the impact of our business operations on the environment

and our local communities is an important part of the way we do business.

We continue to make excellent headway with our ambitious commitment

toachieving Net Zero Scope 1 & 2 emissions by 2035. We prioritise these

risks through our governance and risk management systems.

Example: We targeted a 50% reduction in Scope 1 & 2 emissions by the

close of 2023 against our 2019 Baseline, and Net Zero for Scope 1 & 2

emissions by 2035, at the latest. Due to the focused efforts of teams across

the Group we have achieved our 50% reduction target in 2022, one full year

early. To demonstrate our commitment, Scope 1 & 2 emissions were added

to our Group KPIs in 2020 and they are aligned with executive remuneration

objectives and flowed through the organisation.

Page 50 (Strategic report

– Our people, environment

and communities –

Environment)

AND

Page 66 (Strategic report

– Risk management)

The impact on our planning, related to our principal opportunities (solving

technology challenges for a sustainable world) is most evident in our

integration of ESG and sustainability matters into decision-making and

business practices, from product development to recruitment and the

strategic planning process. This integration is a publicly stated strategic

priority for us.

Example: We are collaborating with aerospace companies in the

development of high efficiency, high power density converters as well as

technologies for the next generation of higher voltage platforms. This is a

direct result of our integration of ESG and sustainability (including climate-

related) matters into our decision-making and business processes. Recently,

we completed qualification on a Power Supply unit for the Digital Flight

Control System (DFCS) and we are now working on the equivalent unit for

a new programme. Our ultimate ambition is in broadening our position as

a supplier of choice in the increasing electrification of aircraft and aircraft

systems. As technology progresses, we believe that we are well positioned

tosupport customers throughout this transition.

Page 20 (Strategic report

– Strategic priorities

Plans for 2023 Improve the clarity of the strategic planning process to more fully reflect

identified climate-related risks and opportunities, using the climate-related

scenario analysis (to be completed) as a source of input and guidance.

TT Electronics plc Annual Report and Accounts 2022 57

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

TCFD

RECOMMENDATION

RECOMMENDED

DISCLOSURE OUR RESPONSE

ANNUAL REPORT

REFERENCE

STRATEGY

CONTINUED

c. Describe the

resilience of the

organisation’s

strategy, taking into

consideration different

climate-related

scenarios, including a

2°C or lower scenario.

TT has not yet conducted detailed climate-related scenario analysis. We

have begun this journey with a variety of actions, including a workshop in

2022, attended by the CEO and CFO, to assess risk and opportunity in a

range of scenarios. TT commits to completion of this detailed climate related

scenario analysis during 2023. Should this prompt additional climate-related

disclosures, these will be made in the Group’s 2023 Annual Report.

Example: After completion of this workshop, we evaluated the output and

used this as a starting point to enable the completion of a detailed scenario

analysis.

Page 50 (Strategic report

– Our people, environment

and communities –

Environment)

Plans for 2023 Completion of a detailed climate-related scenario analysis during 2023 to aid

detailed assessment of the resilience of TT’s business and strategy.

RISK

MANAGEMENT

Disclose how the

organisation identifies,

assesses, and manages

climate-related risks.

a. Describe the

organisation’s

processes for

identifying and

assessing climate-

related risks.

Climate related risk identification is performed both bottom up with more

detailed assessment at operational level, as well as through top-down

assessment of strategic and market risk at the Executive management and

Board level. Ongoing data and information relevant to climate related risks

is supplied through regular Board reports in the form of dashboards and

written submissions. Requirements of guidelines, and those of a regulatory

nature, are monitored on an ongoing basis and we maintain both awareness

and links to professional bodies and organisations such as CDP. Relative

significance, size and scope of climate-related risks is assessed utilising

ourrisk management procedures. The critical element of this is to determine

materiality through consideration of likelihood, gross impact, mitigation

and net impact. Our risk terminology is consistent throughout and in our

hierarchy we position ‘principal risk’ as those risks that are highlighted in

ourAnnual Report.

Example: Inclusion of “sustainability, climate change and the environment”

as a principal risk.

Page 66 (Strategic report

– Risk management)

Plans for 2023 Increased granularity and materiality of risks and opportunity analysis, once

the climate-related scenario analysis is complete, to improve upon the level

of granularity and materiality that we already have.

b. Describe the

organisation’s

processes for

managing climate-

related risks.

As part of its risk management processes, the Board regularly considers

its risk appetite in terms of the tolerance it is willing to accept in relation to

each principal risk based on key risk indicators to ensure it continues to be

aligned with the Group’s goals and strategy. Each principal risk is considered

as to whether or not it currently falls within the Group’s appetite for that risk.

As part of the year-end risk assessment with the Board, it was confirmed

that all of the principal risk areas continue to be within Board and Executive

management’s appetite for that risk.

Example: Regular updates on electricity consumption and therefore

emissions of CO

, highlighted a risk to Scope 2 targets, due to higher-than-

expected levels of activity. This alerted us to a potentially increased level of

risk and triggered our process to deal with the issue enabling us to react with

a detailed plan to reduce electricity consumption. This was successfully

implemented in a number of plants in 2022.

Page 67 (Strategic report

– Risk management

framework)

Plans for 2023 Opportunities for improvement: Isolate climate-related risks within the

Group Risk Register to improve clarity.

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TT Electronics plc Annual Report and Accounts 202258

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

TCFD

RECOMMENDATION

RECOMMENDED

DISCLOSURE OUR RESPONSE

ANNUAL REPORT

REFERENCE

RISK

MANAGEMENT

CONTINUED

c. Describe how

processes for

identifying, assessing,

and managing

climate-related risks

are integrated into the

organisation’s overall

risk management.

Climate-related matters are fully integrated into TT’s risk management

processes. The Risk Committee supports the Board and the Audit

Committee in monitoring the exposure to climate-related risks through

regular reviews, including reviewing the effectiveness of risk management

processes and controls. The Risk Committee provides the framework

for managing these risks, regular reviews of principal risks, and risk

management processes. To enable a bottom-up detailed approach, the

divisions provide risk identification, assessment and implementation of risk

management action plans and actions. Business units/site level steering

and reporting teams implement and embed risk management at operational

level. Climate-related risks are included in these standard procedures.

Example: The TT Group Risk Register contains a clear section on

“sustainability and the environment” which includes climate-related risks.

This allows these risks to be monitored as part of our usual business

processes.

Page 67 (Strategic report

– Risk management

framework)

Plans for 2023 Increased granularity and materiality of risk analysis, once the climate-

related scenario analysis is complete, to improve upon the level of granularity

and materiality that we already have.

METRICS AND

TARGETS

Disclose the metrics and

targets used to assess

and manage relevant

climate-related risks and

opportunities where the

information is material.

a. Disclose the

metrics used by the

organisation to assess

climate-related risks

and opportunities in

line with its strategy

and risk management

processes.

TT uses a wide variety of metrics to assess climate-related risks and

opportunities. Metrics (and reduction targets) for emissions of GHGs play

a key role in reducing our impact on the planet, addressing a principal

risk of reputational damage and bolstering our recognised opportunities

related to our purpose of solving technology challenges for a sustainable

world. Comprehensive emissions statistics are used at monthly divisional

meetings, quarterly Executive reviews and at Board meetings. TT is

committed to measuring and reporting Scope 3 emissions. Examples of

other metrics include: electricity consumption; proportion of electricity

coming from renewable sources; water use; ratings from external agencies

(this year both MSCI and CDP); proportion of revenue as R&D spend on new

products (strategically aligned with sustainability).

With regard to cross-industry climate-related metrics: GHG emissions,

transition risks, climate-related opportunities and capital deployment are

all part of our planning and we have, or intend to have, appropriate metrics.

Remuneration is already linked to climate-related issues. We do not intend

todevelop metrics based on internal carbon pricing.

Example: TT reported a 23% reduction in GHG emissions (Scope 1 & 2) year-

on-year in 2022 and a reduction of 54% against our Baseline in 2019. This is

in comparison to our publicly stated target of a 50% reduction vs Baseline by

2023.

Page 50 (Strategic report

– Our people, environment

and communities –

Environment)

Plans for 2023 Develop additional metrics fully consistent with the cross-industry,

climate-related metric categories (where applicable and in consideration

ofalignment with our own risks, opportunities and business processes).

TT Electronics plc Annual Report and Accounts 2022 59

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

TCFD

RECOMMENDATION

RECOMMENDED

DISCLOSURE OUR RESPONSE

ANNUAL REPORT

REFERENCE

METRICS AND

TARGETS

CONTINUED

b. Disclose Scope

1, Scope 2 and, if

appropriate, Scope 3

GHG emissions, and

the related risks.

TT emissions data can be found in full in the Environmental performance

and disclosures section of the Annual Report. In 2022 our Scope 1 emissions

were 897 tCO

e and Scope 2 emissions were 11,269 tCO

e. Our total Scope

1 & 2 emissions were 12,166 tCO

e, 23% less than 2021 and 54% less than

our Baseline in 2019. Our Intensity Ratio was 19.8 tCO

e/£M revenue, a 40%

reduction from 2021 and a 65% reduction from Baseline in 2019. We have

assessed nine categories of Scope 3 emissions in detail and will measure

and report on six of these categories. A detailed explanation can be found

in the Environmental performance and disclosures section of the Annual

Report. TT is fully committed to measuring and reporting relevant Scope 3

emissions and we will be setting a Baseline and reduction targets within two

years. Related principal risk is a failure to address our environmental impact

and thereby damaging our reputation with stakeholders.

Example: TT continues to grow the proportion of electricity use that comes

from renewable sources. We have done this for three years in a row and it is

now 45% of our total electricity consumption.

Page 52 (Strategic report

– Our people, environment

and communities

– Environmental

performance and

disclosures)

Plans for 2023 Measure and report Scope 3 emissions for 2023 and develop a Baseline and

reduction targets by 2024.

c. Describe the

targets used by

the organisation to

manage climate-

related risks and

opportunities and

performance against

targets.

TT uses a wide variety of targets to measure performance and manage

climate-related risks and opportunities. Our key targets used to manage our

environmental impact are critical to address a principal risk of reputational

damage potentially caused by a failure to manage our impact on the

environment. The key targets are: Scope 1 & 2 emissions measured against

a Baseline of 2019, short term target reduction by 50% (2023), medium term

target Net Zero (2035) and long-term target to maintain Net Zero (2050).

Scope 3 emissions have been assessed and we will measure and report in

the future. We will set a Baseline and reduction targets within two years and

include a long-term target of Net Zero by 2050. We have an additional target

to move all sites to renewable electricity supply, whether that is externally

supplied or internally generated (medium term 2035).

Example: Flow down of ESG targets, including sustainability and

climate-related targets, into short term incentive objectives for our wider

management teams.

Page 52 (Strategic report

– Our people, environment

and communities

– Environmental

performance and

disclosures)

AND

Page 34 (Strategic report

–Our KPIs)

Plans for 2023 Develop additional targets fully consistent with the cross-industry, climate-

related metric categories (where applicable and in consideration of alignment

with our own metrics for risk, opportunities and business processes).

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TT Electronics plc Annual Report and Accounts 202260

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

STEM PROGRAMME RETURNS TO KUANTAN

TT CLEVELAND, US INTRODUCES A NEW GENERATION

We encourage our teams to take an active role in their local communities, whether

fundraising and volunteering for chosen charities or committing time and resources

to promoting STEM education and careers.

STEM SKILLS

After a three-year absence due to COVID, TT Kuantan,

Malaysia launched its fourth STEM programme in 2022.

The team selected a primary school for indigenous

students located in a rural area around 70 kilometres from

the Kuantan site. As in previous years the team spent a

day at the school, setting up a STEM educational booth

and leading interactive games with the students. A week

later, the students were invited to visit TT for a guided plant

tour. At the close of the programme the team donated a

smart TV, an air conditioner and a camera to the school

tosupport the students’ continuing education.

TT Cleveland hosted a group of students from the local

Auburn Career Center for a careers event in 2022. The

students enjoyed a site tour, followed by a presentation

and Q&A about TT and STEM careers. Two female team

members – Helen Cole and Halley English, a graduate of

Auburn Career Center – then shared how their careers had

developed at TT. The event concluded with a pizza party

and swag bags for the students which included a TT Way

values t-shirt to remind them of the day.

STEM skills are in high demand, and this will only grow

in the future. Our teams of engineering, technology and

manufacturing experts are passionate advocates for the

development of STEM skills and engaging with the next

generation of potential talent. We are particularly keen to

encourage more women and under-represented groups to

take up STEM subjects and careers.

Many of our employees give up their time to develop local

STEM partnerships to promote careers in electronics and

related fields, undertaking talks, demonstrations and attending

careers fairs to interest and educate young people in the sector.

Across the world we also aid school curriculums directly by

supporting science projects and engineering competitions to

highlight the importance of STEM subjects ineveryday life.

COMMUNITIES

TT Electronics plc Annual Report and Accounts 2022 61

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

TT has a big fundraising and volunteering culture – our efforts

bring our employee teams together as well as benefiting our

communities.

Each site chooses a local charity to support through the year

and our ‘Hours for giving’ programme enables employees to

take five hours paid leave per year to support local causes.

In 2022 more than 3,600 hours were taken under the

programme.

Our teams support many other local and national causes

andare able to request matched funding from TT through

theGiving the TT Way programme.

VOLUNTEERING AND CHARITABLE GIVING

TT CARDIFF, UK RAISES A MASSIVE £10K

TT MEXICALI, MEXICO UNIDOS POR LA EXCELENCIA

On hearing of the plight of Ukrainians affected by the Russian

invasion of Ukraine our Cardiff team pledged to support

them in any way they could. Then began a fundraising

campaign which would ultimately raise more than £5k,

which was matched by TT. Events included a raffle, a bake

sale and a Walk for Ukraine and the team sold pins and

asked other local businesses for donations. Some male

team members even agreed to be waxed and Cardiff’s

two BE Inspired winners generously donated their prizes.

The whole team was exceptionally proud of the result and

went on to challenge all TT employees to plant sunflowers

inTT’sAnnual Sunflower Contest in honour of Ukraine, with

an award at the end of the summer for the tallest sunflower.

In August, TT Mexicali held its second ‘Unidos por la

Excelencia’ (United for Excellence) event. The event

recognised elementary school children of TT Mexicali

employees who had received high grades at school.

Due to the generosity of employees, the site was able

togift scholarships, a gift certificate for school supplies,

a backpack and a shirt with the event’s slogan to these

hardworking children.

Our Suzhou, China team has been

working with local charity Suzhou

Little Red Cap Association since

2019 to support children of families

in need. Despite COVID restrictions,

our team was still able to hold a

small in-house bazaar in November

this year in which 200 employees

participated, raising CNY3.5k.

Theteam has now raised more

thanCNY30k for Little Red Cap

since 2019.

Adam Bayliss from our Fairford,

UKteam has been playing The Last

Post on his cornet at the Fairford

War Memorial Remembrance Day

service for 25 years. This year he

recorded one of his rehearsals to

play on site to mark the Fairford

team’s own two minutes’ silence

on11 November.

Our TT Dallas team partnered

withlocal organisation Hope’s Door

New Beginning Center and raised

nearly $1k in donations through

various bake sales and a fun raffle.

Hope’s Door provides assistance

toindividuals and families affected

by domestic abuse and violence.

HELPING SUZHOU FAMILIES

INNEED

25 YEARS OF REMEMBRANCE TT DALLAS, US SUPPORTS

LOCAL SHELTER

TT Electronics plc Annual Report and Accounts 202262

STRATEGIC REPORT | OUR PEOPLE, ENVIRONMENT AND COMMUNITIES

SECTION 172

STATEMENT

1: BOARD LEVEL ENGAGEMENT WITH TT MANAGEMENT/EMPLOYEES/CUSTOMERS/INVESTORS

Stakeholders involved:

Employees, customers, investors.

A. Why?

– To deepen NED relationships with the ELT,

senior management and staff at all levels across

the organisation, in order to address the “wider

engagement” post-pandemic action from the

2021 external Board evaluation exercise.

– To better understand key employee, customer,

supply chain, geographic and technology-based

trends across the Group’s operations.

– To identify opportunities for improved cross-

functional working, particularly between Power

Solutions and the GMS Division.

– To stay ahead of the talent bench strength

requirements for the Group and understand

succession opportunities and individual/

Divisional development priorities.

– To better understand key investor priorities

anddrivers of growth.

B. Scope

– Board visit to the Oldham facility, to meet

senior management and staff working in the

Ferranti business acquired in January 2022

and to consider progress against the Power

Solutions Strategy.

– Board visit to one of GMS Suzhou’s key

customers, Waters, including a site tour

and Q&A session with senior management,

which (i) provided a deep insight into TT’s

technology/supply chain positioning and

the “strategic partnership” nature of the

customer relationship; and (ii) allowed the

Board to underline its customer support.

– NED visit to TT’s Minneapolis and Cleveland

facilities in the US, attended by the Chairman

and Chair of the Audit Committee, to meet

senior management/staff and better

understand TT’s customer opportunities,

business performance and risk management

activities, at both a site level and across the

EMS market and medical/power solutions

sectors.

– NED “pulse call” with the GMS Suzhou

senior management team, conducted by

video conference, to gain a greater insight

into current operations, performance,

opportunities and challenges at TT’s largest

Asia-based facility.

– Various face-to-face sessions conducted

by the NEDs throughout the year with

site, Divisional and functional heads to

discuss business dynamics and operational

challenges (including Board dinners and ad

hoc meetings).

– CEO/CFO regularly meet with institutional

shareholders.

– IR briefings provided to the Board (including

from brokers) on investor feedback.

– Face-to-face meetings offered (and several

accepted) for institutional investors to meet

with Board/Committee Chairs.

C. Board decisions/Key outcomes

– Increased understanding of customer

operating needs and TT’s contribution to

maintaining product deliveries (including

inventory management) in challenging supply

chain conditions.

– Greater appreciation of the demands on senior

management and staff (including wellbeing

and stress management) in a high growth,

significant change, inflationary environment,

operating under material supply chain

constraints.

– Increased focus on ED&I initiatives across

theGroup (see page 47 for more detail).

– Greater focus on the interplay between

incentives and key strategic imperatives for

theGroup (e.g. the linkage between supply

chain constraints and inventory management).

– Promotion of the Power Solutions technology

roadmap and its linkage to GMS manufacturing

capability.

– Investor comments feed into strategic

decision-making and Board priority actions.

Under Section 172 of the Companies Act 2006, Directors are required to promote the success of the Company for the benefit

ofour shareholders, whilst having regard to the factors set out in Section 172 including the interests of our other stakeholders.

The Board has identified who its key stakeholders are and has considered how it engages with these groups (see pages 36 to37).

Throughout the year, the Board considered how stakeholders are affected by key decisions.

The principal decisions taken by the Board in 2022 centred around: (i) Board-level engagement (particularly with TT management,

employees, customers and shareholders); (ii) “deep dive” strategic review sessions; (iii) progression of the Defined Benefit Pension

Scheme Buy-in arrangement; (iv) refinancing the Group’s Revolving Credit Facility; and (v) development of TT’s Sustainability/ESG

initiatives.

The following examples describe how the Board addressed its s172 responsibilities (and engaged across a range of stakeholder

groups) in response to these priority initiatives in 2022.

TT Electronics plc Annual Report and Accounts 2022 63

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

SECTION 172 STATEMENT

2: “DEEP-DIVE” STRATEGIC REVIEW

Stakeholders involved:

Shareholders, employees, customers/suppliers.

A. Why?

– To undertake an in-depth review of the strategic

positioning of the Group, assessing options

to reposition the business portfolio in light of

customer growth opportunities, ongoing supply

chain constraints, “people” factors and macro-

economic challenges.

– To carefully consider TT’s portfolio of business

units and the extent to which they operated in

the right market segments, with appropriate

levels of investment/resource, aligned with

TT’sgrowth strategy.

– To address challenging market conditions

andshare price pressures across TT’s industry

sector.

B. Scope

– The Board engaged external advisers

to undertake a detailed assessment of

TT’sstrategic growth plan and its business

operations and valuation potential.

– The Board considered options to grow key

customer accounts (and ensure continuity

of supply in challenging market conditions),

linked to the Group’s technology road map

and corporate purpose.

– The Board focused on the protection of jobs

and providing salary increases/financial

support to the lowest paid part of the

workforce in an attempt to minimise the

burden of the global cost-of-living crisis.

C. Board decisions/Key outcomes

– Completion of the Ferranti acquisition in

January 2022, to enhance TT’s Power

Solutions capabilities in aerospace & defence.

– Prioritisation of key customer accounts/areas

of greatest growth opportunity, with

appropriate levels of investment being

directed towards ensuring continuity of supply

(including inventory management).

– Focus on ensuring appropriate incentivisation

of key talent, for recruitment/retention

purposes, in a competitive marketplace.

– Financial assistance provided to the lower paid

parts of TT’s workforce by delivering initiatives

such as market-tested salary increases, an

energy support scheme (for UK employees

below certain salary levels) and a Salary

Finance Loan scheme.

3: PENSION SCHEME BUY-IN/RCF REFINANCING

Stakeholders involved:

Employees, pension holders (current and future), regulators.

A. Why?

– To de-risk the cost/liability profile of TT’s

Defined Benefit scheme and take the

opportunity (created over a number of years

bythe collaborative efforts of the Company and

Scheme Trustee) to insure the scheme liabilities

with a bulk annuity insurer.

– To ensure that the Pension Scheme buy-in

arrangements were concluded in a way that

would materially benefit TT and its stakeholders

(including current and future pension

holders), with no stakeholder groups being

disadvantaged.

– To re-finance the Group’s existing debt facility,

well in advance of the scheduled maturity date

of November 2023, to give a further four years

of facility cover, taking advantage of positive

lending conditions at the H1 stage, removing

potential re-financing risk and providing

headlinefacility cover (when combined with

the existing Private Placement facility) at a

levelconsidered appropriate for the Group’s

future borrowing needs.

B. Scope

– The Board recognised that TT’s Defined

Benefit scheme had operated effectively

in the past few years, in close cooperation

with the trustees, thereby mitigating liability

risks associated with the scheme. The

combination of the scheme investment

strategy, Company cash contributions

and liability management exercises, had

materially reduced the scheme buy-in deficit

to a position where a buy-in was feasible.

– Following the completion of an extensive

data cleansing exercise, the Board

recognised that 2022 represented an optimal

time to launch a buy-in transaction for the

Defined Benefit scheme and worked with

the scheme trustees and advisers to ensure

that all relevant regulatory and transactional

hurdles were addressed, including the

interests of current/future pension holders

and TT’s wider employee base.

– The Board monitored the macro-economic

environment throughout the year and took

the decision in H1 to launch the refinancing

of the Group’s existing RCF, on favourable

commercial terms, anticipating the

potentially adverse impact of geopolitical

uncertainty on debt markets in the H2 period

(see page 32 for more details).

C. Board decisions/Key outcomes

– Decision to run a competitive bidding process

(with the scheme trustees) to identify a

preferred insurer to lead the transaction for

thebulk annuity insurance buy-in.

– Execution of the transaction for the bulk

annuity insurance buy-in arrangements

inNovember 2022.

– Completion of the new RCF facility

inJune2022.

TT Electronics plc Annual Report and Accounts 202264

STRATEGIC REPORT | SECTION 172 STATEMENT

4: SUSTAINABILITY/ESG

Stakeholders Involved:

Shareholders, employees, customers/suppliers, regulators.

A. Why?

– To ensure that TT’s ESG strategy, progress to

date and future plans (particularly on Scope 1,

2 and 3 initiatives) is effectively communicated

and understood by TT’s stakeholder groups.

– To ensure that ESG targets are properly reflected

in site-level and Divisional objectives, and short-

term incentive plans (for Executive Directors

andthe wider management teams).

– To provide consistent data across the Group to

track and monitor progress on key ESG targets.

– To ensure compliance with the new TCFD

regulatory requirements.

B. Scope

– The Board now receives monthly reports

on the Group’s environmental and safety

performance.

– The Board requested the internal audit team

to undertake a review of the Group’s Scope 1

& 2 emissions data.

– CEO and CFO participated in climate risk and

opportunities scenario analysis workshop.

C. Board decisions/Key outcomes

– The outputs of the progress made by TT

inthe past year on its ESG programme is set

out in detail in the People, environment and

communities section on page 38. This section

also includes TT’s key ESG priorities for the

coming years.

– Appointment of external consultants to

facilitate detailed consideration of TT’s

positioning on the new TCFD regulatory

requirements.

– Expansion of Executive Director STIP targets

for 2023 (as agreed by the Remuneration

Committee) to have ESG items separated

from“strategic objectives”, accounting for

10% of the annual bonus award (see the

Remuneration Report for more details).

– Flow down of ESG targets into short-

term incentive objectives for the wider

managementteams.

TT Electronics plc Annual Report and Accounts 2022 65

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

RISK MANAGEMENT

ROBUST PRACTICES

IN SUPPORT OF OUR

BUSINESS MODEL

RISK MANAGEMENT

The Board of Directors is responsible for

risk management and internal controls,

supported by the Audit Committee

and informed by the executive Risk

Committee. The Board defines risk

appetite and monitors the management

of significant risks to ensure that the

nature and extent of significant risks

taken by the Group are aligned with

overall goals and strategic objectives.

The Risk Committee supports the Board

and the Audit Committee in monitoring

the exposure through regular reviews,

including reviewing the effectiveness

of risk management processes and

controls. The Internal Audit function is

operated under a directed co-sourced

arrangement with PwC to enhance

the levels of resource and expertise

available to the Group in specific areas,

with its activities under the direction of

the Executive Leadership Team (ELT)

and the Audit Committee. We now have

a dedicated in-house Head of Internal

Audit & Risk in post who is supported by

an internal compliance team. The team

are currently in the process of refreshing

our Control Framework to further

strengthen control compliance across

the business.

The Head of Internal Audit & Risk

assists the Risk Committee by advising

management on improvements to the

overall risk management framework,

facilitating the risk review process and

providing independent experience and

input to the process.

Risk management processes and

internal control procedures are

established within business practices

across all levels of the organisation.

Risk identification, assessment and

mitigation, including climate-related risks,

are performed both bottom up with more

detailed assessment at operational level,

as well as through top-down assessment

of strategic and market risk at the

Executive management and Board level.

All of our manufacturing sites perform

an annual self-assessment against the

control framework and the results inform

the internal audit programme of work

and internal audit plan risk assessment.

Risk management and internal controls

provide reasonable but not absolute

protection against risk. The Board

acknowledges and recognises that in the

normal course of business, the Group

is exposed to risk and that it is willing

to accept a level of risk in managing

the business to achieve its strategic

priorities.

Risk appetite is not static and, as part

of its risk management processes, the

Board regularly considers its risk appetite

in terms of the tolerance it is willing to

accept in relation to each principal risk

based on key risk indicators to ensure it

continues to be aligned with the Group’s

goals and strategy.

During the year we reviewed the Group

risks and performed a horizon-scanning

exercise to ensure that we have

considered all material and emerging

risks in our Group risk register. Each

principal risk is considered as to whether

or not it currently falls within the Group’s

appetite for that risk. As part of the year-

end risk assessment with the Board, it

was confirmed that all of the principal

risk areas continue to be within Board

and Executive management’s appetite

for that risk.

TT Electronics plc Annual Report and Accounts 202266

STRATEGIC REPORT | RISK MANAGEMENT

Operational steering and implementation

Bottom-up identification, assessment and mitigation of risk at operational level

Corporate level steering

Top-down oversight; set risk appetite; monitor significant risks; alignment with strategic objectives at corporate level

Board of Directors

Primary responsibility for risk

oversight; setting strategic

objectives; and defining risk appetite

Audit Committee

Oversees risk management and

internal control processes

Risk Committee

Provides framework for managing

risks; regular reviews of principal

risks; and risk management

processes

Divisional level steering and reporting

Risk identification assessment and implementation of risk

management actionplans and actions

Business units/site level steering andreporting

Implement and embed risk management atoperational

level

Risk and Assurance function

OUR RISK MANAGEMENT FRAMEWORK

RISK PROFILE

At the direction of the Board, Executive

management performed a robust

assessment of the principal and

emerging risks facing the Group, taking

into account those that would threaten

the business model, future performance,

solvency or liquidity, as well as the

Group’s strategic objectives. This

process includes a bottom-up analysis

of key risks at a divisional level, including

climate-related risks. All principal risks

identified by this process may have

an impact on the Group’s strategic

objectives within the next six to twelve

months. Executive management and the

Risk Committee perform further analysis

to prioritise these risks, with a focus

on those principal elements posing the

highest current risk to the achievement

of the Group’s objectives or the ongoing

viability of the business. Risks assessed

as higher priority are consolidated into

a Group risk register. Risks included on

the register are monitored closely by the

Board in terms of both prioritisation and

mitigation strategies.

It is recognised that, whilst these “top

risks” represent a significant proportion

of the Group’s risk profile, Executive

management and the Risk Committee

continue to monitor the entire universe

of potential risks to identify new or

emerging threats as well as changes

in risk exposure and a risk horizon-

scanning exercise is performed annually.

The risk horizon scanning exercise

includes consideration of the emerging

risks facing TT as an electronics

manufacturing business and as a

result if any new emergent risks require

inclusion on the Group risk register. As

a result of the risk horizon scanning

exercise no new emerging risks were

identified that were not already captured

in the Group risk register which flows

through to our principal risks detailed in

this report. The Risk committee reviews

the Group risk register at each meeting to

ensure that the risk profile is appropriate

and includes all relevant risks including

emerging risks as appropriate.

The assessment of principal risks during

the year has identified that, while there

have been some significant changes

in the external environment, the Group

has remained robust and resilient with

mitigating activities undertaken. This is

reflected in the table of principal risks.

The Group has long been conscious

of the ESG agenda which has been

reported to the Board through our

People, Social, Environmental and Ethics

Committee (PSEE) which is attended by

the Senior Independent Director. There

continues to be a risk that a negative

perception of our ESG profile could

impact on our ability to attract new

talent to the business, build relationships

with our customers, positively impact

the communities in which we operate,

and attract investment from potential

shareholders.

The risks in relation to these areas

are captured in two principal risks,

“sustainability, climate change and the

environment” and “health and safety”.

TTElectronics is committed to achieving

its sustainability objectives, reducing

carbon emissions, and improving

efficiency and we have extended our

climate reporting in line with TCFD

reporting requirements to include climate

scenario analysis. We have set out our

approach and our progress in these

areas in the Our people, environment and

communities section of this report from

page 38.

The Board monitors the Company’s

internal control systems and has

reviewed their effectiveness in 2022.

Thereview process considered all

material controls including, (i) the

information relating to the general

controls environment as outlined in

the Internal Audit reports submitted to

the Audit Committee at each meeting;

(ii) financial controls; (iii) compliance

controls; (iv) the key outputs of the

controls framework programme; and

(v) management actions in relation to

internal and external audit findings.

The Board found that the Group operates

a sound system of internal control and

did not recommend any specific actions.

TT Electronics plc Annual Report and Accounts 2022 67

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

IMPACT OF COVID-19

During 2022, most of our business have,

consistent with broader society, learned

to operate in a more “business as usual”

manner as regards COVID-19.

China continued to adopt a zero

tolerance approach to COVID-19 through

most of 2022, which had an ongoing

impact on supply chains and logistics

out of China. The relaxation of these

rules saw high levels of infection impact

the country in December and this may

continue through 2023.

Our COVID-secure working practices

and pro-active demand management

continues to keep our employees safe

whilst managing the needs of our

customers.

VIABILITY STATEMENT AND PROSPECTS

In accordance with the UK Corporate

Governance Code, the Directors have

assessed the viability and long-term

prospects of the Group over the period

to December 2025, taking into account

the Group’s current position and the

potential impact of the principal risks

and uncertainties set out on pages 69 to

72 of the Strategic report. Based on this

assessment, the Directors confirm that

they have a reasonable expectation that

the Group will be able to continue

in operation and meet its liabilities as

they fall due over the period to

December 2025.

TT operates in markets with structural

growth dynamics. We engineer and

manufacture power, sensing and

connectivity solutions to address our

customers’ challenges in the healthcare,

aerospace & defence, and automation

& electrification markets. These benefit

from the trends for improved healthcare,

for increased aircraft fuel efficiency

and safety, and demand for sustainable

solutions to improve energy efficiency.

By positioning ourselves in the right

markets, by creating differentiated

capabilities through our R&D investment,

and by attracting and developing the

right talent we have a strategy to create

sustainable value over the long term.

While the Directors have no reason to

believe the Group will not be viable over a

longer period, the period over which the

Directors consider it possible to form a

reasonable expectation as to the Group’s

longer-term viability, is the three-year

period to 31 December 2025. This is

encapsulated in the five-year period

business plan prepared annually and

reviewed by the Board and aligns with

the business cycle including product

development and order intake trends.

The Directors believe that this presents

investors and other key stakeholders

with a reasonable degree of confidence

while still providing a longer-term

perspective.

In making this statement, the Directors

have carried out a robust assessment

of the principal risks facing the Group,

including those that would threaten

its business model, the underlying

mitigation planning, the assessment

of future performance, solvency and

liquidity, and the Group’s internal controls

environment.

In performing the assessment, the

Directors have further stress-tested the

Group’s financial projections for the

period covered by the viability statement,

testing it for “business as usual” risks

(such as profit growth and working

capital variances), the combined impact

of severe but plausible events, as well as

a “reverse” stress test to understand the

conditions which could jeopardise the

future viability of the Group. This work

included assessing against financial

covenants and facility headroom.

This severe but plausible events’ stress

testing included consideration of the

potential impact of the Group’s principal

risks and uncertainties outlined on

pages 69 to 72. This stress testing

specifically included the impact of the

following principal risks: general revenue

reductions; contractual risks; people and

capability; supplier resilience; and health

and safety. Principal risks which were

not specifically modelled were either

considered not likely to have an impact

within the viability period or their financial

effect was covered within the overall

downside economic risks implicit within

the stress testing.

The Group’s wide geographical and

sector diversification helps minimise

the risk of serious business interruption

or catastrophic reputational damage.

Furthermore, the business model is

structured so that the Group is not overly

reliant on any single customer, market

orgeography.

While this review does not consider

all of the risks that the Group may

face, the Directors consider that this

stress testing-based assessment of

the Group’s prospects is reasonable

in the circumstances of the inherent

uncertainty involved.

MACROECONOMIC ENVIRONMENT AND SUPPLY CHAIN

There continues to be challenges as a

result of the geopolitical environment

and disruption to the supply chain.

However, we have grown our order book

to record levels throughout 2022 and

going into 2023 reflecting our successful

positioning in structural growth markets,

new project wins and multi-year

revenues.

The ongoing focus on strategic direction

and markets has significantly improved

the Group’s overall resilience to these

external factors.

The Group continued to experience

challenges in relation to supply chain

lead times, component shortages and

costs, and mitigating this has been

a significant focus for all divisions in

2022. A robust process and controls

environment, alongside forward-looking

indicators and supply chain tools, has

supported this process. The Group

has also taken strategic decisions to

purchase additional materials, building

inventory in certain key areas to enable

delivery against a strong customer

orderbook.

TT Electronics plc Annual Report and Accounts 202268

STRATEGIC REPORT | PRINCIPAL RISKS AND UNCERTAINTIES

RISK DESCRIPTION POTENTIAL IMPACT MITIGATING ACTION CHANGE IN THE YEAR

GENERAL

General revenue reduction

Reduction in demand and

orders due to economic

downturn, geopolitical

instability or disruption to

operations (pandemic or

other business interruption

event)

Sponsor

Richard Tyson

Link to strategy

– Decelerating sales growth

affecting operating profit

– Monitor the wider

economic conditions of our

markets

– Timely financial reporting

to monitor performance

and provide a basis for

corrective action when

required

– Ongoing optimisation of

our cost base and strategic

moves creating a more

resilient portfolio

– Business continuity

and crisis management

planning

– Management structures

in place to enable a rapid

response to changing

circumstances

2021

2022

Risk stabilised. There

continue to be challenges as

a result of the geopolitical

environment and disruption to

the supply chain. However we

have grown our order book to

record levels throughout 2022

and going into 2023 reflecting

our successful positioning in

structural growth markets,

new project wins and multi-

year revenues.

COMMERCIAL

Contractual risks

Potential liabilities from

defects in performance-

critical products that

often operate in extreme

environments

Sponsor

Richard Tyson

Link to strategy

– Reputational impact

– Deterioration in customer

relationships

– Liability claims

– Reduction in revenue,

profitability and cash

generation

– Quality control procedures

and systems in place

and appropriate levels of

insurance carried for key

risk

– Group guidelines on

acceptable levels of

contractual liability are

reinforced

– Continuing to enhance

and deepen expertise in

contract management

across the Group

2021

2022

No change.

PRINCIPAL

RISKS AND

UNCERTAINTIES

Technology investment and R&D Targeted and complementary M&A

Margin enhancement Integration of ESG

TT Electronics plc Annual Report and Accounts 2022 69

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

RISK DESCRIPTION POTENTIAL IMPACT MITIGATING ACTION CHANGE IN THE YEAR

COMMERCIAL

Research and development

Delay in new product

development which is

intended to support revenue

growth

Sponsor

Mike Leahan

Link to strategy

– Increased cost in product

development

– Delay in achieving projected

revenue

– Inability to meet the

latest requirements due to a

step change in technology

– Close collaboration with

key customers

– Active monitoring of costs

and milestones

– Target R&D more effectively

– Implementation of standard

project management

disciplines

2021

2022

No change. R&D spend is one

of our key capital allocation

priorities and we continue

to work in partnership with

our customers to bring

new, innovative products

tomarket.

OPERATIONAL

People and capability

Ability to attract and retain

high-quality and capable

people

Sponsor

Sarah Hamilton-Hanna

Link to strategy

– Loss of key personnel

– Potential business

disruption

– Breakdown of

communication and

misalignment

– Remuneration structure

designed to support

retention

– Succession planning

processes embedded

within the businesses

– Campaigns to increase

performance and

development of

communication between

managers and employees

to ensure alignment to

objectives

– Regular talent reviews

across all Divisions and

Group

– Using a feedback

loop utilising surveys

to encourage regular

objectives and

performance discussions.

See Our people on page 38

2021

2022

Risk stabilised. The US

continues to present

challenges in recruiting talent

which has resulted in salary

inflation but we have seen

attrition stabilise through

theyear.

Supplier resilience

Potential failure of critical

suppliers; product delivery

delays; inability to meet

customer commitments

Sponsor

Mike Leahan

Link to strategy

– Reduction in revenue,

profitability and cash

generation

– Regular review of key

supplier financial health

and product quality

– Monitoring of relevant

commodity and precious

metals pricing

– Review of spend patterns

toidentify opportunities

– Inventory build on key

components where

considered necessary to

mitigate some of the supply

chain risk

– Supply Chain Council

inplace

2021

2022

Risk stabilised. Investment

in inventory to support

increased customer demand

and extended material lead

times and shipment delays.

TT Electronics plc Annual Report and Accounts 202270

STRATEGIC REPORT | PRINCIPAL RISKS AND UNCERTAINTIES

RISK DESCRIPTION POTENTIAL IMPACT MITIGATING ACTION CHANGE IN THE YEAR

OPERATIONAL

IT systems and information

IT security breaches or

disruption, unauthorised

access or mistaken

disclosure of information

Sponsor

Derek Winskill

Link to strategy

– Reputational impact,

business disruption and

potential deterioration in

customer relationships

– Regular analysis of

cyber security and data

management

– IT strategy reviewed by

management and the

Board

– Information security

policies updated recently

– Investment through

recruitment of additional

IT security and enterprise

resource planning (ERP)

specialists

– Processes and tools put

in place to support cyber

security certifications

– Disaster recovery plans in

case of system failure

– Annual penetration testing

– Internal vulnerability

scanning

2021

2022

Risk stabilised. Cyber controls

firmly established to mitigate

cyber risk.

M&A and integration

Realisation of financial benefit

of acquisitions

Sponsor

Mike Leahan

Link to strategy

– Failure to realise the

expected benefits of

an acquisition or post

acquisition performance

of the acquired business

not meeting the expected

financial performance

at the time acquisition

terms were agreed could

adversely affect the

strategic development,

future financial results and

prospects of the Group

– Full financial and other

duediligence is conducted

to the extent achievable in

the context of each M&A

opportunity

– A detailed business case

including forecasts is

reviewed by the Board for

each opportunity

– Integration risk and

planning is reviewed and

undertaken as part of every

acquisition

– Lessons learned activities

are built into future plans

2021

2022

Risk stabilised. Ferranti

acquisition in Oldham in

January 2022 is embedded

within the TT business and

has successfully secured

a seven-year design and

development contract for

power converters for a new

business jet. The award builds

on the existing relationship

between TT and this

customer and strengthens

our order book.

Health and safety

The manufacturing industry

is inherently dangerous.

Managing the impact on our

employees, sites and the

environment of these risks

Sponsor

Sarah Hamilton-Hanna

Link to strategy

– Incidents occurring due

to unsafe manufacturing

processes. Failure to

manage the impact of

these risks could negatively

impact our employees,

lead to regulatory fines,

reputational damage and

lost production

– Health, Safety and

Environmental Council

responsible for Group-

wide best practice

sharing, monitoring and

improvements and strategy

setting

– Regional best practice

teams established

– Processes and roadmaps

in place to minimise the

riskof incidents

– HS&E compliance self-

assessment and external

global H&S audit on a

rolling three-year cycle

across the sites

2021

2022

No change.

TT Electronics plc Annual Report and Accounts 2022 71

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

RISK DESCRIPTION POTENTIAL IMPACT MITIGATING ACTION CHANGE IN THE YEAR

OPERATIONAL

Sustainability, climate

change and the environment

Our manufactured products

or other activities or decisions

of the Group, including in

relation to climate-related

risks, may not be judged by

our customers, employees,

communities and investors as

being sustainable

Sponsor

Sarah Hamilton-Hanna

Link to strategy

– Failure to appropriately

manage the environmental

impact of our operations

and products

– Reputational impact and

potential deterioration in

our relationships with our

stakeholders

– Health, Safety and

Environmental and

Sustainability Councils

responsible for sharing

Group-wide best practice,

monitoring improvements

and strategy setting

– PSEE Committee

responsible for reporting

Group progress against

the development and

monitoring of our strategy

and associated KPIs

– Continued investment

in M&A, business

development and new

product introduction in

areas where the solutions

contribute to a more

sustainable world

– Progress made in reducing

our carbon emissions

through transitioning to

renewable energy contracts

2021

2022

No change. We are

committed to achieving

oursustainability objectives,

reducing carbon emissions,

and improving efficiency and

we are extending climate

reporting to be consistent

with the TCFD reporting

requirements. During 2022,

we reduced our Scope 1 &

2 emissions by 23%; these

are now down 54% from

our 2019 baseline. The

reduction was primarily

related to a site relocation,

the implementation of energy

reduction plans across our

sites and grid emissions in

Mexico. During the year we

made progress assessing our

Scope 3 emissions including

partnering with the Carbon

Disclosure Project (CDP) to

measure carbon emissions in

our supply chain. Our TCFD

statement can be found on

page 55.

Legal and regulatory

compliance

Intentional or inadvertent non-

compliance with legislation

including laws and regulations

covering export control, anti-

bribery and competition

Sponsor

Lynton Boardman

Link to strategy

– Reputational impact

– Civil or criminal liabilities

leading to significant fines

and penalties or restrictions

being placed on the ability

to trade

– Reduction in revenue,

profitability and cash

generation

– Cross-divisional export

compliance group

established and anti-bribery

programme in place

– Export control policy,

procedure and training all

in place and Denied Party

Screening undertaken

– Approach involves risk

assessment, policy,

training, review and

monitoring

– Whistleblower process in

place to ensure issues can

be raised, investigated and

managed

2021

2022

No change.

TT Electronics plc Annual Report and Accounts 202272

STRATEGIC REPORT | PRINCIPAL GOING CONCERN

– A leverage ratio (banking covenant

defined measure) of 2.0 times at 31

December 2022 compared to the

RCF (and PP loan notes) covenant

maximum of 3.0 times. Interest cover

(banking covenant defined measure)

of 7.4 times compared to the RCF

(and PP loan notes) covenant

minimum of 4.0 times

The Group has prepared and reviewed

cash flow forecasts across the business

over the twelve-month period from the

date of the approval of these financial

statements, considering the Group’s

current financial position and the

potential impact of our principal risks

ondivisions.

The Group’s financial projections contain

key assumptions surrounding revenue

and operating profit growth in 2023.

Under the Group’s base case financial

projections, the Group retains significant

liquidity and covenant headroom

throughout the forecast period, with

bothmetrics improving from the position

as at 31 December 2022.

The Group’s financial projections have

been stress tested for “business as

usual” risks (such as profit growth,

supply chain pressure and working

capital variances), and the impact of

the following principal risks: general

revenue reduction, contractual risks,

research and development, people and

capability, supplier resilience and health

and safety (occurring both individually

and in unison). Principal risks which were

not specifically modelled were either

considered not likely to have an impact

within the going concern period or their

financial effect was covered within

the overall downside economic risks

implicit within the stress testing. Under

the stress tested modelling, the liquidity

headroom within the group remains

adequate throughout the forecast period.

Financial covenants continue to be in

compliance under the stress tested

model and management have a number

of mitigating actions which could be

undertaken if required.

The Group’s downside stress test

scenario has been sensitised for

supply chain challenges and capacity

constraints which shows a reduction in

revenue and operating profit compared

to the latest forecast. Despite this

further reduction these projections

The Group’s business activities, together

with the factors likely to affect its future

development, performance and position

are set out within the Strategic Report

onpages IFC to 75.

The Strategic Report analyses the

financial position of the Group, its cash

flows, liquidity position and borrowing

facilities. In addition, note 21 to the

financial statements includes the Group’s

objectives, policies and processes for

managing its capital; its financial risk

management objectives; details of

its financial instruments and hedging

activities; and its exposures tocredit risk

and liquidity risk.

The Group has experienced continued

improvement in trading momentum

and strong growth on our 2021 results.

The structural growth markets we

have selected to focus on have moved

back towards their long-term growth

trajectory, the benefits of our strategic

repositioning and focus on building close

relationships with our clients can be

seen in both the order book and financial

performance of the Group.

The Group’s financial position remains

strong, at 31 December 2022 it had:

– £267.2 million of total borrowing

facilities available (comprising

committed facilities of £226.0 million

and uncommitted facilities of £41.2

million representing overdraft lines and

an accordion facility of £32.6 million).

The Group’s primary source of finance

is the £147.4 million committed

revolving credit facility (RCF) which

was signed in June 2022 to replace the

already existing RCF; at 31 December

2022 £103.6 million of this facility had

been drawn down. The Group’s RCF is

payable on a floating rate basis above

GBP SONIA, USD SOFR or EURIBOR

depending on the currency of the loan

and will mature in June 2026 with

a one-year extension option which

expires in May 2023. In February

2023 £15.0 million of uncommitted

accordion facility was converted into

committed RCF extending the total

committed facilities to £241.0 million.

In December 2021, the Group issued

£75 million of fixed rate loan notes with

three institutional investors; the issue

is evenly split between 7- and 10- year

maturities with an average interest rate

of 2.9% and covenants in line with our

bank facility.

show that the Group should remain

well within its facilities headroom and

within bank covenants for the 12 months

following the approval of these financial

statements. A “reverse” stress-test

was also modelled to understand the

conditions which could jeopardise

the ability of the Group to continue as

a going concern including assessing

against covenant testing and facility

headroom. The stress testing also

considered mitigating actions which

could be put in place. Mitigating actions

included limiting capital expenditure and

reducing controllable costs including

items such as discretionary bonuses

and pay rises. The reverse stress test is

deemed to have a remote likelihood and

help inform the Directors’ assessment

that there are no material uncertainties

inrelation to going concern.

The Group’s wide geographical and

sector diversification helps minimise

the risk of serious business interruption

or catastrophic reputational damage.

Furthermore, the business model is

structured so that the Group is not overly

reliant on any single customer, market

orgeography.

The Directors have assessed the future

funding requirements of the Group with

due regard to the risks and uncertainties

to which the Group is exposed and

compared them with the level of

available borrowing facilities and are

satisfied that the Group has adequate

resources for at least twelve months

from the date of signing. Accordingly, the

financial statements have been prepared

on a going concern basis.

GOING CONCERN

TT Electronics plc Annual Report and Accounts 2022 73

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

NON-FINANCIAL

INFORMATION

STATEMENT

OUR APPROACH

AND KEY POLICIES

OUTCOMES

IN 2022

FURTHER

INFORMATION

ENVIRONMENTAL MATTERS

Stakeholders

impacted:

Employees,

customers

and suppliers,

community,

investors

Our purpose statement is linked to the

development of our internal culture and

to what we do for our customers.

All suppliers receive our policy on social

and environmental practices

Key policies:

Statement of Values and Business

Ethics Code.

Health, Safety and Environmental Policy.

Corporate and Social Responsibilities –

Supplier Expectations policy

Investment in R&D at 3.7 per cent of

revenue in our product businesses

tobring new and improved products

tomarket.

Target of 50% reduction in Scope 1 & 2

emissions achieved in 2022

Data collection capabilities expanded

toinclude Scope 3 indirect emissions

11 sites have switched to renewable

energy tariffs

AA rating achieved in 2022 MSCI ESG

Ratings assessment

See Our strategy

onpages 20 to 21

See Our people,

environment and

communities on

pages 38 to 62

See Environment

onpages 50 to 60

See Principal risks

and uncertainties

on pages 69 to 72

SOCIAL MATTERS

Stakeholders

impacted:

Employees,

community

We are committed to having a positive

impact on the world around us through

our products, the way we do business and

by reducing our environmental footprint.

Key policies:

Statement of Values and Business Ethics

Code.

Community and Charity Support, Our

Guiding Principles.

Health, Safety and Environmental Policy.

Many of our employees volunteer to

develop local STEM partnerships to

promote careers in electronics and

relatedfields.

We run summer internship programmes,

UK graduate programmes and young and

mature apprenticeships.

Our “Hours for giving” programme enables

employees to take five hours’ paid leave

per year to support local causes. In 2022

more than 3,600 hours were taken under

the programme.

See Our people,

environment and

communities on

pages 38 to 62

See Principal risks

and uncertainties

on pages 69 to 72

Our non-financial information statement is set out below in compliance with Sections 414CA

and 414CB of the Companies Act 2006. It is intended to guide our stakeholders to where relevant

non-financial information can be found in this Annual Report and on our website.

TT Electronics plc Annual Report and Accounts 202274

STRATEGIC REPORT | NON-FINANCIAL INFORMATION STATEMENT

OUR APPROACH

AND KEY POLICIES

OUTCOMES

IN 2022

FURTHER

INFORMATION

EMPLOYEES

Stakeholders

impacted:

Employees

We strive to keep our employees healthy

and safe, give them a sense of pride and

belonging, and empower them to think big.

Key policies:

The TT Way values.

Statement of Values and Business Ethics

Code.

Health, Safety and Environmental Policy.

ED&I policy and roadmap.

Whistleblower Policy.

Gender Pay Gap Report.

Employee assistance programme

Two three-day lost-time health and safety

incidents.

A gender balanced permanent workforce

with 53 per cent women and 47 per cent

men at 31 December 2022.

ED&I 101 training for all employees

ED&I policy for the Board introduced

TT Women’s Leadership Programme

launched

BE Inspired recognition scheme.

New HSE Training Academy launched

26 out of 28 sites achieved zero harm

See Our people

onpages 38 to 49

See Annual Report

on Remuneration

on pages 122 to 135

See Principal risks

and uncertainties

on pages 69 to 72

RESPECT FOR HUMAN RIGHTS

Stakeholders

impacted:

Employees,

customers

and suppliers,

community

Our Human Rights Code is taken from the

industry standard (Responsible Business

Alliance Code of Conduct) and covers

expected standards for the treatment of all

workers associated with TT. The Code is

supported by our Modern Slavery Policy.

Key policies:

Statement of Values and Business Ethics

Code.

Modern Slavery Policy.

Human Rights Code

No human rights violations have been

identified during 2022.

We reaffirm annually our commitment to

opposing slavery through the publication

of our Modern Slavery Statement.

See Our people,

environment and

communities on

pages 38 to 62

ANTI-CORRUPTION AND ANTI-BRIBERY

Stakeholders

impacted:

Employees,

customers

and suppliers,

community,

investors

We do not tolerate fraud, corrupt practices

or behaviour not in line with our standards.

We have one ethical standard worldwide

which seeks to create an environment

where our business can flourish within

an appropriate compliance and risk

management framework and in line with

our TT Way values.

Key policies:

Statement of Values and Business Ethics

Code.

Whistleblower Policy.

Mandatory ethics training is provided for

relevant employees on an annual basis.

Any ethical concerns can be reported

to management or to our anonymous

whistleblower reporting facility. Reports

are investigated in detail and any

significant concerns are reported to the

Audit Committee.

No fines, penalties or settlements for

corruption reported in 2022.

See Our people,

environment and

communities on

pages 38 to 62

See Principal risks

and uncertainties

on pages 69 to 72

1 Documents are on the TT Electronics website (www.ttelectronics.com).

2 Group KPIs – see pages 34 to 35 for more information.

The table above corresponds to our key stakeholder groups set out on pages 36 to 37. These stakeholder groups are key to

the long-term sustainability of our business and inform the Board’s engagement activities. The Strategic report also includes

adescription of our business model (see pages 12 to 13), our principal risks and how we manage them (see pages 69 to 72)

andour KPIs, including our non-financial KPIs, (see pages 34 to 35) and the reasons why they are important.

The 2022 Strategic report, from pages IFC to 75, has been reviewed and was approved by the Board of Directors on 7 March 2023.

Richard Tyson Mark Hoad

Chief Executive Officer Chief Financial Officer

TT Electronics plc Annual Report and Accounts 2022 75

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

GOVERNANCE AT A GLANCE

A SNAPSHOT OF

OUR LEADERSHIP

BOARD STATISTICS

Board attendance (%)

100

NED independence (%)*

100

Female representation (%)

Site engagement activities

* excluding Chairman

BOARD DIVERSITY – GENDER

Our Board split

3 – Women

5 – Men

BOARD COMPOSITION

8 Board members

1 – Independent Non-executive

Chairman

2 – Executive Directors

5 – Independent Non-executive Directors

BOARD TENURE IN YEARS

Warren Tucker

Jack Boyer

Alison Wood

Anne Thorburn

Wendy McMillan

Michael Ord

<1 year

SKILLS AND EXPERTISE

8 7

Strategy/Growth M&A Aerospace and

defence sector

Medical sector

3 3

Operations/

Supply chain

Financial

management

Investor relations Talent and

succession

TT Electronics plc Annual Report and Accounts 202276

STRATEGIC REPORT | BOARD OF DIRECTORS AND COMPANY SECRETARY

LEADERSHIP STRUCTURE

Research &

Development

HSE

Business Development

Sustainability

Operations

Supply Chain

Audit

Committee

report on

page 95

Nominations

Committee

report on

page 90

Remuneration

Committee

report on

page 101

Risk Committee

Provides a framework for

managingrisks

Monitors risk appetite and

exposure through regular reviews

ofprincipalrisks

Reviews the effectiveness of risk

management processes and controls

Provides an appropriate level

of reporting on the status of

riskmanagement

Assesses wider emerging risks

People, Social,

Environmental and Ethics

Committee

Health and safety

Environmental

Human Resources

Employee engagement

withthe Board

Local communities

Ethics

Read more on page 88

Diversity & Inclusion Committee

Reviews and develops Equality,

Diversity and Inclusion (ED&I)

Policyand strategic priorities

Provides an ED&I framework

Information-sharing across the

business units

Disclosure Committee

Reviews potential

existence of and manages

the disclosure of

insideinformation

Maintains project

insiderlists

Senior Leadership Team

Reviews and discusses key strategic

and operational matters

Information-sharing between a wider

group of senior executives

Considers and scrutinises cross-

divisional topics

Board

Chief Financial OfficerChief Executive Officer

Executive Leadership Team

Reviews business performance and agrees and

implements any actions asnecessary

Responsible for monitoring and driving delivery

of the Group’s key strategic priorities

Acts as a forum to raise and debate significant

operational issues

Councils

Delegation

Reporting

TT Electronics plc Annual Report and Accounts 2022 77

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

A BLEND OF SKILLS AND EXPERIENCE

THE RIGHT TEAM

P RI

BOARD ATTENDANCE 2022

Attendance 2022 Board

Audit

Committee

Nominations

Committee

Remuneration

Committee

Warren Tucker 7 of 7 4 of 4 4 of 4

Richard Tyson 7 of 7

Mark Hoad 7 of 7

Jack Boyer 7 of 7 3 of 4 4 of 4 3 of 4

Alison Wood 7 of 7 4 of 4 4 of 4 4 of 4

Anne Thorburn 7 of 7 4 of 4 4 of 4

Mark Hoad

Chief Financial Officer

Joined: 2015

Current external appointments:

– Non-executive director of De La Rue

plc (UK Listed)

Relevant skills and experience:

– Strategy/Growth

– Leadership/Management

– Financial Management

– International Business

– Restructuring

– Transformation

– M&A/Financing

– Equity and Debt Capital Markets

– Investor Relations

– Risk Management

– Aerospace & Defence Sector

Past appointments:

– Group finance director of BBA

Aviationplc

Warren Tucker

Chairman

Joined: 2020

Current external appointments:

– Non-executive director and chair of

theaudit committee of Tate & Lyle plc

(UK Listed)

– Non-executive director and chair of

the audit committee of BCP V Modular

Services Holdings Limited (operating

globally as Modulaire)

– Trustee on the board of Magna

Learning Partnership

Relevant skills and experience:

– Strategy/Growth

– M&A/Financing

– Equity and debt Capital Markets

– Financial and Risk Management

– International Business

– Manufacturing/Engineering

– Operations/Supply Chain

– Aerospace & Defence Sector

– Investor Relations

Past appointments:

– Non-executive director of Reckitt

Benckiser Group plc and the Foreign,

Commonwealth and Development

Office

– Chief financial officer of Cobham plc

Richard Tyson

Chief Executive Officer

Joined: 2014

Current external appointments:

– Non-executive director of Videndum

plc (UK Listed)

– Governor of St Swithuns’ Independent

School for Girls in Hampshire

Relevant skills and experience:

– Leadership/Management

– M&A/Integration

– Strategy/Growth

– Operational Excellence

– Supply Chain

– Manufacturing/Engineering

– International Business

– Product Technology

– Risk Management

– Aerospace & Defence Sector

– Investor Relations

Past appointments:

– Member of the Executive Committee

and President of the Aerospace &

Security division of Cobham plc

TT Electronics plc Annual Report and Accounts 202278

STRATEGIC REPORT | BOARD OF DIRECTORS AND COMPANY SECRETARY

Nominations Committee

Remuneration Committee

Risk Committee

Audit Committee

People, Social, Environmental

and Ethics (PSEE) Committee

Chair of the Committee

OUR COMMITTEE KEY

Jack Boyer OBE

Senior Independent

Non-executive Director

Joined: 2016

Current external appointments:

– Non-executive director of Ricardo plc

(UK listed)

– Chair of the University of Bristol

– Non-executive director of the

Department of Education

– Member of the Board of the Henry

Royce Institute for Advanced Materials

Relevant skills and experience:

– Strategy/Growth

– Corporate Finance and Investment

– M&A

– Engineering/Technology/Innovation

– International Business

– Manufacturing/Engineering

– Product Technology

– Operations/Supply Chain

– Aerospace & Defence Sector

– Medical Sector

Past appointments:

– Non-executive director of Elcogen

Group plc, Mitie Group plc and

Lairdplc

– Chairman of Ilika plc, AIM-listed Seeing

Machines Limited and the Academies

Enterprise Trust

Alison Wood

Independent Non-executive Director

Joined: 2016

Current external appointments:

– Non-executive chair of Galliford Try

Holdings plc (UK listed)

– Senior independent director and chair

of remuneration committee of Oxford

Instruments plc (UK Listed)

– Non-executive director of British

Standards Institution (BSI)

Relevant skills and experience:

– Strategy/Growth

– Remuneration Policy-Setting

– M&A/Financing

– International Business

– Regulatory

– Talent and Succession

– Risk Management

– Investor Relations

– Aerospace & Defence Sector

Past appointments:

– Global director corporate development

& strategy for National Grid plc

– Group strategic development director

for BAE Systems plc

– Non-executive director of Capricorn

Energy plc, Cobham plc, e2v

technologies plc, BTG plc, THUS plc

and Costain Group plc

Anne Thorburn

Independent Non-executive Director

Joined: 2019

Current external appointments:

– Senior independent director and chair

of the Audit Committee of Diploma

PLC (UK Listed)

– Board member and chair of the audit

committee of SPT LabTech Limited

Relevant skills and experience:

– Strategy/Growth

– Financial Management

– Risk Management

– Audit and Internal Control

– M&A/Financing

– International Business

– Operations/Supply Chain

– Medical and Industrial Sectors

Past appointments:

– Chief financial officer of Exova Group

plc

– Group finance director of British

Polythene Industries plc

– Non-executive director of BTG plc

TT Electronics plc Annual Report and Accounts 2022 79

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Lynton Boardman

General Counsel and Company

Secretary

Joined: 2012

Relevant skills and experience:

– A qualified solicitor, Lynton has many

years of experience as general counsel

and company secretary in international

companies listed on the London Stock

Exchange. His expertise includes

corporate law and governance,

international operations and M&A.

Past appointments:

– Solicitor with Simmons & Simmons,

Macfarlanes and Burges Salmon LLP

– Head of legal (Europe, Middle East and

Africa) at Syngenta Crop Protection

– General counsel and company

secretary of QinetiQ Group plc

N R

Wendy McMillan

Independent Non-executive Director

Joined: 2023

Current external appointments:

– Chief executive of Safety Sector,

Halma plc

Relevant skills and experience:

– Strategy/Growth

– M&A/Financing

– Integration

– Corporate Finance & Investment

– Technology/Innovation

– Transformation

– Operational Excellence

– International Business

– Talent/Succession

– Leadership/Management

Past appointments:

– Global Commercial Finance Director

of Dyson

– Member of Executive Committee and

Managing Director for Arqiva

– Independent non-executive director

ofthe Industry and Parliament Trust

Michael Ord

Independent Non-executive Director

Joined: 2023

Current external appointments:

– Group Chief Executive of Chemring plc

(UK Listed)

Relevant skills and experience:

– Strategy/Growth

– Transformation

– Technology/Innovation

– Manufacturing/Engineering

– Product Technology

– Risk Management

– Leadership/Management

– Aerospace & Defence sector

Past appointments:

– Managing director of business units

ofBAE Systems plc

– Trustee of The Education & Training

Foundation

TT Electronics plc Annual Report and Accounts 202280

STRATEGIC REPORT | BOARD OF DIRECTORS AND COMPANY SECRETARY

CHAIRMAN’S INTRODUCTION TO GOVERNANCE

GOVERNANCE

SUPPORTING OUR

GROWTH AMBITIONS

A governance platform for enhanced

strategic decision-making

In 2022, the Group was faced with

navigating a path through a series of

unprecedented business challenges

(particularly supply chain interruptions)

and yet delivered both record order book

expansion and excellent revenue and

profit growth. Our robust governance

structures have provided a solid platform

to support our business recovery and

growth ambitions. This has allowed us to

devote more board time to core strategic

priorities for the Group and address key

operational imperatives in areas such

as Health and Safety, Sustainability and

ED&I. We have also focused our attention

on ensuring that TT’s corporate purpose

and values link effectively to our culture.

A great example of how this has operated

in practice is shown by the way we have

supported our lower paid employees

in 2022 in meeting the challenge of

the “costs of living” crisis by targeted

assistance payments and loan options.

The Strategic Report highlights the key

decisions that the Board has taken in

2022 in driving forward the business,

which are reinforced in the sections on

stakeholder engagement (on page 36),

our approach to people, environment and

communities (on page 38), and our s172

statement (on page 63). These sections

outline the heightened focus on “people”

initiatives throughout the year, whilst also

ensuring that TT’s sustainability agenda

remained at the heart of our thinking. Of

equal importance was the opportunity

taken by the Board at the start of the year

to conduct a detailed review of the core

growth dynamics of TT’s operations,

including whether there were better ways

of demonstrating the underlying value.

This exercise led the Board to conclude

that TT has positioned itself in markets

with very good structural demand

Content Page

Chairman’s introduction 81

Governance at a glance 76

The Board 78

Leadership and Company purpose

Nominations Committee report

Audit Committee report

Remuneration Committee report

101

Other statutory disclosures 136

WHAT’S INSIDE

TT Electronics plc Annual Report and Accounts 2022 81

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

drivers, having significant organic and

inorganic opportunities for the business

to pursue over the medium term. The

Board has put in place measures to

monitor the delivery of this organic

potential in 2022, which revealed strong

progress inyear, as demonstrated by

the excellent organic growth delivered

across the Group at year end. In addition,

the Board has progressed the initiatives

set out below in year to promote TT’s

growth agenda:

– Continued strengthening of the capital

structure, through the refinancing of

the Group RCF, now extended for a

further four years, to complement

the US Private Placement transaction

delivered at the end of 2021 (as

described in more detail in the

Strategic Report on page 64);

– The de-risking of our UK Pension

Scheme obligations, with the launch

of the bulk annuity insurance buy-in

transaction for the UK Defined Benefit

scheme, working with the scheme

trustees and advisers to achieve

transaction execution in November

2022;

– Completion of the Ferranti Power

and Control acquisition in January

2022, coupled with a targeted focus

on expanding operational capacity at

key sites including Plano, Kansas City,

Suzhou and Kuantan (as described in

more detail in the Strategic Report on

pages 27 and 31); and

– The increased focus on talent

management and succession

planning (as described in more detail

on this page and in the Nominations

Committee Report on page 92).

Board dynamics – promoting diversity

TT has continued to benefit from an

extended period of Board continuity,

with no changes having been made in

the composition of the Board and its

principal Committees during 2022. The

honest, open and collegiate way in which

the Board operates lies at the heart of

our governance structures and how we

operate as a collective group.

Throughout 2022, we have had

two women on the Board, who also

chaired our Audit and Remuneration

Committees and represented 50% of our

Non-executive Directors. Nevertheless,

following the proposed changes to the

UK Listing Rules in 2023 to promote

ED&I , the Nominations Committee

embarked on a recruitment exercise to

appoint one or more additional NEDs,

with a key consideration being gender

and ethnic diversity at the Board level in

the context of these new Listing Rules

requirements. This recruitment exercise

culminated in the appointment of Wendy

McMillan and Mick Ord to the Board in

January 2023, which takes the female

composition of our Board to 37.5%. It is

my belief that the appointment of Wendy

and Mick to the Board, both of whom

have exceptional track records with blue

chip UK listed companies, enhances the

diversity perspective at the Board level

and provides TT with a wider range of

experience and capability in sectors that

are close to TT’s business operations.

For more detail on the approach we are

taking to increasing diversity at the Board

level, and TT’s path to compliance with

the new Listing Rues requirements – see

page 92 of the Nominations Committee

report.

Enhanced stakeholder engagement

One of the main conclusions identified

from last year’s external Board

evaluation exercise was the need to

maintain the strong focus on stakeholder

engagement in 2022. Aspost-COVID

travel restrictions to TT’s principal sites

(outside China) were lifted in 2022,

the Board took steps to engage with

awide range of stakeholder groups,

inan attempt to better understand the

impact of external macro-economic

factors on the Group’s core business

and ensure the effective linkage of the

Group’s culture and purpose to the

company’s strategic plan. Wherever

possible, meetings were held face to

face, and with a range of important

stakeholder groups, including TT staff

and senior management, customers

andshareholder representatives. These

key stakeholder events in the 2022 Board

schedule included the following:

– A Board visit to the Oldham facility,

to meet senior management and

staff working in the Ferranti business

acquired in January 2022;

– A Board visit to one of GMS Suzhou’s

key customers, Waters, including a

site tour and Q&A session with senior

management, which provided a deep

insight into TT’s technology and supply

chain positioning;

– A NED visit to TT’s Minneapolis

and Cleveland facilities in the US,

attended by the Chairman and

Chair of the Audit Committee, to

meet senior management/staff and

better understand TT’s customer

opportunities in the value-added

manufacturing services and medical/

power solutions sectors;

– A NED “pulse call” with the GMS

Suzhou senior management team,

conducted by video conference, to

gain a greater insight into operations

atTT’s largest Asia-based facility;

– Various face-to-face sessions

conducted by the NEDs throughout the

year with site leaders and divisional/

functional heads to discuss business

dynamics and operational challenges

(through Board dinners andad hoc

meetings);

– Face-to-face dialogue with key

advisers (including TT’s brokers

and financial advisers) on key areas

of strategic planning and investor

relations, together with targeted

engagement with investors involving

(at separate times) the CEO, CFO,

Chairman, Audit Committee Chair

andRemuneration Committee Chair

(see page 36 for more detail); and

– As part of the annual Board cycle,

the Chairman met with a number

of shareholders who accepted his

invitation to discuss TT’s progress.

KEY GOVERNANCE HIGHLIGHTS FOR 2022

– Increased focus on staff and customer engagement, prioritising face-

to-face meetings and NED site visits, in support of delivering operational

improvement, talent/succession progression and enhanced decision-

making, as well as strengthening the linkage of TT’s purpose and values to

Group strategy

– Review and confirmation of TT’s strategic direction, focusing on the pursuit

of revenue and profit growth, talent/succession and prioritisation of key

initiatives, including ED&I, Sustainability and People-based programmes

– Building on the outputs of the 2021 external Board evaluation exercise, steps

were taken to further promote diversity at the Board level and across the

wider Group, reinforcing TT’s coherent and stable governance structures

– Following a thorough external recruitment exercise in 2022, Wendy

McMillan and Mick Ord were appointed as new Non-executive Directors

inJanuary 2023.

TT Electronics plc Annual Report and Accounts 202282

STRATEGIC REPORT | CHAIRMAN’S INTRODUCTION TO GOVERNANCE

UK CORPORATE GOVERNANCE CODE

COMPLIANCE STATEMENT

1. Board leadership and Company purpose Read more on page

A. Board effectiveness, long-term value and sustainability 6-11, 81-83

B. Purpose, values, strategy and culture 20-21, 40-42, 85

C. Governance framework 77

D. Stakeholder engagement 36-37

E. Workforce policies and practices 38-49

2. Division of responsibilities

F. Roles and responsibilities 87-88

G. Leadership structure 77

H. External appointments 89

I. Board policies and processes 87-89

3. Composition, succession and evaluation

J. Appointments, succession planning and ED&I 90-91

K. Skills, experience, knowledge and length of service 76

L. Performance evaluation 93

4. Audit, risk and internal control

M. Financial reporting, internal and external audit functions 95, 97, 98

N. Fair, balanced and understandable 98

O. Internal controls and risk management 66-68

Remuneration

P. Policies and practices 106 -111

Q. Directors’ Remuneration Policy table 114 -120

R. Remuneration outcomes and performance targets 122-129

The Board believes that these meetings

have been important in setting the

Group’s strategic direction, across

various regions (with different cultural

approaches), reflecting factors such

as cost inflation pressures, continued

COVID business interruption (particularly

in Asia), staff retention/hiring challenges

and the global “cost of living” crisis,

without losing sight of TT’s corporate

purpose. Some examples of how these

factors have impacted the Board’s

decision-making in 2022 are set out

in our s172 Statement on page 63 and

elsewhere throughout the Strategic

Report. In addition, further information

on our employee engagement

framework, including the role of our SID

in managing feedback on stakeholder

engagement with the Board, is set out

onpage 42.

UK Corporate Governance Code

compliance

TT is committed to achieving and

maintaining the highest standards of

corporate governance. Throughout

the year, the Group was compliant

with all of the relevant provisions set

Conclusion

In a year of unprecedented external

challenges, TT has once again

demonstrated its resilience and

adaptability in delivering for our

customers, supporting our talented

group of employees and achieving a

strong set of financial results. The Board

has played a key role in setting the tone

and building upon our strong culture to

give TT the best possible opportunity

to deliver sustainable future growth,

focusing investment on key priority

areas. Our embedded governance

structures, coupled with the clear

objective of delivering improvement

in areas such as ED&I, stakeholder

engagement and sustainability, have

been at the heart of our strategic

positioning throughout the past year.

I am grateful to my Board colleagues,

the executive team and our committed

group of outstanding employees for

delivering another year of record order

book growth and strategic progress,

which (supported by our new Board

colleagues) creates a solid foundation

forthe year ahead.

out in the UK Corporate Governance

Code 2018 (the Code), other than

provision 38 in aligning our Executive

Directors’ pension payments with the

wider workforce, for which the Group

became compliant on 1January 2023.

The future Remuneration Policy, to be

put to a shareholder vote at the 2023

AGM, seeks to align both existing and

future Executive Director pension

provision to those available to the

wider UK workforce. The reason for

this non-compliance with provision 38

of the Code is that the Company has

existing contractual agreements with

the Executive Directors at a different rate

to the wider workforce which required

adjustment over time, the Executive

Directors having previously agreed that

their pension provision will align to the

wider UK workforce from 1 January

2023. The Code is available to view at

the website of the Financial Reporting

Council, www.frc.org.uk. The table below

sets out where details and explanations

of the application of the principles of

corporate governance can be found in

this annual report.

TT Electronics plc Annual Report and Accounts 2022 83

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

LEADERSHIP AND COMPANY PURPOSE

BOARD

ACTIVITIES

During the financial year

the Board discussed and

implemented the following

keyactions:

STRATEGY

– Managing growth and addressing challenges raised

by global geopolitical events

– Strategic planning for future growth

– Site rationalisation activity – completion of transfer

of Lutterworth operations to Bedlington and Covina

operations to Kansas, sourcing a new site for the

transfer of Ferranti operations, establishing a new site

in Plano, USA

– Development of divisional strategic growth plans

– Divisional Technology Roadmaps

– Customer site visits

ESG/ENGAGEMENT

– Sustainability planning and progress (including

continued development of our Sustainability Council,

and our global dashboards); MSCI AA rating

– Site visits – Oldham, Cleveland and Minneapolis

– Employee engagement at sites visited and a video

conference engagement session with Suzhou

leadership team

– M&A integration activity (Ferranti Power and Control)

– Internal audit review on Sustainability

PEOPLE

– Recruitment and retention processes

– ED&I planning/development at board and senior

management level, including Board-level policy

– Workforce engagement on remuneration and wider

employee engagement activities

– Cost of living initiatives

– Talent management and succession planning

– Regular IR updates on share price progression and

movements in major shareholdings

– Investor feedback analysis

FINANCING

– Refinancing of the Revolving Credit Facility

– Regular review of existing and emerging financial risks

– Pension buy-in review

– Tax/Treasury reviews

OPERATIONS

– Customer engagement (i.e. record order book/deeper

customer relationships and opportunity pipeline)

– Board-level CRM and Net Promoter Score review

– Contract wins and commercial bids at each meeting

– Review of supply chain challenges

– Global geopolitical and fiscal events

TT Electronics plc Annual Report and Accounts 202284

STRATEGIC REPORT | LEADERSHIP AND COMPANY PURPOSE

COMPANY PURPOSE, STRATEGY

AND VALUES

The Board’s main role is to provide

oversight and leadership of the

Group, to determine and ensure the

implementation of the Group’s strategy,

and to maintain the highest standards

of corporate governance. Underpinning

these aspects of the Board’s

responsibilities lies the principal aim

of ensuring the sustainable, long-term

success of the Company.

The Board understands the relationship

between the Company’s purpose,

strategy and values and their

importance to the long-term success of

the Group. Along with strategy, purpose

and culture are regular discussion

points atBoardmeetings.

The Company’s purpose statement is:

We solve technology challenges for a

sustainable world.

The Board considers that this purpose

isan appropriate reflection of the

Group’s culture, strategic direction

andimpact onthe world.

RELATIONSHIP BETWEEN PURPOSE,

STRATEGY AND VALUES

WHY?

Our corporate purpose describes why we do what we do and aligns the whole

of the Company.

WHAT?

Our strategy defines what we do for both our employees and our wider

stakeholders. The Company’s strategy is clearly defined and regularly

reviewed by the Board. The multi-year strategic plan is discussed in detail

and is approved annually, based on the Company’s activities; its progress

ondelivering strategic priorities; and challenges identified within the business

and in the wider macroeconomic environment.

HOW?

The Company’s values, culture and behaviours drive how we execute our

relationships with internal and external stakeholders and our strategic vision.

Our TT Way values (see page 86) describe our culture and set out how we

expect our employees, from the top down, to conduct business and act with

integrity, transparency and professionalism.

Good governance sets the tone for the culture of TT. The Board and Executive

Directors strive to promote an atmosphere of openness and trust throughout

the Group.

TT Electronics plc Annual Report and Accounts 2022 85

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

BOARD OVERSIGHT OF CULTURE MATTERS – OUR TT WAY VALUES

WE DO THE RIGHT THING

From ethics within our workforce and

safety matters, to consideration of

our wider impact on the environment

and our communities, we pride

ourselves on doing the right thing

and encourage others to do the

same. Our customers benefit from

our focus on providing cleaner,

smarter and healthier solutions

totechnologychallenges.

– Statement of Values and Business Ethics Code

– Whistleblowing reports

– Safety metrics

– Employee support during cost-of-living crisis

– Integration of ESG and sustainability matters into decision-making and

business practices as a strategic priority

– Net Zero Scope 1 & 2 target by 2035 and other environmental impact

reduction work

– Anti-bribery and corruption policies

– Modern Slavery policy

– Global supplier standards for social and environmental practices

– Human Rights Code

– Gender Pay Gap reports

– ED&I Policy

WE BRING OUT THE BEST IN EACH OTHER

Our people are our greatest

asset. Weknow that supporting

development, promoting wellbeing,

ED&I and collaborating with

our colleagues leads to better

performance for our people

andourbusiness.

– Leadership programmes and conferences

– Succession planning/talent reviews

– Remuneration schemes and employee benefits

– Cross-divisional working and information sharing

– ED&I initiatives including our Women in Leadership programme, strong

focus on LGBTQ+ initiatives and awareness programmes, for example,

BlackHistoryMonth

WE ACHIEVE MORE TOGETHER

Throughout the business, our people

areencouraged to share their ideas

and feed back to improve the way we

work. Our culture of openness and

transparency is demonstrated through

the reporting systems we have in

place and the two-way conversations

we have with our employees, our

customers and oursuppliers.

– Best practice sharing across the Group

– Ensuring transparency in reporting systems

– Employee engagement survey (next event scheduled for 2023)

– Voice of the Customer surveys

– SID (Jack Boyer) reports back from the PSEE Committee to the Board

onstakeholder engagement processes

– Group-wide incentives

TT Electronics plc Annual Report and Accounts 202286

STRATEGIC REPORT | LEADERSHIP AND COMPANY PURPOSE

LEADERSHIP

WE CHAMPION EXPERTISE

Our talented team of design,

engineering and manufacturing

experts operate in a supportive

culture that champions knowledge,

skills, innovation, problem solving

and service. We cannot achieve our

purpose without passionate support

for technical expertise in the business

– from R&D and manufacturing to

marketing andsales.

– Focus on capabilities – power, connectivity, sensing, and manufacturing

andengineering

– R&D investment as a percentage of sales target

– Targeted and complementary M&A to expand technology capabilities

– BE Inspired awards for individual achievements

– Focus on training and apprenticeship initiatives

WE GET THE JOB DONE, WELL

TT’s strong business performance is

an indicator of getting the job done,

but our success is based on a culture

of pride within our organisation to

do the best job we can. From the

boardroom to our manufacturing

sites, decision-making is based on

achieving the best results the TT Way.

– Strategic decisions for long-term success

– Strong capital discipline and financing to ensure continued availability

offunds to invest in the business

– Successful integration of acquisitions

– Customer feedback and Voice of Customer surveys

LEADERSHIP

The Board

Subject to the Company’s Articles of

Association, UK legislation and any

directions given by special resolution,

the Board manages the Company’s

business. The Board has reserved

certain specific matters to itself for

decision. These include financial policy

(including tax and treasury matters)

and policy relating to acquisition

anddisposal.

The Board appoints its members, and

those of its principal Committees,

having received the recommendations

of the Nominations Committee. It

also reviews recommendations of the

Board Committees and the financial

performance and operation of the

Group’s businesses. It regularly reviews

the identification, evaluation and

management of the principal risks faced

by the Group, including emerging risks,

and the effectiveness of the Group’s

system of internal control as set out

onpages 66 to 72.

Board and Committee meetings are

scheduled in line with the Company’s

financial calendar, thereby ensuring that

the latest operating data is available for

review and sufficient time and focus can

be given to matters under consideration.

During the year, there were seven

principal Board meetings on scheduled

dates, for which full notice was given.

Three additional meetings were held

in the year to progress the Board’s

work on strategic planning, customer

bid approvals and authorisation of the

Pension Scheme buy-in transaction. The

Board has held two principal meetings

to date during 2023. The NEDs meet,

without the Executive Directors present,

at the end of each scheduled Board

meeting, as a standing agenda item.

During 2022, there was a sense of

returning to “business as usual”. The

Board returned to face-to-face meetings

at our offices and sites around the

world, but we have continued to enjoy

the benefits of online meetings and

communicating with our colleagues

and advisers across the globe without

the environmental costs of travelling

forevery meeting.

The main events in the Board calendar

are the approval of the half-year and

full-year results, the Board site visits,

thereview of the multi-year strategic plan

and the approval of the budget towards

the end of the year. At each meeting

during 2022 the Board discussed

strategic issues (principally focused

on key site rationalisation projects, the

Divisional opportunity pipeline, climate-

related risk and opportunities, and the

status of integration activity on recent

acquisitions) together with operational,

financial, human resources, legal,

governance and investor relations items.

The Directors reviewed, throughout

the year, the opportunities and risks

tothe future success of the business

by receiving and discussing information

from both internal and external sources

regarding the issues affecting the

business, the wider industry and the

macroeconomic environment. The non-

standard areas of focus for the Board

in2022 are shown on page 84.

TT Electronics plc Annual Report and Accounts 2022 87

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

DIVISION OF RESPONSIBILITIES

Chairman, Chief Executive Officer and Senior Independent Director

The division of responsibilities between the Chairman and the Chief Executive Officer has been defined, formalised

inwriting, andapproved by the Board:

Roles and responsibilities

Chairman Chief Executive Officer Senior Independent Director

Maintains responsibility for:

– The leadership and effectiveness

of the Board, and for setting

itsagenda;

– Ensuring all Directors receive

accurate, timely and clear

information on financial, business

and corporate matters so they

can participate in Board decisions

effectively;

– Facilitating the effective

contribution of NEDs;

– Ensuring constructive relations

between Executive andNon-

executiveDirectors;

– Ensuring effective communication

with shareholders; and

– Ensuring the performance of

individual Directors, the Board as

a whole, and its Committees are

evaluated at least once a year.

Maintains responsibility for:

– The operations of the Group;

– Developing Group objectives and

strategy, having regard to the Group’s

responsibilities to its shareholders,

customers, employees and other

stakeholders;

– Successful implementation and

achievement of strategies and

objectives, as approved by the Board;

– Managing the Group’s risk profile,

including its HS&E/Sustainability

performance;

– Ensuring the Group’s businesses

are managed in line with strategy

and approved business plans, and

complying with applicable legislation

and Grouppolicy;

– Ensuring effective communication

with shareholders; and

– Setting Group human resource

policies, including management

development and succession planning

for the senior management team.

Maintains responsibility for:

– Reviewing the performance of the

Chairman

– Providing a sounding board for the

Chairman on strategic matters/

succession planning

– Supporting the Board on the delivery

of key objectives

– Acting as an intermediary for Board

members and/or an alternative point

of contact for investors (as required)

Leadership structure

Details of TT’s Board of Directors are

set out on pages 78 to 80 of this report.

The leadership structure chart on page

77 provides further information on

how leadership at the Board level is

discharged. Most importantly, the Board

comprises a majority of independent

NEDs, with the division of responsibilities

between the Chairman and Chief

Executive Officer having been clearly

articulated. The Board believes that its

composition, the structure of its principal

Committees and the processes it has in

place to discharge its primary areas of

responsibility, meet the requirements of

“Board Leadership” and “Composition”

under the Code.

The Board has established a number

of Committees, each with its own

delegated authority defined in terms

of reference. The Board reviews

these terms periodically (the last

occasion being in November 2022),

and receives reports and copies of

minutes of Committee meetings.

TheBoard appoints the members of

all principal Board Committees, having

received the recommendations of the

NominationsCommittee.

A NED (Jack Boyer) has been nominated

to be a member of the PSEE Committee

with the purpose of receiving information

about the Company’s engagement with

its key stakeholders. As such, he is the

designated NED for the purposes of

engagement with the workforce under

the Code. This includes the outcomes of

our employee engagement activities as

described on page 42 and sustainability

initiatives, including climate-related risk

described from page 50. The designated

NED on the PSEE Committee reports

this information directly to the Board

following each Committee meeting.

The key activities covered by the PSEE

Committee are described in more detail

in the leadership structure chart on

page77.

TT Electronics plc Annual Report and Accounts 202288

STRATEGIC REPORT | LEADERSHIP AND COMPANY PURPOSE

Directors

All Directors have access to the advice

and services of the Group General

Counsel and Company Secretary and

are offered training to fulfil their role

as Directors, both on appointment

and subsequently. There is an agreed

procedure for any individual Director to

take independent professional advice at

the Company’s expense if they consider

it necessary.

In accordance with the provisions on

conflicts of interest in the Companies

Act 2006, the Company has put in

place procedures for the disclosure

and review of any conflicts, or potential

conflicts, of interest which the Directors

may have, and for the authorisation of

such conflicts by the Board. All new

external appointments taken on by

Directors in 2022 were pre-approved by

the Board before the effective date of

the appointment. In deciding whether to

authorise a conflict or potential conflict,

the Directors must have regard to their

general duties under the Companies Act

2006. The authorisation of any conflict,

and the terms of authorisation, may be

reviewed at any time and, in accordance

with best practice, we conduct a review

of Director conflicts of interest annually.

Each member of the Board, including

the SID, has the right to include items on

the Board agenda or the agenda of the

Committees they sit on.

Rules for the appointment and

replacement of Directors are set out in

the Company’s Articles of Association.

Directors are appointed by the Board on

the recommendation of the Nominations

Committee. Directors may also be

appointed or removed by the Company

by ordinary resolution at a general

meeting of holders of ordinary shares.

The office of a Director shall be vacated

if his or her resignation is requested by all

the other Directors, not being fewer than

three in number. Further details of the

activities of the Nominations Committee

are set out on page 90.

There are no agreements between the

Company and its Directors or employees

providing for compensation for loss of

office or employment that occurs as

a result of a takeover bid except that

provisions of the Company’s share

plans may cause options and awards

granted under such schemes to vest

on takeover, subject to the satisfaction

of any performance conditions. Further

details of the Executive Directors’ service

contracts can be found in the Directors’

Remuneration Policy. Copies of the

Executive Directors’ service contracts

and letters of appointment of the NEDs

are available for inspection by any person

at the Company’s registered office,

during normal business hours on any

weekday (other than public holidays) and

at the AGM from 15 minutes before the

start of the AGM until its conclusion.

The Group maintains Directors’ and

Officers’ Liability insurance. The

Directors of the Company also benefit

from a qualifying third-party indemnity

provision in accordance with Section

234 of the Companies Act 2006 and

the Company’s Articles of Association.

The Company has provided a pension

scheme indemnity within the meaning of

Section 235 of the Companies Act 2006

to Directors of associated companies.

RELATIONS WITH

SHAREHOLDERS

The full list of engagement activities and

our relations with shareholders during

the year are set out on pages 36 to 37.

GOING CONCERN

The Directors have reviewed the budgets

for 2023 and the projections for 2024

and 2025 developed during the 2022

annual strategic planning cycle. They

have assessed the future funding

requirements of the Group as outlined

on page 73 of this report. Based on

this, the Directors are satisfied that

the Group has adequate resources to

continue in operational existence for

12 months from the date of approval

of these financial statements. For

this reason, they continue to adopt

the going concern basis in preparing

thefinancialstatements.

DIRECTORS’ INTERESTS

The Directors of the Company held interests (directly or

through their connected persons) in the following numbers

of the Company’s ordinary shares of 25 pence each on

1January 2022, 31 December 2022 and 6 March 2023:

The interests of the Directors in the Company’s share options

and Long-Term Incentive Plan are shown in the Directors’

remuneration report on page 129.

6 March

2023 Ordinary

31 December

2022 Ordinary

1 January

2022 Ordinary

Warren Tucker 60,075 60,075 60,075

Richard Tyson 1,006,666 1,006,666 910,454

Mark Hoad 779,446 779,446 711,149

Jack Boyer 95,514 95,514 95,514

Alison Wood – – –

Anne Thorburn 60,000 60,000 60,000

Wendy McMillan – – –

Michael Ord – – –

TT Electronics plc Annual Report and Accounts 2022 89

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

COMPOSITION, SUCCESSION AND EVALUATION

NOMINATIONS

COMMITTEE

REPORT

PRINCIPAL RESPONSIBILITIES

– Regularly review the structure, size and

composition of the Board as a whole

and make recommendations forany

changes to the Board.

– Review the overall leadership needs

of the organisation by considering

succession planning for the NEDs

(having due regard to their length

of service), Executive Directors and

members of the ELT, and make

recommendations to the Board.

– Manage the search for, and selection

of, suitable candidates for the

appointment of replacement or

additional Directors and nominate

candidates for the approval of

the Board.

MEMBERSHIP

Warren Tucker (Chair)

Jack Boyer

Alison Wood

Anne Thorburn

Wendy McMillan (joined January 2023)

Mick Ord (joined January 2023)

CONTENTS

Principal responsibilities Page 90

Key activities during the year Page 90

Q&A with the Chair Page 90

2022 review Page 91

Board composition Page 92

Equality, diversity and inclusion Page 92

Board and Committee performance

evaluation Page 93

2023 Board objectives Page 94

Directors’ performance evaluation Page 94

Q&A

What prompted the Committee

to launch a NED recruitment

exercise in 2022?

As we highlighted in last year’s

annual report, the 2021 Board

evaluation exercise did not identify

an immediate need to launch a

recruitment exercise for additional

Board members; however, it was

agreed that this issue would

be kept under review by the

Nominations Committee in 2022,

particularly given our stated goal

of maintaining a diverse range

of inputs into Board decision

making. During the past year,

the Committee has continued to

reflect on whether the existing

structure of the Board is likely

to meet TT’s future needs, with

reference to the Group’s core areas

of operations and the anticipated

skill sets required in the coming

years. Based on this analysis,

together with the publication of

the new FCA Listing Rule 9.8.6(9)

on board diversity and the fact

that two of our NEDs are now in

their seventh year as Directors

KEY ACTIVITIES DURING

THE YEAR

– No changes were made to the

composition of the Board or

Committees during 2022.

– Detailed review of the new FCA Listing

Rules requirements for Board and

senior management ED&I targets.

– First-time adoption of a Board diversity

policy (to complement TT’s existing

Group diversity policy).

– NED recruitment process initiated,

factoring in diversity considerations,

culminating in the appointment of

Wendy McMillan and Mick Ord in

January 2023.

– Succession planning review

conducted at Executive Director and

ELT levels (plus a management layer

below).

– In-depth review of talent (“high

potential” and talent gaps) at a senior

management level.

TT Electronics plc Annual Report and Accounts 202290

STRATEGIC REPORT | NOMINATIONS COMMITTEE REPORT

(including the associated transition

process), it was decided to initiate

an externally facilitated recruitment

exercise in 2022, for one or more

NEDs. This process represented

thekey priority for the Committee

inthe past year.

What did the Committee learn from

this NED recruitment exercise?

Following the publication of LR 9.8.6(9),

the Committee reviewed the extent

to which listed companies (operating

both within and outside the FTSE

350) already met these new FCA

requirements, based on the most

current information available. This

analysis concluded that, whereas

many FTSE 350 companies have

taken significant steps in recent years

to increase the level of female and

ethnic minority board representation,

this has not been the case for FTSE

SmallCap companies, which are

generally less diverse in terms of board

composition and often competing to

access a smaller talent pool. Following

on from last year’s Board evaluation

exercise, it was well understood that

TT’s female representation on the

Board stood at 33 per cent, which was

notably higher than for many FTSE

SmallCap comparator companies.

Nevertheless, the Committee agreed

that 2022 would be an opportune time

to reconsider the diversity profile of

the Board and as a result, an external

recruitment firm was appointed to

assess TT’s Board-level requirements

for the future and develop a diverse list

of potential NED candidates.

How far has TT progressed in terms

of achieving compliance with the new

Listing Rules requirements on ED&I?

The conclusion of this NED

recruitment exercise in 2022 (which is

described in more detail in the section

below) resulted in the appointment

of Wendy McMillan and Mick Ord as

new NEDs and we were delighted

to welcome them both as new

members of the Board in January

2023. This means that the level of

female representation on the TT Board

currently stands at 37.5 per cent, which

is marginally below the FCA stated

target of 40 per cent. We also adopted

a Board-level diversity policy for the

first time in 2022 (to complement TT’s

existing Group-level diversity policy)

and have provided numerical data on

the gender diversity profile of the Board

and senior management in the table

set out on page 49.

We recognise that to date, we have

not met the FCA’s stated future target

that at least one member of the

Board should come from an ethnic

minority background; nor are the

positions of CEO, CFO, Chair or SID

held by a woman. However, each of

the incumbents in these roles have

been in post for a significant period

of time and the positions of Audit and

Remuneration Committee Chairs are

both held by women. It is worth noting

that LR 9.8.6(9) only came into force

in 2022 for listed companies having

a financial year beginning on or after

1April; as such, the Committee’s

focus in 2022 has been to meet these

new FCA targets as far as possible,

inadvance of formal implementation

in2023. It is perhaps more important

to recognise that the Committee’s

overall objective in this recruitment

exercise has been to enhance the

Board’s diversity of perspective and

secure NEDs capable of contributing

fully to the strategic debate, with

experience and capability in sectors

that are close to TT’s business

operations. In that sense, we firmly

believe that in Wendy and Mick, we

have secured the best candidates

for the new NED roles, who will help

us significantly in progressing TT’s

strategic development. Nonetheless,

the Committee understands the

intent behind LR 9.8.6(9) and remains

committed to maintaining its focus

on increasing the diversity of thinking/

decision-making at the Board level,

whilst also developing a path to

full compliance with LR 9.8.6(9) in

the future as part ofits succession

planning activities.

2022 REVIEW

The Committee’s main focus in 2022

has been to manage the process for

recruiting one or more new NEDs,

which ultimately led to the appointment

of Wendy McMillan and Mick Ord in

January 2023. The Q&A section above

provides background information on

the data-gathering exercise which led

to the Committee’s decision to launch

a formal recruitment process in 2022.

This decision was taken in the context of

the Committee’s regular review of Board

composition/diversity; the publication

of LR 9.8.6(9) and the fact that two

of our NEDs are now in their seventh

year as Directors (with the associated

transition process during their final years

in office) were additional relevant factors.

The search process was conducted

following the appointment of an external

recruitment firm, Russell Reynolds,

whose expertise was drawn upon in

developing a detailed role specification

and subsequently, a diverse list of

potential NED candidates. There are

noconnections between TT, its directors

and Russell Reynolds that require

disclosure in relation to this recruitment

exercise. The Committee’s strategy was

to leverage the Company’s position as

a purpose-driven organisation, with a

clear commitment to “solving complex

technology challenges for a sustainable

world”, to appeal to a wide range of

candidates from different backgrounds.

Each candidate was assessed against

the agreed role specification, with the

recruitment process being designed to

reduce the perceived risks associated

with appointing individuals from non-

traditional backgrounds, which included

taking references at an earlier stage

(and on a more extensive basis) than is

typically the case. Another key criterion in

the recruitment process was to address

the ways in which each candidate might

contribute to increasing the Board’s

diversity of perspective and add fully

to the strategic debate, based on

experience and skill sets.

The shortlisted group of candidates

were interviewed individually by each of

the NEDs and the CEO. The Committee

retained an open mind at all stages of the

recruitment process as to whether one

or more candidates would ultimately be

offered NED positions with the Company.

As stated in the Q&A section above,

the Committee was mindful of

the requirements of LR 9.8.6(9)

throughout the recruitment exercise,

notwithstanding the fact that these

targets only come into force for TT in

the 2023 reporting round. The extent of

TT’s compliance to date with LR 9.8.6(9)

is also summarised in the Q&A section,

it being noted that a Board-level diversity

policy was also adopted for the first time

in 2022 and we have provided numerical

data on the gender diversity profile of

theBoard and senior management in

thetable set out on page 49.

TT Electronics plc Annual Report and Accounts 2022 91

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

The Committee held four meetings

in 2022, at which (in addition to the

recruitment exercise described above)

the Committee undertook a detailed

review of TT’s talent management

programme, which covered the senior

management team (operating at

ELT level and a layer below), together

with selected members of the wider

leadership group. Attention was also

focused on “high-performing” individuals

across the organisation, who had been

identified as possessing the capability

to progress into senior management

roles over the medium to long term.

This review exercise identified several

candidates across the business with

the potential for promotion to ELT and/

or Executive Director roles in the future,

with talent development also being

highlighted as a key priority area for the

Group going forward. The Committee

agreed, as part of this process, to find

ongoing opportunities for the NEDs to

meet with key individuals identified in the

Group-wide succession plan, on a face-

to-face basis (wherever possible).

In addition to the activities referenced

above:

– All Board members completed a

conflicts of interest questionnaire,

which involved tracking the number

of external appointments held

by each Director, including the

number ofchairmanships and

executive director roles held, to avoid

suggestions of “over-boarding”. No

points of concern were identified by

the Committee from this process; and

– The Committee assessed its

performance in 2022 by reviewing key

activities during the year against its

terms of reference. It was concluded

that the Committee had performed

satisfactorily and was structured

appropriately to provide effective

support to the Board.

BOARD COMPOSITION

Throughout 2022, the Board comprised

two Executive Directors (Richard Tyson

and Mark Hoad) and four NEDs. There

were no changes in Board composition

during 2022, nor in relation to the

membership of Board Committees. As

described above, Wendy McMillan and

Mick Ord were appointed as new NEDs

in January 2023. We provide full details

of each Director’s Board and Committee

meeting attendance on page 78 and

Directors’ biographies, including the

Committees they serve on and chair,

which can be found on pages 78 to 80.

At the time of his appointment

as Chairman, Warren Tucker was

considered to be independent in

accordance with the provisions of the

Code. All the remaining NEDs are also

considered to be independent as defined

by the Code.

In accordance with the Company’s

Articles of Association and the Code,

Directors must offer themselves for

re-election at the forthcoming AGM.

This practice will continue in the

future, to ensure compliance with the

requirements of the Code and the

Company’s Articles of Association.

Following formal performance

evaluation, the Board has concluded

that the performance of each Director

continues to be effective and to

demonstrate commitment to the role.

The Notice of AGM sets out details of the

key areas of contribution made by each

of the Directors in providing leadership to

the Company.

EQUALITY, DIVERSITY AND INCLUSION (ED&I)

In 2020, the Company introduced

its ED&I strategy to the workforce,

setting out our three-step multi-year

programme to enable the Company

to understand the needs of its diverse

workforce and embed ED&I as an

integral part of the Company’s strategy

(see page 47 for further information). The

Board (through the PSEE Committee)

receives updates on the progress of

the initiatives launched pursuant to the

Company’s ED&I strategy and monitors

the achievement of targets set in line

withthe strategy.

As stated in the Q&A section above, a

Board-level diversity policy was adopted

for the first time in 2022, which requires

the Committee to have regard to issues

such as culture and diversity when

reviewing recruitment practices and

succession planning. This ED&I Board

policy will assist the Committee in

overseeing a diverse pipeline for senior

management and Board positions.

At all times during 2022, the Committee

has sought to ensure that the Board

is balanced and effective, with diverse

skills, knowledge and experience, as

highlighted in the Directors’ biographies

on pages 78 to 80. The Committee

attaches a high degree of importance

to diversity at all levels across the Group

and is committed to recruiting the best

talent available, based on merit, and

assessed against an objective criteria

of skills, knowledge, independence

and experience. However, we do not

advocate a forced approach to diversity

at any level of the organisation. The

extent of TT’s compliance to date with

LR 9.8.6(9) is set out in the Q&A section

above. Female representation on the

Board currently stands at 37.5 per cent,

which the Committee believes will

have a positive impact on the Board’s

governance processes and sends out

astrong message across the Group of

the importance of a diverse workforce

tothe future success of the business.

A table setting out data on the gender

diversity profile of the Board and senior

management is set out on page 49.

For more detail on TT’s approach to ED&I

across the organisation, see page 47 of

the Our people section.

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BOARD AND COMMITTEE PERFORMANCE EVALUATION

In accordance with the Code, the Board

has conducted an evaluation of its

performance and that of its principal

Committees during 2022. Following the

external evaluation exercise undertaken

in 2021, the Board decided to undertake

an internal assessment in 2022 (using

the procedure used most recently in

2020), without the assistance of external

facilitators. The Bo ard allotted part of

a scheduled meeting in year to conduct

the evaluation exercise, using the Board

objectives for 2022 (as outlined in last

year’s annual report) and the outputs of

the previous year’s evaluation exercise

toframe the discussion, which involved

all Board members.

The 2022 evaluation exercise highlighted

the positive Board dynamics experienced

by the NEDs and the Executive

Directors alike. It was concluded that

the Board was effective in discharging

its responsibilities and operated as a

high-performing unit, which continued

to benefit from a “low ego/high trust”

culture. In particular, it was noted that:

– The issues raised from the external

review in 2021 had been incorporated

into the Board’s operations, with

good progress made on the priority

items and incremental improvements

achieved, despite the challenging

economic environment.

– The NEDs are highly committed, both

to TT and the Executive team, with

a strongly inclusive dynamic in the

strategic discussions.

– Each member of the Board is seen as

being appropriately provocative and

challenging on key issues (at different

times and using their own unique

approaches); likewise, the Executive

team is regarded as very transparent

and open. The importance of

maintaining TT’s unique and positive

culture is very much understood and

promoted by the Board.

Key positives for 2022 included: (i) the

delivery of two wide-ranging strategy

reviews (involving good data points,

positive use of advisers and healthy

debate); (ii) the Board continuing to

focus on the key strategic topics

(pitched at the right level); (iii) changes

in external governance requirements

(eg ED&I) being appropriately

controlled and addressed; (iv) timely

progression of talent reviews and

reward discussions in year; (v)

outstanding Board-level support for

an efficient NED recruitment process;

and (vi) good levels of engagement on

succession planning.

– The evaluation process confirmed

that the Board had continued to

deliver on its prior year objective of

increasing the level of face-to-face

dialogue, which had resulted in a

more in-depth understanding of day-

to-day operational issues, thereby

directly benefiting the strategic

review process.

– The evaluation process also

highlighted that each Board member

possessed the requisite skills and

experience in each of the core

areas relevant to TT’s operations,

recognising that the appointment

of the two new NEDs in January

2023 would further enhance the

skill sets and experience around the

Board table. Accordingly, the Board

concluded that the composition

of the Board (and its Committees)

remained fit for purpose, with diversity

of experience, approach, mindset and

thinking around the Board table.

In summary, the Board concluded from

the evaluation exercise that it (and its

Committees) had performed well on all

fronts in 2022 and that the performance

of each Director was highly effective,

whilst giving due commitment to his or

her role.

Discussion points and areas of focus

The 2022 evaluation review highlighted

several developmental areas for further

consideration, which included the

following:

– The Board recognised the need

to ensure that strategic planning

remained at the centre of the Board’s

thinking, with the recommendation

that more time be allocated on the

Board agenda for strategic reviews

and discussion.

– The Board concluded that good

progress had been made on

succession planning in 2022;

nevertheless, this remained a

priority objective for the year ahead,

with the need to attract/retain top

talent forming a key part of Board’s

responsibilities.

The review exercise recognised the

positive gender and cultural diversity at

the Board level (and a range of different

styles and approaches that allowed the

Board to work effectively as a group),

whilst also acknowledging the lower

levels of ethnic diversity. The Board also

recognised the approach taken in year

to address gaps in diversity within its

senior leadership ranks, which included

the recruitment of two new NEDs in

early2023.

Having considered these issues in detail,

the overall outcome of TT’s evaluation

exercise was that the Board was

operating in a very effective manner and

that the structure of the Board remained

fit for purpose, given the diversity of

experience, approach, mindset and

thinking around the Board table.

TT Electronics plc Annual Report and Accounts 2022 93

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

DIRECTORS’ PERFORMANCE EVALUATION

In accordance with the Code, the

performance of individual Directors was

evaluated during 2022.

For the NEDs, the output from a private

meeting held between the Chairman

and the Executive Directors formed the

basis for individual appraisals held by

the Chairman with each NED. This also

provided an opportunity to discuss any

issues which had arisen from either their

individual assessments or those of the

Board and its principal Committees. For

the Chairman’s performance, the other

NEDs, led by the Senior Independent

Director, and, with input from the Chief

Executive Officer and Chief Financial

Officer, met privately to discuss this,

with the outcomes being fed back to the

Chairman by the Senior Independent

Director for discussion.

At the beginning of the year, we set

each Executive Director challenging

performance objectives, and reviewed

progress against these as the year

progressed.

Both of the Executive Directors take

part in the Group’s performance

management programme which,

together with a review of progress

against agreed goals and objectives,

is used to assess performance and to

set clear objectives and developmental

plans for the following year (which

are closely aligned with the Group’s

strategic priorities and values). The Chief

Executive Officer meets with the Chief

Financial Officer at the beginning of each

year to discuss and review performance

against objectives.

The Chairman conducted the

performance evaluation of the Chief

Executive Officer, taking account of the

output from the Group’s performance

management programme together with

feedback provided by the other NEDs

at a private meeting held to discuss this

and any other matters which the NEDs

wished to raise.

Warren Tucker

Chair, Nominations Committee

7 March 2023

2023 BOARD OBJECTIVES

Following the conclusion of the 2022

Board evaluation exercise, the Board

objectives for the year ahead were

agreed, which are set out below:

– NEDs and Executive Directors to

continue to operate in an engaged,

constructive, open, supportive and

challenging manner.

– Creation of more time on the

Board agenda to focus on strategic

development and execution, including

one meeting dedicated to the

development of strategic positioning at

both a Group and Divisional level.

– Achieving the successful integration

of the newly appointed NEDs onto the

Board, to allow meaningful input on

key strategic topics from the start of

their appointment (whilst also avoiding

increased pressure on Executive

Directors’ time, wherever possible).

– Increased focus on HR priorities,

including succession/retention, talent

management and ED&I.

– Continued focus on ensuring

employee, sustainability and wider

stakeholder engagement through

face-to-face meetings (wherever

possible).

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STRATEGIC REPORT | NOMINATIONS COMMITTEE REPORT

AUDIT, RISK AND INTERNAL CONTROL

AUDIT

COMMITTEE

REPORT

MEMBERSHIP

Anne Thorburn (Chair)

Jack Boyer

Alison Wood

Wendy McMillan

CONTENTS

Principal responsibilities Page 95

Key activities during the year Page 95

Q&A with the Chair Page 95

Procedural and governance matters Page 97

2022 review Page 97

Significant issues Page 99

PRINCIPAL RESPONSIBILITIES

– Monitor the integrity of the financial

statements (including significant

reporting/accounting issues, going

concern/viability statements, and

fair, balanced and understandable

reporting process) and the Group

results announcements.

Q&A

How is the Internal Audit function

structured? In the Committee’s

view, does the Internal Audit

team have an appropriate range

of skills and capabilities to

meet the ongoing needs of the

business?

We have a designated Head of

Internal Audit and Risk, who sits

within our Group Finance function

and acts as the conduit through

– Recommend appointment and

remuneration of the Auditor, assess

effectiveness and monitor provision

ofnon-audit services.

– Assess content of the Auditor’s

independence report in providing both

audit and non-audit services, including

the Auditor fee structure.

– Review the remit, planned scope

of activities, performance and

effectiveness of the Internal Audit

function.

– Review changes to accounting

policies and procedures, decisions of

judgement affecting financial reporting

and compliance with accounting

standards and company law (including

FRC recommendations).

– Review risk management/assurance

processes, including the principal

risks and internal control findings

highlighted by management or

internal/external audit.

– Monitor the Company’s systems and

controls for the prevention of bribery

and fraud.

– Review Group whistleblowing

arrangements and procedures.

KEY ACTIVITIES DURING

THE YEAR

– Key areas of accounting judgement

considered in detail, including: (i)

consideration of items excluded from

adjusted profit; (ii) goodwill and the

annual impairment review, including

the impairment identified in the IoT

Solutions cash generating unit (CGU);

(iii) Group tax rates and provisions; and

(iv) going concern and viability.

– Performance assessment of the

external Auditor and overall audit

quality and effectiveness (in the

second full year following Deloitte’s

appointment), identifying areas of

potential improvement for the audit

teams, including opportunities for

accelerating certain audit workstreams

earlier in the year in an attempt to

reduce the workload associated with

the year-end sign-off process.

– Detailed consideration of findings from

the risk/assurance reviews undertaken

by the Internal Audit function, including

structuring the 2022 programme to

align with key Group-level risks.

– Strengthening the Internal Audit

function, including the creation of a

new Internal Compliance team (based

in the UK and US) with a remit to

deliver further improvements in the

Control Framework programme.

– Reviewing the progression of the

proposed BEIS Audit/Governance

reforms, including an assessment of

the key areas of focus for TT, to ensure

a smooth path to compliance with the

new rules, once enacted.

– Ongoing review of climate-related risks

(and associated TCFD disclosures),

in light of the new regulatory

requirements.

TT Electronics plc Annual Report and Accounts 2022 95

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

which the Committee exercises

oversight of risk management and

assurance activities across TT,

including the operation of the Group

Control Framework. We see this as a

key role within TT and were delighted

to recruit a highly experienced

individual in 2022, from one of the “Big

4” accountancy firms, with specialist

expertise in the risk/assurance area

in the context of UK listed companies.

This appointment was made as part of

our succession planning programme,

with the predecessor in role having

taken on a senior Finance position

within one of the Divisional teams.

2022 also saw the creation of a new

Internal Compliance team (comprising

two separate roles, one based in the

UK and the other in the US), with a

focus on providing updates to the

Control Framework (to ensure it

continues to reflect best practice),

together with awareness training and

compliance reviews. The internal

team will also complement some of

the more operational aspects of the

internal audit programme, with TT’s

co-sourced internal audit partner

(PwC) continuing to deliver site

audits, as well as focusing on more

highly specialised compliance areas

(such as IT and Sustainability). We

believe that this structure provides the

Committee with an optimal structure

to exercise oversight over the Group’s

core risk management and assurance

activities, particularly with regards to

the proposed implementation of the

BEIS Audit/Governance reforms.

What is the Committee’s view on

theprogress made in 2022 on the

risk and assurance front?

The Internal Audit plan each year is

structured to reflect the priority areas

in the Group-level risk framework (see

page 67 for more details). This allows

the Committee to focus its attention on

TT’s higher revenue-generating sites

(at least once every three years), whilst

also providing scope to assess higher

risk areas of operation (including

functional activities) on an “as needed”

basis. The outputs of the 2022 Internal

Audit programme revealed a good

level of compliance across the Group,

with the majority of audit actions

being principally confined to “lower

risk” items and with very few “overdue”

issues having been noted. Challenges

are often associated with recently

acquired business units, where the

higher levels of compliance associated

with a UK listed company environment

typically take time to adapt to.

This will remain a key area of focus for

the Internal Audit team going forward,

as well as ensuring that the Control

Framework is suitably modified (where

appropriate) so as not to impose

an undue administrative burden on

smaller teams working on lower risk

business activities. The Committee

takes a keen interest in ensuring that

the Internal Audit plan aligns carefully

to TT’s Risk Framework and took an

active role in developing the scope of

both the Sustainability and IT Security

reviews in year.

To what extent have the BEIS

proposals on Audit and Governance

reform been part of the Committee’s

agenda during 2022?

As stated in last year’s report, TT

takes its governance responsibilities

extremely seriously and welcomes

the opportunity to enhance its audit,

internal controls and wider governance

processes in the interests of its

stakeholder groups. The Committee

has continued to track the BEIS

reform proposals during 2022, having

provided a formal response to the

consultation exercise the year before.

We remain of the view that the BEIS

recommendations are helpful in the

round and should not present too

much of an additional burden for TT,

given the governance environment

and Control Framework structure

wealready have in place.

However, recognising the likelihood

that the BEIS reforms will be adopted

in 2023 (coming into force for the 2024

reporting season), the Committee has

already started to look at key initiatives

to further strengthen the Group’s

policies and procedures in certain

areas. These include the creation of

the Internal Compliance function to

support work on the effectiveness of

internal controls; more extensive fraud

prevention/detection assessments;

updating our enterprise assurance

mapping; and (building on existing

work on distributable reserves at the

holding company level) consideration

of the distributable reserve position

across the Group’s operations.

Based on the size of our individual

business units, we do not believe that

any of our Group subsidiaries will be

designated as Public Interest Entities

for the purposes of the BEIS reform

proposals.

TT Electronics plc Annual Report and Accounts 202296

STRATEGIC REPORT | AUDIT COMMITTEE REPORT

2022 REVIEW

The Committee held four scheduled

meetings during 2022. A summary of the

key financial reporting and judgement

issues considered by the Committee in

2022 is set out in the table on page 99.

In addition, as part of the Committee’s

planning for the 2022 year-end audit

process, a detailed assessment was

undertaken (in conjunction with the

external Auditor) of the FRC’s key areas

of focus, as outlined in its “Key matters

for 2021/22 report and accounts”

document.

The Q&A section on page 96 sets out

details of the core areas of activity for

the Committee in 2022. In addition, the

following specific audit matters were

considered by the Committee for the

reporting period: (i) consideration of

items excluded from adjusted profit;

(ii) goodwill and the annual impairment

review, including the impairment

identified in the IoT Solutions cash

generating unit (CGU); (iii) Group

tax rates and provisioning (with the

Committee concluding that, as a result

of processes first adopted in 2021, the

level of judgemental analysis applied in

this area for the current year had been

significantly reduced); and (iv) the going

concern and viability position for the

Group (reflecting current year trading,

thenew US PP arrangement and the

RCFrefinancing).

The Committee also reviewed the

outputs of the internal audit projects

conducted during 2022, which are

undertaken both on a site-specific

basis (with each principal TT site being

reviewed at least once every three

years) and for targeted functional areas,

which for 2022 included IT Security,

SAP deployment, TT’s Shared Services

functionality and Sustainability initiatives.

The Committee has continued to pay

close attention in the past year to the

progress made in developing the Group-

wide Control Framework programme

and its application in driving business

performance across TT (as described

inmore detail in the Q&A section on

page 96), particularly in the context of

the Group’s migration to a shared service

environment and the financial integration

of acquisitions having only recently

adopted the Control Framework. For

further details of TT’s risk management

and internal controls structures see

pages 66 to 72.

During 2022, the Risk Committee

continued to conduct a detailed

review of possible emerging risks (in

consultation with the Internal Audit

function), which were not currently

addressed in the Group risk register but

could have application in the future to an

international business operating in TT’s

sector. The outputs of this analysis were

discussed further at both the Board and

Audit Committee level, which included

a review of the risk appetite of the

Group. For further details of the Board’s

approach to assessing the Group’s risk

appetite, see page 66.

In the fourth quarter, the Committee

undertook a workshop review of the

Group’s climate-related risks and

opportunities, with particular reference to

the new TCFD disclosure requirements.

PROCEDURAL AND GOVERNANCE MATTERS

Meetings of the Committee are

structured on the following basis:

– The CFO, the Group Financial

Controller, the Company Secretary and

Auditor representatives attend each

Committee meeting, at which they

present reports and provide analysis

on key areas of accounting judgement.

At the request of the Committee, the

Chairman and the CEO also attend

for part of the scheduled Committee

meetings.

– The Head of Internal Audit and Risk

presents on the progress of the

internal audit plan (undertaken in

conjunction with PwC under the

co-sourced partnering arrangement)

and provides updates on the Group’s

risk management framework, to allow

members to review principal risks and

the effectiveness of risk management

processes.

– The Committee meets with the

Auditor at the close of each meeting,

without Executives being present. The

Committee also has the opportunity to

meet with the internal audit function at

each meeting on the same basis.

In relation to Governance considerations:

– The Committee Chair, Anne Thorburn,

fulfils the Code requirement of at

least one member of the Committee

having recent and relevant financial

experience (as a former CFO of

several listed companies and as audit

committee chair of Diploma PLC since

2015).

– The structures and methodologies

that were put in place in 2020 to

address the COVID-19 “stay-at-

home” measures were relaxed in

the current year, with a significantly

greater amount of audit work being

undertaken on a “face-to-face” basis;

however, these remote working

practices remained available during

2022 to ensure that both internal

and external audit activities could be

fully completed. The existence of a

co-sourced internal audit arrangement

with PwC, and the use of Deloitte

as external Auditor, meant that local

teams were able to access our sites

in China to perform both internal and

external audit activities, despite the

ongoing restrictions during the year in

relation to travel into and out of China.

– The Committee undertook an

evaluation of external Auditor

performance in 2022, which included

input from the heads of finance across

the Group’s operations. Through

this process, several limited areas

for improvement were identified and

shared with the Auditor; however, this

process indicated an improvement in

overall Auditor performance in 2022.

– The Committee assessed its

performance in 2022 by reviewing key

activities during the year against its

terms of reference. It was concluded

that the Committee had performed

satisfactorily in the year and was

structured appropriately to provide

effective support to the Board.

TT Electronics plc Annual Report and Accounts 2022 97

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATEMENTS

The main areas of judgement and

estimation are set out in the accounting

policies on pages 158 to 163. The

Committee received and reviewed

reports from management and

the external Auditor setting out the

significant issues in relation to the 2022

financial statements, as outlined on

page 99. They discussed these issues

with management during the year and

with the external Auditor at the time

the Committee reviewed and agreed

the external Auditor’s Group audit plan;

when the external Auditor reviewed the

half-year results in August 2022; and

also at the conclusion of the audit of the

financial statements. The Committee is

satisfied that the significant assumptions

used for determining the value of assets

and liabilities have been appropriately

scrutinised and challenged, and are

sufficiently robust.

POLICY ON NON-AUDIT SERVICES

The Company has an established policy

regarding the provision of non-audit

services by the external Auditor, which

was last refreshed in 2021. This policy

provides that non-audit services may

be obtained from the most appropriate

source, having regard to expertise,

availability, knowledge and cost as

confirmation that they comply with

the whitelist of permitted services as

set out in the Revised Ethical standard

2019. Non-audit services where fees are

expected to exceed £25,000 should be

approved, in advance, by the Chair of the

Audit Committee or, in her absence, by

another member of the Audit Committee.

Any arrangement with the auditor that

includes contingent fee arrangements is

not permitted. There is also a restriction

that fees for non-audit services will not

exceed 50% of the annual audit fee which

is more stringent than the FRC imposed

cap of 70% of the average audit fees

paid for the audit of the parent and its

controlled subsidiaries in the last three

years. This limit will only be exceeded

in unusual circumstances and only with

the pre-approval of the Audit Committee.

The overriding preference of the

Committee is not to engage the Auditor

for additional non-assurance services,

unless there are compelling reasons to

the contrary, such as capability, time

orcost.

In 2022, the total fees paid to Deloitte

were £1.7 million, including £0.1 million

for their review of the Company’s interim

results, while no other non-audit service

fees were paid to Deloitte in the year.

Accordingly, during 2022, non-audit

service fees paid to Deloitte represented

six per cent of audit service fees paid to

them during the same period.

AUDITOR’S INDEPENDENCE, OBJECTIVITY AND EFFECTIVENESS

The Audit Committee assesses the

independence of the Auditor annually to

ensure suitable policies and procedures

are in place to safeguard the Auditor’s

independence and objectivity, having

regard to length of tenure, provision of

non-audit services and the existence of

any conflicts of interest. The Committee

has formally reviewed the independence

of the Auditor as part of the 2022 review.

Deloitte has provided a statement to

the Committee confirming it remains

independent within the meaning of the

relevant regulations and in accordance

with its professional standards.

The Committee also reviewed the

quality and effectiveness of the audit

programme during the year, as described

on page 97.

FAIR, BALANCED AND UNDERSTANDABLE

In accordance with the Code, the Board

requested the Committee to advise it on

whether it believed the Group’s Annual

Report, taken as a whole, is fair, balanced

and understandable, and provides the

information necessary for shareholders

to assess the Company’s position and

performance, business model and

strategic plan. Procedures are in place

to facilitate the appropriate and timely

review of the drafts of the Annual Report

and specifically to highlight evidence

of a fair and balanced representation,

which supports input and challenge

from all independent NEDs, the external

Auditor and other external advisers.

On careful review of the Annual Report

for the year ended 31 December 2022,

and the basis for the statement made

by the Board on “Fair, balanced and

understandable” on page 139, the Audit

Committee recommended to the Board

that, taken as a whole, the Annual Report

is fair, balanced and understandable and

provides the information necessary for

shareholders to assess the Company’s

position and performance, business

model and strategic plan.

KEY JUDGEMENTS

Management has confirmed to the

Committee that it was not aware of any

material uncorrected misstatements

or immaterial misstatements made

intentionally to achieve a particular

presentation. The Committee confirms

that it is satisfied that the external

Auditor has fulfilled its responsibilities

with diligence and professional

scepticism.

After reviewing the presentations

and reports from management and

consulting where necessary with

the Auditor, the Audit Committee is

satisfied that the financial statements

appropriately address the critical

judgements and key estimates (both

for the amounts reported and the

disclosures).

TT Electronics plc Annual Report and Accounts 202298

STRATEGIC REPORT | AUDIT COMMITTEE REPORT

SIGNIFICANT ISSUES

SIGNIFICANT ISSUE COMMITTEE ACTIONS/WORK UNDERTAKEN

Adjusted profit (see Note 7)

The Group reports non-trading

income or expenditure outside of

adjusted profit when the size, nature

or function of an item or aggregation

of similar items is such that separate

presentation is relevant to an

understanding of its financial position.

The Committee challenged the items that were excluded from adjusted profit

and were satisfied that these were in accordance with the Group’s disclosed

accounting policy and gave a true and fair view of the Group’s underlying

financialposition.

The Auditor explained to the Committee the work they had conducted and

theresults of their audit procedures on significant items recorded outside

adjustedprofit.

Provisions – Taxation (see Note 8)

Current tax provisions held in respect

of tax risks are included within

current tax liabilities depending on

the underlying circumstances of

theprovision.

Management confirmed to the Committee that the provisions recorded at

31December 2022 represent its best estimate of the potential financial exposure

faced by the Group. The Committee reviewed each significant provision and

challenged the basis of management’s judgement and concurred with the

estimates.

The Auditor explained to the Committee the work they had conducted during

theyear, including how their audit procedures were focused on those provisions

with the highest level of judgement on recognition criteria and/or measurement.

Goodwill and impairment review

(see Note 14)

The Committee has reviewed

management’s computation of the

present value of future cash flows

from the five-year plan and outer

years. These have been compared to

the carrying amounts in order to test

for impairment, (refer to Note 13 to

the Group Financial Statements) and

an impairment identified in the IoT

Solutions Cash Generating Unit (CGU).

The Committee considers management’s conclusion that no impairment charges

for goodwill and acquired intangibles are required for 2022 other than that

identified in the IoT Solutions CGU. The Committee noted that the impairment

includes assets associated with the Virolens project and reviewed the revised

growth assumptions used in the five year plan, challenging management’s

assumptions and concurring with them.

The Committee reviewed the reasonable possible change disclosure for the IoT

Solutions CGU and challenged management’s assumptions and sensitivities. The

Committee confirmed both the disclosures and assumptions were appropriate.

Going concern and viability

(see Note 1d)

The Committee considered the

outcome of management’s reviews

of current and forecast net debt

positions and the various financing

facilities and options available to the

Group, including the risk and potential

impact of unforeseen events.

The Committee reviewed the going concern and viability assessment over the

three-year period based upon the 2023 budget and the strategic plan to 2025.

The Committee confirmed that the application of the going concern basis for

thepreparation of the financial statements continued to be appropriate.

The Auditor explained to the Committee the work they had conducted and the

results of their audit procedures on going concern and viability.

TT Electronics plc Annual Report and Accounts 2022 99

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

COMMITTEE ACTIVITIES IN 2022

FINANCIAL REPORTING GOVERNANCE

– Monitored and reviewed the Group’s financial

statements and results announcements.

– Reviewed significant financial reporting and accounting

issues.

– Reviewed going concern and viability statements,

including appropriate sensitivity analysis.

– Reviewed the fair, balanced and understandable process

for the financial reports.

– Reviewed and discussed 2022 H1 and year-end

accounting issues.

– Reviewed the outputs of the ongoing BEIS consultation

on Audit and Governance Reform.

– Reviewed Terms of Reference.

– Received and considered whistleblowing matters

reported through the Group’s multi-lingual, anonymous

ethics and integrity portal.

– Undertook an evaluation on the effectiveness of the

Committee.

– Considered new areas of audit disclosure under

UKlegislation/regulation.

INTERNAL AUDIT AND RISK AND ASSURANCE EXTERNAL AUDIT

– Received a report at each meeting on progress on

theinternal audit and risk assurance plan.

– Reviewed internal audit planned activity and resource.

– Agreed the remit of the internal audit programme

ofwork.

– Considered the results of the 2022 internal audit

activities.

– Reviewed and approved the 2023 internal audit plan.

– Conducted the annual review of the Group’s internal

audit function.

– Assessment of controls designed to protect against

fraud.

– Ongoing monitoring of the Group’s internal controls

environment throughout the year.

– Discussed and approved the external audit plan

andaudit fee.

– Reviewed external Auditor planned activity.

– Reviewed and confirmed both the independence of

theexternal Auditor as part of the 2022 review, and

non-audit fees.

– Assessed the quality and effectiveness of the audit

programme, including the performance of the Auditor

relative to prior year.

Anne Thorburn

Chair, Audit Committee

7 March 2023

TT Electronics plc Annual Report and Accounts 2022100

STRATEGIC REPORT | AUDIT COMMITTEE REPORT

INTRODUCTION TO OUR:

REMUNERATION

COMMITTEE

REPORT

MEMBERSHIP

Alison Wood (Chair)

Warren Tucker

Jack Boyer

Michael Ord

CONTENTS

Principal responsibilities Page 101

Key activities during the year Page 101

Q&A with Chair Page 102

Annual statement Page 103

2022 Executive Remuneration at a glance Page 105

2023 Remuneration Policy overview Page 108

Remuneration Policy Report Page 112

Annual report on remuneration Page 122

Implementation of the Policy for 2023 Page 122

Implementation of the Policy for 2022 Page 124

Total single figure remuneration Page 124

Salary and benefits Page 125

Short-term incentive for 2022 Page 125

Long-term incentive Page 128

Directors’ share interests Page 129

PRINCIPAL RESPONSIBILITIES

– Determine the Remuneration Policy

for Directors for approval at least every

three years.

– Determine remuneration packages

andterms and conditions of

employment for the Executive

Directors, senior managers and the

Chairman of theBoard.

– Approve the design, performance

measures, targets and outturns of

incentive schemes for the Executive

Directors and senior managers.

– Set Remuneration Policy within the

wider context of remuneration trends

across the workforce.

– Produce an annual report of the

implementation of the Directors’

Remuneration Policy in respect of

thelast financial year and for the

current year.

KEY ACTIVITIES DURING THE YEAR

– We sought to support our employees

with the increased cost of living which

disproportionately impacts our lowest

earners through a variety of pro-active

actions, including an additional cost of

living support payment to eligible UK

employees.

– In addition, we provided our lowest

paid UK colleagues with higher salary

increases in April 2022 and increased

our salary review budgets for 2023.

– We undertook a thorough review of

remuneration design as part of our

Remuneration Policy review which

will be put to a shareholder vote at

the 2023 AGM. We reviewed the

most appropriate incentive structures

and quantum, the use of and types

of performance measures in our

incentives, and developments in

governance practices.

– We consulted both our major

shareholders (and their representative

bodies) and employee stakeholders

on the proposed changes to

our Remuneration Policy and its

implementation in 2023. We reflected

on both shareholder and employee

feedback in finalising the changes to

the Remuneration Policy, how it will

be implemented for 2023 and the

changes required to wider incentives to

ensure alignment of culture and focus.

– We considered remuneration

outcomes to ensure they remain

fair, appropriate, and in line with our

remuneration principles and Company

performance.

– Our Short-Term Investment Plan

(STIP) awards are ahead of on-target

reflecting the strong profit growth in

extremely challenging circumstances

with multiple headwinds for the

Executive team to manage. Cash flow

performance was creditable but held

back by investment in working capital

to support increased growth and

customer demand.

– Long-Term Incentive Plan (LTIP)

awards granted in 2019 vested in 2022

at 27.4 per cent primarily reflecting

the impact of the pandemic on the

momentum of the business during the

three-year performance period and the

halt in progress during 2020 as a result

of the temporary pause ingrowth of

our end markets.

TT Electronics plc Annual Report and Accounts 2022 101

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

geopolitical and economic context.

Our Remuneration Policy review was

guided by our remuneration principles

alongside the following three

objectives:

(i) To better reflect the strategic

importance of ESG within our

remuneration;

(ii) To enable a wider choice of

performance measures in

incentives; and

(iii) To ensure remuneration packages

remain appropriately positioned

in respect of the high calibre

individuals required to deliver the

Group’s strategic priorities and

lead a Company of our scale and

complexity.

Our stakeholder consultation indicated

broad support for these objectives.

In particular, stakeholders were

complimentary about our proposal

in respect of increasing the strategic

focus on ESG matters to ensure

longer-term sustainable valuecreation.

The Committee undertook

significant engagements with

stakeholders in the creation of the

future Remuneration Policy. How did

their feedback shape the final Policy

proposal?

Ahead of the consultation in 2022,

the Company led a review of our

existing Remuneration Policy and

remuneration design with support

from the Committee’s appointed

independent remuneration

consultants. This review included

an examination of the strategic

alignment of a range of remuneration

structures/approaches alongside

corporate governance developments.

The outcome of this review was

discussed by Committee members,

initially on a confidential one-to-one

basis and then as a Committee, to

define the proposed changes put

toconsultation.

The Committee values the input of

stakeholders and consulted with a

broad range in the second half of the

year, including our key shareholders,

the main shareholder representative

bodies and employees whose

remuneration most closely aligns

withthat of the Executive Directors.

Q&A

It has been another busy year,

whathas pleased you the most

about 2022?

The year has featured many highlights

and positive actions. The COVID-19

pandemic tested the resilience of

our organisational culture and the

strength of our TT Way values. Our

embedded values were central to

our approach during the pandemic,

leading to a series of actions to

make our workplaces safe and

secure and to protect and support

employees who ensured delivery

for our customers. We have brought

our values to the fore once again

this year in seeking to support our

employees with the impact of higher

inflation on costs of living with

appropriate regional responses, whilst

continuing to manage the impact of

COVID-19 to our employees in Asia.

Most notably, cost of living has been

a significant challenge in the UK,

disproportionately impacting our

lower paid employees. Our response

has focused on the active provision

of a range of support measures

encompassing financial, physical

and mental health. Lower paid UK

employees also received a one-off

additional payment to support the

winter months. Further details are

outlined in my annual statement

onpage 103.

Despite the cost of living challenge,

our employees have continued to

support their local communities

and fundraise for local and national

causes. The ongoing resilience,

contribution, and dedication of our

employees in all regions has been

remarkable over this prolonged period

of uncertainty. We will continue to

focus on supporting them as they are

critical to the long-term sustainability

and success of TT.

External events continue to make

markets and economic conditions

volatile and uncertain. How does the

Committee approach target setting

inthese times?

Target setting is a critical component

of the Committee’s activities to ensure

alignment of strategic progress,

stakeholder outcomes, and the

continued motivation and aspiration of

the Executive team. The effect of volatile

and uncertain economic conditions

where significant events and headwinds

could make performance targets feel

unachievable or, in different times too

easily achievable, reduces stakeholder

and leadership alignment.

As a Committee, we ensure stretching

performance goals are set taking

account of the latest information at the

time they are set. Typically this includes:

internal and external forecasts relating

to the Group’s performance; the key

risks associated with the forecasts,

notably ongoing economic and societal

uncertainty; and the Board’s expectation

of the development of the Group. In

setting the performance targets for

2023, the Committee has considered

the setting of stretching performance

targets that encompass a wider range

of outcomes to limit any motivational

impact of unforeseen external events.

The Committee remains mindful of the

need for stakeholder alignment and the

perception of windfall gains. To ensure

that performance outcomes remain

appropriate, the Committee continues to

be willing to exercise both upwards and

downwards judgement and discretion

when determining remuneration

outcomes for the Executive Directors

where appropriate.

What were the primary considerations

informing the review of the future

Remuneration Policy?

Our role as a Committee is to encourage

enhanced performance and to reward

contribution to the long-term success of

the Group, from which our stakeholders

benefit. The future Remuneration Policy

is intended to apply for the coming three

years, which is expected to be a period of

continued uncertainty, given the current

TT Electronics plc Annual Report and Accounts 2022102

STRATEGIC REPORT | REMUNERATION COMMITTEE REPORT

ANNUAL STATEMENT

On behalf of the Board, I am pleased to

introduce the Directors’ remuneration

report for the year ended 31 December

2022. The report sets out our philosophy,

together with the key activities and

decisions made by the Remuneration

Committee during the year. The report is

split into the following sections:

i. This annual statement which contains

a summary of the activities of the

Remuneration Committee during the

year, including the key remuneration

decisions taken by the Committee

and the context within which these

decisions were reached.

ii. At-a-glance summaries of the key

remuneration outcomes for the

year, the future Remuneration Policy

and proposed Executive Director

remuneration for 2023.

iii. The future Directors’ Remuneration

Policy, to be proposed to shareholders

at the 2023 AGM (the future Policy or

the 2023 Policy).

iv. The annual report on remuneration

which details the implementation of

the current Policy in the year ended

31 December 2022 and the proposed

implementation of the future Policy

for the current financial year. The

current Policy operated as intended

during 2022 with no changes.

CONTEXT FOR THE YEAR

The operating context to our

performance has continued to be

affected by significant external events

and challenges which continue to be

shaped by the COVID-19 pandemic

and more recently, by the conflict in

Ukraine. Despite this difficult external

environment, the Executive team has

navigated the Group with agility, speed

and resilience to deliver another year of

great progress. Our performance has

been underpinned by numerous proof

points of our strategy delivering in 2022

as we continue to unlock the potential

of TT. The dedication and commitment

of our employees continues to be

a key differentiating factor of our

competitive advantage and our operating

performance.

The Committee’s focus for the year

has been on the wider workforce and

responding to the impact of inflation

on our employees and affordability

pressures arising from the cost of living.

As outlined in the Q&A the Company has

undertaken a range of activities across

its geographic footprint displaying the

strength of our values and how they

inform our decision-making.

In the UK, this support included:

– Partnering with a financial wellbeing

partner to provide: (i) a financial fitness

questionnaire and online education

resources; (ii) emergency access to

pay advances thereby reducing the

need for payday loans; (iii) access to

longer-term debt and reconciliation

of existing employee debt to reduce

interest repayment charges; and (iv)

the ability to set up savings accounts

direct from payroll to build rainy day

savings.

– Delivering an additional cost of living

support payment of £300 to all UK

employees on salaries up to £40,000.

– Running frequent communications

on our voluntary benefits programme

which incorporates discount on a

range of retailers to help offset some

of the cost of living changes.

– Improving communication and raising

employee awareness of our pan-

UK health cash plan and Employee

Assistance Programme (EAP) which:

(i) enables employees to recover some

day-to-day healthcare costs such as

for vision and dental costs; (ii) ensures

access to GPs via a virtual video call;

and (iii) offers assistance with a range

of counselling services from financial

through to mental health.

– Delivering sessions focused on the

all-employee ShareSave scheme

and retirement savings to ensure

employees are aware of the

choices available to them, including

participation, pausing contributions

and withdrawal.

– Reviewing and increasing the

budget for 2023 salary reviews

with distribution, once again, being

weighted to our lowest paid workers

and increases averaging in the range

of 6.5 to 7 per cent.

Against this backdrop the Committee has

assessed remuneration outcomes and

undertaken a review of the Remuneration

Policy to ensure the continued alignment

of remuneration with the delivery of the

Company strategy.

who are critical to the ongoing

development of the Company.

The Committee thanks our

stakeholders for their engagement,

support and constructive dialogue

which helped to shape and refine the

final proposal.

The majority of feedback was

supportive of the aims of the Policy

and positive in respect of the changes

proposed. It was interesting to note

that stakeholder feedback was

principally focused on how the Policy

would be implemented in 2023 rather

than the changes to the Policy. The

key feedback themes and how the

Committee, with the support of the

appointed independent remuneration

advisor, incorporated them into the

finalised proposals in early 2023 are

setout on page 106.

The Committee believes that both the

future Remuneration Policy and its

implementation align remuneration

with the principle of delivering long-

term, sustainable value creation for our

stakeholders; and will help to retain, align

and motivate the Executive Directors

TT Electronics plc Annual Report and Accounts 2022 103

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

PERFORMANCE-RELATED REMUNERATION FOR 2022

The Committee adopts a holistic and

rigorous approach to decision-making,

determining Executive Directors’

remuneration in the context of our core

remuneration principles of: aligning

pay with performance; ensuring the

appropriate level of motivation and focus

required to deliver the Group strategy;

and reviewing remuneration outcomes

in the context of our stakeholder

experience.

The Committee believes that the

following remuneration outcomes are

a fair reflection of strong business

performance and excellent growth in

the context of the macro-economic

challenges arising from geopolitics,

supply chain constrains, increased

inflation and the ongoing impacts

from the pandemic, and the personal

performance of the Executive Directors.

In respect of short-term incentive

remuneration outcomes for the wider

workforce, awards continue to recognise

performance and the attainment

of relevant business performance

measures in 2022. This ensures

alignment with the approach forthe

Executive Directors.

– The 2022 STIP design for Executive

Directors was 50 per cent Group

adjusted profit before tax, 25 per cent

Group free cash flow and 25 per cent

based on the achievement of strategic

objectives. Financial performance

targets in the STIP exclude movements

in foreign exchange. Performance

against the financial measures of

adjusted profit before tax and free

cash flow were between on-target and

the maximum, and below threshold

respectively. Combined with the

significant progress against the Group’s

strategic objectives, the calculated

outturn on the STIP performance

measures for 2022 is 61% of the

maximum. The Committee believes

that this is an appropriate outcome,

reflecting the stretching budget set, the

strong revenue and profit performance,

resilient cash flow performance whilst

investing to support high organic

growth, and the Group's strategic

performance. Eighty per cent of the

award will be paid in cash and 20 per

cent deferred into shares in accordance

with the current Remuneration Policy.

Details of the short-term incentive

performance targets and performance

achieved are presented on page 125.

– The 2019 LTIP awards vested in March

2022. The awards were based on two

equally weighted measures, absolute

adjusted EPS and relative TSR

performance. As reported last year,

the impact of the pandemic on the

business momentum and progress

linked to this award meant that the

threshold EPS performance measure

was not met. TSR performance over

the three-year period was ahead of

median which meant that this half of

the awards vested at 54.8 per cent.

Further details are presented on

page128.

– The 2020 LTIP awards are due to

vest in March 2023 based on a sole

TSR performance measure. The TSR

performance period ends in March

2023 and is anticipated to vest close

to the threshold performance targets.

The final vesting will be disclosed in

next year’s Directors’ remuneration

report.

– The Committee did not exercise

judgement or discretion in respect of

the remuneration outcomes for 2022.

BUSINESS PERFORMANCE

The year has once again tested and

proven the success of our strategy to

become a higher-quality, better-balanced

business aligned to structural growth

markets. Our business development

success in customer partnering has

seen new project wins and deeper,

more embedded relationships with key

partners that are longer term and more

collaborative. The effect of which we are

seeing in our record order book and very

strong organic growth. We have also

progressed well on our sustainability

agenda, which has remained central to

strategic decision-making, particularly

when we consider the opportunities

presented by the move to a lower

carbonworld.

Sustainability actions also

continue to improve our safe and

supportiveworkplaces in which

individuals can bring their best and

authentic selves to work every day.

Our focus on ED&I (rollout of our

global Inclusive Leadership workshops

to over 900 leaders, completion

of our first Women’s Leadership

Programme, targeted workshops

on microaggressions, allyship and

menopause as well as calendar

events focused on key ED&I topics)

has created a culture that is not only

more deliberate about ensuring a more

inclusive environment but more focused

on building a diverse workforce that

can help us achieve our business aims.

We believe this provides our people a

greater voice and platform, especially

when it comes to sustainability, their

safety and well-being. The Committee

was also pleased to see significant

talent development actions during the

year and the establishment of a Global

HSE framework and operational toolkits.

Our progress against our 2035 net zero

for Scope 1 and 2 emissions target

has continued with improvements in

the environmental sustainability of our

facilities through established site carbon

reduction plans and investment in

renewable energy.

Across the Group, operational execution

has been impressive despite ongoing

supply chain issues characterised by

lengthy lead times, material availability

and cost inflation. At the same time, our

site rationalisation programme has been

completed, with additional benefits being

realised and more still to come through.

There has been strong organic revenue

growth of 20% at constant currency and

we started 2023 with excellent visibility

from our record order book. We are well

positioned to deliver further growth in

2023 and improved margin and cash

performance.

Free cash flow in the year was managed

in the context of the material supply

chain challenges, and significant working

capital investments to protect customer

delivery and to serve additional customer

demand. The actions to fully de-risk the

UK DB pension scheme assisted our in-

year free cash flow by £6m and provides

an equivalent annual improvement to

free cash flow in future years.

Overall, performance has been very

strong in challenging circumstances:

– Adjusted profit before tax was

£40.4million, up by 28 per cent;

significantly ahead of the market

consensus.

– Free cash outflow was £13.1 million

aswe invested to support high organic

growth will keeping leverage within

our1-2x target range.

– Adjusted EPS was 18.2 pence, up by

26per cent.

TT Electronics plc Annual Report and Accounts 2022104

STRATEGIC REPORT | REMUNERATION COMMITTEE REPORT

2022 EXECUTIVE REMUNERATION AT A GLANCE

BUSINESS PERFORMANCE

£40.4m £13.1m

Outperforming Above median

rank

Adjusted profit beforetax

Group free cash outflow

Strategic performance Total shareholder return

1 Target and actual performance are assessed at constant budget exchange rates.

2 TSR performance measure of the 2019 LTIP award (performance period of 11 March 2019 to 10 March 2022).

PERFORMANCE OUTCOMES

Short-term incentive plan Long-term incentive plan

61.2% 0% 61.2% 27.4% 0% 27.4%

Formulaic outcome

(%of maximum)

Committee

judgement/discretion

(% of maximum)

Final outcome

(% of maximum)

Formulaic outcome

(% of maximum)

Committee

judgement/discretion

(% of maximum)

Final outcome

(% of maximum)

Financial objectives (% weighting) Performance dimensions (% weighting)

Adjusted profit before tax (50%)

Group free cash flow (25%)

9%41%

25%

KPI

Total shareholder return (50%)

KPI

27.4% 26.6%

Strategic objectives (% weighting)

1 In line with the disclosures in the 2020 Annual Report and Accounts, 100% of the 2020

LTIP is based on relative TSR performance. The full value of the vested award will be

included in the 2023 single figure of remuneration.

Achieved Not achieved

ESG development (10%)

Group Strategy development (7.5%)

People talent development (7.5%)

KPI

7% 3%

7% 0.5%

6% 1.5%

TOTAL REMUNERATION FOR 2022

Richard Tyson, Chief Executive Officer Mark Hoad, Chief Financial Officer

51.1% fixed 48.9% variable

44.9% – Salary and benefits

6.2% – Pension

31.9% – Short-term incentive

17.0% – Long-term incentive

52.3% fixed 47.7% variable

46.0% – Salary and benefits

6.3% – Pension

32.2% – Short-term incentive

15.5% – Long-term incentive

ALIGNMENT WITH STAKEHOLDERS

Share ownership requirement:

200% of salary for Executive Directors.

CEO

CFO

335%

346%

200%

Short-term incentive

Awards subject to a 20% mandatory

deferral into shares with a two-year

holding period.

Long-term incentive

Awards delivered in shares and

subject to mandatory two-year

holding period.

Workforce alignment

Executive remuneration set in

the context of wider workforce

remuneration.

Remuneration principles flow through

the Group to ensure alignment.

Post-employment shareownership

Shares to the value of 100% of

salary to be held until two years after

cessation of employment.

£1.19m

2021: £1.31m

£0.89m

2021: £0.98m

TT Electronics plc Annual Report and Accounts 2022 105

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

REMUNERATION POLICY REVIEW

During the year significant thought has

been given to the design of our 2023

Policy. This centred on ensuring the

alignment of remuneration with the

next phase of the Company strategy, in

particular: that incentive structures and

performance measures are strategically

aligned, that the Committee has

sufficient flexibility in incentive design

to support the evolution of the strategy

over the next three years, and that

arrangements are able to attract, retain

and motivate high calibre individuals

that are required to deliver the Group’s

strategic priorities and lead a Company

of our scale and complexity.

Whilst we have undertaken a full

review of our Policy, we concluded

that the existing pay for performance

principle has served us well and we

consider the proposed changes to be

evolutionary. In reviewing the Policy

we have consulted with our major

shareholders, investor bodies and

employees. We were encouraged that

the majority were supportive of both our

reasons for evolutionary change and

the changes to the 2023 Remuneration

Policy with some specific constructive

suggestions. In finalising the changes

we reviewed stakeholder feedback

and endeavoured to incorporate their

views. The Committee thanks our

stakeholders for their engagement,

support and constructive dialogue which

helped to test the rigour of our approach

and improve the final proposals. The

Committee believes that the changes

ensure that the Policy remains “fit for

purpose” to align both stakeholders’

and our Executive Directors’ focus and

interests to deliver the next phase of

thestrategy.

The main changes to the Policy, which

are set out in detail in the Remuneration

Policy Report, are summarised as

follows:

– To align the pension provision for

Executive Directors (existing and new)

to those available to the majority of

the workforce in which the Executive

is employed. From 1 January 2023 the

Executive Directors pension provision

reduced from 15 per cent to 7 per cent

of salary.

– To better reflect TT’s wider role in the

global ESG arena and the importance

of our sustainability strategy, we are

increasing the flexibility within our

remuneration to introduce a separate

ESG component into the STIP and

more clearly enabling the ability to

introduce ESG measures into the

LTIPduring the Policy period.

– To enable a wider choice of

performance measures in incentives

by increasing the flexibility with respect

to performance metrics used in both

the STIP and LTIP, and to increase

flexibility of metric weightings in the

ST IP.

– To ensure remuneration packages

remain appropriately positioned in

respect of the high calibre individuals

required to deliver the Group’s strategic

priorities and lead a Company of our

scale and complexity by increasing

variable, performance related pay,

rather than fixed remuneration, with

an increase in STIP opportunity of

25% of salary to 150% of salary.

This change is also fundamental to

enabling additional focus on ESG in

our incentives. To further improve

stakeholder alignment and Executive

Director shareholding the STIP deferral

into shares will increase from 20 per

cent to 30 per cent.

EXECUTIVE DIRECTOR REMUNERATION FOR 2023

The implementation of the 2023 Remuneration Policy was a core component of our stakeholder consultation and provided the

opportunity for more detailed stakeholder discussion and feedback. That feedback, as outlined in the Q&A, positively tested our

thinking and improved our plans for Executive Director remuneration in 2023. The key themes and outcomes from consultation

were as follows:

Stakeholder theme Incorporation of feedback

Setting stretching targets to reflect the increase in Executive Director STIP

opportunity from 125% to 150% of salary

Targets will be appropriately stretching reflecting the increase in maximum

opportunity

Wider market practice has shown some companies have faced difficulties

in setting appropriate ESG performance measures in the STIP, and shown

the potential tension between ESG targets and the need to continue to drive

financial performance

ESG targets in the STIP will be strategically aligned and outturns will be subject

to an underpin alongside the strategic objectives

Feedback showed divergent views on LTI design and that no one approach to

performance measures would fully satisfy our broad shareholder base. Most

notably, feedback concerned: (a) whether TSR should or should not be included

as a performance measure in long-term incentives; and (b) where included, the

differing preferences for its prominence and weighting in the plan design.

Reflecting the majority view, a cash-based performance measure will be

included, reflecting the increased strategic importance of strengthening the

balance sheet. To maintain strategic and stakeholder alignment the Committee

currently anticipates that the 2023 LTIP awards will be subject to performance

against EPS (50% weighting), TSR (25% weighting) and operating cash

conversion (25% weighting).

TT Electronics plc Annual Report and Accounts 2022106

STRATEGIC REPORT | REMUNERATION COMMITTEE REPORT

What they measure

– Operational performance

encompassing our strategic

priorities of strategic business

development and operational

excellence.

– Cash flow performance,

encompassing our cash conversion

and cash generation for capital

reinvestment.

– Progress of the Group’s strategy

to deliver sustainable growth in

stakeholder value.

What they measure

– Sustainable growth in the Group’s

profitability per share over three

years.

– Long-term operational cash

flow efficiency over three years,

supporting cash generation for

capital re-investment.

– The Group’s share price and

dividend performance relative

to a peer group over three years.

OUR 2023 EXECUTIVE DIRECTOR REMUNERATION FRAMEWORK

Performance measure and weighting

47% – Adjusted profit before tax

23% – Group free cash flow

20% – Strategic objectives

10% – ESG objectives

Performance measure and weighting

50% – Adjusted EPS

25% – Average operating cash conversion

25% – Relative TSR

1 Target and actual performance are assessed at constant budget exchange rates.

2 LTIP performance measures and weightings shown represent anticipated design for 2023.

Short-term incentive plan Long-term incentive plan

50%

Adjusted

EPS

47%

Profit before

tax

25%

Relative

TSR

25%

Average

cash

conversion

23%

Free cash

flow

20%

Strategic

objectives

10%

ESG

The Committee was mindful of the

stakeholder experience, particularly

the context of the wider workforce and

wider society, in finalising the following

arrangements for 2023:

– When determining base salaries

increases for the Executive Directors,

the Committee reviewed the Company

response to support our employees

with the increase in cost of living and

the planned salary increases for the

wider workforce. For the UK, salary

budgets have been increased and will,

once again, deliver higher increases

to our lower paid workers who are

most impacted by higher inflation.

UK workforce increases are expected

to average in the range of 6.5 to 7.5

per cent. For the Executive Directors

base salaries were increased at a rate

lower than the workforce, by 5 per

cent on 1January 2023. Fees for the

Chairman and Non-executive Directors

were also increased by 5 per cent.

– Executive Directors’ pension

allowances reduced from 15 per cent

to 7 per cent from 1January 2023 to

align with those available to the wider

UK workforce.

– In keeping with the ambitions of the

2023 Policy, the STIP will evolve from

prior years with the inclusion of a new,

separate higher-profile ESG-based

component to improve the strategic

alignment. The STIP will also continue

to focus on our momentum to grow

our profitability and deliver good free

cash flow of the Group. The STIP will

be based on adjusted profit before tax

(47%), free cash flow (23%), ESG (10%)

and strategic objectives (20%). To

enable the new ESG component and to

ensure remuneration packages remain

appropriately positioned to retain and

attract high calibre individuals, the

opportunity will increase by 25 per

cent of salary to 150 per cent of

salary with at least 30per cent of

any award deferred into shares for

two years. Further details are

included on page 122.

– LTIP awards are planned to be made

in March 2023. The Committee

anticipates that the 2023 LTIP awards

will evolve from prior year to better

reflect the strategic importance

of delivering improved and stable

operating cashflow to improve the

leverage position in the longer term

whilst continuing to recognise the

importance of delivering sustainable

earnings growth and relative

total shareholder returns. Awards

are anticipated to be subject to

performance against EPS (majority

weighting), TSR (minority weighting)

and operating cash conversion

(minority weighting). Award levels for

the Executive Directors are expected

to be 150 per cent of salary. LTIP

awards will be subject to a two-year

post-vesting holding period. Due to

the ongoing uncertainty and to ensure

performance targets are appropriately

stretching, the setting of performance

measures and targets are expected to

occur at the date of grant. Details of

the targets will be published in the RNS

following the grant.

– All incentives are subject to malus and

clawback provisions.

– In-employment shareholding

guidelines apply (200% of salary)

and post-employment shareholding

guidelines (100% of salary) apply for

two years.

TT Electronics plc Annual Report and Accounts 2022 107

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

2023 REMUNERATION POLICY OVERVIEW

Remuneration objectives and key principles

The Remuneration Policy supports and rewards the achievement of the Group’s strategy to deliver profitable and

sustainable growth over the short and longer term. This is driven and evaluated by how the Group performs against a

variety of strategically aligned KPIs, both financial and non-financial. Our Directors’ Remuneration Policy was last approved

by shareholders at the AGM in 2020 and this overview outlines the proposed key changes which shareholder will be able

tovote on at the 2023 AGM and how this would be applied.

As a Committee, we believe that the proposed evolution of the Policy will be “fit for purpose” to align both stakeholders’

and our Executive Directors’ focus and interests during the next phase of the Company strategy. In proposing the changes,

we have sought feedback from our largest institutional shareholders, the major investor bodies and employees; feedback

themes have been incorporated in our final proposals.

The Policy is set out in full on pages 112 to 121.

Executive Director remuneration for 2023

Element Maximum 2023 2024 2025 2026 2027

Fixed Pay Salary Market competitive.

Increases set with

reference to the wider

workforce.

Salary paid.

Benefits Market competitive. Benefits paid.

Pension Aligned to those

available to majority of

local workforce.

Pension

provision paid.

Variable Pay Short-term

incentiveplan

CEO/CFO 150% of

salary. 70% cash and

30% in deferred shares.

Annual

performance

conditions

apply. Majority

weighting on

Group financial

targets,

minority to ESG

performance

and strategic

objectives.

Cash

element

paid

(70% of

incentive).

Two-year share

deferral (30% of

incentive).

Long-term

incentive plan

CEO 150% of salary,

CFO 150% of salary.

Two-year holding period.

Based on a variety of financial and/

or shareholder value creation and/

or ESG measures over a three-year

performance periods.

Two-year holding

period.

Governance Malus

(withholding)

and clawback

(recovery)

All incentives. Malus: incentive plans allow for the Committee to exercise

discretion and make adjustments to formulaic outcomes.

Clawback: misstatement, serious misconduct, serious

reputational damage, error in calculation and corporate failure.

ownership

requirement

200% of salary. Executive Directors required to build and maintain the share

ownership requirement.

Post-

employment

ownership

100% of salary. Holding requirement for shares until two years after cessation

of employment.

TT Electronics plc Annual Report and Accounts 2022108

STRATEGIC REPORT | REMUNERATION COMMITTEE REPORT

Outline of key Policy changes

Element Current Policy Proposed Policy Rationale

Fixed Pay Pension Current policy for Executive

Directors is up to 15% of

salary.

The maximum contribution

for Executive Directors

will be aligned with those

available to the majority of

the workforce in which the

Executive is employed.

The proposed change is

consistent with the 2018 UK

Corporate Governance Code

and Investment Association

guidance. Details in respect

of reducing the pension

of incumbent Executive

Directors is explained below.

Variable Pay Short-term

incentive plan

opportunity

The maximum opportunity

for Executive Directors is

125% of salary.

The maximum opportunity

for Executive Directors is

150% of salary.

The proposed increase

to the STIP potential

ensures the package

remains competitive

against companies of a

similar size, complexity

and geographical spread,

enables a greater focus on

ESG and enables a greater

proportion of the STIP to be

delivered in deferred shares

(see below).

Short-term

incentive plan

performance

measures

Based on a combination

of financial and strategic

performance measures with

at least 75% of the incentive

assessed against Group

level financial measures.

Based on a combination

ofGroup financial (majority

weighting) and strategic

and/or ESG performance

measures (minority

weighting).

The proposed change

provides the Committee

with greater flexibility

to operate ESG-based

performance metrics

in addition to strategic

metrics albeit ensuring that

the majority of the STIP

remains on Group-based

financial measures.

Long-term

incentive plan

performance

measures

Awards vest based on a

variety of financial and/or

shareholder value creation

measures.

Awards vest based on a

variety of financial and/or

shareholder value creation

and/or ESG measures.

The proposed change

provides the Committee

with greater flexibility to

introduce and operate

long-term ESG-based

performance metrics.

Governance Short-term

incentive plan

deferral

20% of any earned incentive

is automatically deferred

pre-tax into shares for a

period of two years.

30% of any earned incentive

is automatically deferred

pre-tax into shares for a

period of two years.

The proposed change

increases long-term

alignment with shareholders

and means that almost all

of the increase to the STIP

potential will be deferred

into shares.

TT Electronics plc Annual Report and Accounts 2022 109

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

– The Committee spends considerable

time on matters relating to

remuneration across the workforce.

This provides important context to

frame decision-making on Executive

Director remuneration as well as

ensuring that reward principles are

consistently applied throughout the

organisation and reward practices

arealigned and complementary.

– TT Electronics’ overarching

remuneration is designed to underpin

the Group’s core purpose and

delivery of strategic priorities. The

framework is commonly applied

across the Group and supports the

people strategy to create an inclusive,

equitable and performance-related

organisational culture. Where

practicable, remuneration practices

are aligned with those of the Executive

Directors to ensure alignment of focus

andmotivation.

– As described in this report, during the

year the Committee focused on the

response to the impact of inflation on

employees and affordability pressures

arising from the cost of living. The

Committee expects this to remain

akey agenda item for 2023.

– In addition to existing site employee

forums, we built on the feedback

from our 2021 pilot sessions with

the workforce, focused on our

remuneration principles and how

these align with our remuneration

arrangements, to deliver improved

sessions across our UK footprint.

Sessions are design to be open,

transparent and enable constructive

discussion on remuneration to enable

clear and concise feedback of themes

to the Committee.

– NED site visits (in-person for:

Cleveland, Minneapolis, Oldham and

virtual for Suzhou, China) continue

to allow for open and frank dialogue

directed by feedback and priority

areasfrom our employees.

– For 2022, the median CEO pay ratio

has decreased from 52:1 in 2021 to

43:1. This reflects our remuneration

principles, with the majority of CEO

remuneration based on variable

performance-related pay and the

wider workforce having the majority

of remuneration based on fixed pay. In

particular the decrease in ratio results

from: (i) higher workforce earnings

which include the additional payment

to support employees manage the

impacts of high inflation, and (ii) a

lower STIP award to the CEO than in

the prior year reflecting the challenging

external environment and a low LTIP

vesting which continues to reflect the

pause in the growth momentum of the

Company caused by the pandemic.

PAY IN THE WIDER WORKFORCE

– Creating a safe and positive work

environment where all employees

candevelop and build their expertise

is of paramount importance to TT.

Westrive to build a supportive, diverse

and engaging culture and place to

work built around the TT Way. We are

confident that our people policies and

approaches to recruitment, training,

development and remuneration are

fairand free of bias.

– Across the Company we are broadly

evenly split by gender; however, we

acknowledge that there remain long-

term objectives to further improve

diversity amongst our professional

and management roles. We continue

to make progress by championing

a female-friendly workplace and

targeting our talent processes to

improve our diversity. We have started

to see improved representation of

female employees in professional,

manager and leadership roles. Details

of our UK Gender Pay disclosures can

be found on www.ttelectronics.com.

Board site

visits, and direct

engagement with

the workforce

and the SLT

Reward focus

sessions

run at sites

Remuneration

arrangements

across the

workforce

Other sources

of feedback on

total employee

experience

including

designated NED

Remuneration

Committee

Board

Information

flow

Reward/

culture-related

feedback also

shared with the

Remuneration

Committee

EMPLOYEE VOICE IN THE BOARDROOM

TT Electronics plc Annual Report and Accounts 2022110

STRATEGIC REPORT | REMUNERATION COMMITTEE REPORT

– As a Committee, we are willing to

exercise judgement and discretion

when determining remuneration

outcomes for the Executive Directors.

– Before agreeing remuneration

outcomes we reflect on whether

the Company’s overall performance

and stakeholder experiences

are appropriately represented by

the financial and non-financial

performance measures we have set.

We also reflect on ESG matters, the

demonstration of leadership qualities,

living our values and conversations with

our major shareholders where relevant.

– The Committee did not apply

judgement or exercise discretion to

performance-related remuneration

inrespect of 2022.

– In line with good practice, the

Committee reviews its effectiveness

on a regular basis. The Committee

believes that the openness and

transparency provided by the

Companyis of significant benefit to

enable extensive and well-informed

decision-making.

– During the year we engaged our

investor and employee stakeholders

to consult on our 2023 Remuneration

Policy and how we intended to

implement the Policy in the design

of remuneration for 2023. The

Committee thanks our stakeholders

for their engagement, support and

constructive dialogue which helped

to test the rigour of our approach

and improve the final proposals. We

remain committed to stakeholder

engagements.

DISCRETION, INDEPENDENT JUDGEMENT AND STAKEHOLDER ENGAGEMENT

Stakeholder experience

Customers

and

suppliers

Employees Society

Environmental

Investors

Fair and appropriate remuneration outcomes

Formulaic incentive outcomes Total single figure remuneration

Underlying financial performance

Requirement for judgement/discretion

Other inputs e.g. HSE

Assessing remuneration outcomes

Alison Wood

Chair, Remuneration Committee

7 March 2023

As the Company continues to develop, the Committee, working with management, will continue to assess and ensure our

arrangements remain fit for purpose to unlock the potential of the Group. In particular, the Committee looks forward to

assessing the successes of the changes of the 2023 Remuneration Policy and the evolution of performance measures

in our incentives against the aims of the Policy review. The Committee remains mindful of the impact of high inflation on

employees’ cost of living and will ensure this remains an area of focus.

THE YEAR AHEAD

TT Electronics plc Annual Report and Accounts 2022 111

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

REMUNERATION POLICY REPORT

OVERVIEW

INTRODUCTION

The following pages detail the Directors’

Remuneration Policy which we intend to

apply, subject to shareholder approval at

the 2023 AGM, and how it differs from

that approved by shareholders at the

2020 AGM.

The Remuneration Policy supports

and rewards the achievement of the

Group’s strategy to deliver profitable and

sustainable growth over the short and

longer term. This is driven and evaluated

by how the Group performs against

a variety of strategically aligned KPIs,

both financial and non-financial. As a

Committee, we believe that the proposed

Policy will be “fit for purpose” to align

both stakeholders’ and our Executive

Directors’ focus and interests during

thenext phase of the Company strategy.

In proposing the changes, we have

consulted with our largest institutional

shareholders, the major investor bodies

and employees; feedback themes have

been incorporated in our final proposals.

Summary of the key changes from the

previous Policy

The key differences between the Policy

approved by shareholders in 2020 and

the 2023 Policy are as follows:

– To align the pension provision for

Executive Directors (existing and new)

to those available to the majority of the

workforce in which the Executive is

employed. This is currently 7 per cent

of salary.

– To better reflect the wider role TT

plays in the global ESG arena and

the importance of our sustainability

strategy, we are increasing the

flexibility within our remuneration to

introduce a separate ESG component

into the STIP and more clearly enabling

the ability to introduce ESGmeasures

into the LTIP during thePolicy period.

– To enable a wider choices of

performance measures in incentives

by increasing the flexibility with respect

to performance metrics used in both

the STIP and LTIP, and to increase

flexibility of metric weightings in

the ST IP.

– To ensure remuneration packages

remain appropriately positioned to

attract and retain the high calibre

individuals required to deliver the

Group’s strategic priorities and lead a

Company of our scale and complexity

by increasing variable, performance-

related pay, rather than fixed

remuneration, with an increase in STIP

opportunity of 25% of salary to 150% of

salary. This change is also fundamental

to enabling additional focus on ESG

in our incentives. To further improve

stakeholder alignment and Executive

Director shareholding the STIP deferral

into shares will increase from 20 per

cent to 30 per cent.

KEY POLICY OBJECTIVES

Our remuneration principles, shown

below, informed the design of our current

Remuneration Policy which aims to:

– Enable us to attract, retain and

motivate high-calibre executive talent

in a challenging and competitive

business environment to promote the

strategic and financial performance

ofthe business;

– Deliver an appropriate balance

between fixed and variable

compensation for each Executive;

– Place a strong emphasis on

performance, both short and

longerterm;

– Strongly align to the achievement of

strategic progress and the delivery of

sustainable value to shareholders; and

– Avoid creating excessive risks in the

achievement of performancetargets.

Remuneration principles

– Performance related: the majority of

the Executive and Senior Manager

remuneration packages should be

determined based on the performance

of the Group, maintaining an alignment

of reward outcomes with stakeholder

interests.

– Transparency and culture: to engender

a fair and collaborative culture, total

remuneration frameworks should be

clear, openly communicated and easy

to understand.

– Competitive: through a combination

of base salaries and competitive

performance-related incentive

schemes, the Committee aims to

provide competitive total remuneration

in return for superior performance.

TT Electronics plc Annual Report and Accounts 2022112

STRATEGIC REPORT | REMUNERATION POLICY

Alignment with the Code

The table below details how the Committee addresses the factors set out within Provision 40 of the Code, which align with

ourprinciples:

Clarity Simplicity Risk Predictability Proportionality Alignment to culture

– The

Remuneration

Policy sets out

the terms for

remuneration

including limits

in terms of

quantum, the

measures which

can be used

and discretions

which could

be applied if

appropriate.

– We believe in

being open and

transparent.

Detailed

disclosures of

the relevant

performance

assessments

and outcomes

are provided so

stakeholders can

assess whether

remuneration

paid to

Executives is

appropriate.

We continually

review feedback

to enhance

the clarity and

transparency of

the report.

– We welcome

stakeholder

engagement and

are committed

to shareholder

consultation,

such as that

undertaken over

the past year.

– We are mindful

to avoid overly

complex

remuneration

structures. Our

arrangements

include market

standard short-

and long-term

incentive designs,

each of which are

explained in detail.

– No complex

or artificial

structures are

required to

operate incentive

plans.

– Participants in

incentive plans

receive annual

communications

to confirm

award levels and

performance

measures.

– Stakeholder

engagements

on remuneration

changes help

to ensure that

proposals remain

simple and easy

to understand.

– The Committee

undertakes

an annual

review of risks.

Identified risks

are considered

with appropriate

mitigation

strategies or

tolerance levels

agreed.

– The Committee

considers that

the structure of

variable incentive

arrangements

does not

encourage

unnecessary risk

taking.

– The Committee

considers the

effective risk

management

throughout

the delivery of

variable incentive

plans, applying

reasonable

discretion to

override formulaic

outturns as

appropriate.

– Clawback and

malus provisions

are in place

across all

incentive plans

and are clearly

communicated.

– Our Policy

clearly outlines

the maximum

award levels and

vesting outcomes

applicable to

our variable

incentive plans.

Possible reward

outcomes can be

easily quantified,

and these are

reviewed by the

Committee.

–

Performance

is reviewed

regularly so there

are no surprises

at the end of

performance

periods.

– Our approach to

decision-making

ensures pay

outcomes are

fair, proportionate

and do not

reward poor

performance.

– There is a robust

link between

the delivery of

strategic business

objectives and

performance

outcomes in

our variable

incentive plans.

Performance

is assessed on

a broad basis,

including a

combination

of financial,

operational, ESG

and strategic

progress which

ensures there

is no undue

focus on a single

metric which

may be to the

detriment of other

stakeholders.

– The Committee

has appropriate

discretion to

override formulaic

outturns if they

are deemed

inappropriate in

light of the wider

performance of

the Group and

considering the

experience of

stakeholders.

– Our remuneration

principles

underpin our

Remuneration

Policy for the

Executive

Directors and

that of the wider

workforce to

ensure cultural

alignment through

the Group and

that performance

aligns with our TT

Way values.

– The Committee

takes into account

the stakeholder

experience,

particularly the

context of the

wider workforce

and wider society,

when determining

remuneration

outcomes for

the Executive

Directors.

– Our remuneration

principles place a

strong emphasis

on performance,

both short

and long term

to deliver a

sustainable

business in the

long term. This

is a key part of

our purpose

and informs

our approach to

incentive design,

target setting,

operation of

discretion and

setting of non-

financial strategic

performance

objectives.

TT Electronics plc Annual Report and Accounts 2022 113

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

2023 REMUNERATION POLICY

Operation and scope of Remuneration policy

The future Remuneration policy is intended to apply to the Executive Directors and Non-executive Directors from the close of the

Company’s AGM on 9 May 2023, subject to approval by shareholders.

The Committee has written this Policy principally in relation to remuneration arrangements for the Executive Directors, whilst

taking into account the possible recruitment of a replacement or additional Executive Director during the operation of the Policy,

which is intended to operate for the full three-year Policy term. However, the Committee may after due consideration, seek

to change the Policy during this period if it believes it is appropriate to do so for the long-term success of the Company, after

consultation with stakeholders and having sought shareholder approval at a general meeting.

The Committee reserves the right to make any remuneration payments and/or payments for loss of office (including exercising

any discretions available to it in connection with such payments) notwithstanding that they are not in line with the Policy where the

terms of the payment were agreed:

(i) before AGM 2014 (the date the Company’s first shareholder-approved Directors’ Remuneration Policy came into effect);

(ii) before the future Policy comes into effect, provided that the terms of the payment were consistent with the shareholder-

approved Directors’ Remuneration Policy in force at the time they were agreed; or

(iii) at a time when the relevant individual was not a Director of the Company and, in the opinion of the Committee, the payment

was not in consideration for the individual becoming a Director of the Company. For these purposes “payments” includes the

Committee satisfying awards of variable remuneration and, in relation to an award over shares, the terms of the payment are

“agreed” at the time the award is granted.

Future Remuneration policy table

Subject to shareholder approval at the Company’s 2023 AGM, the Remuneration Policy for each remuneration element will be

as outlined in the following Policy tables. From time to time, the Committee may consider it appropriate to apply judgement and

discretion in respect of the approved Policy. This is highlighted where relevant in the Policy, and the use of discretion will always be

in the spirit of the approved Policy.

Salary No material change

Purpose and link to

strategy Operation Opportunity Performance measures

To provide a core

reward for the role.

Set at an

appropriate level

to attract, motivate

and retain high

calibre individuals

needed to deliver

the Group’s

strategic priorities.

Salary is normally reviewed annually,

typically effective from 1 January each

year. Salaries are normally paid in the

currency of the Executive Director’s

home country.

The Committee considers a number

offactors in setting salaries, including

but not limited to:

– Broader Company policy in respect

ofsalaries applied to all employees.

– Individual’s role and scope, skills,

experience and performance.

– Competitiveness to independently

sourced data compared to relevant

comparator groups such as

companies of similar complexity,

sector and size.

– Set at a level to ensure an appropriate

level of basic fixed income and avoids

excessive risk arising from over

reliance on variable income.

There is no prescribed

maximum annual increase

although increases are

generally aligned with the

general increase received by

the broader employee base in

which the Executive operates

and market movement.

Higher increases may be

made at the Committee’s

discretion in certain

circumstances such as

a significant change in

responsibility, in the scale of

their role or in the size and

complexity of the Group.

Larger increases may also be

considered for progression

if a Director has been initially

appointed to the Board at a

lower than typical salary.

Current base salary levels

are set out in the Directors’

Annual Remuneration Report.

Not applicable, although

the overall performance of

the individual is taken into

account when determining

salary increases.

TT Electronics plc Annual Report and Accounts 2022114

STRATEGIC REPORT | REMUNERATION POLICY

Benefits No material change

Purpose and link to

strategy Operation Opportunity Performance measures

To provide market

competitive and

cost-effective

benefits to attract

and retain high

calibre individuals

Executive Directors are eligible to receive

benefits, which typically may include but

are not limited to:

– Cash allowance in lieu of company car

benefit.

– The provision of private medical

insurance, health screening.

– Life assurance, income protection and

critical illness cover.

In line with the policy for other

employees, Executive Directors may be

eligible to receive relocation or overseas

relocation benefits and allowances as

appropriate.

Benefit provision is tailored to reflect

geographic market practice in which the

Executive Director is based and different

policies may apply if Executive Directors

are based in a different country.

There is no prescribed maximum as

benefit costs can fluctuate depending on

changes in provider cost and individual

circumstances.

Details of the current benefit costs

are set out in the Directors’ Annual

Remuneration Report.

Not applicable.

Pension No material change

Purpose and link to

strategy Operation Opportunity Performance measures

To provide

a market

competitive level

of retirement

income and assist

attraction and

retention.

Pension arrangements for Executive

Directors are structured in accordance

with the provisions available to the

majority of the workforce in which the

Executive is employed.

Executive Directors in the UK are entitled

either to join the defined contribution

pension plan and/or to receive a

cash pension in lieu of the pension

contribution.

In line with market practice, pensionable

pay for Executive Directors in the UK

includes basic salary only.

The maximum contribution for Executive

Directors will be aligned with those

available to the majority of the workforce

in which the Executive is employed.

Not applicable.

TT Electronics plc Annual Report and Accounts 2022 115

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Short-term incentive plan

Change to opportunity, increased

deferral into shares, greater

flexibility to operate non-financial

performance measures, such as ESG

Purpose and link to

strategy Operation Opportunity Performance measures

To incentivise

and recognise

execution of the

achievement

of the business

strategy on an

annual basis.

Rewards the

achievement

of stretching

annual financial

measures and

strategic business

targets aligned to

business strategy.

Performance measures and targets

are typically set at the Committee’s

discretion at the start of each financial

year and are aligned with the strategic

business priorities. Financial targets are

set with reference to the budget.

Incentive awards are assessed and

determined by the Committee based

onperformance against the targets.

30 per cent of any earned incentive

is automatically deferred pre-tax

into shares for a period of two years.

Deferred shares are eligible for dividend

equivalents up to the date of vesting and

release. Deferred awards (after any sales

to pay associated tax withholdings) must

be retained until the share ownership

guideline and/or post-cessation of

employment share ownership guidelines

are met.

The Committee may apply judgement

in making appropriate adjustments to

incentive outcomes to ensure they reflect

underlying business performance and

shareholder interests.

Awards are subject to malus and

clawback provisions.

The maximum opportunity

for Executive Directors is

150per cent of basic salary.

For target performance,

theincentive award will be

50 per cent of the maximum

opportunity.

Based on a combination

ofGroup financial (majority

weighting) and strategic

and/or ESG performance

measures (minority

weighting). The specific

measures and weighting

between measures will

be determined each year

to ensure alignment with

Company strategy and

budgets. The Committee

may use its discretion to set

financial measures that it

considers appropriate in each

financial year.

Specific performance

measures and weightings

willbe included in the relevant

year’s Annual Report on

Remuneration.

Long-term incentive plan

Greater flexibility to operate

ESG performance measures

Purpose and link to

strategy Operation Opportunity Performance measures

To incentivise

and recognise

delivery of longer-

term sustainable

business

performance,

aligning Executive

Directors’ interests

with those of

shareholders.

In addition,

to provide a

retention element,

encourage long-

term shareholding

and discourage

excessive risk

taking.

Award of shares, either as nil cost

options or conditional awards, made

annually with vesting dependent on the

achievement of performance conditions

measured over three years. Vested

shares (after any sales to pay tax) are

subject to an additional two-year holding

period.

Performance measures and targets are

set at the Committee’s discretion, there

may be a single target range to be met at

the end of the three-year period or annual

target ranges to be met throughout

the three-year period. Targets are set

for each award with reference to the

business plan.

Awards are eligible for dividend

equivalents up to the date of vesting and

release.

The Committee may apply judgement to

adjust the formulaic vesting outcomes

(either up or down) to ensure they reflect

underlying business performance

and shareholder interests over the

performance period.

Awards are subject to malus and

clawback provisions.

The maximum award which

may be granted under the

LTIP in any one year is up to

150 per cent of basic salary

for the Executive Directors.

The amount that is paid out

for achievement of threshold

performance will be no

more than 25 per cent of the

maximum. The minimum

vesting is zero.

Awards vest based on a

variety of financial and/or

shareholder value creation

and/or ESG measures.

The specific measures and

weighting between measures

will be determined each

year to ensure alignment

with Company strategy

and business plan. The

Committee may use its

discretion to set measures

that it considers appropriate

each year. Specific

performance measures and

weightings will be included

in the relevant year’s Annual

Report.

TT Electronics plc Annual Report and Accounts 2022116

STRATEGIC REPORT | REMUNERATION POLICY

All-employee share plans No material change

Purpose and link to

strategy Operation Opportunity Performance measures

To encourage

employee share

ownership and

increase alignment

with shareholders.

A number of all-employee share plans

are operated across the Group.

Executives are entitled to participate

inall-employee share plans (Sharesave

in the UK, Employee Share Purchase

Plan in the USA) on the same terms asall

other eligible employees.

In accordance with prevailing legislative

and plan limits.

Not applicable.

Share ownership

guidelines No material change

Purpose and link to

strategy Operation Opportunity Performance measures

To align the

interests of

Executive

Directors

with those of

shareholders.

Executive Directors are required to build

and maintain significant shareholdings

over time.

Executive Directors are required to

build and maintain a shareholding in

employment of 200 per cent of basic

salary.

Post-cessation of employment,

Executive Directors are required to

maintain for two years, a shareholding

ofhalf the in employment requirement

ormaintain their actual holding if lower.

The post-cessation requirement will be

calculated based on the basic salary at

the leave date and applies to shares that

vest (after any sales to pay tax) under the

long-term incentive plan and the deferred

share bonus plan (DSBP) following the

2020 AGM.

Not applicable.

Malus (withholding) and Clawback (recovery) No material change

The Committee may apply judgement to adjust formulaic incentive outcomes (either up or down) prior to payment/vesting to

ensure they reflect underlying business performance and shareholder interests. Malus and clawback events include material

misstatement, misconduct of the participant, vesting/payments based on erroneous or misleading data, serious reputational

damage and corporate failure.

The Committee may enact clawback up to three years from the vesting of share awards under the LTIP (2019 awards onwards)

and the DSBP. Clawback of the cash incentive may be enacted up to two years after payment. In the event that clawback is

enacted, the Committee has the discretion to require repayment or to reduce any unvested or unpaid award madeunder any

Employees’ Share Scheme or the short-term incentive plan. In addition, if a participant in the DSBP is subject to investigation

then the vesting of their award may be delayed until the outcome of that investigation.

TT Electronics plc Annual Report and Accounts 2022 117

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Future Remuneration Policy Table – Non-executive Directors (NEDs)

Non-executive Director

fees No material change

Purpose and link to

strategy Operation Opportunity Performance measures

To attract NEDs

who have a

broad range

of experience

and skills to

oversee the

implementation

ofour strategy.

NED fees (excluding those of the

Chairman) are set by the Chairman and

Executive Directors. The Chairman fee

isset by the Committee.

NEDs receive a basic fee paid monthly

inrespect of their Board duties.

Further fees are paid in respect of

Board committee chair fees and the

role of Senior Independent Director.

No additional fees are payable for

membership of a Board committee.

Fees are reviewed annually and set by

reference to independently sourced data

compared to relevant comparator groups

such as companies of similar complexity,

sector and size. Fee reviews are typically

effective from 1 January each year. Fees

are normally paid in the currency of the

Non-executive’s home country.

Non-executives are eligible for the

reimbursement of Company-related

expenses (grossed up for tax where

appropriate) relating to the performance

of their duties including travel,

accommodation and subsistence.

There is no prescribed maximum fee

level, increases are generally aligned

with the general increase received by

the broader employee base and market

movement.

Not applicable.

TT Electronics plc Annual Report and Accounts 2022118

STRATEGIC REPORT | REMUNERATION POLICY

NOTES TO THE POLICY TABLE

Performance measures and targets

The Committee believes the choice

of performance measures for the

short-term and long-term incentive

plans represent an appropriate balance

between the short-term and long-term

focus of the Group’s strategic aims and

key performance indicators, as well

as an appropriate balance between

internal and external assessment of

performance. Performance measures

for the short-term incentive are tied to

the Company’s delivery of key financial

metrics and non-financial strategic

objectives. The measures applicable

tothe LTIP reward the delivery of long-

term returns to shareholders and the

Group’s financial performance being

consistent with the Company’s objective

of delivering superior levels of long-term

sustainable value to shareholders. When

setting targets, the Committee takes into

account a variety of factors, including but

not limited to, market practice, market

expectations and internal business

plans, and forecasts. In setting the

targets, the Committee ensures that

they are sufficiently stretching and that

there is an appropriate balance between

incentivising Executive Directors to meet

targets for the year, whilst ensuring that

they do not drive unacceptable levels

of risk and encourage inappropriate

behaviours.

Consideration of remuneration

arrangements throughout the Group

In setting the Policy the Committee

considers the remuneration arrangement

across the Group and the relativity of

Executive Director remuneration. When

considering annual salary adjustments,

the Committee takes account of the

expected increases for the broader

employee base.

Remuneration arrangements across the

Group are based on the same principles

that remuneration should support

the delivery of the business strategy

and should be sufficient to attract,

motivate and retain talent. Although the

remuneration offered to the Executive

Directors has a stronger emphasis on

variable performance-related pay than

that offered to other employees, to

the extent practicable, remuneration

practices are cascaded down the

organisation, such that employees

arealigned towards common goals.

The Group operates in a number of

different geographic territories and has

many employees who carry out a range

of diverse roles. The ratio of fixed to

variable pay differs by employee level

and the structure of remuneration varies

by local market, consisting:

– Salary and benefits (including pension/

retirement) are tailored to the local

market.

– Short-term incentive plans are

operated across the Group, typically

on differing metrics aligned to the

Company strategy which may include

financial performance, sales team

KPIs, operational KPIs, HSE, ESG,

individual or team performance.

– Long-term incentive plan awards are

made annually to senior leadership

roles across the Group, typically on

the same terms as those for Executive

Directors or as restricted share

awards.

– All employee share plans are available

to all UK and US employees.

The Committee consulted with a

range of stakeholders in the formation

and finalisation of the 2023 Policy.

Stakeholders included our key

shareholders, shareholder proxy bodies

and our employees whose remuneration

most closely aligns with that of the

Executive Directors. This subset of

employees were selected as being: (i)

those with the most comprehensive

understanding of the company strategy

and the company's KPIs, (ii) whose

remuneration would most likely be

impacted by the proposals, and (iii) best

place to provide constructive feedback

on the proposals.

Recruitment Policy

When considering the recruitment of a

new Executive Director, the Committee

will apply the prevailing Remuneration

Policy at the time of appointment.

The Committee will determine

remuneration on a case-by-case basis

depending on the role, the market

fromwhich they will operate, their skills

and experience. Total remuneration

levels will be set to attract the most

appropriate candidate and will take into

account remuneration levels amongst

relevant comparator groups. Where

appropriate, salaries may initially be set

below mid-market levels to allow for

future development in the role with the

Committee retaining discretion to award

increases in excess of those of the wider

workforce to bring the salary to the

market level over time.

Benefit and pension arrangements will

be set in accordance with the terms

of the approved Remuneration Policy

in force at the time of appointment.

The Committee may also agree that

the Company will meet certain costs

associated with the recruitment, for

example legal fees, and the Committee

may agree to provide relocation benefits.

It is anticipated that new Executive

Directors will participate in short- and

long-term incentive plans on the same

arrangements as existing Directors. In

certain circumstances, the performance

measures associated with these awards,

in the year of joining, may be granted

with different measures and/or targets

tothe other Directors.

For an externally appointed Executive

Director, the Company may offer

additional remuneration that it

considers necessary to buy out

current entitlements from the existing

employer that will be lost, as may

be required in order to achieve a

successful recruitment when the

Committee considers these to be in

the best interests of the Company and

stakeholders. The Company is mindful

of the sensitivity relating to recruitment

packages and will seek to minimise

buy-out remuneration. The overriding

principle for any such remuneration

would be that any replacement buy-

out award should be of comparable

commercial value to the terms,

incentives and other compensation

which have been forfeit. In order

to facilitate buy-out arrangements,

existing incentive arrangements will be

used to the extent possible, although

if necessary awards may be granted

as permitted under the Listing Rules

exemption 9.4.2.

For an internal executive Director

appointment or a new Director following

acquisition or merger, any variable pay

element awarded in respect of their prior

role may be determined according to

the original terms, adjusted as relevant

to take into account the appointment. In

addition, any other ongoing remuneration

obligations existing prior to appointment

may continue on their original terms.

TT Electronics plc Annual Report and Accounts 2022 119

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

The Committee retains discretion

to make appropriate remuneration

decisions outside the standard Policy

to meet the individual circumstances

ofrecruitment when:

– an interim appointment is made to fill

an Executive Director role on a short-

term basis; or

– exceptional circumstances require

that the Chairman or a Non-executive

Director takes on an executive function

on a short-term basis.

In the event that a Non-executive

Director takes on an executive role for

a temporary period, the Non-executive

Director will be remunerated in line

with the prevailing Executive Director

Remuneration Policy in force at the

timeof appointment.

If appropriate, on the recruitment of

a new Executive, the Committee may

agree to an initial notice period in excess

of 12 months, reducing to 12 months

over a specified period.

Fees for a new Chairman or Non-

executive Directors will be set in line

with the approved Policy in force at the

time of appointment. It is not intended

that variable pay, day rates or benefits in

kind be offered, although in exceptional

circumstances such remuneration may

be required in currently unforeseen

circumstances.

The Committee will include in future

Remuneration Reports details of the

implementation of the Policy as utilised

during the Policy period in respect of

anysuch recruitment to the Board.

Service contracts/letters of

appointment

Executive Directors service contracts

are terminable by either party with

12 months’ notice and allow for the

Company to impose a six-month non-

competition clause.

The Chairman and Non-executive

Directors do not have service contracts

but have letters of appointment with the

Company. Notice periods are normally

set at one month for the Chairman and

Non-executive Directors.

Service contracts are available for

inspection at the Company’s registered

office.

Loss of office policy

In the event that an Executive Director’s

employment with the Company

terminates, the following policies and

payments will apply.

Element of Remuneration Loss of office payment policy

Fixed Pay Up to 12 months’ annual salary payable. The contracts contain provision, at the Board’s discretion,

forpayment in lieu of notice. In calculating any termination payment, the Board would take into account

thecommercial interests of the Company and apply usual common law and contractual principles.

Generally, benefits will continue to apply until cessation. The Committee may make payments in

connection with an existing legal obligation or in respect of any claim relating to the cessation of

employment. This may include fees for outplacement assistance, legal and/or professional advice.

Short-term

incentive plan

No award would generally be payable if on the date the payment is declared an individual is no longer

employed by the Company, or has received or given notice to leave the Group. However, the Committee

retains discretion to deem an individual a good leaver

, in which case it may provide a time pro-rated

award, determined against the relevant performance conditions. Any award would normally be payable

at the normal payment date. In determining the level of short-term incentive to be paid, the Committee

may, at its discretion, take into account performance up to the date of cessation or over the financial year

as a whole based on appropriate performance measures as determined by the Committee.

Deferred share

bonus plan

Deferred short-term incentive awards are governed by the plan rules which are subject to shareholder

approval.

Unvested awards will normally lapse unless the individual is deemed a good leaver

in which case the

awards will vest in full on the original vesting date. The Committee retains discretion, in exceptional

circumstances, to determine an early vesting date.

In the event of change of control, awards will vest or may be exchanged for new awards.

Long-term

incentive plan

Long-term incentive plan awards are governed by the plan rules which have been approved by

shareholders.

Unvested awards will normally lapse unless the individual is deemed a good leaver

in which case

the awards will normally vest on the original vesting date, subject to the satisfaction of the relevant

performance conditions and be pro-rated for time. The Committee retains discretion to determine that

awards vest at cessation (for example in the case of death) and/or to disapply time-based pro-ration.

In the event of change in control, and unless participants agree with the acquiring company to exchange

their awards, awards will vest subject to the satisfaction of the relevant performance conditions and be

pro-rated for time. However, the Committee has discretion to disapply time proration.

1 For example: death, disability, redundancy, retirement, or other circumstances at the discretion of the Committee.

External appointments

Executive Directors, with the prior approval of the Board, may accept one external appointment as a Non-executive Director

ofanother company. Experience as a board member of another company is considered to be valuable personal development,

which is of value to the Company. The retention of any related fees by the Executive Director or remission to the Company will

bedetermined on a case-by-case basis.

TT Electronics plc Annual Report and Accounts 2022120

STRATEGIC REPORT | REMUNERATION POLICY

Illustration of total remuneration opportunity

The following charts illustrate the future total remuneration for each Executive Director in respect of the proposed remuneration

opportunity to be granted under the future Remuneration Policy for approval at the 2023 AGM. The charts indicate the minimum,

on-target and maximum remuneration that could be received. Underlying assumptions follow the charts.

£1,381

100%

£597 £453

44%

28%

23%

100%

45%

29%

25%

28% 28%

36% 36% £2,165

31% 46% £2,556

29% 26%

£1,012

37%

34%

£1,570

32% 43% £1,835

Richard Tyson Mark Hoad

0 1,000500 1,500 2,000 2,500 0 1,000500 1,500 2,000 2,500 3,000

Fixed pay Short-term incentive Long-term incentive

Maximum with

50% share price

growth

Maximum with

50% share price

growth

Maximum

On target

Minimum

Maximum

On target

Minimum

All scenarios:

– Base salary and pension to be paid in 2023.

– Benefits in kind received in 2022 as shown in the Single Total Figure of Remuneration table.

– Short-term incentive is based on 150 per cent of salary, as proposed under the future Remuneration Policy.

– Long-term incentive is based on the multiples for 2023 of 150 per cent and 135 per cent of salary for the CEO and

CFOrespectively.

– Dividend equivalents are not included in respect of deferred awards under the short-term incentive or awards under the long-

term incentive plan.

Fixed:

– Fixed pay consists of salary, pension and benefits in kind as provided under the Remuneration policy.

On-target:

– For the short-term incentive 50 per cent of the maximum would be payable. For the long-term incentive 50 per cent vesting

isassumed.

Maximum:

– It is assumed that the short-term incentive would be payable at maximum and the that the long-term incentive award would

vest in full.

Maximum with share price growth:

Calculated as per the maximum but for the long-term incentive award which includes a 50 per cent share price growth assumption.

Discretion

The Committee has discretion in numerous areas of the Policy as set out in the report. The Committee may also exercise

administrative and operational discretion under incentive plan and share plan rules. The Committee may make minor

amendments to the Policy set out in this Policy Report (for regulatory, exchange control, tax or administrative purposes or to

takeaccount of a change in legislation) without obtaining shareholder approval for that amendment.

The Committee may vary or waive any performance condition(s) if an event occurs which causes it to determine that the original

condition(s) have ceased to be appropriate, provided that any such variation or waiver is fair, reasonable and not materially less

difficult to satisfy than the original condition would have been but for the event in question (in its opinion). The Committee may

also adjust the calculation of performance targets and vesting outcomes (for instance for material acquisitions, investments or

disposals and events not foreseen at the time the targets were set) to ensure they remain a fair reflection of performance over

the relevant period. In the event that the Committee was to make an adjustment of this sort, a full explanation would be provided

in the next Directors’ Annual Remuneration Report. The Committee will also consider shareholder consultation in respect of

materialadjustments.

TT Electronics plc Annual Report and Accounts 2022 121

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

ANNUAL REPORT ON

REMUNERATION

IMPLEMENTATION OF THE REMUNERATION POLICY FOR THE YEAR ENDING 31 DECEMBER 2023

A summary of how the Directors’ Remuneration Policy will be applied, subject to the approval of the future Remuneration Policy,

during the year ending 31 December 2023 is set out below.

BASIC SALARY

The Remuneration Committee agreed that it would be appropriate to increase the base salaries of the Executive Directors at a

level lower proportionally than general increases across the broader workforce and significantly below inflation. Executive Director

base salaries were increased by 5 per cent effective 1 January 2023. After a review, the budget for the Group’s UK salary review

has been increased and will, once again, be weighted to our lower paid employees. Following on from our cost of living actions

in2022 salary increases across the UK are expected to average 6.5 to 7.5 per cent depending on location, promotional increases

and individual performance.

Executive 2023 2022 Increase

Richard Tyson £522,402 £497,526 5%

Mark Hoad £391,876 £373,215 5%

PENSION AND BENEFITS

The Executive Directors previously agreed that their contractual pension allowance of 15 per cent of salary would be aligned with

those available to the wider UK workforce by 31 December 2022 by way of a single reduction. The revised pension allowance, in

line with those available to the wider UK workforce, is 7 per cent of salary.

SHORT-TERM INCENTIVE PLAN

The Committee believes it is important that a significant proportion of Executive Director remuneration be performance related

and that the performance conditions applying to incentive arrangements support the delivery of the Group’s strategy. In line with

the proposed new Policy, the intention is that the maximum short-term incentive opportunity for 2023 will be increased from 125

per cent to 150 per cent of base salary. The bonus deferral into shares will increase from 20 per cent to 30 per cent of the earned

bonus for a period of two years.

The Policy changes provide the Committee with greater flexibility to ensure the selection of performance measures that best

reflect those critical to business needs. The split between financial (majority weighting) and non-financial (minority weighting)

performance measures will remain broadly consistent with prior years, continuing to be principally focused on profit, cash flow

and strategic progress. For 2023, a complementary, separate, and higher-profile component is proposed to be introduced to

better reflect the strategic importance of ESG performance measures to sustainable shareholder value within our remuneration.

Performance measure Weighting

Threshold

opportunity

(% of salary)

Maximum

opportunity

(% of salary)

Paid

in cash

Awarded

in shares

Adjusted profit before tax 46.7% 7% 70%

Group free cash flow 23.3% 3.5% 35%

ESG 10% n/a 15%

Strategic objectives 20% n/a 30%

Total 100% 150% 70% 30%

TT Electronics plc Annual Report and Accounts 2022122

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

Targets are set taking account of internal and external forecasts relating to the Group’s performance, the ongoing economic

and societal uncertainty arising from the pandemic and reflecting the Board’s expectation of the development of the Group.

Themajority of targets for the 2023 STIP are currently considered to be commercially sensitive; the targets and respective levels

of achievement will be disclosed in the 2023 Directors’ remuneration report.

Both the ESG and strategic objectives reflect the importance of sustainable value for all our stakeholders. The ESG objectives

are focused on our environmental sustainability: (i) Scope 1 & 2 carbon emission reduction; (ii) evaluation of the material Scope

3 impacts; (iii) progress towards SBTi verification; and (iv) employee outcomes and support through the next phase of high

inflation. The Committee considered that the people agenda continues to be an area of focus in 2023 and the strategic objectives

encompass: (i) human capital management ensuring smooth employee succession and (ii) a strategic review of customer

strategies and global supply chains to optimise organic growth opportunities.

To the extent that neither the threshold profit before tax or threshold free cash flow target has been met, the Committee will

consider if appropriate, a reduction to the outcomes payable in respect of the strategic objectives and/or the ESG performance

measures, up to and including a reduction to zero.

LONG-TERM INCENTIVE PLAN

LTIP awards are expected to be granted in March 2023. Vesting is intended to be based on performance against the following

measures over the three-year financial performance period.

Performance measure Weighting

Adjusted EPS compound annual growth on a constant currency basis over the three-year performance period 50%

Average operating cash conversion over the three-year performance period 25%

Relative TSR performance against the FTSE SmallCap (excluding Investment Trusts) 25%

The performance measures ensure the alignment of senior management and shareholder interests. The 2023 awards are

intended to differ from those last year with the inclusion of a cash-based target to reflect the importance of delivering improved

and stable cash generation to improve the leverage position over the longer term.

In light of the ongoing external volatility the setting of the final targets will be delayed until the date of grant, the detail of which

will be published in the RNS following the grant. The setting of the performance target ranges for the 2023 awards will take into

account the latest internal and external forecasts for the business, including both economic and political uncertainty and TT’s

principal risks.

The Committee will continue to consider the impact of any significant future portfolio development on the outstanding

performance targets at the time of the capital deployment. Any further changes to the performance targets in these

circumstances will be communicated to shareholders.

The awards, as a percentage of salary, are expected to be as follows:

Executive 2023 2022

Richard Tyson 150% 150%

Mark Hoad 150% 135%

For 2023 the Committee anticipate aligning the awards for the Executive Directors. This continues to ensure that the Executive

Directors are adequately tied to the longer-term performance of the Company. The one-off increase in award to Mark Hoad

recognises his strong contribution and his importance to the ongoing development of the Company and ongoing value creation

for stakeholders. The Committee anticipate that future awards will be at the 2022 levels.

The Committee is mindful that share price falls can lead to the perception of windfall gains. The Committee will review the share

price at grant when determining final award values. Discretion may be applied at grant or on vesting to manage any relevant

windfall gain from the allocation.

The awards will vest on the third anniversary of grant to the extent the performance targets have been satisfied, followed by atwo-

year holding period.

SHAREHOLDING REQUIREMENT

No changes will be made to the shareholding requirements. Executive Directors are required to build and maintain a shareholding

in employment of 200 per cent of basic salary. Post cessation of employment, Executive Directors are required to maintain

for two years, a shareholding of half this requirement or maintain their actual holding if lower. During the two-year period,

Executive Directors will be required to self-certify their holdings on an annual basis. In addition, it is anticipated that some vested

shareholding will be subject to holding periods during the post cessation requirement.

TT Electronics plc Annual Report and Accounts 2022 123

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

FEES FOR NON-EXECUTIVE DIRECTORS

The Chairman’s fee, NED base fee and NED additional fees increased by 5 per cent effective 1 January 2023, a level which is

below the average expected increase for the wider UK workforce.

2023 2022 Increase

Chairman £196,631 £187,268 5%

Base fee £49,316 £46,968 5%

Additional fees

Senior Independent Director £8,610 £8,200 5%

Audit Committee Chair £8,610 £8,200 5%

Remuneration Committee Chair £8,610 £8,200 5%

IMPLEMENTATION OF THE REMUNERATION POLICY FOR THE YEAR ENDED 31 DECEMBER 2022

Single figure for total remuneration (audited)

Directors’ remuneration for the year ended 31 December 2022 was as follows:

£’000

Salary/

fees

Taxable

benefits Pension

Total

fixed pay

Short-term

Incentive

Long-term

Incentive

Other

Total

variable

pay

Single

total

figure

Executive Directors

Richard Tyson 2022 498 38 75 611 380 203 583 1,194

2021 485 37 73 595 589 119 3 711 1,306

Mark Hoad 2022 373 34 56 463 285 137 422 885

2021 364 32 55 451 442 82 3 527 978

Chairman

Warren Tucker 2022 187 187 187

2021 183 183 183

Non-executive Directors

Jack Boyer 2022 55 55 55

2021 54 54 54

Anne Thorburn 2022 55 55 55

2021 54 54 54

Alison Wood 2022 55 55 55

2021 54 54 54

1. Executive Directors’ short-term incentive awards are subject to deferral into shares in the Company. The STIP value includes the incentive paid in both cash and deferred into shares. In line

with the current Remuneration Policy 20% of the 2022 award will be deferred into shares and 20% of the 2021 award was deferred into shares. Deferred awards are not subject to any

further performance conditions.

2. LTIP values shown in the single figure include dividend equivalents. The 2022 single figure is comprised solely of the TSR element of the 2019 award; the 2021 figure is comprised of the

EPS element of the 2019 award and the TSR element of the 2018 award. Further detail is contained on page 128. The value attributable to share price appreciation in the 2022 single figure

value for the CEO and CFO was £(4,000) and £(3,000) respectively. The Committee did not exercise any discretion to vesting outcomes in relation to the impact of share price movements.

3. The 2021 single figure includes the exercise of the Executive Directors’ 2018 Sharesave options. The value shown was the gain on exercise.

TT Electronics plc Annual Report and Accounts 2022124

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

BASE SALARY/FEES

Base salaries for the Executive Directors were reviewed in December 2021 and were increased by 2.5 per cent with effect from

1January 2022. Base fees for the Chairman, and the base fee and SID/Chair fees for the NEDs were also increased by 2.5 per

cent with effect from 1 January 2022.

The increases were set at a level below those of the wider UK workforce which averaged between 3 and 4 per cent.

TAXABLE BENEFITS

The Executive Directors’ taxable benefits consist of a car allowance and insurance benefits. Costs associated with insurance

benefits reflect the circumstances of each Executive Director and typical increase with age.

PENSIONS

Employer contributions were paid at 15 per cent of base salary, as defined contribution pension and/or a cash supplement.

Employer contributions for 2023 have reduced to 7 per cent of base salary in line with those available to the wider UK workforce.

SHORT-TERM INCENTIVE

Short-term incentive opportunity was capped at up to 125 per cent of salary. Performance was assessed against Group adjusted

profit before tax (up to 62.5 per cent of salary) and Group free cash flow (up to 31.25 per cent of salary) measured at constant

budget exchange rates and strategic objectives (up to 31.25 per cent of salary) as measured over the 2022 financial year.

Short-term incentive payments for 2022

Performance measure

Threshold

potential

(% of salary)

Maximum

potential

(% of salary)

Required for

threshold

bonus (£m)

Required for

maximum

bonus (£m)

Outturn for

incentive plan

purposes (£m)

Achievement

(% of salary)

Group adjusted profit before tax 6.25% 62.5% 31.1 35.3 34.7 51.5%

Group free cash flow 3.125% 31.25% 7.9 17.4 (14.7) 0%

Strategic objectives n/a 31.25% As outlined 25%

2022 short-term incentive award

125% 76.5%

1 Short-term incentives are measured using constant budget exchange rates.

2 Short-term incentive award is part paid in cash (80%) and part in deferred shares for two-years (20%) in line with Remuneration Policy.

The Committee considers that the Executive Directors have delivered another year of strong leadership alongside making

significant strategic progress. Company financial performance has been strong, with organic growth for the year of 20 per cent

reflecting our successful positioning in structural growth markets and new project and customer wins. Adjusted profit before tax

for the year is around the top end of range of analyst consensus expectations with leverage reduced back into the 1-2 times target

range. All delivered against a challenging economic backdrop and ongoing impacts from the pandemic in our supply chains and

associated freight costs, employment markets and inflation. The Group has good momentum, underpinned by a strong order book.

Our stakeholder experience has similarly been strong, lead by a strong focus on our values and purpose. Good customer

outcomes have continued to be delivered and strategic partnerships deepened with agile navigation of the supply chain tightness.

The Executive Directors have continued to focus on making the Company a great place to work and have pro-actively led the

responses to protect employees and to provide support to employees through a range of cost of living actions.

Despite the strong performance of the Group, the STIP award amounted to 61 per cent of the maximum (i.e. 76.5 per cent of

salary), reflecting the strong profit and strategic performance in the face of challenging headwinds. In line with the Remuneration

Policy, 80 per cent of the award will be paid in cash and 20 per cent will be deferred into shares for two years.

TT Electronics plc Annual Report and Accounts 2022 125

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

STRATEGIC OBJECTIVES

The strategic objectives of the Executive Directors focused on the creation of sustainable value for all our stakeholders with a

focus on ESG development, evaluation and development of the Group strategy to unlock value, and a focus on our people talent

development. Performance against these objectives are set out in the table below.

Strategic

objective Target Committee assessment

Maximum

potential

(% of salary) Achievement

ESG development Environmental:

Make significant

progress towards

carbon net

zero by 2035

by establishing

a clear plan

to deliver the

achievement of

long-term targets.

Social and

Governance:

Roll out the

Group’s

sustainability

strategy and

vision.

Environmental: In assessing the target the Committee

noted:

– significant progress delivered in accordance with

plans to deliver on carbon net zero commitments

by 2035 with a cumulative 54% reduction in Scope

1 & 2 carbon emissions since 2019 and against our

commitment to deliver a 50% reduction in by the

endof 2023;

– that all sites have established carbon reduction

plans and are working towards their annual carbon

reduction targets;

– in year total gross Scope 1 & 2 tCO

reduction of 23%

or 3,574 tCO

; Carbon intensity ratio reduced from

33.1 to 19.7 tCO

e/£m;

– the establishment and verification of plans to deliver

our absolute Scope 1 & 2 tCO

2023 goal and to

offset the impacts of our business growth and

the associated increase in tCo

, with a focus on

countries where renewable energy is not available

e.g. Mexico and China;

– the significant capital investment in projects

underway, including the installation of solar power

inKuantan, Malaysia.

Social and Governance: In assessing the target the

Committee noted:

– improved site engagement through progress against

improvement actions from the employee survey;

– that 2022 salary budgets continued to target higher

increases to our lower paid employees;

– the Company’s strong response to high inflation and

cost of living impact on our employees, including the

regional responses taken to reflect local employment

market conditions and the multi-faceted approach

taken in the UK where inflation has disproportionately

impacted our lowest paid employees culminating in

an additional cost of living payment;

– the improvements in Board access to the workforce

and key customers with an enhanced number of

board visits during the year and virtual engagements

with China;

– the enhanced retirement security for 5,000 current

and former UK employees and their dependants with

the completion of an annuity buy-in of all UK defined

benefit pension liabilities.

12.5% ✓✓✓

8.75% of

salary

TT Electronics plc Annual Report and Accounts 2022126

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

Strategic

objective Target Committee assessment

Maximum

potential

(% of salary) Achievement

Group strategy

and portfolio

review

Agree the scope

of the Group

strategy and

portfolio review

with the Board

and complete the

review to unlock

value potential and

action the agreed

outcomes.

In assessing the target, the Committee noted:

– the completion of the strategic portfolio review

including a full review of material actions to unlock

potential value in the Group;

– actions focused on organic growth in the near

term to unlock value via actions to manage our

employment cost base and the removal of UK

defined benefit pension liabilities;

– annualised cost savings of circa £4m offset by in-

year cost phasing, external events and deterioration

of macro market conditions;

– the completion of the acquisition of Ferranti Power

& Control business and the integration actions

delivered.

9.375% ✓✓✓✓

8.75% of

salary

People

development

Develop a

clear plan for

successors to

ELT and SLT.

Launch

development

programmes for

Female leadership,

interns and

high potential

employees.

In assessing the target, the Committee noted:

– progress in succession development to ELT with

succession plans in place. Optionality in succession

plans being improved by further specific people

development actions;

– a completed review of key succession and retention

plans with a series of succession-based promotions

to smooth role transitions;

– a review completed of the core operational

leadership team and its expansion with a dedicated

role to lead and enhance customer-centric growth

opportunities;

– roll out of line manager training across the business,

along with inclusive leadership training to all

managers to enhance engagement and line manager

capability;

– Completion of the first women’s leadership

programme, with strong feedback and ongoing

support.

9.375% ✓✓✓

7.5% of

salary

✓ underperforming, ✓✓ performing, ✓✓✓ outperforming, ✓✓✓✓ stretch

TT Electronics plc Annual Report and Accounts 2022 127

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

LONG-TERM INCENTIVE

LTIP awards over conditional shares have typically vested depending on performance against two equally weighted measures

over separate three-year performance periods with EPS performance assessed over a three-year period aligned with the Group’s

financial year and TSR performance assessed over a separate three-year performance period, ending on the third anniversary

ofthe award date. Accordingly, the performance periods of the two performance conditions end in separate reporting years.

The 2019 LTIP awards had a TSR performance condition, shown below, that ended in March 2022 and is included in the single

figure for total remuneration for 2022. The EPS performance condition within the award ended on 31 December 2021 and was

previously included in the 2021 single figure for total remuneration.

The 2020 LTIP award, following shareholder consultation and as previously disclosed, has a sole TSR performance condition

which will be disclosed in the 2023 single figure of remuneration.

Award year and performance measure

Threshold

(25% vesting)

Maximum

(100% vesting) Outcome

Percentage

of maximum

achievement

2019 LTIP award

: Relative TSR

performance against the FTSE SmallCap

(excluding Investment Trusts)

Median

rank

Upper quartile

rank or above

59 percentile

(Between

median and

upper quartile)

54.8%

1 2019 LTIP award (vested March 2022): The EPS performance period for this award ended on 31 December 2021; the vesting of the EPS component was not achieved and was included in

the 2021 single figure for total remuneration. The TSR performance period ended in March 2022 and vested between the median and upper quartile performance targets as indicated in the

above table. The vested value of the shares subject to the TSR performance measure is included in the 2022 single figure for total remuneration; shares at vesting were valued at 197.7p.

Other

No disclosures occurred during the period.

Malus and clawback

No malus or clawback events occurred during 2022.

LONG-TERM INCENTIVES GRANTED DURING THE FINANCIAL YEAR (AUDITED)

LTIP awards over conditional shares were granted to Executive Directors on 14 March 2022. Awards are subject to a three-year

vesting period plus an additional two-year holding period.

Executive

Basis of award

granted

(% of salary)

Share price at

date of grant

(pence)

Number

of shares over

which award

was granted

Face value

of award

(£)

% of award

that would vest

at threshold

performance

Performance

period end date

Richard Tyson 150% 192.07 388,550 746,288 25% 14/03/2025

Mark Hoad 135% 192.07 262,321 503,840 25% 14/03/2025

1 The share price used to determine the number of shares granted was the average share price over the three trading days prior to grant.

The Committee is mindful that share price falls can lead to the perception of windfall gains. The share price used to calculate the

number of shares under the 2022 award was 8 per cent lower than that of the 2021 award. The Committee did not believe that

windfall gains would apply to this award as a result of the share price volatility at the time of grant but retains discretion to adjust

formulaic incentive vesting outcomes to ensure they reflect underlying business performance and shareholder interests.

PERFORMANCE MEASURES FOR LTIP AWARDS GRANTED DURING THE FINANCIAL YEAR (AUDITED)

Awards granted to Executive Directors during 2022 are subject to the two equally weighted performance measures of EPS and

TSR as follows:

Performance measures Weighting

Threshold

(25% vesting)

Maximum

(100% vesting)

Adjusted EPS compound annual growth over the

three-year period on a constant currency basis

50% 5% 12%

Relative TSR performance against the FTSE

SmallCap (excluding Investment Trusts)

50% Median

rank

Upper quartile

rank or above

The performance measures ensure the alignment of the Executive Director and shareholder interests. Target ranges for the 2022

awards were set taking into account the latest internal and external forecasts for the business, including both economic and

political uncertainty and TT’s principal risks. The Committee believed that the EPS growth targets pose a similar level of stretch to

those of prior years, with maximum performance aligning with upper quartile growth forecasts and following the significant year

of recovery in 2021 (the EPS base year over which growth is assessed). In line with previous awards, to better manage some of

the uncertainty resulting from the pandemic and to ensure that EPS performance targets were appropriately stretching, the EPS

performance targets will be measured on a constant currency basis.

TT Electronics plc Annual Report and Accounts 2022128

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

DEFERRED SHORT-TERM INCENTIVE AWARDS

During the year the Executive Directors were awarded conditional shares as deferred bonus share plan awards in relation to the

2021 STIP outcome. Details of the awards are summarised in the table below. No performance conditions apply to these awards.

Executive Date of grant

Number

of shares

awarded

Share price at

date of grant

(pence)

Face value of

award

(£) Date of vesting

Richard Tyson 14/03/2022 61,374 192.07 117, 881 14/03/2024

Mark Hoad 14/03/2022 46,039 192.07 88,427 14/03/2024

1 The share price used to determine the number of shares granted was the average share price over the three trading days prior to grant.

EXECUTIVE DIRECTOR INTERESTS IN SHARES

The table below sets out details of outstanding LTIP and DBSP share awards held by the Executive Directors at 31 December

2022.

Executive Scheme

Date

of grant

1 January

2022

Granted

during

the year Lapsed Vested

31 December

2022

Market value at

31 December

2022

(£)

Market

price at

grant date

(pence)

Vesting

date

Richard Tyson LTIP 11/03/2019 355,993

258,505 97, 4 8 8 – – 202 11/03/2022

13/03/2020 365,983

365,983 636,810 196 13/03/2023

16/03/2021 349,621

349,621 608,341 208 16/03/2024

14/03/2022 388,550 388,550 676,077 192 14/03/2025

DSBP 16/03/2021 84,047

84,047 – – 208 16/03/2022

16/03/2021 21,011

21,011 36,559 208 16/03/2023

14/03/2022 61,374 61,374 106,791 192 14/03/2024

Total outstanding 1,186,539 2,064,578

Mark Hoad LTIP 11/03/2019 240,340

174,523 65,817 – – 202 11/03/2022

13/03/2020 247,085

247, 085 429,928 196 13/03/2023

16/03/2021 262,265

262,265 456,341 208 16/03/2024

14/03/2022 262,321 262,321 456,439 192 14/03/2025

DSBP 16/03/2021 63,047

63,047 – – 208 16/03/2022

16/03/2021 15,761

15,761 27, 424 208 16/03/2023

14/03/2022 46,039 46,039 80,108 192 14/03/2024

Total outstanding 833,471 1,450,240

1 Awards granted under the LTIP are subject to the attainment of stretching performance conditions, awards granted under the DSBP in respect to STIP deferral are not subject to any further

performance conditions.

2 Calculated as the total number of shares awarded multiplied by the share price on 31 December 2022 of 174 pence. The calculation does not take into account dividend equivalents or

thelikelihood of vesting.

3 The performance condition attached to 50% of the award is based on EPS. 25% of the shares subject to this part of the award will vest for EPS growth of 6% compound per annum,

increasing on a straight-line basis to 100% vesting for EPS growth for the year ending 31 December 2021 of 13.5% compound per annum. The performance condition attached to the other

50% of the award is based on TSR performance against the FTSE SmallCap (excluding Investment Trusts) during the three-year performance period from the date of award. 25% of the

shares subject to this part of the award will vest at median performance increasing on a straight-line basis to 100% vesting at the upper quartile of the comparator group.

4 The sole performance condition attached to the award is TSR performance against the FTSE SmallCap (excluding Investment Trusts) during the three-year performance period from the

date of award. 25% of the shares will vest at median performance increasing on a straight-line basis to 100% vesting at the upper quartile of the comparator group. As previously disclosed,

the award was granted shortly before the onset of the COVID-19 pandemic subject to equally weighted EPS and TSR performance conditions. Following consultation with shareholders,

the EPS performance condition was removed and the full weighting was allocated to the existing TSR performance condition.

5 The performance condition attached to 50% of the award is based on EPS. 25% of the shares subject to this part of the award will vest for EPS growth of 10% compound per annum,

increasing on a straight-line basis to 100% vesting for EPS growth for the year ending 31 December 2023 of 18% compound per annum. The performance condition attached to the other

50% of the award is based on TSR performance against the FTSE SmallCap (excluding Investment Trusts) during the three-year performance period from the date of award. 25% of

theshares subject to this part of the award will vest at median performance increasing on a straight-line basis to 100% vesting at the upper quartile of the comparator group.

6 The Committee applied its discretion to defer the full 2020 STIP award into shares with 80% vesting on the first anniversary and the 20% vesting on the second anniversary.

TT Electronics plc Annual Report and Accounts 2022 129

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

TT ELECTRONICS PLC SHARESAVE SCHEME

Executive

Date

of grant

January

2022

Granted

during the

year Lapsed Exercised

31 December

2022

Market

value at

31 December

2022

(£)

Market

price at

grant date

(pence)

Vesting

date

Richard Tyson 29/09/2021 7,96 4 7,96 4 0 226

01/11/2024–

30/04/2025

Mark Hoad 29/09/2021 7,96 4 7,964 0 226

01/11/2024–

30/04/2025

1 The market value is the difference between the share price on 31 December 2022 and the option price of 174 pence multiplied by the total number of shares under the option (or £0 if this

difference is negative).

PAYMENTS TO PAST DIRECTORS (AUDITED)

No payments were made in 2022.

PAYMENTS FOR LOSS OF OFFICE (AUDITED)

No payments were made in 2022.

STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED)

The Executive Directors are required to build and hold a shareholding of 200 per cent of salary. Executive Directors must retain 50

per cent of the net of tax value of any vested LTIP shares until the guideline is met. At 31 December 2022, the Executive Directors

were compliant with the requirement.

Executive

Beneficially

owned at

1 January

2022

Beneficially

owned at

31 December

2022

Unvested share

awards subject

to Company

performance

conditions

Unvested

deferred bonus

share plan

awards as at

31 December

2022

Outstanding

share awards

under all

employee share

plans as at

31 December

2022

Beneficially

owned

shareholding

at 31 December

2022 as a % of

salary

Value of

beneficially

owned at

31 December

2022

(£)

Executive Directors

Richard Tyson 910,454 1,006,666 1,104,154 82,343 7,964 335% 1,751,599

Mark Hoad 711,149 779,446 771,671 61,769 7,964 346% 1,356,236

Chairman

Warren Tucker 60,075 60,075

Non-executive Directors

Jack Boyer 95,514 95,514

Alison Wood 0 0

Anne Thorburn 60,000 60,000

1 Calculated using the share price as at close of business on 31 December 2022 of 174 pence and the basic salary as at the same date.

There have been no changes to shareholdings between 31 December 2022 and the date of this report.

Post cessation of employment, the Executive Directors are required to hold for two years the lower of half of the share ownership

requirement or the shareholding at cessation.

The closing middle market prices for an ordinary share of 25 pence of the Company on 31 December 2021 and 31 December

2022 as derived from the Stock Exchange Daily Official List were 256 pence and 174 pence respectively. During 2022, the middle

market price of TT Electronics plc ordinary shares ranged between 124.8 pence and 264 pence.

TT Electronics plc Annual Report and Accounts 2022130

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

DIRECTORS’ SERVICE CONTRACTS

Executive

Date of

appointment

Date of current

contract/letter of

appointment

Notice from

Company

Notice from

individual

Unexpired

period of

service contract

Executive Directors

Richard Tyson 01/07/2014 14/01/2014 12 months 12 months Rolling contract

Mark Hoad 01/01/2015 09/12/2014 12 months 12 months Rolling contract

Chairman

Warren Tucker 06/05/2020 02/04/2020 1 month 1 month Rolling contract

Non-executive Directors

Jack Boyer 10/06/2016 10/06/2016 1 month 1 month Rolling contract

Alison Wood 11/07/2016 11/07/2016 1 month 1 month Rolling contract

Anne Thorburn 01/07/2019 12/06/2019 1 month 1 month Rolling contract

PERFORMANCE GRAPH AND TABLE

The following graph shows the cumulative TSR of the Company over the last 10 financial years relative to the FTSE Small-Cap

Index (excluding Investment Trusts). The FTSE SmallCap Index has been selected for consistency as it is the index against which

the Company’s TSR is measured for the purposes of the LTIP. In addition, the Company is a constituent of the Index.

The graph shows the value, by 31 December 2022, of £100 invested in TT Electronics plc on 31 December 2012 compared with

the value of £100 invested in the FTSE SmallCap Index (excluding Investment Trusts).

Dec 22Dec 21Dec 20Dec 19Dec 18Dec 17Dec 16Dec 15Dec 14Dec 13Dec 12

100

150

200

250

300

TT Electronics (Re-based to 100) FTSE SmallCap excluding Investment Trusts (Re-based to 100)

TOTAL REMUNERATION FIGURES FOR THE CEO

The total remuneration figures for the Chief Executive Officer during each of the last 10 financial years are shown in the table

below. The total remuneration figures include the short-term incentive based on that year’s performance and LTIP awards based

on three-year performance periods ending in the relevant year.

2013 2014

2014

2015 2016 2017 2018 2019 2020 2021 2022

Total remuneration (£’000) 1,154 249 401 1,151 1,152 1,794 2,189 1,430 1,003 1,306 1,194

Short-term incentive

(% of maximum) 53.0 0.0 25.0 90.8 100.0 100.0 93.3 64.0 45.8 97.1 61.2

LTIP vesting (% of maximum) 89.6 39.6 n/a 0.0 0.0 50.0 100.0 86.5 50.0 18.3 27.4

1 Relates to previous Chief Executive Officer who was in position until 30 June 2014.

2 Relates to current Chief Executive Office who joined on 1 July 2014.

TT Electronics plc Annual Report and Accounts 2022 131

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

WIDER WORKFORCE CONSIDERATIONS

TT Electronics is a diversified business that operates in 26 locations, across 7 countries with more than 5,000 people across our

divisions. Our people are central to our success and we pride ourselves on being a great place to work with a strong purpose and

culture where employees can be themselves, do their best work every day, and achieve their ambitions.

The Committee spends considerable time on matters relating to remuneration across the workforce. This ensuring that: (i) our

reward principles are consistently applied throughout the organisation, (ii) that reward practices are aligned and complementary,

and (iii) provides important context to frame decision-making on Executive Director remuneration.

Fair pay

As an international business we want to ensure that our people are paid fairly for their contribution. Our businesses operate in line

with our principles, set our below, and in compliance with all local laws.

Pay should be appropriate and market competitive

Pay should be explainable, free from

discrimination and easy to understand

Pay should enable employees to share in the

success they create

Appropriate for the employee’s role, responsibility,

experience and skills.

Pay set in the context of local market conditions.

Fixed pay will meet or exceed all legal minimum

standards.

Pay should be free from bias and should not be

impacted by gender, sexual orientation, ethnicity or

other characteristics.

The business should be able to explain how

employees’ pay has been set and calculated.

Employees should be paid in full and on time.

Employees are eligible to receive variable,

performance-related pay.

Performance-related payments are timely and in

accordance with scheme rules.

Performance-related pay is free of bias and subject to

good governance.

Employee engagement

We believe that creating environments where everyone is engaged and gets to be their best and do their best every day is key

tothe culture and success of the Company.

We value the opinions and insights of our people and frequently receive feedback through a variety of means, such as our

engagement survey. Through our PSEE Committee, direct interactions with the workforce by the Committee and via feedback

from our UK workforce engagement sessions on remuneration we ensure oversight of the implementation of our remuneration

principles and understand key employee insights and feedback. Our UK workforce engagement sessions include overviews

ofExecutive Director remuneration and how remuneration aligns through the organisation. These sessions allow for open and

active discussion on all areas of remuneration. Additionally, during the year we engaged those employees whose remuneration

most closely aligns with the Executive Directors as core stakeholders in the review of the future Remuneration policy.

Inflation and wider workforce remuneration

This year has seen exceptionally high inflation in a number of our locations, especially in the UK, with the lowest paid

disproportionately impacted. The Company response to the impact of inflation on employees and affordability pressures arising

from the cost of living has been a key area of focus for the Committee.

As detailed in this report, the Company has undertaken a range of activities across its geographic footprint displaying the strength

of our purpose, values, how they inform our decision-making and the strength of the culture of the organisation.

Directors’ pay in the context of the Group’s wider pay practices

The Committee’s oversight of the implementation of our remuneration principles and the alignment of remuneration across

theCompany, provides important context as to the impact of reward on organisational culture and helps inform decision-making

on Executive Director remuneration.

The following summarises the alignment of remuneration for the wider workforce during 2022. The detail of retirement and

benefits are specific to each location and are shown for the UK.

TT Electronics plc Annual Report and Accounts 2022132

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

Salary

Short-term incentive

Deferred share bonus plan

Long-term incentive

Retirement

Other benefits

All employees Executive Directors

• Pay increase recommended by site & division.

• Reviewed and approved by head office

(UK Average 3-4% in 2022)

• All employees are eligible for a bonus.

• Site incentive targets: customer delivery,

productivity, quality, HSE

• Not applicable

• Divisional leadership team, three-year

performance period, no holding period

• Targets: typically per Executive Directors

• Up to 7% contribution

• Life cover 4x

• Healthcare

• ShareSave

• Life cover 4x

• Healthcare

• ShareSave

• Car allowance

(Sales and

senior leadership)

• Car allowance

• Risk benefits

• Pay rise % below or in line with employee pay

(2.5% in 2022)

• Max 125%, on-target 62.5%

• Targets: profit, cash flow, strategic delivery

• 20% of short-term incentive deferred for 2 years

• Max 150%, on target 37.5%

• Three years, two year holding period

• Performance conditions: EPS and TSR

• 15% contribution

• Reducing to 7% for 2023

CEO PAY RATIO

The table below shows the ratio of the total remuneration of the Chief Executive Officer to that of the UK employees of the Group.

The CEO’s pay is based on the single figure of remuneration.

Year Methodology used Lower quartile Median Upper quartile

2022 Option B 51:1 43:1 28:1

2021 Option B 62:1 52:1 34:1

2020

Option B 54:1 40:1 29:1

2019 Option B 63:1 55:1 38:1

1 The 2020 ratio was impacted by COVID-19. Salary and incentive remuneration levels for 2020 include salary reductions taken by the CEO, included in the single figure of remuneration, and

the impact of the UK Government Coronavirus Job Retention Scheme and associated voluntary furlough salary reductions in the wider UK workforce. Under the chosen method for

calculation, the employee ranking and quartile assessment was based on the April 2020 snapshot date during which time approximately 14% of employees were on furlough.

We have chosen to use Option B of the available methodologies as permitted under The Companies (Miscellaneous Reporting)

Regulations 2018. Given the complexity of the Group, this approach enables us to use our existing Gender Pay reporting

datasets as the foundation for our calculations. We determined the hourly rates at each quartile of our 5 April 2022 Gender

Pay data then calculated the average annual salary and total remuneration for representative employees at each quartile.

Representative employees must have been employed on 31 December 2022 and employee data is based on full-time equivalent

pay and calculated in accordance with the single figure of remuneration. Adjustments may be made to ensure that quartiles are

representative, no adjustments were required for 2022.

Across the UK, the majority (80 per cent) of the workforce undertake operational roles in our facilities. The employee lower quartile

and median remuneration values are generally reflective of the roles held by our semi-skilled/skilled operators. The quartile data is

considered to be broadly representative of total remuneration across the workforce in the UK.

The change in the median CEO pay ratio is attributable to changes in the remuneration of the CEO and of the Company’s

UK employees as a whole. In line with our remuneration principles, the majority of the CEO’s remuneration opportunity is

performance-related variable pay. The CEO’s pay ratio is, therefore, heavily dependent on the outcomes of the short-term and

long-term incentive plans and, in the case of long-term share-based awards, share price movements. As such it is expected that

there will be considerable year-to-year changes in the ratio. The lower CEO pay ratio results from a number of factors: (i) higher

UK employee remuneration from the actions to support employees manage the impacts of high inflation through targeted salary

increases to lower paid employees and the one-off additional cost of living payment, (ii) lower CEO variable remuneration from

a lower STIP award than in the prior year, reflecting the challenging external environment, and the low vesting of the LTIP which

continues to reflect the pause in the growth momentum of the Company caused by the pandemic. The Committee believes that

the pay ratio is appropriate and is reflective of the performance of the Group and the roles undertaken by employees in the UK.

Further context to the CEO total remuneration is set out on in detail in this report.

The following table summarises the representative salary and single figure of total remuneration pay quartiles of UK employees.

Lower quartile Median Upper quartile

Salary £21,732 £25,800 £38,837

Single figure of total remuneration £23,331 £27,491 £43,230

TT Electronics plc Annual Report and Accounts 2022 133

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

ANNUAL PERCENTAGE CHANGE IN REMUNERATION OF DIRECTORS AND EMPLOYEES

The following table shows the percentage change in each Executive and Non-executive Director’s remuneration compared with

the average change for all employees of the parent Company for the years ended 31 December 2020, 2021 and 2022. Going

forward, this disclosure will build up over time to cover a rolling five-year period.

Change in basic salary/fees (%) Change in benefits (%) Change in bonus (%)

2021 to

2022

2020 to

2021

2019 to

2020

2021 to

2022

2020 to

2021

2019 to

2020

2021 to

2022

2020 to

2021

2019 to

2020

Executive Directors

Richard Tyson 2.5% 6.8% (5.0)% 5.0% 48.0% 5.9% (35.5)% 169.4% (28.5)%

Mark Hoad 2.5% 6.7% (5.0)% 5.2% 52.0% 8.0% (35.5)% 169.4% (28.5)%

Chairman

Warren Tucker

2.5% 1.5% n/a n/a n/a n/a n/a n/a n/a

Non-executive Directors

Jack Boyer

2.5% 14.9% 3.3% n/a n/a n/a n/a n/a n/a

Alison Wood 2.5% 8.0% (5.0)% n/a n/a n/a n/a n/a n/a

Anne Thorburn

2.5% 12.5% 6.0% n/a n/a n/a n/a n/a n/a

Average UK TT Electronics

parent employee

9.4% 2.9% 3.8% 10.4% 6.8% 6.1% (25.7)% 108.4% (39.4)%

1 Benefit data is calculated on the same basis as the benefits data in the single figure table and includes benefits in kind and benefits taken in cash but excludes any pension allowances.

2 Salary/fees paid to Directors in 2020 included a 20% reduction for a three-month period that was volunteered by the Directors in response to the COVID-19 pandemic and the actions taken

by the Group to reduce costs and protect cash flows.

3 Warren Tucker was appointed to the Board as Chairman on 2 April 2020. For comparison purposes the figure shown is the change in the Chairman fee over the period excluding the

three-month impact of the 20% fee reduction volunteered by Directors during 2020 in response to the COVID-19 pandemic.

4 Jack Boyer was appointed SID on 6 May 2020.

5 Anne Thorburn was appointed Chair of the Audit Committee on 6 May 2020.

6 Average parent Company employee based on employees who were employed throughout each two-year comparison period.

The Directors received salary/fee increases of 2.5 per cent in January 2022, a level below that generally received across the

UK workforce. The majority of the changes in respect of salaries/fees between 2019 and 2021 were related to the 20 per cent

voluntary reduction for a three-month period in 2020 as part of the cost reduction and cash flow protection actions in response to

the COVID-19 pandemic. The change in average salaries across parent Company employees was in part due to increases received

during the annual salary review and increases in relation to promotions, progression in role and market realignment inresponse to

specific retention risks.

RELATIVE IMPORTANCE OF SPEND ON PAY

A year-on-year comparison of the relative importance of spend on pay with significant distributions to shareholders and others

isshown below.

2022 2021 Change

Staff costs for the Group (£m) 164.5 135.3 21.6%

Dividends relating to the period (£m) 11.1 9.8 13.3%

Share buyback (£m) 0 0 0%

TT Electronics plc Annual Report and Accounts 2022134

STRATEGIC REPORT | ANNUAL REPORT ON REMUNERATION

ADVISERS TO THE REMUNERATION COMMITTEE

The Committee received advice during the year from FIT Remuneration Consultants LLP (FIT). FIT is a member of the

Remuneration Consultants Group and has signed up to that group’s code of conduct. FIT was appointed by the Committee

following an adviser review in 2019. The Committee is satisfied that the advice it received during the year was appropriate,

objective and independent. FIT did not provide any other services to the Group and does not have any other connection with

theCompany or individual Directors.

Work undertaken by FIT in its role as independent advisers to the Committee included advice in respect of the developments in

good governance, the evolution of the 2023 Policy, the provision of market information and market practice, and other governance

matters. The fees paid to FIT for providing advice in relation to Executive remuneration over the financial year, basedon time and

materials, totalled £28,990.

The Group’s approach to the Chairman’s and Executive Directors’ remuneration is determined by the Board on the advice of the

Remuneration Committee. The Committee considers the views of the Chairman on the performance of the CEO, and of the CEO

on the performance and remuneration of the other members of the ELT. The Committee is also supported by the Group General

Counsel and Company Secretary who acts as Secretary to the Committee, the CFO, the Chief People Officer, and the Group

Reward Director who attend meetings at the invitation of the Committee. No Committee members or attendees take part in

anydiscussions relating to their own remuneration.

SHAREHOLDER VOTING

At the AGM held on 13 May 2022, the proxy votes cast in respect of the resolutions on the Directors’ remuneration report were as

follows:

Number of votes

Date of

AGM

For and

Discretionary

For and

Discretionary

(%)

Against

(%)

Withheld

Total

votes

Directors’ Remuneration Policy

May 2020 109,271,441 91.89% 9,642,007 8.11% 13,273,878 132,187,326

Directors’ remuneration report May 2022 128,029,798 88.47% 16,682,114 11.53% 3,558,473 148,270,385

A full schedule in respect of shareholder voting on the above and all resolutions at the 2023 AGM is available at

www.ttelectronics.com.

The Remuneration Committee considers shareholder feedback received in connection with the AGM each year at a meeting

immediately following the AGM and at other times of the year. This feedback is considered as part of the Group’s annual review

ofthe Remuneration report and Remuneration Policy. In addition, the Remuneration Committee endeavours to consult directly

with the largest shareholders and their representative bodies on proposals ahead of significant changes.

The Directors’ remuneration report has been approved by the Board on 7 March 2023 and signed on its behalf by:

Alison Wood

Chair, Remuneration Committee

7 March 2023

TT Electronics plc Annual Report and Accounts 2022 135

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

OTHER

STATUTORY

DISCLOSURES

This Annual Report and

Accounts includes the

Directors’ report and the

audited financial statements for

the year ended 31 December

2022. Certain information

required to be disclosed in the

Directors’ report is provided

in other sections of this

Annual Report. This includes

the overview, the operating

and financial reviews, the

Governance and Remuneration

reports and specific elements

of the financial statements

noted below. The table below

lists items that are relevant

to this report, and which are

incorporated by reference,

including information required

in accordance with the UK

Companies Act 2006 and

Listing Rule 9.8.4R:

AGM information Page 227

Current and future dividend waiver Page 137

Employee engagement Page 42

Future developments in the business Pages 6 to 21

Going concern Page 73

Scope 1 & 2 emissions Page 54

Section 172 statement Page 63

Share capital Page 227

Subsidiary undertakings Page 216

Viability statement Page 68

Results and dividend

The Group’s loss on ordinary activities

after taxation was £13.2 million (2021:

£12.8 million, profit). The audited

financial statements of the Group and

the Company are set out on pages 149

to 226. Further details of the Group’s

activities are set out in the Strategic

report on pages IFC to 75 which is

incorporated into the Directors’ report

byreference.

Full details of the Company’s dividend

policy and proposed final dividend

payment for the year ended 31

December 2022 are set out on page 32

and Note 9 to the consolidated financial

statements.

Tax principles and strategy

The Group applies a conservative

approach to tax and seeks to comply

with the OECD Transfer Pricing

guidelines, which should ensure that

profits are taxed where value is created

and business risks are managed. The

Group’s full Tax Principles and Strategy

document is published on the Group’s

website.

Important events since the end

of the financial year

There were no important events

affecting the Group which occurred since

31 December 2022.

Auditor

In 2019, the Company undertook a

competitive re-tender exercise for

external audit services, following which

Deloitte LLP (Deloitte) was appointed

as external Auditor for the financial year

2020 onwards. Deloitte was appointed

by the Company’s shareholders at the

AGM held on 6 May 2020 and have been

reappointed at each subsequent AGM

(including the 2022 AGM). See page

95 for further details on the Auditor

transition process.

The Auditor’s responsibilities are set

out on page 146 and should be read in

conjunction with those of the Directors

as set out at the end of this report.

Significant agreements relating

tochange of control

The Group has a number of borrowing

facilities provided by various banking

groups. The most significant of these

facility agreements (as described below)

include change of control provisions

which, in the event of a change in

ownership of the Company, could result

in renegotiation or withdrawal of these

facilities:

PP: In August 2021, the Group agreed

a debut issue of £75 million of private

placement fixed rate loan notes with

three institutional investors. The PP

transaction completed in December

2021, whereupon funds were received

by the Group, with the issue being

evenly split between seven- and ten-year

maturities with an average interest rate

of 2.9%.

RCF: In June 2022, the Group entered

into an agreement for a £147.4 million

multicurrency revolving credit facility with

a syndicate of five relationship banks,

taking the maturity date out to four years,

with a one-year extension option.

TT Electronics plc Annual Report and Accounts 2022136

STRATEGIC REPORT | OTHER STATUTORY DISCLOSURES

There are a number of other agreements

that may be terminable upon a change

of control of the Company and therefore

subject to renegotiation. No such

agreements are considered at present to

be significant in terms of their potential

impact on the business of the Group as a

whole, with the exception of the contract

described below:

Anthem Contract: In November 2022, the

Group’s GMS Division entered into a long-

term contract with Honeywell, pursuant

to which GMS will provide manufacturing

services to enable Honeywell to bring

to market its next generation avionics

cockpit system. This system is designed

to operate with the next generation of

electric aircraft. The long-term contract

has a duration of 12 years and contains

market standard provisions requiring

Honeywell’s consent for the contract

to continue in the event of a change of

control of the Company.

Employment

The Group is committed to the fair and

equal treatment of all its employees

regardless of gender, race, age, religion,

disability or sexual orientation. Where

existing employees become disabled,

the policy of the Group is to provide

continuing employment and training

wherever practicable.

The Group makes significant efforts

toensure it maintains high standards

ofemployee welfare in all its operations,

irrespective of where in the world, and

of local market conditions. Together

with many other global companies

operating in this sector, the Group is a

member of the Responsible Business

Alliance (formerly the Electronic Industry

Citizenship Coalition), a leading industry

organisation promoting best practice

in corporate responsibility, which

is committed to raising standards

of employee welfare, (addressing

such issues as modern slavery) in

alljurisdictions and at all levels of the

supplychain for electronic products.

Further details on the Group’s policies

relating to its employees are given on

pages 40 to 49.

Political contributions

The Group made no political

contributions during the year.

Authority to allot shares and disapply

statutory pre-emption rights

The Directors will be seeking to renew

their authorities to allot unissued shares

and to disapply statutory pre-emption

rights at the Annual General Meeting,

to be held on 9 May 2023. During 2022,

this authority was used in respect of

customary allotments of shares resulting

from the operation of the Group’s share

schemes. As set out in the Notice

of Annual General Meeting which

accompanies this report, the Company is

seeking shareholder approval of revised

authorities this year (in resolutions

17 and 18) in line with the updated

Statement of Principles published by the

Pre-Emption Group inNovember 2022.

Purchase of own shares

At the Annual General Meeting held on

13 May 2022, the Company was given

authority to purchase up to 17,630,474

of its ordinary shares until the date of its

next AGM. Other than market purchases

made by the Employee Benefit Trust, no

purchases were made during the year

by the Company. The Directors will be

seeking a new authority for theCompany

to purchase its ordinary shares at the

forthcoming Annual General Meeting.

Further details regarding the authority

toallot shares and disapply statutory

pre-emption rights and the purchase

ofown shares are set out in the

Noticeofthe Annual General Meeting,

which accompanies this document

andis available to view on the

Company’s website.

Shares held by the Employee

BenefitTrust

The Company has established an

employee benefit trust (EBT), the Trustee

of which is Sanne Fiduciary Services

Limited, part of Sanne Group. As at

31 December 2022, the Trustee held

479,727 shares with a nominal value of

£119,931.75 and an aggregate purchase

price of £0.89 per share, representing

0.271 per cent of the total issued share

capital at that date. These shares will

be used to satisfy awards made under

the TT Electronics plc Restricted Share

Plan, the TT Electronics plc Long-Term

Incentive Plan or other employee share

schemes. The maximum number of

shares held by the EBT during the year

was 1,064,565. The voting rights in

relation to these shares are exercisable

by the Trustee. However, in accordance

with investor protection guidelines, the

Trustee abstains from voting. A dividend

waiver is in place under which the trustee

waived its right to receive dividends on

the shares it held during the year, and

any future dividends. The Executive

Directors, as employees of the Company,

are potential beneficiaries of shares held

by the EBT.

Disclosure of information to theAuditor

To the best of each Director’s knowledge

and belief, there is no audit information

relevant to the preparation of the

Auditor’s report of which the Auditor is

unaware and each Director has taken

all steps which might be expected to be

aware of such relevant information and

to establish that the Auditor is also aware

of that information.

Approved by the Board on 7 March 2023

and signed on its behalf by:

Lynton Boardman

Group General Counsel and Company

Secretary

TT Electronics plc Annual Report and Accounts 2022 137

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

STATEMENT OF

DIRECTORS’

RESPONSIBILITIES

The Directors are responsible

for preparing the Annual Report

and Accounts and the Group

and parent Company financial

statements in accordance with

applicable law and regulations.

Company law requires the Directors

toprepare Group and parent Company

financial statements for each financial

year. Under that law the Directors are

required to prepare the Group financial

statements in accordance with UK

adopted international accounting

standards in conformity with the

requirements of the Companies Act

2006. The financial statements also

comply with International Financial

Reporting Standards (IFRSs) as issued

by the IASB. The Directors have elected

to prepare the parent Company financial

statements in accordance with UK

accounting standards, including FRS 101

Reduced Disclosure Framework.

Under company law, the Directors must

not approve the financial statements

unless they are satisfied that they give

atrue and fair view of the state of affairs

of the Group and parent Company and

of their profit or loss for that period. In

preparing each of the Group and parent

Company financial statements, the

Directors are required to:

– select suitable accounting policies and

then apply them consistently;

– make judgements and estimates that

are reasonable, relevant and reliable;

– for the Group financial statements,

state whether they have been prepared

in accordance with UK adopted

international accounting standards;

– for the parent Company financial

statements, state whether applicable

UK accounting standards have been

followed, subject to any material

departures disclosed and explained

in the parent Company financial

statements;

– assess the Group and parent

Company’s ability to continue as

a going concern, disclosing, as

applicable, matters related to going

concern; and

– use the going concern basis of

accounting unless they either intend

to liquidate the Group or the parent

Company or to cease operations,

orhave no realistic alternative but

todoso.

The Directors are responsible for keeping

adequate accounting records that are

sufficient to show and explain the parent

Company’s transactions and disclose

with reasonable accuracy at any time

the financial position of the parent

Company and enable them to ensure

that its financial statements comply

with the Companies Act 2006. They are

responsible for such internal control as

they determine is necessary to enable

the preparation of financial statements

that are free from material misstatement,

whether due to fraud or error, and have

general responsibility for taking such

steps as are reasonably open to them to

safeguard the assets of the Group and

to prevent and detect fraud and other

irregularities.

Under applicable law and regulations,

the Directors are also responsible for

preparing a Strategic report, Directors’

report, Directors’ remuneration report

and Corporate Governance statement

that complies with that law and those

regulations.

The Directors are responsible for

the maintenance and integrity of the

corporate and financial information

included on the Company’s website.

Legislation in the UK governing the

preparation and dissemination of

financial statements may differ from

legislation in other jurisdictions.

TT Electronics plc Annual Report and Accounts 2022138

STRATEGIC REPORT | OTHER STATUTORY DISCLOSURES

RESPONSIBILITY STATEMENT

OF THE DIRECTORS IN RESPECT

OF THE ANNUAL REPORT AND

ACCOUNTS

We confirm that to the best of our

knowledge:

– the financial statements, prepared

inaccordance with the applicable set

of accounting standards, give a true

and fair view of the assets, liabilities,

financial position and profit or loss

ofthe Company and the undertakings

included in the consolidation taken

asa whole; and

– the Strategic report includes a fair

review of the development and

performance of the business and

the position of the Company and

the undertakings included in the

consolidation taken as a whole,

together with a description of the

principal risks and uncertainties

thatthey face.

We consider the Annual Report and

Accounts, taken as a whole, is fair,

balanced and understandable and

provides the information necessary

for shareholders to assess the Group’s

position and performance, business

model and strategy.

The coordination and review of Group-

wide input into the Annual Report is

a key element of the control process

upon which the Directors rely and is an

exercise which spans a period wider than

the timetable for compiling the Annual

Report itself. This control process

incorporates the controls the Group

operates throughout the year to identify

key financial and operational issues and

includes:

– strategy meetings held as part of most

Board meetings, at which the entire

Board is present, resulting in a clear

agreement of the Group’s strategy;

– the identification of the key milestones

and the related KPIs to be monitored

and measured throughout the period;

– monthly reviews of business

performance conducted by Executive

management (in consultation

with divisional management),

supplemented by reports highlighting

key issues and analysis of the main

variances from budget and prior year;

– preparation of a detailed budget,

reviewed and agreed by management

and then the Board, which is used to

calibrate strategy implementation and

against which actual performance is

measured.

– a timetabled process coordinating

input from each division, identifying

significant market issues and key

elements of performance for each

business area, and appropriately

incorporating them into the structure

of the Annual Report;

– the identification of key risks from

the risk management process, for

inclusion within the Annual Report,

ensuring a consistency of approach

with regard to the risks and the

ongoing review programme;

– a planned Audit Committee sign-off

process which incorporates meetings

of the Chair of the Audit Committee

with the Executive Directors, the Risk

and Assurance function and external

Auditor to identify and timetable

potential issues of significance to

beaddressed; and

– a process for internal distribution

and comment on the Annual Report,

including those of the members of

the Board, the ELT, key advisers and

external Auditor.

By order of the Board:

Lynton Boardman

Group General Counsel and Company

Secretary

7 March 2023

TT Electronics plc Annual Report and Accounts 2022 139

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Report on the audit of the

financial statements

1. OPINION

In our opinion:

– the financial statements of

TT Electronics plc (the ‘parent

company’) and its subsidiaries

(the ‘Group’) give a true and fair

view of the state of the Group’s

and of the parent company’s

affairs as at 31 December 2022

and of the group’s loss for the

year then ended;

– the group financial statements

have been properly prepared

in accordance with United

Kingdom adopted international

accounting standards and

International Financial Reporting

Standards (IFRSs) as issued

by the International Accounting

Standards Board (IASB);

– the parent company financial

statements have been properly

prepared in accordance with

United Kingdom Generally

Accepted Accounting Practice,

including Financial Reporting

Standard 101 “Reduced

Disclosure Framework”; and

– the financial statements have

been prepared in accordance

with the requirements of the

Companies Act 2006.

We have audited the financial statements

which comprise:

– the consolidated income statement;

– the consolidated statement of

comprehensive income;

– the consolidated and parent company

statements of financial position;

– the consolidated and parent company

statements of changes in equity;

– the consolidated statement of cash

flows; and

– the related Notes 1 to 32 of the

consolidated financial statements and

the related Notes 1 to 15 of the parent

company financial statements.

The financial reporting framework that

has been applied in the preparation

of the group financial statements is

applicable law, United Kingdom adopted

international accounting standards

and IFRSs as issued by the IASB. The

financial reporting framework that has

been applied in the preparation of the

parent company financial statements

is applicable law and United Kingdom

Accounting Standards, including FRS

101 “Reduced Disclosure Framework”

(United Kingdom Generally Accepted

Accounting Practice).

2. BASIS FOR OPINION

We conducted our audit in accordance

with International Standards on Auditing

(UK) (ISAs (UK)) and applicable law.

Ourresponsibilities under those

standards are further described in the

auditor’s responsibilities for the audit

ofthe financial statements section

ofourreport.

We are independent of the group and the

parent company in accordance with the

ethical requirements that are relevant to

our audit of the financial statements in

the UK, including the Financial Reporting

Council’s (the ‘FRC’s’) Ethical Standard

as applied to listed public interest entities,

and we have fulfilled our other ethical

responsibilities in accordance with these

requirements. We confirm that we have

not provided any non-audit services

prohibited by the FRC’s Ethical Standard

to the Group or the parent company.

We believe that the audit evidence

we have obtained is sufficient and

appropriate to provide a basis for

ouropinion.

INDEPENDENT AUDITOR’S REPORT

TO THE

MEMBERS OF

TTELECTRONICS PLC

TT Electronics plc Annual Report and Accounts 2022140

FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT

3. SUMMARY OF OUR AUDIT APPROACH

Key audit matters The key audit matters that we identified in the current year were:

– Impairment of technology products goodwill

– Classification of adjusting items.

Within this report, key audit matters are identified as follows:

Newly identified

Increased level of risk

Similar level of risk

Decreased level of risk

Materiality The materiality that we used for the group financial statements was £2.1 million which was determined

based on 5% of the adjusted income before tax after amortisation.

Scoping Our approach to the audit scoping included performing the following: Components representing 49%

ofrevenue and 24% of net assets were subject to full scope audit procedures;

Components representing 32% of revenue and 56% of net assets were subject to audits of specific

account balances;

Overall, our components subject to full scope and specified account balance audits represented 87%

ofadjusted profit before tax after amortisation; and

All remaining parts of the Group were subject to analytical review procedures.

Significant changes

in our approach

In the prior year, we identified a key audit matter relating to the recoverability of assets related to the

Virolens product. In the current year, these assets have been fully impaired and this is no longer a key audit

matter.

4. CONCLUSIONS RELATING TO GOING CONCERN

In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate.

Our evaluation of the Directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern

basis of accounting included:

– obtaining an understanding of the key processes relating to the Group’s forecasting;

– inspecting loan documents to assess the principal terms and related financial covenants;

– assessing management’s key assumptions underpinning the Group’s forecasts, specifically the forecast adjusting items

expense and cash flows, and the achievability of forecasts; these were assessed with reference to external data such as market

growth rates and industry data;

– assessing the impact of reasonably possible downside scenarios on the Group’s funding position including forecast financial

covenants;

– comparing forecasts to historical financial information to assess management’s historical forecasting accuracy;

– assessing the mitigating actions available to the Group in the event of any downside scenarios and the feasibility of these in

thenext 12 months; and

– assessing the appropriateness of the going concern disclosures in the financial statements.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the Group’s and parent company’s ability to continue as a going concern

for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add

or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it

appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections

ofthis report.

TT Electronics plc Annual Report and Accounts 2022 141

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

5. KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial

statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to

fraud) that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of

resources in the audit and directing the efforts of the engagement team.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on these matters.

5.1. ImpairmentofTechnologyProductsgoodwill

Key audit matter

description

Total goodwill on the balance sheet at 31 December 2022 is £155.1 million (2021: £156.5 million) arising

from past acquisitions. As required by IAS 36 Impairment of Assets management performs an impairment

review for all cash generating units (‘CGUs’) that have goodwill on an annual basis. An impairment charge

of £17.7million (2021: £nil) was recognised in the IoT Solutions CGU’s goodwill (after impairing Virolens

related assets of £5.4million). Subsequent to the impairment, this CGU accounts for £9.9 million (2021:

£27.6 million) of the Group’s goodwill.

The impairment assessment of goodwill for the IoT Solutions CGU has been identified as a key audit

matter as a result of the subjective nature over the value of impairment recorded during the year, the

quantitative significance of the balance, and the application of management judgement and estimation in

its impairment assessment. The key assumptions driving the subjective nature of the impairment relates

to Revenue Growth, Operating Profit, Discount Rate and Long-Term Growth Rate.

Note 14 to the financial statements discloses the sensitivities reflecting the risks inherent in the value

inuse calculations that were used in performing the impairment review. Note 1g discloses this matter

asakey source of estimation uncertainty and reasonably possible changes in the value for this CGU.

Refer also to page 99 of the Audit Committee report.

How the scope of

our audit responded

to the key audit

matter

We obtained an understanding of the relevant controls over the valuation of goodwill, in particular controls

over the Group’s forecasting of future cash flows and the determination of CGU specific discount and

growth rates that underpin the impairment model, and controls around management’s preparation of

themodel.

We assessed management’s impairment paper, underlying analysis, and supporting financial models,

and challenged the reasonableness of the assumptions which underpinned the forecasts. Specifically,

ourwork included, but was not limited to:

– challenging the key assumptions relating to the 2023 forecast and later forecast periods with reference

to the recent and historical performance of the IoT Solutions business, expected order book levels, our

knowledge of the businesses, inflationary pressures, benefits from current and prior year restructuring

activity from the Group’s self-help programme, and the status of new product launches;

– retrospective review of performance against budget, including consideration of post year end actual

against budget;

– benchmarking long term growth rates to applicable macro-economic and market data;

– involving our valuation specialists to challenge the discount rate applied, by benchmarking against

market data and comparable organisations, and by evaluating the underlying process used to determine

the risk-adjusted cash flow projections;

– testing the integrity and mathematical accuracy of the impairment models;

– checking the application of the input assumptions, and testing their compliance with IAS 36;

– assessing and reperforming management’s sensitivity analysis to assess the key assumptions which

have a significant effect on the model;

– challenging management on the key drivers of the value in use model such as forecast revenues,

operating margins, discount and long-term growth rates. We considered how movements in these

drivers, either individually or collectively, could impact the level of impairment and the likelihood of such

movements; and

– assessing the appropriateness of the disclosures relating to the IoT Solutions goodwill as an area with

key sources of estimation certainty, and whether a reasonably possible change disclosure has been

included which appropriately reflects the sensitivity in the IoT’s CGU impairment review.

Key observations We determined that the assumptions applied in the impairment model and the resultant overall position

adopted was reasonable including the impairment charge recorded of £17.7 million. We assessed that the

disclosures including the impairment assessment of goodwill for the IoT Solutions CGU are appropriate.

TT Electronics plc Annual Report and Accounts 2022142

FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT

5.2. Classificationofadjustingitems

Key audit matter

description

In addition to the statutory results, the Group continues to present adjusted profit measures in the

consolidated income statement. While the key measure used by management to monitor performance

is adjusted operating profit, adjusted profit before tax is also a key measure used by management in

communication with shareholders. The Group’s policy on adjusting items is set out in note 1c to the

financial statements.

Judgements made regarding the classification of adjusting costs and income therefore have a significant

impact on the presentation of the Group’s results. In total, adjustments of £50.5 million (2021: £15.5 million)

have been made to the statutory operating loss of £3.4 million (2021: £19.3 million profit) to derive adjusted

operating profit of £47.1 million (2021: £34.8 million profit).

Adjusting items in 2022 include:

– Restructuring costs £6.4 million;

– Impairment of IoT goodwill (£17.7million) and Virolens related assets (£5.4million);

– Amortisation of intangible assets arising on business combinations (£6 million);

– Pension Buy in / Enhanced Transfer Value (ETV) exercise (£13.8 million); and,

– Other acquisition related costs (£1.2 million).

The identification of adjusting items and the presentation of adjusted profit and earnings measures that

show a consistent and balanced view of the performance of the Group involves significant judgement.

Significant judgement is also involved in ensuring that undue prominence is not given to adjusted financial

information, as this would be misleading to the readers of the financial statements.

There is a risk that items may be classified as adjusting which do not meet the Company’s definitions,

and therefore distort the reported adjusted profit, whether due to manipulation or error; this could also

impact financial covenants reported and management remuneration, hence this is considered a fraud risk.

Consistency in the identification and presentation of these items is important for the comparability of year

on year reporting.

Explanations of each adjustment are set out in note 7 to the financial statements and also in note 1 to the

group financial statements in relation to the critical judgements in determining adjusting items. Refer also

to page 99 of the Audit Committee report.

How the scope of

our audit responded

to the key audit

matter

We obtained understanding of the relevant controls over the classification of adjusting items in the

financial statements.

We evaluated the appropriateness of the inclusion of items, both individually and in aggregate, within

adjusted results. Specifically, our procedures included:

– assessing the consistency of the Group’s policy and items included year on year, and the application

of management’s accounting policy, challenging the nature of these items in comparison to ESMA

guidance and latest FRC guidance on alternative performance measures, and challenging in particular

the inclusion of those items that recur annually;

– challenging management regarding the nature of restructuring related adjusting items and evaluating

whether they fall within management’s accounting policy definition for restructuring related costs for

restructuring costs related to severance, assessing whether these met the criteria of IAS37 Provisions,

including a review of announcements and other communication to employees;

– testing a sample of adjusting items by agreeing to source documentation and evaluating the

classification of the individual costs against the Group’s definition of adjusting items and assessing

whether the disclosures within the financial statements provide sufficient detail for the reader to

understand the nature of these items and how adjusted results are reconciled to statutory results.

Key observations The value of adjusting items results in a material difference between the statutory and adjusted results.

Whilst we note that the majority of adjusting items recur from period to period, we assessed that their

classification and presentation is reasonable and consistent with the Group’s policy.

TT Electronics plc Annual Report and Accounts 2022 143

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

6. OUR APPLICATION OF MATERIALITY

6.1. Materiality

We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic

decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope

of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Group financial statements Parent company financial statements

Materiality £2.1 million (2021: £1.6 million) £0.7million (2021: £0.6 million)

Basis for

determining

materiality

5.1% of adjusted income before tax after

amortisation as disclosed in note 7 of the financial

statements. We considered other measures such as

adjusted profit before tax and statutory profit before

tax.

Materiality for the current year represents:

– 0.3% of revenue (2021: 0.3%);

– 4.5% of adjusted profit before tax (2021: 4.6%);

and

– 0.7% of net assets (2021: 0.5%).

Parent company materiality equates to 0.2% of net

assets which is capped at 60% of group performance

materiality, consistent with the prior year, in order to

address the risk of aggregation when combined with

other businesses.

This is consistent with the prior period.

Rationale for the

benchmark applied

We considered the financial measures that were

most relevant to users of the financial statements

and concluded that the adjusted profit measure

represented the most relevant metric for the purpose

of evaluating financial performance.

We believe that use of a balance sheet measure

was appropriate given that the parent acts as a

holding company.

Group materiality £2.1m

Component materiality range £0.5m–£0.7m

Audit committee reporting threshold £105k

Adjusted operating proﬁt £41.1m

Group materiality

6.2. Performance materiality

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and

undetected misstatements exceed the materiality for the financial statements as a whole.

Group financial statements Parent company financial statements

Performance

materiality

65% (2021: 65%) of group materiality 70% (2021: 65%) of parent company materiality

Basis and rationale

for determining

performance

materiality

In determining performance materiality, we considered the following factors:

– our assessment of the respective complexity of the group and the parent company, and nature of the

group’s business model;

– the de-centralised nature of the group’s control environment and its variation across the group; and

– the number of uncorrected misstatements identified in the previous year.

6.3. Error reporting threshold

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £105k (2021: £80k),

as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the

Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.

TT Electronics plc Annual Report and Accounts 2022144

FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT

7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT

7.1. Identification and scoping of components

Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide controls,

andassessing the risks of material misstatement at the Group and component level.

There are 72 (2021: 72) reporting components in total, each of which is responsible for maintaining their own accounting records

and controls and using an integrated consolidation system to report to UK head office.

Our Group audit scope focused on audit work at 20 components (2021: 22 components). We selected 10 reporting units where

we requested component auditors to perform a full scope audit of the component’s financial information. We also requested

component auditors to audit specified account balances at a further 10 reporting units. Coverage from the in-scope components

represents 81% (2021: 79%) of the Group’s revenue, 87% (2021: 88%) of the Group’s adjusted operating profit and 80% (2021: 88%)

of the Group’s net assets.

Each component was set a specific component materiality, considering its relative size and any component-specific risk factors

such as the location of components. The component materialities applied were in the range £0.5 million to £0.7 million (2021: £0.4

million to £0.6 million).

We tested the consolidation process at the parent company level and conducted analytical procedures for entities not subject

to detailed audit work to confirm our conclusion that there was no significant risk of material misstatement in the aggregated

financial information.

Revenue Adjusted operating profit Net assets

49%

32%

19%

61%

26%

13%

24%

56%

20%

Full audit scope Audit of specified account balances Review at group level

7.2. Our consideration of climate-related risks

Climate change and the transition to a low carbon economy were considered in our audit where they have the potential to directly

or indirectly impact key judgements and estimates within the group financial statements. The Group continues to develop its

assessment of the potential impacts of climate change. Management have identified sustainability, climate change and the

environment as a principal risk to the business.

We performed the following procedures to address the climate-related risks:

– We held discussions with management to obtain an understanding of the process for considering the impact of climate-related

risks and controls that are relevant to the entity.

– We performed our own qualitative risk assessment of the potential impact of climate change on the Group’s account balances

and classes of transaction and did not identify any reasonably possible risks of material misstatement.

– With the involvement of our Environmental, Social & Governance ("ESG") specialist team, we assessed the climate change

related disclosures including TCFD in the financial statements against regulatory requirements and market peers.

– We also considered whether information included in the climate related disclosures in the Annual Report were materially

consistent with the financial statements and our knowledge obtained in the audit.

7.3. Working with other auditors

Given the Group’s geographical presence across the world, we directed and supervised our many component audit teams in

theexecution of our audit referral instructions.

We performed site visits to a number of our material components to discuss significant matters of the audit, audit procedures

performed, as well as results of work done. The Group engagement team continued to have online interaction with the Group’s

largest and most complex businesses during 2022 with a particular focus on locations where work was performed on significant

or material components.

In addition to the above, the group engagement partner held group-wide, divisional and individual planning and close meetings

which covered all businesses. Each division has a dedicated senior member of the group audit team responsible for the

supervision and direction of components, including where appropriate sector-specific expertise. We included all component audit

teams in our team briefing, discussed and reviewed their risk assessment, and reviewed documentation of the findings from their

work. We also reviewed the audit work papers supporting each component team’s reporting to us; this was done remotely using

shared desktop technology.

TT Electronics plc Annual Report and Accounts 2022 145

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

8. OTHER INFORMATION

The other information comprises the information included in the annual report, other than the financial statements and our

auditor’s report thereon. The Directors are responsible for the other information contained within the annual report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated

in our report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether the other information is materially

inconsistent with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be

materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives

rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

9. RESPONSIBILITIES OF DIRECTORS

As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial

statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is

necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or

error.

In preparing the financial statements, the Directors are responsible for assessing the group’s and the parent company’s ability

to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis

of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no

realistic alternative but to do so.

10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a

high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial

statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.

org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES,

INCLUDING FRAUD

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which

our procedures are capable of detecting irregularities, including fraud is detailed below.

11.1. Identifying and assessing potential risks related to irregularities

In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with

laws and regulations, we considered the following:

– the nature of the industry and sector, control environment and business performance including the design of the group’s

remuneration policies, key drivers for Directors’ remuneration, bonus levels and performance targets;

– results of our enquiries of management, internal audit, the Directors and the audit committee about their own identification and

assessment of the risks of irregularities, including those that are specific to the Group’s sector;

– any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:

• identifying, evaluating, and complying with laws and regulations and whether they were aware of any instances of non-

compliance

• detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected, or alleged fraud;

• the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; and

– the matters discussed among the audit engagement team including significant component audit teams and relevant internal

specialists, including tax, valuations, pensions, ESG and IT, regarding how and where fraud might occur in the financial

statements and any potential indicators of fraud.

TT Electronics plc Annual Report and Accounts 2022146

FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT

As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud

and identified the greatest potential for fraud in the classification of adjusting items. In common with all audits under ISAs (UK),

we are also required to perform specific procedures to respond to the risk of management override.

We also obtained an understanding of the legal and regulatory frameworks that the Group operates in, focusing on provisions

of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial

statements The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions

legislation and tax legislation.

In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but

compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty.

11.2 Audit response to risks identified

As a result of performing the above, we identified the classification of adjusting items as a key audit matter related to the potential

risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the specific

procedures we performed in response to that key audit matter.

In addition to the above, our procedures to respond to risks identified included the following:

– reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of

relevant laws and regulations described as having a direct effect on the financial statements;

– enquiring of management, the audit committee and external legal counsel concerning actual and potential litigation and claims;

– performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material

misstatement due to fraud;

– reading minutes of meetings of those charged with governance, reviewing internal audit reports, and reviewing correspondence

with tax authorities; and

– in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and

other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias;

and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members

including internal specialists and significant component audit teams and remained alert to any indications of fraud or non-

compliance with laws and regulations throughout the audit.

Report on other legal and regulatory requirements

12. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006

In our opinion the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

– the information given in the strategic report and the Directors’ report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

– the strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the

course of the audit, we have not identified any material misstatements in the strategic report or the Directors’ report.

13. CORPORATE GOVERNANCE STATEMENT

The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the

Corporate Governance Statement relating to the group’s compliance with the provisions of the UK Corporate Governance Code

specified for our review.

Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate

Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:

– the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any

material uncertainties identified set out on page 89;

– the Directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why the

period is appropriate set out on page 68;

– the Directors’ statement on fair, balanced and understandable set out on page 98;

– the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 66;

– the section of the Annual report that describes the review of effectiveness of risk management and internal control systems

set out on page 67; and

– the section describing the work of the Audit Committee set out on pages 95 to 100.

TT Electronics plc Annual Report and Accounts 2022 147

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

14. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

14.1. Adequacy of explanations received and accounting records

Under the Companies Act 2006 we are required to report to you if, in our opinion:

– we have not received all the information and explanations we require for our audit; or

– adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been

received from branches not visited by us; or

– the parent company financial statements are not in agreement with the accounting records and returns.

We have nothing to report in respect of these matters.

14.2. Directors’ remuneration

Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have

not been made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and

returns.

We have nothing to report in respect of these matters.

15. OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS

15.1. Auditor tenure

Following the recommendation of the Audit Committee, we were appointed by the board of directors of the parent company on

6 May 2020 at the 2020 Annual General Meeting to audit the financial statements for the year ended 31 December 2020 and

subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of

the firm is 3 years, covering the years ending 31 December 2020 to 31 December 2022.

15.2. Consistency of the audit report with the additional report to the audit committee

Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).

16. USE OF OUR REPORT

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act

2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to

state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for

the opinions we have formed.

As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R, these financial

statements form part of the European Single Electronic Format (ESEF) prepared Annual Financial Report filed on the National

Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report

provides no assurance over whether the annual financial report has been prepared using the single electronic format specified in

the ESEF RTS.

Robert Knight (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London/United Kingdom

07 March 2023

TT Electronics plc Annual Report and Accounts 2022148

FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT

Consolidated income statement

for the year ended 31 December 2022

TT Electronics plc Annual Report and Accounts 2022 149

£million (unless otherwise stated) Note 2022 2021

Revenue 3 617. 0 476.2

Cost of sales (481.5) (360.6)

Gross profit 135. 5 115.6

Distribution costs (29.6) (29.6)

Administrative expenses (109.3) (69.4)

Operating (loss)/profit (3.4) 19.3

Analysed as:

Adjusted operating profit 3 47.1 34.8

Restructuring and other 7 (20.2) (7.8)

Asset impairments 7 (23.1) –

Acquisition and disposal related costs 7 (7.2) (7.7)

Finance income 5 2. 3 1.1

Finance costs 5 (9.0) (4.4)

(Loss)/profit before taxation (10.1) 16.0

Taxation 8 (3.1) (3.2)

(Loss)/profit for the period attributable to the owners of the Company (13.2) 12.8

EPS attributable to owners of the Company (pence)

Basic 10 (7.5) 7. 3

Diluted 10 (7.5) 7.2

TT Electronics plc Annual Report and Accounts 2022 149

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Consolidated statement of comprehensive income

for the year ended 31 December 2022

150 TT Electronics plc Annual Report and Accounts 2022

£million Note 2022 2021

(Loss)/profit for the year (13.2) 12.8

Other comprehensive income for the year after tax

Items that are or may be reclassified subsequently to the income statement:

Exchange differences on translation of foreign operations 26.9 3.4

Tax on exchange differences (1.6) –

Loss on hedge of net investment in foreign operations (3.4) (0.2)

Loss on cash flow hedges taken to equity less amounts recycled to the income statement (2.9) (3.2)

Deferred tax (loss)/gain on movement in cash flow hedges (0.4) 0.5

Items that will never be reclassified to the income statement:

Remeasurement of defined benefit pension schemes 22 (35.9) 35. 8

Tax on remeasurement of defined benefit pension schemes 6.5 (11.4)

Total comprehensive (loss)/income for the period attributable to the owners of the Company (24.0) 37.7

TT Electronics plc Annual Report and Accounts 2022150

FINANCIAL STATEMENTS

Consolidated statement of financial position

at 31 December 2022

TT Electronics plc Annual Report and Accounts 2022 151

£million Note 2022 2021

ASSETS

Non-current assets

Right-of-use assets 12 19.6 19.6

Property, plant and equipment 13 54.8 50.4

Goodwill 14 155.1 156.5

Other intangible assets 15 53.7 51.7

Deferred tax assets 8 13.2 11.3

Derivative financial instruments 21 0.8 0.6

Pensions 22 31.3 78.4

Total non-current assets 328 .5 3 68.5

Current assets

Inventories 16 189.2 141.8

Trade and other receivables 17 120.3 86.2

Income taxes receivable 1.1 2.6

Derivative financial instruments 21 3.1 4.0

Cash and cash equivalents 65.0 68.3

Total current assets 378 .7 3 02.9

Total assets 707.2 671.4

LIABILITIES

Current liabilities

Borrowings 20 3.7 1.1

Lease liabilities 20, 28 4.4 4 .1

Derivative financial instruments 21 3.6 1.3

Trade and other payables 18 173.2 133.9

Income taxes payable 9.6 7.1

Provisions 19 3.5 2.5

Total current liabilities 198.0 150. 0

Non-current liabilities

Borrowings 20 176.6 147.1

Lease liabilities 20, 28 18.7 18.5

Derivative financial instruments 21 0.8 0.7

Deferred tax liability 8 12.4 20.2

Pensions 22 2.9 3.9

Provisions and other non-current liabilities 18, 19 0.8 1.0

Total non-current liabilities 212.2 191.4

Total liabilities 410.2 341.4

Net assets 297.0 330. 0

EQUITY

Share capital 23 44. 1 44.1

Share premium 22.9 22.6

Translation reserve 55.1 33.2

Other reserves 24 7.3 7.1

Retained earnings 167.6 221. 0

Equity attributable to owners of the Company 297.0 328. 0

Non-controlling interests 25 – 2. 0

Total equity 297 .0 330.0

Approved by the Board of Directors on 7 March 2023 and signed on their behalf by:

Richard Tyson Mark Hoad

Director Director

TT Electronics plc Annual Report and Accounts 2022 151

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Consolidated statement of changes in equity

for the year ended 31 December 2022

152 TT Electronics plc Annual Report and Accounts 2022

£million

capital

premium

Translation

Reserve

Other

reserves

Retained

earnings

Sub-

total

Non-

controlling

interest

Total

At 31 December 2020 43.6 21.7 30.0 5.5 1 95.2 296.0 2.0 298.0

Profit for the year – – – – 12.8 12.8 – 12.8

Other comprehensive income

Exchange differences on translation

of foreign operations

– – 3.4 – – 3.4 – 3 .4

Loss on hedge of net investment in

foreign operations – – (0.2) – – (0.2) – (0.2)

Loss on cash flow hedges taken to

equity less amounts recycled to the

income statement – – – (3.2) – (3.2) – (3.2)

Deferred tax gain on movement in

cash flow hedges

– – – 0.5 – 0.5 – 0.5

Remeasurement of defined benefit

pension schemes – – – – 35.8 35.8 – 35.8

Tax on remeasurement of defined

benefit pension schemes – – – – (11.4) (11.4) – (11.4)

Total comprehensive income – – 3.2 (2.7) 37.2 37.7 – 37.7

Transactions with owners recorded

directly in equity

Equity dividends paid by the Company – – – – (11.4) (11.4) – (11.4)

Share-based payments – – – 3.8 – 3.8 – 3. 8

Deferred tax on share-based payments – – – 0.5 – 0.5 – 0.5

New shares issued 0.5 0.9 – – (0.3) 1.1 – 1.1

Other movements – – – – 0.3 0.3 – 0.3

At 31 December 2021 44.1 22.6 33.2 7.1 221.0 328.0 2.0 330.0

At 31 December 2021

44.1 22.6 33.2 7 .1 221.0 328.0 2.0

330.0

Loss for the year

(13.2)

(13.2) – (13.2)

Other comprehensive income

Exchange differences on translation

of foreign operations

– – 26.9 – – 26. 9 –

26.9

Tax on exchange differences

–

– (1.6)

–

– (1.6) – (1.6)

Loss on hedge of net investment in

foreign operations

–

(3.4)

–

(3.4) – (3.4)

Loss on cash flow hedges taken to

equity less amounts recycled to income

statement

– –

– (2.9) – (2.9) – (2 .9)

Deferred tax on movement in cash

flow hedges

– – –

0.2

(0.6)

(0.4) – (0.4)

Remeasurement of defined benefit

pension schemes

– – –

–

(35.9)

– (35.9)

Tax on remeasurement of defined

benefit pension schemes

– – – – 6.5 6.5 –

6.5

Total comprehensive income/(loss)

– –

21.9

(2.7) (43.2)

(24.0)

– (24.0)

Transactions with owners recorded

directly in equity

Equity dividends paid by the Company

– – –

–

(10.2)

– (10.2)

Share-based payments

– – – 4.8 – 4.8 –

4.8

Deferred tax on share-based payments

– –

– (1.0) – (1.0) – (1 .0)

New shares issued

– 0.3 – – – 0.3 –

0.3

Other movements

– –

– (0.9) – (0.9) – (0 .9)

Dividend to non-controlling interest

– – – – –

–

(2.0)

At 31 December 2022

44.1 22.9 55.1 7 .3 167.6 297.0 –

297.0

1 During the year £0.6 million was transferred out of retained earnings and into the hedging reserve.

TT Electronics plc Annual Report and Accounts 2022152

FINANCIAL STATEMENTS

Consolidated statement of cash flows

for the year ended 31 December 2022

TT Electronics plc Annual Report and Accounts 2022 153

£million Note 2022 2021

Cash flows from operating activities

(Loss)/Profit for the year (13.2) 12.8

Taxation 8 3 .1 3.2

Net finance costs 6 .7 3. 3

Restructuring costs and non underlying asset impairments 7 43.3 7. 8

Acquisition related costs 7 7.2 7.7

Adjusted operating profit 47.1 34.8

Adjustments for:

Depreciation 12, 13 13.9 13.6

Amortisation of intangible assets 15 2.2 2.5

Share based payment expense 4.8 3.8

Other items 0.5 1.1

Increase in inventories (40.4) (42.6)

Increase in receivables (26.3) (15.7)

Increase in payables and provisions 27.9 42.0

Adjusted operating cash flow 29.7 39.5

Special payments to pension funds – (5. 5)

Restructuring and acquisition related costs (11.1) (15.0)

Net cash generated from operations 18.6 19.0

Net income taxes paid (5.9) (4.7)

Net cash flow from operating activities 12.7 14.3

Cash flows from investing activities

Purchase of property, plant and equipment 13 (11.4) (14.6)

Proceeds from sale of property, plant and equipment and government grants received 0.3 9.3

Capitalised development expenditure 15 (2.3) (1.9)

Purchase of other intangibles 15 (0.6) (0.5)

Acquisitions of businesses 4 (8.3) (0.5)

Net cash flow used in investing activities (22.3) (8.2)

Cash flows from financing activities

Issue of share capital 23 0.4 1.4

Interest paid (7.5) (4.0)

Repayment of borrowings (149.3) (86.9)

Proceeds from borrowings 174.3 96.4

Capital payment of lease liabilities (4.3) (3.9)

Other items (1.0) (0.5)

Dividends paid to minority shareholders 25 (2 .0) –

Dividends paid by the Company 9 (10.2) (11.4)

Net cash flow from/(used in) financing activities 0.4 (8.9)

Net (decrease)/increase in cash and cash equivalents (9.2) (2.8)

Cash and cash equivalents at beginning of year 27 67.2 69.0

Exchange differences 27 3.3 1.0

Cash and cash equivalents at end of year 27 61.3 67.2

Cash and cash equivalents comprise:

Cash at bank and in hand 65.0 68.3

Bank overdrafts (3.7) (1.1)

61.3 67.2

TT Electronics plc Annual Report and Accounts 2022 153

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

at 31 December 2022

154 TT Electronics plc Annual Report and Accounts 2022

1 Basis of preparation

a) Basis of accounting

TT Electronics Plc (“the Group”) is a public company limited by shares (company number 00087249). The Group is incorporated

in the United Kingdom under the Companies Act 2006 and registered in England and Wales. The address of the registered office

is ‘TT Electronics Plc, Fourth Floor, St Andrews House, West Street, Woking, Surrey, GU21 6EB’. The nature of the Group’s

operations and its principal activities by operating segment are set out in note 3 and in the divisional reviews on pages 26 to 31.

The Consolidated Financial Statements of the Group for the year ended 31 December 2022 were authorised in accordance with

a resolution of the Directors of TT Electronics Plc on 7 March 2023.

These consolidated financial statements are presented in pounds sterling, which is also the functional currency of the Company.

Foreign operations are included in accordance with the policies set out in note 2.

The consolidated financial statements have been prepared on a historical cost basis modified by derivatives held at fair value.

The consolidated financial statements have been prepared in accordance with UK adopted international accounting standards

in conformity with the requirements of the Companies Act 2006. The financial statements have also been prepared in accordance

with International Financial Reporting Standards as issued by the IASB.

The financial statements set out on pages 149 to 226 have been prepared using consistent accounting policies except for the

adoption of new accounting standards and interpretations noted below.

b) Basis of consolidation

The consolidated financial statements set out the Group’s financial position as at 31 December 2022 and the Group’s financial

performance for the year ended 31 December 2022.

Subsidiaries are those enterprises controlled by the Group. Control exists when the Group is exposed, or has rights, to variable

returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date

on which control is transferred out of the Group.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated

in full. Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that

there is no evidence of impairment.

c) Alternative performance measures

The Group presents Alternative Performance Measures (“APMs”) in addition to the statutory results of the Group. These are

presented in accordance with the guidelines on APMs issued by the European Securities and Markets Authority (“ESMA”).

Adjusted operating profit has been defined as operating profit from continuing operations excluding the impacts of significant

restructuring programmes, significant one-off items including property disposals, impairment charges significant in nature and/or

value, business acquisition, integration, and divestment related activity, and the amortisation of intangible assets recognised on

acquisition. Acquisition and disposal related items include the writing off of the pre-acquisition profit element of inventory written

up on acquisition, other direct costs associated with business combinations and adjustments to contingent consideration related

to acquired businesses. Restructuring includes significant changes in footprint (including movement of production facilities) and

significant costs of management changes.

In addition to the items above, adjusting items impacting profit after tax include:

• The net effect on tax of significant restructuring from strategy changes that are not considered by the Group to be part of the

normal operating costs of the business; and

• The tax effects of adjustments to profit before tax.

These financial statements include alternative performance measures that are not prepared in accordance with IFRS. These

alternative performance measures have been selected by the Directors to assist them in making operating decisions because

they represent the underlying operating performance of the Group and facilitate internal comparisons of performance over time.

The Directors consider the adjusted results to be an important measure used to monitor how the businesses are performing

as this provides a meaningful reflection of how the businesses are managed and measured on a day-to-day basis and achieves

consistency and comparability between reporting periods.

TT Electronics plc Annual Report and Accounts 2022154

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 155

1 Basis of preparation continued

These alternative performance measures exclude certain significant non-recurring, infrequent or non-cash items that the Directors

do not believe are indicative of the underlying operating performance of the Group (that are otherwise included when preparing

financial measures under IFRS).

Adjusted profit is not a defined term under IFRS and may not be comparable with similarly titled profit measures reported by other

companies. It is not intended to be a substitute for, or superior to, GAAP measures. All APMs relate to the current year results and

comparable periods where provided.

The Directors consider there to be four main alternative performance measures: adjusted operating profit, free cash flow, adjusted

EPS and adjusted effective tax rate.

All alternative performance measures are presented on pages 224 to 226 and are reconciled to their equivalent statutory measures

where this is appropriate.

d) Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set

out within the Strategic Report on pages 1 to 75. The Strategic Report analyses the financial position of the Group, its cash flows,

liquidity position and borrowing facilities. In addition, note 21 to the financial statements includes the Group’s objectives, policies

and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging

activities; and its exposures to credit risk and liquidity risk.

The Group has experienced continued improvement in trading momentum and strong growth on our 2021 results. The structural

growth markets we have selected to focus on have moved back towards their long-term growth trajectory, the benefits of our

strategic repositioning and focus on building close relationships with our clients can be seen in both the order book and financial

performance of the Group.

The Group’s financial position remains strong, at 31 December 2022 it had:

• £267.2 million of total borrowing facilities available (comprising committed facilities of £226.0 million and uncommitted facilities

of £41.2 million representing overdraft lines and an accordion facility of £32.6 million). The Group’s primary source of finance is

the £147.4 million committed revolving credit facility (RCF) which was signed in June 2022 to replace the already existing RCF;

at 31 December 2022 £103.6 million of this facility had been drawn down. The Group's RCF is payable on a floating rate basis

above GBP SONIA, USD SOFR or EURIBOR depending on the currency of the loan and will mature in June 2026 with a one-year

extension option which expires in May 2023. In February 2023 £15.0 million of uncommitted accordion facility was converted into

committed RCF extending the total committed facilities to £241.0 million. In December 2021, the Group issued £75 million

of fixed rate loan notes with three institutional investors; the issue is evenly split between 7- and 10- year maturities with an

average interest rate of 2.9% and covenants in line with our bank facility.

• A leverage ratio (banking covenant defined measure) of 2.0 times at 31 December 2022 compared to the RCF (and PP loan notes)

covenant maximum of 3.0 times. Interest cover (banking covenant defined measure) of 7.4 times compared to the RCF (and PP

loan notes) covenant minimum of 4.0 times

The Group has prepared and reviewed cash flow forecasts across the business over the twelve-month period from the date of the

approval of these financial statements, considering the Group’s current financial position and the potential impact of our principal

risks on divisions.

The Group’s financial projections contain key assumptions surrounding revenue and operating profit growth in 2023. Under the

Group’s base case financial projections, the Group retains significant liquidity and covenant headroom throughout the forecast

period, with both metrics improving from the position as at 31 December 2022.

The Group’s financial projections have been stress tested for “business as usual” risks (such as profit growth, supply chain pressure

and working capital variances), and the impact of the following principal risks: general revenue reduction, contractual risks, research

and development, people and capability, supplier resilience and health and safety (occurring both individually and in unison).

Principal risks which were not specifically modelled were either considered not likely to have an impact within the going concern

period or their financial effect was covered within the overall downside economic risks implicit within the stress testing. Under the

stress tested modelling, the liquidity headroom within the group remains adequate throughout during the forecast period. Financial

covenants continue to be in compliance under the stress tested model and management have a number of mitigating actions

which could be undertaken if required.

TT Electronics plc Annual Report and Accounts 2022 155

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

156 TT Electronics plc Annual Report and Accounts 2022

1 Basis of preparation continued

The Group’s downside stress test scenario has been sensitised for supply chain challenges and capacity constraints which shows a

reduction in revenue and operating profit compared to the latest forecast. Despite this further reduction these projections show that

the Group should remain well within its facilities headroom and within bank covenants for the 12 months following the approval of

these financial statements. A “reverse” stress-test was also modelled to understand the conditions which could jeopardise the

ability of the Group to continue as a going concern including assessing against covenant testing and facility headroom. The stress

testing also considered mitigating actions which could be put in place. Mitigating actions included limiting capital expenditure and

reducing controllable costs including items such as discretionary bonuses and pay rises. The reverse stress test is deemed to have

a remote likelihood and help inform the Directors’ assessment that there are no material uncertainties in relation to going concern.

The Group’s wide geographical and sector diversification helps minimise the risk of serious business interruption or catastrophic

reputational damage. Furthermore, the business model is structured so that the Group is not overly reliant on any single customer,

market or geography.

The Directors have assessed the future funding requirements of the Group with due regard to the risks and uncertainties to which

the Group is exposed and compared them with the level of available borrowing facilities and are satisfied that the Group has

adequate resources for at least twelve months from the date of signing. Accordingly, the financial statements have been prepared

on a going concern basis.

e) New and revised standards and interpretations adopted, not yet adopted and those in issue but not yet effective

New and revised standards and interpretations adopted during the year

At the date of authorisation of these financial statements the Group has considered the following revised standards or

interpretations, however they were deemed not to have a material effect on the financial statements:

• Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS 16)

New and revised standards and interpretations not yet adopted

The Group does not consider that any standard, amendment or interpretation issued by the IASB, but not yet applicable, will have

a significant impact on the financial statements.

New and revised IFRS Standards in issue but not yet effective

At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards

that have been issued but are not yet effective:

• Applying IFRS 9 'Financial Instruments' with IFRS 4 'Insurance Contracts' (Amendments to IFRS 4)

• Classification of liabilities as current or non-current (Amendments to IAS 1)

• Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

• Annual Improvements 2018-2020 Cycle

• Reference to the Conceptual Framework (Amendments to IFRS 3)

• Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37)

• Amendments to IFRS 17

• Extension of the Temporary Exemption from Applying IFRS 9 (Amendments to IFRS 4)

• Initial Application of IFRS 17 and IFRS 9 — Comparative Information (Amendment to IFRS 17)

• Amendments to IAS 12 – Deferred tax related to assets and liabilities arising from a single transaction.

• Amendments to IAS 8 – Definition of accounting estimates.

f) Change in accounting policies

Adoption of new and amendments to published standards and interpretations effective for the Group for the year ended

31 December 2022 did not have any material impact on the financial position or performance of the Group.

Interest rate benchmark reform

Throughout 2021 the Group was exposed to the following interest rate benchmarks within its hedge accounting relationships and

borrowings, which have been subject to interest rate benchmark reform in 2022: GBP LIBOR and USD LIBOR (“IBORs”). The hedging

instruments are interest rate swaps and the hedged items are Sterling and US Dollar floating rate debt. On 4 January 2022 the

Group transitioned away from GBP LIBOR and replaced this with GBP SONIA. USD LIBOR remained available throughout 2022.

There was no impact of this transition. As described in note 20 the Group underwent a refinancing exercise in June 2022 and is

now exposed to GBP SONIA, USD SOFR and EURIBOR.

TT Electronics plc Annual Report and Accounts 2022156

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 157

1 Basis of preparation continued

g) Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 2, the Directors are required to make judgements,

estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources.

The estimates and associated assumptions are based on historical experiences and other factors that are considered to be

relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in

the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the

revision affects both current and future periods.

Critical judgements

In the course of preparing the Financial Statements, a critical judgement within the scope of paragraph 122 of IAS 1: “Presentation

of Financial Statements” is made during the process of applying the Group’s accounting policies.

Adjusting items

Judgements are required as to whether items are disclosed as adjusting, with consideration given to both quantitative and

qualitative factors. Further information about the determination of adjusting items in the year ended 31 December 2022 is included

in note 1c.

There are no other critical judgements other than those involving estimates, that have had a significant effect on the amounts

recognised in the financial statements. Those involving estimates are set out below.

Key sources of estimation uncertainty

Assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that may have

a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year,

are discussed below.

• Notes 7 and 14 – Assumptions used to determine the carrying value of goodwill in relation to the IoT Solutions cash generating

unit (“CGU”). The carrying amount of goodwill at 31 December 2022 was £155.1 million (2021: £156.5 million). Determining

whether goodwill is impaired requires an estimation of the value in use of the CGUs to which the goodwill has been allocated.

The value in use calculation requires management to estimate the future cash flows expected to arise from CGUs and a suitable

discount rate in order to calculate present value. During the year a full impairment review was performed and an impairment

charge of £17.7 million was recorded in respect of goodwill held in the IoT Solutions CGU which was recognised within the Power

and Connectivity segment. Should the business experience further unforeseen deterioration of results a future impairment may

be required. Further information is provided in note 7 and sensitivity analysis is provided in note 14. Following the impairment,

the carrying amount of the IoT Solutions CGU’s goodwill was £9.9 million (2021: £27.6 million).

• Note 8 – Taxation. Accruals for tax contingencies require management to make judgements and estimates in relation to tax

authority audits and exposures. Amounts accrued are based on management’s interpretation of country-specific tax law and

the likelihood of settlement. Tax benefits are not recognised unless the tax positions are probable of being sustained. Once

considered to be probable, management reviews each material tax benefit to assess whether a provision should be taken against

full recognition of the benefit on the basis of potential settlement through negotiation and/or litigation. These amounts are

expected to be utilised or to reverse as tax audits occur or as the statute of limitations is reached in the respective countries

concerned. The Group’s current tax liability at 31 December 2022 includes tax provisions of £8.4 million (2021: £6.9 million).

The Group believes the range of reasonable possible outcomes in respect of these exposures is tax liabilities of up to

£11.1 million (2021: £9.0 million).

TT Electronics plc Annual Report and Accounts 2022 157

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

158 TT Electronics plc Annual Report and Accounts 2022

2 Summary of significant accounting policies

The following significant accounting policies have been applied in the preparation of the consolidated financial statements.

These accounting policies have been consistently applied across the Group.

a) Revenue

Revenue is measured at the fair value of the right to consideration, usually the invoiced value, for the provision of goods to external

customers excluding value added tax and other sales related taxes and is recognised when the customer obtains control of goods

for revenues which are not recognised over time. In most cases this is at the point in time of transfer of legal title of the goods;

terms vary by customer, but the two most common arrangements are at the time of dispatch and at the time of delivery. Where

revenue is recognised over time this is recognised with regards to completion of performance obligation milestones. For sales to

customers where a right to return an item is granted, revenue is recognised to the extent of the consideration to which the Group

ultimately expects to be entitled (i.e. revenue is not recognised for goods expected to be returned). Where a service warranty is

provided to customers, the associated revenue, based upon an allocation of the overall cost of performance, is recognised over

the warranty period. Payment terms typically range from 30 to 120 days.

b) Finance income

Finance income comprises interest income on funds invested, the calculated interest income on pensions assets for schemes

which are in surplus and net foreign exchange gains or losses on cash balances and loans receivables. Interest income is

recognised using the effective interest rate. Net foreign exchange gains or losses on other monetary assets or liabilities are

recognised either within other income or cost of sales, depending on what the underlying monetary asset or liability relates to.

c) Finance costs

Finance costs comprise interest expense on borrowings which are not capitalised under the borrowing costs policy, the calculated

interest expense on pension liabilities for schemes which are in deficit, the interest costs on lease liabilities and net foreign

exchange gains or losses on external loans. Net foreign exchange gains or losses on other monetary assets or liabilities are

recognised either within other income or cost of sales, depending on what the underlying monetary asset or liability relates to.

d) Discontinued operations and assets held for sale

The Group reports a business as a discontinued operation when it has been disposed of in a period, or its future sale is considered

to be highly probable at the balance sheet date, and results in the cessation of a major line of business or geographical area of

operation. An asset is classified as held for sale if it is available for immediate sale in its present condition subject only to terms that

are usual and customary for sales of such assets and that it is highly probable the asset will be sold within one year from the date

of classification.

e) Dividends

Dividends are recognised as a liability in the period in which they are approved by shareholders. Dividends receivable are recognised

when the Group’s right to receive payment is established.

f) Business combinations

Business combinations are accounted for using the acquisition method. Goodwill on business combinations is recognised as the

fair value of the consideration, including the full cost of any derivative financial instruments used to hedge this item, less the fair

value of the identifiable assets and liabilities acquired and is recognised as an asset in the consolidated balance sheet. Costs

directly attributable to business combinations are recognised as an expense within the income statement as incurred.

Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions

with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments

to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Any difference between the

price paid or received and the amount by which non-controlling interests are adjusted is recognised directly in equity and attributed

to the owners of the parent.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination

occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts

are adjusted during the measurement period (which is no longer than 12 months from the acquisition date), or additional assets or

liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date

that, if known, would have affected the amounts recognised as of that date.

g) Property, plant and equipment

Initial measurement

Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. The cost of a tangible fixed

asset comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. The

cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

TT Electronics plc Annual Report and Accounts 2022158

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 159

2 Summary of significant accounting policies continued

Depreciation

The cost of each item of property, plant and equipment is depreciated over its useful life. Depreciation is charged to the income

statement so as to write-off the cost less estimated residual value on a straight-line basis over the estimated useful life of the asset.

Depreciation commences on the date the assets are ready for use within the business and the asset carrying values are reviewed

for impairment when there is an indication that they may be impaired. Freehold land is not depreciated.

The depreciation rates of assets are as follows:

Freehold buildings 50 years

Leasehold building improvements 50 years (or over the period of the lease, if shorter)

Plant and equipment 3 to 10 years

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets that take a substantial period

of time to get ready for their intended use are capitalised as part of the cost of the respective asset.

h) Investment property

Property held to earn rental income rather than for the purpose of the Group’s principal activities is classified as investment

property. Investment property is recorded at cost less accumulated depreciation and any recognised impairment loss. The

depreciation policy is consistent with that described for other Group properties. The assets’ residual values and useful lives

are reviewed, and adjusted, if appropriate, at each balance sheet date.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently

withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal

proceeds and the carrying amount of the asset is recognised in the income statement in the period of derecognition.

i) Leases

The Group applies IFRS 16 ‘Leases’ and recognises right-of-use assets and lease liabilities for most leases (unless the lease term

is 12 months or less or the underlying asset has a low value).

The Group recognises a lease liability at the lease commencement date, measured as the present value of the future lease

payments, discounted at the incremental borrowing rate. A corresponding right-of-use asset is recognised separately on the face

of the consolidated balance sheet, net of accumulated depreciation and impairment losses.

The Group has applied judgement to determine the lease term for contracts that include renewal options. The assessment of

whether the exercise of such options is reasonably certain impacts the lease term, which affects the amount of lease liability

and right-of-use asset recognised.

j) Government grants

Government grants relating to non-current assets are treated as deferred income and credited to the income statement by equal

instalments over the anticipated useful lives of the assets to which the grants relate. Other grants are credited to the income

statement over the period of the project to which they relate.

k) Goodwill

Goodwill arising on the acquisition of a business, representing the difference between the cost of acquisition and the fair value

of the identifiable net assets acquired, is capitalised and is tested annually for impairment. Goodwill is not amortised, and any

impairment losses are not subsequently reversed. On the subsequent disposal or discontinuance of a previously acquired business,

the relevant goodwill is included in the gain or loss on disposal within the consolidated income statement except to the extent it has

been previously impaired.

Negative goodwill arising on the acquisition of a business is credited to the consolidated income statement on acquisition as part of

acquisition costs reported outside adjusted profit.

Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an

indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of

the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the

other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for

goodwill is not reversed in a subsequent period.

TT Electronics plc Annual Report and Accounts 2022 159

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

160 TT Electronics plc Annual Report and Accounts 2022

2 Summary of significant accounting policies continued

l) Other intangible assets

Intangible assets acquired as part of a business combination are stated in the balance sheet at their fair value at the date of

acquisition less accumulated amortisation.

Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding

is recognised in the income statement as incurred. Expenditure on development activities, whereby research findings are applied to

a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process

is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure

capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure

is recognised in the income statement as incurred. Capitalised development expenditure is stated at cost less accumulated

amortisation and impairment losses. The carrying values of intangible assets are tested for impairment whenever there is an

indication that they may be impaired.

Customer relationships and contracts are valued on the basis of the net present value of the future additional cash flows arising

from customer relationships with appropriate allowance for attrition of customers.

Acquired computer software licences for use within the Group are capitalised as an intangible asset on the basis of the

costs incurred to acquire and bring to use the specific software. Costs that are directly associated with the implementation of

identifiable and unique software products controlled by the Group, and that will probably generate economic benefits exceeding

costs beyond one year, are recognised as intangible assets. Capitalised software development expenditure is stated at cost less

accumulated amortisation.

The amortisation rates for intangible assets are:

Acquired patents and licences up to 10 years

Product development costs 5 years

Customer relationships 3 to 22 years

Order backlog up to 2 years

Software 3 to 5 years

Amortisation is charged on a straight-line basis.

m) Deferred taxation

Deferred taxation is provided on taxable temporary differences between the carrying amounts of assets and liabilities in the

financial statements and their corresponding tax bases. No provision is made for deferred tax which would become payable

on the distribution of retained profits by overseas subsidiaries where the timing of the reversal of the temporary difference can be

controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is measured using

the tax rates expected to apply when the asset is realised, or the liability settled based on tax rates enacted or substantively enacted

by the balance sheet date. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of

an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the

asset can be utilised or that they will reverse. Deferred tax assets are reduced to the extent that it is no longer probable that the

related tax benefit will be realised.

Deferred tax assets and liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax

liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

n) Inventories

Inventories are valued at the lower of cost, including related overheads, and net realisable value. Cost comprises direct materials

and, where applicable, direct labour costs and the overheads incurred in bringing inventories to their present location and condition.

Cost is calculated on a weighted average cost basis. Net realisable value is based on estimated selling price less costs expected to

be incurred to completion and disposal. Provisions are made for obsolescence or other expected losses where necessary.

o) Financial instruments

Recognition

The Group recognises financial assets and liabilities on its balance sheet when it becomes a party to the contractual provisions of

the instrument.

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FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 161

2 Summary of significant accounting policies continued

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable

right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the

liability simultaneously.

Measurement

When financial assets and liabilities are initially recognised, they are measured at fair value being the consideration given or

received plus (or minus) directly attributable transaction costs.

Trade receivables are recognised at transaction price (i.e. original invoice price) and subsequently measured at amortised cost less

provision made for loss allowance of these receivables based upon the expected credit loss model (simplified model). All trade

receivables are held to collect contractual cash flows within a business model and meet the ‘Solely Payments of Principal and

Interest’ (SPPI) test.

Trade payables are carried at the amounts expected to be paid to counterparties and are held at amortised cost.

Borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method.

Cash and cash equivalents comprise cash at bank and in hand, short-term deposits held on call or with maturities of less than

three months at inception, and highly liquid investments that are readily convertible into known amounts of cash and are subject

to insignificant risk of changes in value. Within the cashflow statement this definition also includes bank overdrafts that are

repayable on demand and form an integral part of the Group's cash management. Cash and cash equivalents are initially

recognised at fair value and subsequently are measured at amortised cost because they meet the ‘Solely Payments of Principal

and Interest’ (SPPI) test.

In determining estimated fair value, investments are valued at quoted bid prices on the trade date.

Derivatives and hedge accounting

The Group uses derivative financial instruments such as forward foreign exchange contracts and interest rate derivatives to hedge

risks associated with foreign exchange fluctuations and interest rate risk. These are designated as cash flow hedges (CFH). At the

inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item,

along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the

inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging

relationship is highly effective in offsetting changes in cash flows of the hedged item.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in

equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.

Amounts deferred in equity are reclassified to the income statement in the periods when the hedged item is recognised in the

income statement, in the same line of the income statement as the recognised hedged item.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for

hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the forecast

transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the

cumulative gain or loss that was deferred in equity is recognised immediately in the income statement.

When hedging the FX risk on a forecast business combination, the Group includes the accumulated gains or losses on hedging

instruments within goodwill as a 'basis adjustment’.

Derecognition

A financial asset is derecognised when the Group loses control over the contractual rights that comprise that asset. This occurs

when the rights are realised, expire or are surrendered. A financial liability is derecognised when it is extinguished. Originated loans

and receivables are derecognised on the date they are transferred by the Group.

Impairment of financial assets – other financial assets

At each reporting date the Group assesses credit risk by considering reasonable and supportable information that may indicate

increases in credit risk. Indicators that an asset carries a higher credit risk compared to at inception or that an asset is credit-

impaired would include observable data in relation to the financial health of the debtor: significant financial difficulty of the issuer

or the debtor; the debtor breaching contract; it being probable that the debtor will enter bankruptcy or financial reorganisation.

TT Electronics plc Annual Report and Accounts 2022 161

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

162 TT Electronics plc Annual Report and Accounts 2022

2 Summary of significant accounting policies continued

The amount of credit risk provision is the difference between the original carrying amount and the recoverable amount, being the

present value of expected cash flows receivable (discounted using the original effective interest rate). The amount of the provision

is recognised in the income statement within administrative expenses.

Financial assets are written off when there is evidence indicating that the debtor is in severe financial difficulty and the Group has

no realistic prospect of recovery. Receivables written off are still subject to enforcement activity and pursued by the Group.

p) Income tax

Income tax for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent

that it relates to items charged or credited directly to equity, in which case it is recognised in equity. Current tax expense is the

expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years.

q) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is

probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount. If

the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-

tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the

liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

r) Employee benefits

The Group operates defined benefit post-retirement benefit schemes and defined contribution pension schemes.

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity

and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution

pension plans are recognised in the income statement in the periods during which services are rendered by employees.

Defined benefit plans

The liability recognised in the balance sheet for defined benefit schemes is the present value of the schemes’ liabilities less the fair

value of the schemes’ assets. The operating and financing costs of defined benefit schemes are recognised separately in the

income statement. Operating costs comprise the current service cost, any gains or losses on settlement or curtailments, and past

service costs. Net interest income and expense on net defined benefit assets and liabilities is determined by applying discount rates

used to measure defined benefit obligations at the beginning of the year to net defined benefit assets and liabilities at the beginning

of the year and is included in finance income and costs. Remeasurements arising from defined benefit plans comprise actuarial

gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest).

The Group recognises remeasurements immediately in other comprehensive income and all other expenses related to defined

benefit plans in employee benefit expenses in profit or loss. Surpluses are recognised where, on wind-up, the Group has

unconditional right to any surplus and Trustees do not have unilateral power to alter members’ benefits.

Termination benefits

Termination benefits are recognised as an expense when the Group is committed demonstrably, without realistic possibility of

withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination

benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are

recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted,

and the number of acceptances can be estimated reliably.

Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service

is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans

if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee,

and the obligation can be estimated reliably.

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FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 163

2 Summary of significant accounting policies continued

Share-based payments

Certain employees of the Group receive part of their remuneration in the form of share-based payment transactions, whereby

employees render services in exchange for shares or rights over shares (equity-settled transactions). The cost of equity-settled

transactions with employees is measured at fair value at the date at which they are granted. The fair value of share awards with

market-related vesting conditions is determined by an external consultant and the fair value at the grant date is expensed on a

straight-line basis over the vesting period based on the Group’s estimate of shares that will eventually vest. The estimate of the

number of awards likely to vest is reviewed at each balance sheet date up to the vesting date at which point the estimate is

adjusted to reflect the actual outcome of awards which have vested. No adjustment is made to the fair value after the vesting date

even if the awards are forfeited or not exercised.

s) Own shares

Own equity instruments which are re-acquired (own shares) are recognised at cost and deducted from equity. No gain or loss

is recognised in the income statement on the purchase, sale, issue or cancellation of the Group’s own equity instruments.

Any difference between the carrying amount and the consideration paid to acquire such equity instruments is recognised within

retained earnings.

t) Foreign currency translation

The functional currency for each entity in the Group is determined with reference to the currency of the primary economic

environment in which it operates. Transactions in currencies other than the functional currency are initially recorded at the

functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are

retranslated at the rate of exchange ruling at the balance sheet date. Exchange gains and losses on settlement of foreign currency

transactions translated at the rate prevailing at the date of the transactions, or the translation of monetary assets and liabilities at

period end exchange rates, are taken to the income statement. Non-monetary assets and liabilities denominated in foreign

currencies that are stated at historical cost are translated to the functional currency at the foreign exchange rate ruling at the date

of the transaction.

On consolidation, income statements of subsidiaries are translated into sterling at average rates of exchange. Balance sheet

items are translated into sterling at period end exchange rates. Exchange differences on the retranslation are taken to equity.

Exchange differences on foreign currency borrowings financing those net investments (which are designated as net investment

hedges) and exchange differences on intercompany loans which will not be repaid in the foreseeable future (which are treated

as quasi equity) are also recorded within equity and are reported in the statement of comprehensive income. All other exchange

differences are charged or credited to the income statement in the year in which they arise. On disposal of an overseas subsidiary

any cumulative exchange movements relating to that subsidiary held in the translation reserve are transferred to the consolidated

income statement.

u) Impairment of non-financial assets

Property, plant and equipment and intangible assets (excluding goodwill) carrying amounts are reviewed at each reporting date

to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset

is estimated. Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use,

the estimated future cash flows are discounted to their present value using a pre-tax discount rate. Assets that do not generate

largely independent cash flows are assessed based on the CGU to which the asset belongs. If the recoverable amount of an asset

(or CGU) is estimated to be less than its carrying amount, an impairment loss is recognised in the income statement.

TT Electronics plc Annual Report and Accounts 2022 163

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

164 TT Electronics plc Annual Report and Accounts 2022

3 Segmental reporting

The Group is organised into three divisions, as shown below, according to the nature of the products and services provided.

Each of these divisions represents an operating segment or an aggregation of operating segments in accordance with IFRS 8

‘Operating Segments’. The chief operating decision maker is the Chief Executive Officer. The operating segments are:

• Power and Connectivity – The Power and Connectivity division designs and manufactures power application products and

connectivity devices which enable the capture and wireless transfer of data. We collaborate with our customers to develop

innovative solutions to optimise their electronic systems; Power and Connectivity is an aggregation of two operating segments

due to similarities in products and markets served;

• Global Manufacturing Solutions – The Global Manufacturing Solutions division provides manufacturing services and engineering

solutions for our product divisions and to customers that often require a lower volume and higher mix of different products. We

manufacture complex integrated product assemblies for our customers and provide engineering services including designing

testing solutions and value-engineering; and

• Sensors and Specialist Components – The Sensors and Specialist Components division works with customers to develop

standard and customised solutions including sensors and power management devices. Our solutions improve the precision,

speed and reliability of critical aspects of our customers’ applications.

The key performance measure of the operating segments is adjusted operating profit. Refer to the section titled ‘Reconciliation of

KPIs and non IFRS measure’ for a definition of adjusted profit.

Corporate costs – Resources and costs of the head office managed centrally but deployed in support of the operating units are

allocated to segments based on a combination of revenue and operating profit. Resources and costs of the head office which are

not related to the operating activities of the trading units are not allocated to divisions and are separately disclosed, equivalent to

the segment disclosure information, so that reporting is consistent with the format that is used for review by the chief operating

decision maker. This gives greater transparency of the adjusted operating profits for each segment.

Inter-segment pricing is determined on an arms length basis in a manner similar to transactions with third parties.

The Group’s geographical segments are determined by the location of the Group’s non-current assets and, for revenue, the location

of external customers. Group financing (including finance costs and finance income) and income taxes are managed on a Group

basis and are not allocated to operating segments. Goodwill is allocated to the individual cash generating units which may be

smaller than the segment of which they are part.

a) Income statement information – continuing operations

2022

£million

Power and

Connectivity

Global

Manufacturing

Solutions

Sensors and

Specialist

Components

Total Operating

Segments Corporate Total

Sales to external customers

154.2 323.0 139.8 617.0 –

617.0

Adjusted operating profit

7.9 25.2 21.8

54.9 (7.8) 47.1

Add back: adjustments made to

operating profit (note 7)

(50.5)

Operating loss

(3.4)

Net finance costs

(6.7)

Loss before taxation

(10.1)

2021

£million

Power and

Connectivity

Global

Manufacturing

Solutions

Sensors and

Specialist

Components

Total Operating

Segments Corporate Total

Sales to external customers 140.2 220.1 115.9 476.2 – 476.2

Adjusted operating profit 7.8 18.3 16.4 42.5 (7.7) 34.8

Add back: adjustments made to

operating profit (note 7) (15.5)

Operating profit 19.3

Net finance costs (3.3)

Profit before taxation 16.0

TT Electronics plc Annual Report and Accounts 2022164

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 165

3 Segmental reporting continued

b) Segment assets and liabilities

Assets Liabilities

£million 2022 2021 2022 2021

Power and Connectivity 231.0 219.6 48.1 39.0

Global Manufacturing Solutions 210.0 162.8 118.9 84.3

Sensors and Specialist Components 148.6 121.4 31.0 30.4

Segment assets and liabilities 589.6 503.8 198.0 153.7

Pensions 31.3 78.4 2.9 3.9

Unallocated 86.3 89.2 209.3 183.8

Total assets/liabilities 707.2 671.4 410.2 341.4

Unallocated assets of £86.3 million (2021: £89.2 million) comprise deferred tax of £13.2 million (2021: £11.3 million), cash and cash

equivalents of £65.0 million (2021: £68.3 million), income tax of £1.1 million (2021: £2.6 million) and assets associated with the

central corporate function of £7.0 million (2021: £7.0 million).

Unallocated liabilities of £209.3 million (2021: £183.8 million) comprise borrowings (excluding leases and overdrafts)

of £176.6 million (2021: £147.1 million), overdrafts of £3.7 million (2021: £1.1 million), deferred tax of £12.4 million (2021:

£20.2 million), income tax of £9.6 million (2021: £7.1 million) and liabilities associated with the central corporate function

of £7.0 million (2021: £8.3 million).

Capital expenditure Depreciation and amortisation

£million 2022 2021 2022 2021

Power and Connectivity 5.4 6.1

5.5

5.6

Global Manufacturing Solutions 2.4 1.7 4.6 4.8

Sensors and Specialist Components 6.5 9.2 6.0 5.7

Total 14.3 17.0 16.1 16.1

c) Geographic information

Revenue by destination

The Group operates on a global basis. Revenue from external customers by geographical destination is shown below. Management

monitors and reviews revenue by region rather than by individual country given the significant number of countries where

customers are based.

£million 2022 2021

United Kingdom 130.0 100.2

Rest of Europe 104.3 78.6

North America 236.6 182.7

Asia 144.7 113.3

Rest of the World 1.4 1.4

617.0 476.2

Revenue from services is less than 1% of Group revenues. All other revenue is from the sale of goods.

TT Electronics plc Annual Report and Accounts 2022 165

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

166 TT Electronics plc Annual Report and Accounts 2022

3 Segmental reporting continued

Non-current assets

The carrying amount of non-current assets, excluding deferred tax assets, derivatives and pensions, analysed by the geographical

area is shown below:

£million 2022 2021

United Kingdom 103.6 116.3

Rest of Europe 0.2 0.3

North America 162.6 144.8

Central and South America 5.0 4.4

Asia 11.8 12.4

283.2 278.2

d) Market information key customers

The Group operates in the following markets:

£million 2022 2021

Healthcare 172.0 118.8

Aerospace and defence 91.7 85.5

Automation and electrification 229.6 172.2

Distribution 123.7 99.7

617.0 476.2

1 Revenue by market in 2021 has been represented following a reclassification of end markets for several key customers.

The Group had one customer who contributed greater than 10% of revenues (12%) in 2022 (2021: less than 10%). Revenues from

this customer are recognised within the Global Manufacturing Solutions segment.

TT Electronics plc Annual Report and Accounts 2022166

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 167

4 Acquisitions

On 7 January 2022 the Group acquired the Power and Control business of Ferranti Technologies Ltd, from Elbit Systems UK Ltd.

Total cash consideration was £8.3 million comprising £10.0 million paid in January 2022 and a final £1.7 million working capital

adjustment received in April 2022.

Had the acquisition been completed on 1 January, the full year revenue, operating loss and adjusted operating profit would have been

unchanged at £617.0 million, £3.4 million and £47.1 million respectively as reported. Ferranti Power and Control’s contribution to the

Group’s 2022 revenue, operating loss and adjusted operating profit was £7.9 million, £0.8 million and £1.9 million respectively.

Ferranti Power and Control, based in Oldham, Greater Manchester, designs and manufactures mission-critical complex power and

control sub-assemblies for blue chip customers in high-reliability and high-performance end markets, primarily aerospace and

defence. The acquisition brings highly skilled employees who provide full-service capabilities from design, assembly, manufacturing,

and testing including environmental stress screening and inspection through to service. Ferranti Power and Control adds further

technology capability, and scale to our Power business with valuable long-term customer relationships and programmes with

leading global aerospace, defence and industrial OEMs operating in highly regulated markets with significant barriers to entry

through necessary industry accreditations and customer approvals. The goodwill recognised on acquisition represents the Group’s

view on the future earnings growth potential and technical capabilities of the acquired business. None of the goodwill recognised is

expected to be deductible for income tax purposes. Costs in relation to this acquisition recognised in the statement of profit or loss

amounted to £0.3 million.

The fair values of the identifiable assets (including goodwill) and liabilities are presented below.

The fair value of receivables of £2.1 million is not materially different to the contractual cashflows. The amount expected to not be

collected is £nil.

£million Power and Control business of Ferranti Technologies Ltd

Non-current assets

Right-of-use asset 0.2

Property, plant and equipment 0.4

Identifiable intangible assets 5.3

Current assets/(liabilities)

Inventory 2.2

Trade and other receivables 2.1

Trade and other payables (2.5)

Provisions (3.0)

Lease liabilities (0.2)

Deferred tax liabilities (1.2)

Net assets of acquiree 3.3

Consideration paid

Cash consideration 8.3

Goodwill 5.0

The acquisition balance sheet above represents the final acquisition balance after substantially completing the initial measurement

period of 12 months since acquisition. During the final six months of the year there were opening balance sheet adjustments as

compared to the preliminary acquisition balance sheet disclosed with the half year results. These adjustments were to increase

provisions by £0.4 million reduce trade and other receivables by £0.1 million, reduce deferred tax liabilities by £0.1 million and to

increase goodwill by £0.4 million.

TT Electronics plc Annual Report and Accounts 2022 167

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

168 TT Electronics plc Annual Report and Accounts 2022

5 Finance costs and finance income

£million 2022 2021

Interest income 0.1 0.2

Net interest income on pension schemes in surplus 2.2 0.9

Finance income 2.3 1.1

Interest expense 7.1 3.1

Interest on lease liabilities 0.8 0.8

Net interest expense on pension schemes in deficit 0.1 0.1

Amortisation of arrangement fees 1.0 0.4

Finance costs 9.0 4.4

Net finance costs 6.7 3.3

Within ‘Amortisation of arrangement fees’ is an expense of £0.5m relating to the acceleration of capitalised loan arrangement fees

following a refinancing activity described in note 20.

6 Profit for the year

Profit from continuing operations for the year is stated after charging/(crediting):

£million 2022 2021

Depreciation of property, plant and equipment 9.6 9.9

Depreciation of right-of-use assets 4.3 3.7

Amortisation of intangible assets

8.2 7.6

Impairment of goodwill (excluded from adjusted operating profit, note 14) 17.7 –

Impairment of other assets (excluded from adjusted operating profit)

5.4 –

Net foreign exchange losses/(gains) recognised within operating profit 1.1 (4.1)

Cost of inventories recognised as an expense 481.5 360.6

Research and development 10.1 10.2

Staff costs (see note 11) 164.5 135.3

Restructuring (excluded from adjusted operating profit) 20.2 7.8

Acquisition and disposal related costs (excluded from adjusted operating profit) 7.2 7.7

Remuneration of Group Auditor:

– audit of these financial statements 0.8 0.6

– audit of financial statements of subsidiaries of the Company 0.8 0.7

– assurance and other services

0.1 0.1

Government grants (0.1) (0.2)

Share-based payments 4.8 3.8

Profit on disposal of property, plant and equipment (excluded from adjusted operating profit) – (1.7)

1 Included within amortisation of intangible assets is £6.0 million (2021: £5.1 million) reported within items excluded from adjusted operating profit. The remaining charge is within

administrative expenses.

2 Included within impairment of other assets of £5.4 million is £2.8 million in respect of inventories, £1.5 million in respect of plant property and equipment, £0.8 million in respect of

receivables and £0.3 million in respect of capitalised product development costs.

3 Assurance and other services of £0.1 million relate to the half year review (2021: £0.1 million relating to the half year review).

TT Electronics plc Annual Report and Accounts 2022168

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 169

7 Adjusting items

As described in note 1c, adjusted profit measures are an alternative performance measure used by the Board to monitor the

operating performance of the Group.

2022 2021

£million

Operating

profit

Tax

Operating

profit

Tax

As reported

(3.4)

(3.1) 19.3 (3.2)

Restructuring and other

Restructuring (6.4) 1.2 (9.7) 1.2

Property disposals

–

– 1.7 (0.2)

Pension restructuring costs (2.0) 0.4 (1.5) 0.2

Pension enhanced transfer value exercise (11.8) 2.2 – –

Pension increase exchange exercise

–

– 1.8 (0.2)

Other items

–

– (0.1) –

(20.2) 3.8 (7.8) 1.0

Asset impairments

Goodwill impairment (17.7) –

– –

Other impairments (5.4) 1.0 – –

(23.1) 1.0 – –

Acquisition and disposal related costs

Amortisation of intangible assets arising on business combinations (6.0) 0.3 (5.1) (0.3)

Torotel acquisition and integration costs (0.1) – (1.5) 0.6

Covina acquisition and integration costs

–

(0.2) 0.1

Ferranti Power and Control acquisition and integration costs (1.1) 0.2 (0.5) 0.2

Tax losses relating to the disposal of the transportation division

–

– – 1.3

Other acquisition and disposal related costs

–

(0.4) 0.1

(7.2) 0.5 (7.7) 2.0

Total items excluded from adjusted measure (50.5) 5.3 (15.5) 3.0

Adjusted measure 47.1 (8.4) 34.8 (6.2)

Restructuring and other £20.2 million (2021: £7.8 million)

Restructuring costs charged in the period primarily relate to cost of the Group’s self-help programme which began in 2020 and it is

now substantially complete.

Restructuring costs of £6.4 million comprise £2.7 million relating to the restructure of the North America Resistors business, which

includes pre-production costs at our new Plano facility; £2.0 million relating to closure of our site in Lutterworth, UK, £1.5 million

relating to the relocation of production facilities from Covina, USA to Kansas, USA and £0.2 million relating to the relocation of

production facilities from Medina, USA to Minneapolis, USA.

Pension enhanced transfer value exercise of £11.8 million represents the settlement cost of a liability management exercise

undertaken during the year ahead of the buy-in completed in 2022. Pension restructuring costs of £2.0 million relate to costs

associated with the enhanced transfer value exercise and scheme buy-in (see note 22).

Prior period restructuring costs of £7.8 million primarily comprised £8.0 million, net of a £1.7 million gain on property disposals,

relating to restructuring the Group’s footprint, £1.5 million relating to preparing the Group’s pension scheme for buy-in, £0.1 million

relating to other costs, and a £1.8 million gain relating to a ‘Pensions Increase Exchange’ exercise whereby eligible current pension

members were offered the option to exchange their non statutory pension increases for an additional amount of level pension.

TT Electronics plc Annual Report and Accounts 2022 169

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

170 TT Electronics plc Annual Report and Accounts 2022

7 Adjusting items continued

Asset impairments £23.1 million (2021: £nil)

During the year an impairment of £5.4 million associated with Virolens related assets (£2.8 million of inventory, £1.5 million of plant

and equipment, £0.8 million of other debtors and £0.3 million of product development costs) was recognised, reducing the carrying

value to £nil.

Following a detailed impairment review of goodwill completed during the year an impairment charge of £17.7 million (2021: £nil)

was recognised to reduce the carrying value of the IoT Solutions CGU to the recoverable amount.

The impairments of both Virolens related assets and goodwill were as a result of revised forecasts in the context of a weaker

macro-economic environment and the impact of the evolution of the COVID pandemic on the potential demand for COVID testing.

The impairment charges were recognised within the Power and Connectivity segment.

Acquisition and disposal related costs £7.2 million (2021: £7.7 million)

Acquisition and disposal related costs charged in the year comprise £6.0 million (2021: £5.1 million) of amortisation of acquired

intangible assets; £0.3 million (2021: £0.5 million) of acquisition costs and £0.8 million of integration costs relating to the

acquisition of the Power and Control business of Ferranti Technologies Ltd based in Oldham, UK and £0.1 million of integration

costs of Torotel, Inc. (2021: £1.5 million). The prior period also included £0.4 million of costs of terminated acquisitions and

£0.2 million of integration costs of the aerospace and defence power supply business of Excelitas Technologies Corp based

in Covina, California.

TT Electronics plc Annual Report and Accounts 2022170

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 171

8 Taxation

a) Analysis of the tax charge for the year

£million 2022 2021

Current tax

Current income tax charge 9.1 5.1

Adjustments in respect of current income tax of previous year (0.5) (0.9)

Total current tax charge 8.6 4.2

Deferred tax

Relating to origination and reversal of temporary differences (3.4) (0.4)

Change in tax rate (1.2) 0.8

Adjustments in respect of deferred tax of previous years (0.9) (1.4)

Total deferred tax credit (5.5) (1.0)

Total tax charge in the income statement 3.1 3.2

The applicable tax rate for the period is based on the UK standard rate of corporation tax of 19% (2021: 19%). Overseas taxation is

calculated at the rates prevailing in the respective jurisdictions. The Group’s effective tax rate for the year was -30.7% (the adjusted

tax rate was 20.8%, see section ‘Reconciliation of KPIs and non IFRS measures’).

The enacted UK tax rate applicable since 1 April 2017 to current year profits is 19%. An increase in UK rate has been enacted to

occur from 1 April 2023 to 25%. In 2022 the impact on deferred tax as a result of this change was £1.2 million recognised in the

income statement.

Included within the total tax charge above is a £5.3 million credit relating to items reported outside adjusted profit (2021:

£3.0 million credit).

b) Reconciliation of the total tax charge for the year

£million 2022 2021

(Loss)/profit before tax from continuing operations (10.1) 16.0

(Loss)/profit before tax multiplied by the standard rate of corporation tax in the UK of 19% (2021: 19%) (1.9) 3.0

Effects of:

Impact on deferred tax arising from changes in tax rates (1.2) 0.8

Overseas tax rate differences 0.8 0.7

Items not deductible for tax purposes or income not taxable 8.8 2.2

Adjustment to current tax in respect of prior periods (0.5) (0.9)

Current year tax losses and other items not recognised (2.0) (1.2)

Adjustments in respect of deferred tax of previous years (0.9) (1.4)

Total tax charge reported in the income statement 3.1 3.2

Items not deductible for tax purposes or income not taxable includes an impairment of IoT Solutions CGU not deductible for tax

purposes of £9.6 million.

The adjustment to current tax in respect of prior periods largely relates to the release of tax provisions in respect of concluded

disputes and uncertainties.

TT Electronics plc Annual Report and Accounts 2022 171

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

172 TT Electronics plc Annual Report and Accounts 2022

8 Taxation continued

The overall aim of the Group’s tax strategy is to support business operations by ensuring a sustainable tax rate, mitigating tax risks

in a timely and cost-efficient way and complying with tax legislation in the jurisdictions in which the Group operates. It is however

inevitable that the Group will be subject to routine tax audits or is in ongoing disputes with tax authorities in the multiple

jurisdictions it operates within. This is much more likely to arise in situations involving more than one tax jurisdiction. Differences

in interpretation of legislation, of global standards (e.g. OECD guidance) and of commercial transactions undertaken by the group

between different tax authorities are one of the main causes of tax exposures and tax risks for the group.

In order to manage the risk to the Group an assessment is made of such tax exposures and provisions are created using the best

estimate of the most likely amount to be incurred within a range of possible outcomes. The resolution of the Group's tax exposures

can take a considerable period of time to conclude and, in some circumstances, it can be difficult to predict the final outcome.

The current tax liability at 31 December 2022 includes tax provisions of £8.4 million (2021: £6.9 million). The Group believes the

range of reasonable possible outcomes in respect of these exposures is tax liabilities of up to £11.1 million (2021: £9.0 million).

c) Deferred tax

The Group completed a five year forward looking strategic plan covering the periods from 2023 to 2027 in which it was forecast

that all divisions would show increasing profitability. Therefore, a deferred tax asset is recognised on the basis that it is considered

probable that net taxable profits will be recognised in the future.

The amounts of deferred taxation assets/(liabilities) provided in the financial statements are as follows:

£million

As at 1

January 2022

Continuing

operations

Recognised on

acquisition

Recognised in

equity/OCI

Net exchange

translation

As at 31

December 2022

Intangible assets (11.4) 0.9 (1.2) –

(0.7)

(12.4)

Property, plant and equipment 1.5 (0.6)

–

– (0.1) 0.8

Deferred development costs (0.5)

0.2 –

–

(0.2)

(0.5)

Retirement benefit obligations (18.9)

1.8 – 6.5

0.2

(10.4)

Inventories 1.1 (0.5)

– – 0.3

0.9

Tax losses

9.3 0.9 – – 0.5

10.7

Unremitted overseas earnings (2.3)

0.5 – –

–

(1.8)

Share-based payments 1.9 (0.2) – (1.0)

–

0.7

Cash flow hedges

0.5 –

– (0.4)

–

0.1

Short-term temporary differences

9.9 2.5

–

(1.6)

1.9

12.7

Net deferred tax asset/(liability) (8.9) 5.5 (1.2)

3.5 1.9

0.8

Deferred tax assets

11.3

13.2

Deferred tax liabilities (20.2)

(12.4)

Net deferred tax asset/(liability) (8.9)

0.8

TT Electronics plc Annual Report and Accounts 2022172

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 173

8 Taxation continued

£million

At 31

December 2020

Continuing

operations

Recognised on

acquisition

Recognised in

equity/OCI

Net exchange

translation

As at 31

December 2021

Intangible assets (10.6) (0.8) – – – (11.4)

Property, plant and equipment 1.7 (0.2) – – – 1.5

Deferred development costs (0.5) – – – – (0.5)

Retirement benefit obligations (5.7) (1.8) – (11.4) – (18.9)

Inventories 1.0 0.1 – – – 1.1

Tax losses 7.5 1.9 (0.2) – 0.1 9.3

Unremitted overseas earnings (2.0) (0.3) – – – (2.3)

Share-based payments 0.7 0.7 – 0.5 – 1.9

Cash flow hedges – – – 0.5 – 0.5

Short-term temporary differences 8.4 1.3 (0.1) – 0.3 9.9

Net deferred tax asset 0.5 0.9 (0.3) (10.4) 0.4 (8.9)

Deferred tax assets 8.9 11.3

Deferred tax liabilities (8.6) (20.2)

Net deferred tax asset 0.5 (8.9)

Deferred tax Description

Intangible assets Deferred tax relating to intangible assets created on acquisitions by the Group. This

excludes any internally generated intangibles relating to product development costs.

Property, plant and equipment

Deferred tax relating to temporary differences in the value of property, plant and equipment

between Group accounting and local accounting and/or tax returns

Deferred development costs Deferred tax relating to deferred development costs

Retirement benefit obligations Deferred tax relating to retirement benefit obligations

Inventories

Deferred tax relating to temporary differences between the local book value and Group

consolidated value of inventory

Tax losses Deferred tax relating to recognised tax losses carried forwards for offset against future

profits of the Group

Unremitted overseas earnings Deferred tax relating to the repatriation of subsidiary profits to the Group's ultimate

holding company

Share based payments Deferred tax relating to share based payment

Cash flow hedges Deferred tax relating to derivatives designated as cash flow hedges

Short term temporary differences Deferred tax relating to temporary differences between Group accounts and local accounts

or tax return arising where a tax deduction is received on payment of an amount either

between Group companies or to external unconnected third parties rather than on an

accounting basis. This includes product development costs.

TT Electronics plc Annual Report and Accounts 2022 173

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

174 TT Electronics plc Annual Report and Accounts 2022

8 Taxation continued

At 31 December 2022, the gross amount and expiry date of losses not recognised for deferred tax purposes but available for carry

forward are as follows:

£million

Expiring

within

5 years

Expiring

within

6 to 10 years Unlimited Total

Losses for which no deferred tax asset has been recognised

0.6 – 71.6

72.2

Deferred tax is not recognised on these losses because profit projections do not support the utilisation of these losses.

Tax losses of £58.2 million are subject to substantial limitations in the type of profits they can be offset against and no such capital

disposals are currently anticipated.

At 31 December 2021, the gross amount and expiry date of losses available for carry forward were as follows:

£million

Expiring

within

5 years

Expiring

within

6 to 10 years

Unlimited Total

Losses for which no deferred tax asset has been recognised 0.4 – 71.1 71.5

At 31 December 2022, the Group had no other items for which no deferred tax assets have been recognised (2021: £nil).

TT Electronics plc Annual Report and Accounts 2022174

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 175

9 Dividends

2022

pence

per share

2022

£million

2021

pence

per share

2021

£million

Final dividend paid for prior year

3.80

6.7 4.70 8.2

Interim dividend declared for current year

2.00

3.5 1.80 3.2

The Directors recommend a final dividend of 4.3 pence per share. The Group has a progressive dividend policy. The final dividend

will be paid on 26 May 2023 to shareholders on the register on 28 April 2023.

10 Earnings per share

Basic earnings/(loss) per share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted

average number of shares in issue during the year.

Pence 2022 2021

(Loss)/Earnings per share

Basic (7.5) 7.3

Diluted (7.5) 7.2

As the Group made a statutory loss, diluted statutory EPS has been calculated using the basic weighted average number of shares.

The numbers used in calculating adjusted, basic and diluted (loss)/earnings per share are shown below. Adjusted earnings per

share is based on the adjusted profit after interest and tax.

Adjusted earnings per share:

£million (unless otherwise stated) 2022 2021

Group

(Loss)/profit for the year attributable to owners of the Company (13.2) 12.8

Restructuring and other 20.2 7.8

Asset impairments 23.1 –

Acquisition and disposal related costs 7.2 7.7

Tax effect of above items (see note 7) (5.3) (3.0)

Adjusted earnings 32.0 25.3

Adjusted earnings per share (pence) 18.2 14.5

Adjusted diluted earnings per share (pence) 18.0 14.2

The weighted average number of shares in issue is as follows (new shares issued in the year described in note 23):

million 2022 2021

Basic 175.8 174.8

Adjustment for share awards 2.0 3.3

Diluted 177.8 178.1

TT Electronics plc Annual Report and Accounts 2022 175

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

176 TT Electronics plc Annual Report and Accounts 2022

11 Employee information

The average number of full time equivalent employees (including Directors) during the year from continuing operations was:

Number 2022 2021

By function

Production 4,352 4,075

Sales and distribution 296 270

Administration 324 287

4,972 4,632

By division

Power and Connectivity 1,650 1,597

Global Manufacturing Solutions 1,567 1,456

Sensors and Specialist Components 1,755 1,579

Total 4,972 4,632

Aggregate emoluments, including those of Directors, for the year were:

£million 2022 2021

Wages and salaries 124.8 103.1

Social security charges 30.5 24.0

Employers’ pension costs 3.2 3.0

Defined benefit pension costs 1.2 1.4

Share based payments expense 4.8 3.8

164.5 135.3

Remuneration in respect of the Directors was as follows:

£million 2022 2021

Emoluments 2.1 2.3

The remuneration of key management during the year was as follows:

£million 2022 2021

Short-term benefits 3.5 4.0

Pension and other post-employment benefit expense 0.2 0.1

Share based payments 2.2 1.8

5.9 5.9

The Schedule 5 requirements of the Accounting Regulations for directors’ remuneration are included within the Directors’

remuneration report on pages 122-135.

TT Electronics plc Annual Report and Accounts 2022176

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 177

12 Right-of-use assets

£million

Land and

buildings

Other

Right-of-use

assets

Cost

At 1 January 2021 34.9 1.8 36.7

Additions 10.5 0.3 10.8

Disposals (4.4) (0.1) (4.5)

Net exchange adjustment 0.5 – 0.5

At 1 January 2022

41.5 2.0

43.5

Additions

2.3 –

2.3

Disposals

(0.5) (0.1)

(0.6)

Business acquired

0.2 –

0.2

Net exchange adjustment 2.7 (0.4) 2.3

At 31 December 2022

46.2 1.5

47.7

Depreciation

At 1 January 2021 23.3 1.0 24.3

Depreciation charge 3.4 0.3 3.7

Impairment 0.1 – 0.1

Disposals (4.4) (0.1) (4.5)

Net exchange adjustment 0.2 0.1 0.3

At 1 January 2022

22.6 1.3

23.9

Depreciation charge

4.0 0.3

4.3

Impairment (0.2) – (0.2)

Disposals

(0.5) (0.1)

(0.6)

Net exchange adjustment 0.9 (0.2) 0.7

At 31 December 2022

26.8 1.3

28.1

Net book value

At 31 December 2022

19.4 0.2

19.6

At 31 December 2021 18.9 0.7 19.6

The reversal of impairment during the year of £0.2m relates to the reversal of a previously impaired lease as part of a previous

restructuring programme; the credit has been recognised in the income statement under adjusting items as a restructuring cost.

Additions during the year relate to a new site in Manchester, UK (£1.8 million) and other locations throughout the Group

(£0.5 million).

The Group only leases land and buildings for use in trading activities. Lease liabilities are disclosed in note 20. Contractual

cashflows for these leases are disclosed in note 21e.

TT Electronics plc Annual Report and Accounts 2022 177

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

178 TT Electronics plc Annual Report and Accounts 2022

13 Property, plant and equipment

£million

Land and

buildings

Plant and

equipment

Total

Cost

At 1 January 2021 29.7 177.0 206.7

Additions 7.9 6.7 14.6

Disposals (13.5) (13.2) (26.7)

Net exchange adjustment 0.1 1.3 1.4

At 1 January 2022

24.2 171.8

196.0

Additions

1.8 9.6

11.4

Disposals

(0.3) (21.5)

(21.8)

Business acquired

– 0.4

0.4

Net exchange adjustment

1.9 11.5

13.4

At 31 December 2022

27.6 171.8

199.4

Depreciation and impairment

At 1 January 2021 10.8 142.9 153.7

Depreciation charge 1.1 8.8 9.9

Impairment – (0.1) (0.1)

Disposals (5.7) (13.2) (18.9)

Net exchange adjustment 0.1 0.9 1.0

At 1 January 2022

6.3 139.3

145.6

Depreciation charge

1.2 8.4

9.6

Impairment

– 1.5

1.5

Disposals

(0.5) (21.5)

(22.0)

Net exchange adjustment

0.3 9.6

9.9

At 31 December 2022

7.3 137.3

144.6

Net book value

At 31 December 2022

20.3 34.5

54.8

At 31 December 2021 17.9 32.5 50.4

Included within land and buildings is one investment property with a carrying value of £nil (2021: £nil) and a fair value of

£0.7 million (2021: £0.7 million). Rental income of £0.2 million (2021: £0.2 million) was recognised within other income

in relation to this property.

The impairment charge for the year of £1.5 million (2021: £nil) relates to assets in the IoT Solutions CGU and is reported within

items excluded from adjusted operating profit as described in note 7. All impaired assets have been impaired down to a recoverable

amount of £nil.

TT Electronics plc Annual Report and Accounts 2022178

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 179

14 Goodwill

£million

Cost

At 1 January 2021 155.7

Net exchange adjustment 0.8

At 31 December 2021 156.5

Additions 5.0

Net exchange adjustment 11.3

At 31 December 2022 172.8

Impairment

At 1 January 2021 and at 31 December 2021 –

Impairment 17.7

At 31 December 2022 17.7

Net book value

At 31 December 2022 155.1

At 31 December 2021 156.5

The £5.0 million addition in goodwill in 2022 arose upon the acquisition of Power and Control business of Ferranti Technologies Ltd

and is considered part of the Power Solutions CGU.

The goodwill generated as a result of acquisitions represents the premium paid in excess of the fair value of all net assets, including

intangible assets, identified at the point of acquisition. The future improvements applied to the acquired businesses, achieved

through a combination of revised strategic direction, operational improvements and investment are expected to result in improved

profitability of the acquired businesses during the period of ownership. The combined value achieved from these improvements is

expected to be in excess of the value of goodwill acquired.

Goodwill net of impairment is attributed to the following CGUs in the divisions shown below:

£million 2022 2021

Power and Connectivity:

Power Solutions 65.6 57.0

IoT Solutions 9.9 27.6

Global Manufacturing Solutions:

Global Manufacturing Solutions 19.5 18.4

Sensors and Specialist Components:

Resistors 34.2 30.5

Sensors 25.9 23.0

155.1 156.5

TT Electronics plc Annual Report and Accounts 2022 179

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

180 TT Electronics plc Annual Report and Accounts 2022

14 Goodwill continued

Impairment Testing

The Group tests goodwill impairment annually or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use

calculations are those regarding the discount rates, growth rates and operating cash flow projections over a forecast period.

The growth rate assumed after this forecast period is based on long-term GDP projections capped at long term growth rates

(which are approximated as long-term inflation rates) of the primary market for the CGU, in perpetuity. Long-term growth rates

are based on long-term forecasts for growth in the geography in which the group of CGUs operates. Long-term growth rates are

determined using long-term growth rate forecasts that take into account the international presence and the markets in which each

business operates.

Management estimate discount rates using pre-tax rates that reflect current market assessments of the Group’s time value of

money and the risks specific to the CGU being measured.

In determining the cost of equity, the Capital Asset Pricing Model (“CAPM”) has been used. Under CAPM, the cost of equity is

determined by adding a risk premium, based on an industry adjustment, to the expected return of the equity market above the risk-

free return. The relative risk adjustment reflects the risk inherent in each group of CGUs relative to all other sectors and geographies

on average.

The cost of debt is determined using a risk-free rate based on the cost of government bonds, and an interest rate premium

equivalent to a corporate bond with a similar credit rating to TT Electronics Plc.

The growth rates assume that demand for our products remains broadly in line with the underlying economic environment in the

long-term future. Taking into account our expectation of future market conditions, we believe that the evolution of selling prices

and cost measures put into place will lead to a sustained improvement in profitability.

Management has detailed plans in place reflecting the latest budget and strategic growth plan. The pre-tax discount rates and

periods of management approved forecasts are shown below. The discount rates used in the annual impairment test for the year

ended 31 December 2022 are shown below:

2022

2021

Pre-tax

discount rate

Long term

growth rate

Period of

forecast

(years)

Pre-tax

discount rate

Long term

growth rate

Period of

forecast

(years)

Power Solutions

13.4% 1.7%

5 12.2% 1.7% 5

IoT Solutions

14.3% 1.6%

5 12.2% 1.6% 5

Global Manufacturing Solutions

13.8% 1.9%

13.2% 1.8% 5

Resistors

13.5% 1.6%

5 13.3% 1.6% 5

Sensors

13.2% 1.7%

5 13.8% 1.7% 5

The date of the annual impairment test was 30 September 2022 to align with internal forecasting and review processes.

Based on the impairment testing performed, an impairment charge of £17.7 million was recorded in 2022 (2021: £nil) in respect of

the IoT Solutions CGU as a result of revised forecasts for the business in the context of a weaker macro-economic environment and

the impact of the evolution of the COVID pandemic on the potential demand for COVID testing, coupled with an increase in discount

rates. The impairment charge is shown as an adjusting item (see note 7) in conjunction with related assets in the IoT Solutions

CGU. No impairment losses have been recognised in the current or prior year in respect of the other CGUs as recoverable amounts

exceed carrying value of assets in respect of those businesses.

Sensitivity analysis has been provided in respect of reasonably possible changes to key assumptions where applicable.

Key assumptions in the value in use test are the projected performance of the CGUs based on sales growth rates, cash flow

forecasts and discount rate. Forecast sales growth rates are based on past experience adjusted for the strategic direction and near-

term investment priorities within each CGU. The key assumptions include externally obtained growth rates in the key markets

disclosed in note 3 and customer demand for product lines. Cash flow forecasts are determined based on historic experience of

operating margins, adjusted for the impact of changes in product mix and cost-saving initiatives, including the impact of our

restructuring projects and cash conversion based on historical experience.

TT Electronics plc Annual Report and Accounts 2022180

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 181

14 Goodwill continued

The recoverable amounts associated with the goodwill balances which are based on these performance projections and current

forecast information do not indicate that any goodwill balance, other than that for IoT Solutions, is impaired. If a company’s actual

performance does not meet these projections this could lead to an impairment of the goodwill in future periods.

Sensitivity Analysis

Sensitivity analysis has been performed on the key assumptions; operating cash flow projections, revenue growth rates and

discount rate. Cash flows can be impacted by changes to sales prices, direct costs and replacement capital expenditure; individually

they are not significant assumptions. Forecast sales growth rates are based on past experience adjusted for the strategic direction

and near-term investment priorities. Cash flow forecasts are determined based on historic experience of operating margins,

adjusted for the impact of changes in product mix and cost-saving initiatives, including the impact of our committed restructuring

projects and cash conversion based on historical experience.

Other than in the case of the IoT Solutions CGU where an impairment has been recognised, the Directors have not identified

reasonably possible changes in significant assumptions that would cause the carrying value of recognised goodwill to exceed

its recoverable amount.

As discussed in note 1, determination of the recoverable amount involves management judgement on highly uncertain matters,

particularly with regard to future growth prospects in the markets in which the CGUs operate, the level of competition and discount

factors. Revenue forecasts for the IoT Solutions CGU have reduced and a higher discount factor has been applied in 2022. As a

result the recoverable amount of the IoT Solutions CGU was £43.8 million resulting in an impairment to goodwill of £17.7 million.

In accordance with IAS 36 ‘Impairment of Assets’ sensitivity analysis has been carried out as illustrated below:

• a further 1 per cent increase in the discount rate would result in a reduction in value in use (and additional impairment)

of £3.3 million.

• a further 1 per cent decrease in the long-term growth rate (driven by delayed product launches) would result in a reduction

in value in use (and additional impairment) of £2.2 million.

• a further 5 per cent reduction in the terminal value of operating profit (driven by lower than anticipated margin) would result

in a reduction in value in use (and additional impairment) of £1.4 million.

TT Electronics plc Annual Report and Accounts 2022 181

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

182 TT Electronics plc Annual Report and Accounts 2022

15 Other intangible assets

£million

Product

development

costs

Patents,

licences

and

other

Customer

relationships

Total

Cost

At 1 January 2021 16.7 35.4 63.9 116.0

Additions 1.9 0.5 – 2.4

Disposals (0.1) (0.1) (0.5) (0.7)

Net exchange adjustment 0.1 0.1 0.2 0.4

At 1 January 2022

18.6 35.9 63.6

118.1

Additions

2.3 0.6 –

2.9

Disposals

(0.1)

(0.3)

– (0.4)

Businesses acquired

– 2.3 3.0

5.3

Net exchange adjustment

1.4 0.9 2.6

4.9

At 31 December 2022

22.2 39.4 69.2

130.8

Amortisation

At 1 January 2021 9.7 31.0 18.2 58.9

Charge for the year 0.9 2.5 4.2 7.6

Impairment – – 0.2 0.2

Disposals (0.1) (0.1) (0.5) (0.7)

Net exchange adjustment 0.1 0.2 0.1 0.4

At 1 January 2022

10.6 33.6 22.2

66.4

Charge for the year

1.2 2.8 4.2

8.2

Impairment

0.3 – –

0.3

Disposals

(0.1)

(0.3)

– (0.4)

Net exchange adjustment

1.1 0.9 0.6

2.6

At 31 December 2022

13.1 37.0 27.0

77.1

Net book value

At 31 December 2022

9.1 2.4 42.2

53.7

At 31 December 2021 8.0 2.3 41.4 51.7

Included within the impairment charge for the year is £0.3 million (2021: £nil) reported within the Power and Connectivity segment

and within items excluded from adjusted operating profit as described in note 7. All impaired assets have been impaired down to a

recoverable amount of £nil.

Included within the amortisation charge for the year is £6.0 million (2021: £5.1 million) included within items excluded from

adjusted profit as the charge relates to intangibles acquired upon acquisition of businesses.

Customer relationships are intangible assets recognised upon acquisition which are amortised over long periods of time and are

summarised below. The amortisation charge is excluded from adjusted operating profit as described in note 7. The composition

of customer relationships and the years remaining until they are fully amortised is shown below.

TT Electronics plc Annual Report and Accounts 2022182

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 183

15 Other intangible assets continued

Customer relationships held on the balance sheet are summarised below.

£million Net book value Years remaining

Stadium Group 13.4 10.3

Aero Stanrew 8.9 8.0

Torotel 7.9 19.9

Precision Inc. 5.8 9.7

Covina 3.5 11.2

Ferranti Power and Control 2.7 12.0

At 31 December 2022

42.2

£million Net book value Years remaining

Stadium Group 14.5 11.3

Aero Stanrew 10.0 9.0

Torotel 7.3 20.9

Precision Inc. 5.6 10.7

Covina 3.3 12.2

Roxspur 0.3 0.6

Others 0.4 –

At 31 December 2021 41.4

16 Inventories

£million 2022 2021

Raw materials 130.9 92.6

Work in progress 34.8 26.3

Finished goods 23.5 22.9

189.2 141.8

Inventories are stated after a provision for obsolescence of £25.8 million (2021: £18.3 million). The directors do not consider there

to be a material difference between net book value and replacement cost for inventories. An impairment of £2.8 million was

recognised in items excluded from adjusted operating profit as described in note 7.

17 Trade and other receivables

£million 2022 2021

Trade receivables 101.3 72.9

Prepayments 8.1 6.3

VAT and other taxes receivable 3.4 2.9

Amounts owed by non-controlling interests – 2.0

Accrued income 1.4 –

Contract assets 1.7 –

Other receivables 4.4 2.1

120.3 86.2

Loss allowance for expected credit losses in respect of trade receivables and amounts owed by non-controlling interests are shown

in note 21d(ii) and note 21d(iii) respectively.

TT Electronics plc Annual Report and Accounts 2022 183

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

184 TT Electronics plc Annual Report and Accounts 2022

18 Trade and other payables

£million 2022 2021

Current liabilities

Trade payables 97.0 77.7

Taxation and social security 4.1 4.0

Accruals 27.9 26.4

Deferred income 31.3 16.1

Goods received not invoiced 10.1 7.6

Other payables 2.8 2.1

173.2 133.9

£million 2022 2021

Non-current liabilities

Accruals 0.1 0.2

Deferred income primarily represents pre-funded inventory which is expected to be converted into finished goods and sold within

12 months. All the brought forward balance carried over from 2021 was converted into finished goods and sold to the end customer

within the year.

19 Provisions

£million Property Reorganisation

Legal, warranty

and other Total

At 1 January 2021 0.9 4.1 2.5 7.5

Utilised – (3.2) (0.3) (3.5)

Released (0.1) (0.2) (1.4) (1.7)

Transfer – – (0.2) (0.2)

Arising during the year – 0.8 0.6 1.4

Exchange differences – (0.1) (0.1) (0.2)

At 1 January 2022

0.8

1.4 1.1

3.3

Utilised –

(0.3)

(1.7)

(2.0)

Released (0.1) –

(0.2)

(0.3)

Transfer – (0.7) 0.5 (0.2)

Arising during the year

–

– 0.3

0.3

Businesses acquired

–

– 3.0

3.0

Exchange differences

–

– 0.1

0.1

At 31 December 2022

0.7

0.4 3.1

4.2

£million 2022 2021

Non-current 0.7 0.8

Current 3.5 2.5

4.2 3.3

TT Electronics plc Annual Report and Accounts 2022184

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 185

19 Provisions continued

Property

Property provisions of £0.7 million (2021: £0.8 million) relate to dilapidation provisions.

Reorganisation

Reorganisation provisions relate to committed costs in respect of restructuring programmes, as described in note 7, usually

resulting in cash spend within one year.

The reorganisation provision of £0.4 million (2021: £1.4 million) includes £0.3 million in respect of self-help programmes which

commenced in 2020 to consolidate our footprint. £0.1 million of the utilisation in year relates to severance provisions following

the closure of our facilities in Lutterworth, UK and Covina, US.

A further £0.1 million (2021: £0.3 million) relates to the restructuring programme undertaken in association with the closure

of the Boone, North Carolina operations. Work has been performed to rectify soil contamination that occurred as a result of past

production practices, with £0.2 million utilised during the period. The provision is based upon the Group’s estimate of the scope

of further work which contains inherent uncertainty.

Legal, warranty and other

Legal, warranty and other claims represent the best estimate for the cost of settling outstanding product and other claims, and

warranty provisions created on the disposal of businesses.

The provisions with acquired business of £3.0 million relate to provision on the opening balance sheet of the newly acquired

Ferranti Power and Control business to complete onerous contracts. Of the £1.7 million utilisation in year £1.1 million relates

to costs incurred for the completion of acquired onerous contracts in the Ferranti Power and Control business and £0.6 million

relates to other provisions. The £0.2 million provision release during the year primarily relates to lower than anticipated costs for

integration of our 2021 acquisition of Torotel. The £0.3 million costs charged to the income statement in year relate to £0.2 million

local warranty provisions (recognised within admin expenses in the income statement) and £0.1 million for provisions in relation

to the integration of the acquired Ferranti Power and Control business (recognised in acquisition and disposal costs which are

excluded from adjusted operating profit).

The Group has, on occasion, been required to enforce commercial contracts and to defend itself against proceedings brought by

other parties. Provisions are made for the expected costs associated with such matters, based on past experience of similar items

and other known factors, taking into account professional advice received, and represent management’s best estimate of the likely

outcome. The timing of utilisation of these provisions is frequently uncertain, reflecting the complexity of issues and the outcome

of various court proceedings and negotiations. Contractual and other provisions represent the Directors’ best estimate of the cost

of settling future obligations although there is a higher degree of judgement involved. Unless specific evidence exists to the

contrary, these provisions are shown as current.

No provision is made for proceedings which have been or might be brought by other parties against Group companies unless

management, taking into account professional advice received, assesses that it is more likely than not that such proceedings may

be successful. Contingent liabilities associated with such proceedings have been identified, but the Directors are of the opinion that

any associated claims that might be brought can be resisted successfully, and therefore the possibility of any material outflow in

settlement in excess of amounts provided is assessed as remote.

The timing of the utilisation of these amounts is uncertain as they are subject to commercial negotiation and legal process in

different jurisdictions. Where possible the Group has purchased insurance cover to protect itself from these exposures.

TT Electronics plc Annual Report and Accounts 2022 185

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

186 TT Electronics plc Annual Report and Accounts 2022

20 Borrowings and lease obligations

£million Maturity

Currency of

denomination

Current Non-current Total

At 31 December 2022

£147.4 million multi-currency revolving credit facility

2026 GBP 72.0

72.0

2026

USD 31.6

31.6

Unsecured loan note

2028 GBP 37.5

37.5

Unsecured loan note

2031 GBP 37.5

37.5

Overdrafts

3.7 –

3.7

Lease liabilities

4.4 18.7

23.1

Loan arrangement fee

–

(2.0)

Total

8.1 195.3

203.4

At 31 December 2021

£180 million multi-currency revolving credit facility 2023 GBP 52.0 52.0

2023 USD 21.4 21.4

Unsecured loan note 2028 GBP 37.5 37.5

Unsecured loan note 2031 GBP 37.5 37.5

Overdrafts 1.1 – 1.1

Lease liabilities 4.1 18.5 22.6

Loan arrangement fee – (1.3) (1.3)

Total 5.2 165.6 170.8

The Group’s primary source of finance is the £147.4 million committed revolving credit facility (RCF), and an uncommitted accordion

facility of £32.6 million, which was signed in June 2022 to replace the previously existing RCF. The Group's RCF is payable on a floating

rate basis above GBP SONIA, USD SOFR or EURIBOR depending on the currency of the loan and will mature in June 2026 with a one

year extension option which expires in May 2023. As at 31 December 2022, £103.6 million (31 December 2021: £73.4 million) of the

facility was drawn down. Arrangement fees with amortised cost of £2.0 million (2021: £1.3 million) have been netted off against

these borrowings.

The interest margin payable on the facility is based on the Group’s compliance with financial covenants, net debt/adjusted EBITDA

(bank covenant) and is payable on a floating basis above GBP SONIA, or USD SOFR depending on the currency of denomination of

the loan. On 4 January 2022 the Group transitioned away from GBP LIBOR to be replaced by GBP SONIA. There was no impact of

this transition.

In December 2021 the Group issued £75.0 million of unsecured loan notes with £37.5 million maturing in seven years and

£37.5 million maturing in 10 years respectively to a collection of three counterparties. The average interest rate on the loan

notes is 2.9 per cent.

Undrawn facilities

At 31 December 2022, the total lease liabilities and borrowing facilities available to the Group net of £2.0 million of loan

arrangement fees (2021: £1.3 million) amounted to £288.3 million (2021: £318.9 million). At 31 December 2022, the Group had

available £47.4 million (2021: £110.1 million) of undrawn committed borrowing facilities (comprising the main facility £43.8 million

(2020: £106.6 million) and China £3.6 million (2021: £3.5 million) and £41.2 million (2021: £38.0 million) of undrawn uncommitted

borrowing facilities, representing overdraft lines and the accordion facility.

In February 2023 £15.0 million of accordion was converted from uncommitted into committed facility extending the total

committed facilities available (including lease liabilities) to £262.1 million.

TT Electronics plc Annual Report and Accounts 2022186

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 187

21 Financial risk management

The main risks arising from the Group’s financial instruments are foreign exchange risk, interest rate risk, credit risk and liquidity

risk. These risks arise from exposures that occur in the normal course of business and are managed by the Group’s Treasury

department in close co-operation with the Group’s business divisions and operating companies, under the oversight of a Treasury

Committee which is chaired by the Chief Financial Officer. The responsibilities of the Group’s Treasury department include the

monitoring of financial risks, management of cash resources, debt and capital structure management, approval of counterparties

and relevant transaction limits, and oversight of all significant treasury activities undertaken by the Group. The Group Treasury

department operates as a service centre to the business divisions of the Group and not as a profit centre.

A Group Treasury policy has been approved by the Board of Directors and is periodically updated to reflect developments in the

financial markets and the financial exposure facing the Group.

The Group’s principal financial instruments comprise borrowings, cash and cash equivalents and derivatives used for risk

management purposes. The Group’s borrowings, surplus liquidity and derivative financial instruments are monitored and managed

centrally by the Group’s Treasury department.

The Group’s accounting policies with regard to financial instruments are detailed in note 2o.

a) Derivatives, other financial instruments and risk management

The Group uses derivative financial instruments to manage certain exposures to fluctuations in exchange rates and interest rates.

The Group does not hold any speculative financial instruments.

The Group is exposed to transactional and translation foreign exchange risk. Transactional foreign exchange risk arises from sales

or purchases by a Group company in a currency other than that company’s functional currency. Translational foreign exchange risk

arises on the translation of profits earned in overseas currencies into GBP and the translation of net assets denominated in

overseas currencies into GBP, the Group’s functional currency.

To mitigate transactional foreign exchange risk, wherever possible, Group companies enter into transactions in their functional

currencies with customers and suppliers. When this is not possible, hedging strategies are undertaken through the use of forward

currency contracts for up to two years ahead. The forward currency contracts have been designated as cash flow hedges and the

effective portion of the mark to market valuation of these derivatives at 31 December 2022 is taken to the hedging reserve within

equity. Currency basis spread that is not designated is taken to the income statement.

The Group have designated £31.6 million ($38.0 million) (2021: £21.4 million ($29.0 million)) of loans in a net investment hedge

of USD net assets. No ineffectiveness was recorded (2021: £nil) and a loss of £3.4 million (2021: £0.2 million loss) was taken

to the translation reserve. The amount accumulated in this reserve in respect of gains/losses arising on hedging instruments

designated in net investment hedges up to 31 December 2022 was an accumulated loss of £3.7 million (2021: accumulated loss

of £0.3 million).

The Group’s interest rate management policy is to maintain a balance between fixed and floating rates of interest on borrowings

and deposits, and to use interest rate derivatives when appropriate and pre-approved by the Treasury Committee. The interest rate

hedging instruments are floating to fixed rate interest rate swaps used to manage the Group’s interest cost.

At 31 December 2022, the Group had a net derivative financial liability of £0.5 million (2021: £2.6 million net asset).

TT Electronics plc Annual Report and Accounts 2022 187

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

188 TT Electronics plc Annual Report and Accounts 2022

21 Financial risk management continued

Foreign exchange (FX) hedges

Notional

Amount

(£m)

Average

Hedged Rate

Fair value

(£m)

Type of hedge

31 December 2022

USD:CNY

74.2

6.65 (1.6) CFH – Forward rate

USD:MXN

35.2 21.95 2.1

CFH – Forward rate

USD:GBP

31.5

1.07 (0.9) CFH – Forward rate

GBP:USD

20.1 1.26 0.6

CFH – Forward rate

EUR:GBP

17.0

0.87

(0.5) CFH – Forward rate

HKD:CNY

10.1

0.88 (0.1) CFH – Forward rate

USD:MYR

9.7

4.32 (0.1) CFH – Forward rate

CNY:GBP

6.8

8.57

(0.4) CFH – Forward rate

CNY:EUR

4.2

7.50 (0.1) CFH – Forward rate

GBP:EUR

1.9 1.15 –

CFH – Forward rate

GBP:SEK

1.3

12.02

(0.1) CFH – Forward rate

Total

212.0

(1.1)

31 December 2021

USD:CNY 65.6 6.70 3.0 CFH – Forward rate

USD:MXN 23.9 22.03 0.4 CFH – Forward rate

USD:GBP 23.3 1.35 (0.1) CFH – Forward rate

EUR:GBP 10.8 1.13 0.3 CFH – Forward rate

USD:MYR 8.6 4.17 – CFH – Forward rate

CNY:GBP 6.1 9.08 (0.3) CFH – Forward rate

GBP:USD 5.5 1.03 (0.1) CFH – Forward rate

CNY:EUR 3.4 7.89 (0.3) CFH – Forward rate

HKD:CNY 3.2 0.85 0.1 CFH – Forward rate

GBP:EUR 2.7 0.87 (0.1) CFH – Forward rate

GBP:SEK 2.6 11.63 (0.1) CFH – Forward rate

Other – – 0.1 CFH – Forward rate

Total 155.7 2.9

CFH is an abbreviation for cash flow hedge.

The most common exchange rate risk is the transaction risk the Group takes when it invoices a customer or purchases from

suppliers in a different currency to the underlying functional currency of the business. The Group policy is to review transactional

foreign exchange exposures and place contracts on a quarterly basis. To the extent the cash flows associated with a transactional

foreign exchange risk are committed the Group will hedge 100%. The notional values of the hedged transactions are disclosed in

the above table. The group’s policy is to hedge these transactions on a 1:1 ratio. Foreign currency basis spread of the derivative

item is not designated and is therefore recognised in the income statement. The potential sources of ineffectiveness are timing

of forecast transaction and credit risk. There was no hedge ineffectiveness incurred during the period.

The closing value of the hedging reserve in relation to FX hedges on 31 December 2022 was an accumulated loss of £1.1 million

(2021: accumulated gain of £2.6 million). The transactions that have been designated as the hedged item in a cash flow hedge

relationship are still considered highly probable forecasted transactions, during the year and at the year end 31 December 2022.

Hedges with a notional amount of £148.6 million (2021: £27.8 million) are due within 12 months with the remainder maturing within

24 months.

TT Electronics plc Annual Report and Accounts 2022188

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 189

21 Financial risk management continued

Interest rate swaps

Notional

amount

(£m)

Fair value

(£m)

Type of hedge

31 December 2022

GBP

19.0 0.6

CFH – SONIA

19.0 0.6

31 December 2021

USD 5.1 (0.1) CFH – IBOR

GBP 19.0 (0.2) CFH – IBOR

24.1 (0.3)

At the start of the year the Group was exposed to the following interest rate benchmarks within its hedge accounting relationships,

which are subject to interest rate benchmark reform: GBP LIBOR and USD LIBOR (“IBORs”). The hedged items are Sterling and

US Dollar floating rate debt (see note 20). On 4 January 2022 the Group transitioned away from GBP LIBOR to be replaced by

GBP SONIA. There was no impact of this transition. As part of the RCF refinance in June 2022 the Group transitioned away from

USD LIBOR to USD SOFR. There was no impact of this transition.

The Group hedges approximately 39% of the interest rate exposure of the Group. At 31 December 2022 the Group held interest rate

swap instruments to fix the cost of GBP SONIA on borrowings under the bank facility. Under the terms of the swaps on the bank

borrowings and excluding the bank margin, the Group will pay a weighted average fixed cost of approximately 1.5% until the swaps

terminate in November 2023.

The average cost of the debt for the Group is expected to be approximately 5.1% over the next 12 months. The interest rate swaps are

designated as cash flow hedges and were highly effective throughout 2022. The fair value of the contracts as at 31 December 2022

is disclosed in the table above. For the year ending 31 December 2022 an accumulated loss of £0.1 million (2021: accumulated loss

of £0.4 million) was reclassified from the cash flow hedge reserve and included in the income statement as part of finance costs.

A loss on the movement in fair value of the hedging instruments of £3.0 million (2021: gain of £0.3 million) was recognised within other

comprehensive income. The closing value of the hedging reserve in relation to interest rate swaps on 31 December 2022 was a credit

of £0.6 million (2021: debit of £0.3 million). Swaps with a notional value of £19.0 million will mature in November 2023.

No ineffectiveness was recognised through the income statement in 2022 (2021: £nil) or is expected to be recognised in

future periods.

TT Electronics plc Annual Report and Accounts 2022 189

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

190 TT Electronics plc Annual Report and Accounts 2022

21 Financial risk management continued

b) Foreign exchange risk

Trade receivables are denominated in the currencies in which the Group trades. The Group’s policy is that receivables and payables

not in the functional currency of the subsidiary concerned are, in the main, hedged through forward foreign currency exchange

contracts.

The Group’s exposure to foreign currency before the impact of hedging is shown below:

£million GBP USD Euro Other Total

31 December 2022

Trade and other receivables

– 23.8 1.9 0.6

26.3

Cash and cash equivalents

– 18.6 3.3 1.8

23.7

Borrowings – (32.7)

–

– (32.7)

Lease liabilities

– –

–

(1.6)

Trade and other payables

(0.7) (23.0) (1.3) (2.8)

(27.8)

Net Derivative financial instruments (1.8) 1.2

(0.1) (0.4)

(1.1)

Total

(2.5)

(12.1)

3.8

(2.4)

(13.2)

31 December 2021

Trade and other receivables 0.1 21.3 2.1 0.6 24.1

Cash and cash equivalents – 4.0 1.2 1.6 6.8

Borrowings – (21.4) – – (21.4)

Lease liabilities – – (0.1) (1.2) (1.3)

Trade and other payables (0.4) (19.5) (1.4) (2.9) (24.2)

Net Derivative financial instruments (0.1) (0.1) (0.3) 3.1 2.6

Total (0.4) (15.7) 1.5 1.2 (13.4)

A 10% strengthening of GBP against the following currencies at 31 December 2022 would have reduced loss after tax by the

amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. A 10%

weakening of GBP against the above currencies at 31 December 2022 would have had an equal but opposite effect on the above

currencies to the amount shown above, on the basis that all other variables remain constant.

£million 2022 2021

US dollar 1.8 0.6

Euro 0.4 0.2

A 10% strengthening of GBP against the following currencies at 31 December 2022 would have decreased equity by the amounts

shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The Group finances

operations by obtaining funding through external borrowings and, where they are in foreign currencies, these borrowings may be

designated as net investment hedges. This enables gains and losses arising on retranslation of these foreign currency borrowings

to be charged to other comprehensive income, providing a partial offset in equity against the gains and losses arising on translation

of the net assets of foreign operations. This has been considered in the analysis below.

£million 2022 2021

US dollar (3.0) (2.1)

Euro – –

10% weakening of GBP against the above currencies at 31 December 2022 would have had an equal but opposite effect on the

above currencies to the amount shown above, on the basis that all other variables remain constant.

TT Electronics plc Annual Report and Accounts 2022190

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 191

21 Financial risk management continued

c) Interest rate risk

The Group has financial assets and liabilities which are exposed to changes in market interest rates. Changes in interest rates

primarily impact borrowings by changing their future cash flows (floating rate debt) or their fair value (fixed rate debt) and deposits.

The Group’s objective is to manage this interest rate exposure through the use of interest rate derivatives.

The exposure of the Group’s financial assets and liabilities to interest rate risk is as follows:

£million

Floating

rate

Fixed

rate

Non-interest

bearing

2022

total

Financial assets

Trade and other receivables

– – 101.3

101.3

Cash and cash equivalents

19.4 – 45.6

65.0

Derivative financial instruments

0.6 – 3.3

3.9

Total financial assets

20.0 – 150.2

170.2

Financial liabilities

Borrowings

(88.3)

(94.0)

2.0 (180.3)

Lease liabilities – (23.1) – (23.1)

Trade and other payables

–

(135.1)

Derivative financial instruments

–

(4.4)

Total financial liabilities

(88.3) (117.1) (137.5)

(342.9)

£million

Floating

rate

Fixed

rate

Non-interest

bearing

2021

total

Financial assets

Trade and other receivables – – 74.9 74.9

Cash and cash equivalents 16.0 – 52.3 68.3

Derivative financial instruments – – 4.6 4.6

Total financial assets 16.0 – 131.8 147.8

Financial liabilities

Borrowings (50.4) (99.1) 1.3 (148.2)

Lease liabilities – (22.6) – (22.6)

Trade and other payables – – (111.9) (111.9)

Derivative financial instruments (0.3) – (1.7) (2.0)

Total financial liabilities (50.7) (121.7) (112.3) (284.7)

At 31 December 2022, 52% of borrowings was at a fixed rate when including the effect of derivatives (2021: 66%).

The interest charged on floating rate financial liabilities is based on the relevant benchmark rate (such as GBP SONIA). Interest on

financial instruments classified as fixed rate is fixed until the maturity of the instrument.

Considering the net debt position of the Group at 31 December 2022, any increase in interest rates would result in a net loss in the

consolidated income statement, and any decrease in interest rates would result in a net gain. The effect on loss after tax of a 1%

movement in interest rate, based on the year end floating rate borrowings, with all other variables held constant, is estimated to be

£0.6 million (2021: £0.3 million). The impact on equity would be materially the same.

TT Electronics plc Annual Report and Accounts 2022 191

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

192 TT Electronics plc Annual Report and Accounts 2022

21 Financial risk management continued

d) Credit risk

Exposure to credit risk arises as a result of transactions in the Group’s ordinary course of business and is applicable to all financial

assets. Investments in cash and cash equivalents and derivative financial instruments are with approved counterparty banks and

other financial institutions. Counterparties are assessed prior to, during, and after the conclusion of transactions to ensure exposure

to credit risk is limited to an acceptable level. The maximum exposure with respect to credit risk is represented by the carrying

amount of each financial asset on the balance sheet.

The Group’s major exposure to credit risk is in respect of trade receivables. Given the number and geographical spread of the

Group’s ultimate customers and the solvency of major trade debtors, credit risk is believed to be limited. The Group is not reliant on

any particular customer in the markets in which it operates and there is no significant concentration of credit risk. The Group

regularly monitors its exposure to bad debts in order to minimise this exposure.

The Group has strict procedures in place to manage the credit risk on trade receivables. Customer credit risk is managed by each

operating company within a division but is subject to Group oversight to ensure that each division’s customer credit risk management

system operates in a prudent and responsible manner. Credit evaluations are performed for all customers and credit limits are

established based on internal or external rating criteria. The credit quality of the Group’s significant customers is monitored on an

ongoing basis. Letters of credit or payments in advance are obtained where customer credit quality is not considered strong enough

for open credit. The Group operates the expected credit losses model when applying credit risk to receivables.

During the year there was a £0.4 million impairment of trade receivables as at 31 December 2022 (2021: £1.9 million) recognised

within admin expenses. The solvency of the debtor and their ability to repay the receivables were considered in assessing the

impairment of such assets.

(i) Risk for trade receivables by geographical regions

The maximum exposure to credit risk for trade receivables at 31 December by geographic areas was:

£million 2022 2021

Europe (including UK) 40.2 32.7

North America 35.3 26.7

Asia 25.4 13.2

Rest of the World 0.4 0.3

101.3 72.9

(ii) Impairment losses

The ageing of trade receivables at 31 December was:

£million Gross

2022

Impairment Gross

2021

Impairment

Not past due

90.1

– 66.0 (0.2)

Past due 1 – 60 days

9.9

–

6.6 –

Past due 61 – 120 days

1.1

– 0.3 (0.2)

More than 120 days 2.3 (2.1) 2.1 (1.7)

103.4 (2.1) 75.0 (2.1)

TT Electronics plc Annual Report and Accounts 2022192

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 193

21 Financial risk management continued

The movement in the provision for impairment in respect of trade receivables during the year was as follows:

£million 2022 2021

At 1 January 2.1 0.5

Released to income statement – (0.2)

Charged to income statement 0.4 1.9

Utilised (0.4) (0.1)

At 31 December 2.1 2.1

(iii) Credit risk related to other financial assets and cash deposits

Credit risk relating to the Group’s other financial assets, principally comprising cash and cash equivalents and derivative financial

instruments arises from the potential default of counterparties. Credit risk arising from balances with banks and financial

institutions is monitored by the Group’s Treasury department. The Group’s policy on investment of cash and deposits are to only

hold cash deposits with banks with a credit rating of investment grade and are reviewed on a regular basis to take account of

developments in financial markets. Currently the Group has 12 counterparties to which it has credit risk exposure. The credit risk of

the counterparties is between AA- and A- on the S&P’s long term credit risk scale. The same process is undergone for counterparts

with which the Group enters into hedging agreements. As such credit risk on these financial assets (cash and cash equivalents and

derivatives) is calculated as £nil.

The expected credit risk model was applied to other receivables as described in note 2o where the credit risk was deemed immaterial.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at

31 December was:

£million 2022 2021

Amounts owed by non-controlling interests – 2.0

Cash and cash equivalents 65.0 68.3

Derivative financial instruments 3.9 4.6

TT Electronics plc Annual Report and Accounts 2022 193

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

194 TT Electronics plc Annual Report and Accounts 2022

21 Financial risk management continued

e) Liquidity risk

The Group maintains a balance between availability of funding and maximising investment return on cash balances through the use

of short-term cash deposits, credit facilities and longer-term debt instruments. Management regularly reviews the funding

requirements of the Group.

The Group’s policy is to centrally manage debt and surplus cash balances.

At 31 December 2022, the Group had £47.4 million of undrawn committed borrowing facilities (2021: £110.1 million) and £41.2 million

(2021: £38.0 million) of undrawn uncommitted borrowing facilities.

Contractual cashflows of financial liabilities

The following are the contractual maturities of financial liabilities including contractual future interest payments and commitment fees:

£million

Carrying

value

Contractual

Cash Flows

demand

Under 3

months

3 to 12

months

1 to 2

years

2 to 3

years

3 to 4

years

4 to 5

years

Over 5

years

31 December 2022

Borrowings (excl overdrafts)

(176.6)

(208.9) –

(1.0) (5.5) (6.0) (6.0) (107.7) (2.2)

(80.5)

Overdrafts

(3.7) (3.7)

(3.7)

– – – – – –

–

Lease liabilities

(23.1)

(26.8) –

(1.2) (3.8) (4.8) (3.7) (3.2) (2.1)

(8.0)

Trade and other payables

(135.1)

(135.1) –

(131.8)

(3.3)

– – – –

–

Derivatives settled gross

(4.4)

(148.3)

–

(28.4) (75.8)

(44.1)

– – –

–

Interest rate swaps

0.6 – – – – – – – –

–

(342.3) (522.8) (3.7) (162.4) (88.4) (54.9) (9.7) (110.9) (4.3)

(88.5)

31 December 2021

Borrowings (excl overdrafts) (147.1) (172.0) – (0.7) (4.1) (77.9) (2.2) (2.2) (2.2) (82.7)

Overdrafts (1.1) (1.1) (1.1) – – – – – – –

Lease liabilities (22.6) (27.0) – (1.2) (3.2) (4.2) (3.4) (2.9) (2.7) (9.4)

Trade and other payables (111.9) (112.1) – (111.3) (0.6) (0.1) (0.1) – – –

Derivatives settled gross (1.7) (41.9) – (5.7) (22.1) (14.1) – – – –

Interest rate swaps (0.3) (1.1) – (0.2) (0.5) (0.5) – – – –

(284.7) (355.2) (1.1) (119.1) (30.5) (96.8) (5.7) (5.1) (4.9) (92.1)

f) Fair value of financial assets and liabilities

IFRS 13 “Fair Value Measurement” requires an analysis of those financial instruments that are measured at fair value at the end of

the year in a fair value hierarchy. In addition, IFRS 13 requires financial instruments not measured at fair value but for which fair

value is disclosed to be analysed in the same fair value hierarchy:

• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as

prices) or indirectly (i.e. derived from prices); and

• Level 3 – inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

TT Electronics plc Annual Report and Accounts 2022194

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 195

21 Financial risk management continued

Set out below is a comparison by class of the carrying amounts and fair value of the Group’s financial instruments that are carried

in the financial statements.

At 31 December 2022 At 31 December 2021

£million

Fair value

hierarchy

Carrying

value

Fair value

Carrying

value

Fair value

Held at amortised cost

Cash and cash equivalents n/a 65.0 65.0 68.3 68.3

Trade and other receivables n/a 101.3 101.3 74.9 74.9

Trade and other payables n/a (135.1) (135.1) (111.9) (111.9)

Borrowings (excluding unsecured loan notes) 2 (105.3) (105.3) (73.2) (73.2)

Unsecured loan notes 3 (75.0) (55.1) (75.0) (71.5)

Held at fair value

Derivative financial instruments (assets) 2 3.9 3.9 4.6 4.6

Derivative financial instruments (liabilities) 2 (4.4) (4.4) (2.0) (2.0)

Held at depreciated cost –

Investment properties 3 – 0.7 – 0.7

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a

current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were

used to estimate the fair values:

• cash and cash equivalents, trade and other receivables, trade and other payables approximate to their carrying amounts largely

due to the short-term maturities of these instruments;

• the fair value of borrowings is estimated by discounting future cash flows using rates currently available for debt and remaining

maturities.

• the fair value of derivative financial instrument assets (£3.9 million) and liabilities (£4.4 million) are estimated by discounting

expected future cash flows using current market indices such as yield curves and forward exchange rates over the remaining

term of the instrument (level 2); and

• the fair value of investment properties are based on market valuations obtained through third party valuations (level 3).

• The fair value of unsecured loan notes has been derived from available market data for borrowings of similar terms and

maturity period.

g) Capital management

The overriding objectives of the Group’s capital management policy are to safeguard and support the business as a going concern

through the business cycle and to maintain an optimal capital structure by reducing the Group’s overall cost of capital. The Board

considers equity shareholders’ funds as capital.

The Group maintains a balance between availability of funding and maximising investment return on cash balances through the

use of short-term cash deposits, credit facilities and longer term debt instruments, and management regularly reviews the funding

requirements of the Group.

Dividends are paid when the Board consider it appropriate to do so, taking into account the availability of funding. The Group has a

progressive dividend policy.

The Group has net debt of £138.4 million (2021: £102.5 million). Included within the debt facilities are certain financial covenants

related to IFRS (excluding IFRS 16 update, and after the application of other covenant defined adjustments) net debt divided by

adjusted EBITDA. Adjusted EBITDA is EBITDA adjusted to exclude the items not included within adjusted operating profit/net

finance charges for which compliance certificates are produced on a 12 month rolling basis every half year. All financial covenants

were fully complied with during the year and up to the date of approval of the financial statements.

TT Electronics plc Annual Report and Accounts 2022 195

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

196 TT Electronics plc Annual Report and Accounts 2022

22 Retirement benefit schemes

Defined contribution schemes

The Group operates 401(k) plans in North America and defined contribution arrangements in the rest of the world. The assets of

these schemes are held independently of the Group. The total contributions charged by the Group in respect of defined contribution

schemes were £3.2 million (2021: £3.0 million).

Defined benefit schemes

During the year the Group operated two defined benefit schemes in the UK (the TT Group (1993) Pension Scheme and the Southern

& Redfern Ltd Retirement Benefits Schemes) and overseas defined benefit schemes in the USA. These schemes are closed to new

members and the UK schemes are closed to future accrual.

In October 2022 the Trustees of the Southern & Redfern Ltd Retirement Benefits Scheme completed a buy-out of the scheme with a

leading insurer, securing the pensions of members for the future. As a result, the assets (£0.6 million) and liabilities (£0.6 million) of

the scheme have been derecognised. There was no impact on the income statement or OCI as a result of the buy-out.

The TT Group scheme commenced in 1993 and increased in size in 2006, 2007 and 2019 through the mergers of former UK

schemes following a number of acquisitions. The parent company is the sponsoring employer in the TT Group scheme. The TT

Group scheme is governed by TTG Pension Trustees Limited (the “Trustee”) that has control over the operation, funding and

investment strategy in consultation with the Group.

In November 2022, the Trustees of the TT Group Scheme entered into a bulk annuity insurance contract with an insurer in respect

of the liabilities of the defined benefit scheme. This type of deal is also known as a ‘buy-in’. The insurer, Legal & General, will pay into

the Scheme cash matching the benefits due to members. The Trustee is of the opinion that this investment decision is appropriate,

reduces the risks in the Scheme and provides additional security for the benefits due to members of the Scheme. The Trustee

continues to be responsible for running the Scheme and retains the legal obligation for the benefits provided under the Scheme.

As the buy-in policy is a qualifying insurance asset, the fair value of the insurance policy is deemed to be the present value of the

obligations that have been insured. The policy secured matches the benefits due to Scheme members under the Scheme's Trust

Deed and Rules.

Since the assets of the Scheme were greater than the premium required to secure the liabilities through the buy-in, the Scheme Is

in a net asset position at 31 December 2022 of £31.3 million. The buy-in has resulted in a re-measurement of the Scheme’s assets,

with a total re-measurement loss of £37.5 million recognised in the Group Statement of Comprehensive Income. A “true-up

premium/refund” may be payable to/from the insurer during 2023, subject to a data cleanse exercise to formally agree the final

benefits that are covered by the buy-in contract.

Prior to the buy-in, the TT Group scheme exposed the Group to a number of actuarial risks such as longevity risk, currency risk,

inflation risk, interest rate risk and market (investment) risk. The buy-in mitigates the majority of these risks and the principal risk

remaining is the credit risk associated with Legal & General, which is assessed to be very low. The Group is not exposed to any

unusual, entity specific or scheme specific risks, but given the material nature of the TT Group scheme, the Group has developed

a comprehensive strategy covering the following areas to manage the financial risk associated with it:

• Maintaining a long term working partnership with the Trustee to ensure strong governance of risks within the TT Group scheme.

The TT Group scheme is a long term undertaking and is managed accordingly, in order to provide security to members’ benefits

and value for money to the Group.

• Since 2023 the Group had in place financial hedging that aimed to remove the majority of interest rate and inflation related risks.

As the scheme funding has improved the level of hedging has been increased. Following the buy-in the Scheme’s financial and

demographic risks are now fully hedged by the insurer. There will be no material impact on the reported accounting position in future

of a change in interest rates, inflation, or a change in life expectancies, in relation to the Scheme’s liabilities and matching insurance

policy asset. However, a small amount of residual investment risk remains within the surplus assets held by the Trustee.

The Scheme’s investment strategy has been assessed as being low risk as the insured asset matches changes in the assessed

value of the Schemes liabilities due to changes in interest rates, inflationary expectations and longevity expectations. The buy-in

policy therefore matches the term and nature of the liabilities.

The Trustee does not currently hedge the longevity risk, although prudent assumptions are made regarding anticipated longevity for

the purposes of the statutory funding actuarial valuation.

TT Electronics plc Annual Report and Accounts 2022196

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 197

22 Retirement benefit schemes continued

The Trustee, in conjunction with the Group, has a duty to ensure that the TT Group scheme has an appropriate funding strategy in

place that meets any local statutory requirements. The objective, which has been negotiated and agreed between the Group and the

Trustee, is that the TT Group scheme should target and then maintain 100% funding on a basis that should ensure benefits can be

paid as they fall due. Any shortfall in the assets relative to the funding target will be financed over a period that ensures the

contributions are reasonably affordable to the Group.

The weighted average duration of the TT Group scheme defined benefit obligation is around 11 years.

UK legislation requires the Trustee to carry out a statutory funding valuation at least every three years and to target full funding

against a basis that prudently reflects the TT Group scheme’s risk exposure.

The last triennial valuation of the TT Group scheme as at April 2019 showed a net surplus of £0.3 million against the Trustee’s

statutory funding objective. As the scheme was fully funded at the 2019 triennial valuation date, there was no requirement for the

Company to pay pension contributions. In addition to the statutory funding objective, the Trustee and Company agreed to move

towards a ‘self-sufficiency’ funding target, under which once full funding is achieved the likelihood of the Trustee requiring

subsequent contributions from the Company is significantly reduced. To support the scheme’s long-term funding target of self-

sufficiency the Company agreed to pay additional fixed contributions of £5.7 million and £4.4 million in the years 2022 and 2023

respectively. Due to an improvement in the funding position and favourable insurer pricing during 2022 the Company and Trustee

began investigating in more detail the possibility of securing the Scheme’s liabilities under a buy-in policy. As a result of the plans

to secure the Scheme’s liabilities under the buy-in policy, the Trustees and Company agreed that there was no requirement for any

contributions falling due after 30 September 2022 to be paid to the Scheme after that date. The next triennial valuation of the

TT Group scheme, as at April 2022, is expected to be completed by July 2023 and will take account of the new buy-in policy held

by the Trustee.

In the year ended 31 December 2022 the Group made no funding contributions to the TT Group (1993) scheme or the Southern &

Redfern Ltd Retirement Benefits Schemes.

The Company has set aside £0.2 million to be utilised in agreement with the Trustee for reducing the long-term liabilities of the

TT Group scheme.

The Trustee and Company agreed that the Trustee should undertake an exercise during 2022, whereby deferred members were

offered an enhanced transfer value option. In the year ended 31 December 2022 a £11.8 million settlement cost was recognised

within items excluded from adjusted operating profit as a result of this exercise.

An actuarial valuation of the USA defined benefit schemes was carried out by independent qualified actuaries in 2022 using the

projected unit credit method. Pension scheme assets are stated at their market value at 31 December 2022.

An analysis of the pension surplus/(deficit) by scheme is shown below:

£million 2022 2021

TT Group (1993) 31.3 78.4

Southern & Redfern – –

USA schemes (2.9) (3.9)

Net surplus 28.4 74.5

Given the nature of the Group’s control of the TT Group under the Scheme rules, the Group considers that it has an unconditional

right to refund of surplus in the event of the Scheme’s wind-up. Based on these rights, any pension surpluses have been recognised

in full under IFRIC 14. The ongoing expenses of running the Scheme are now met from the remaining Scheme assets.

TT Electronics plc Annual Report and Accounts 2022 197

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

198 TT Electronics plc Annual Report and Accounts 2022

22 Retirement benefit schemes continued

The principal assumptions used for the purpose of the actuarial valuations for the Group’s primary defined benefit schemes

were as follows:

TT Group TT Group

% 2022 2021

Discount rate 5.00 1.80

Inflation rate (RPI) 3.30 3.60

Increases to pensions in payment (LPI 5% pension increases) 3.05 3.40

Increases to deferred pensions (CPI) 2.65 3.00

The mortality tables applied by the actuaries at 31 December 2022 for the TT Group (1993) Scheme were S2 tables with 105% (male)/

106% (female) weighting for pensioners and 108% (male)/105% (female) weighting for non-pensioners with a 1.5% long-term rate of

improvement in conjunction with the CMI 2021 projection model. The assumptions are equivalent to life expectancies as follows:

Current pensioner aged 65: 87 years (male), 89 years (female). Future retiree currently aged 45: 88 years (male), 91 years (female).

Risk and sensitivity

Following the buy-in, changes in actuarial assumptions will impact the liabilities and insured asset to the same extent, with no

overall impact on the net reporting position. A decrease in the discount rate by 0.1% per annum increases the liabilities and assets

by approximately £4 million. An increase by 0.1% per annum in the inflation rate increases the liabilities and assets by

approximately £2 million. An increase in the life expectancy of 1 year increases the liabilities and assets by approximately

£11 million.

The sensitivities above consider the impact of the single change shown, with the other assumptions unchanged. The inflation

sensitivities allow for the consequential impact on the relevant pension increase assumptions. The sensitivity analyses have been

determined based on a method that extrapolates the impact on the defined benefit obligation as a result of reasonable changes in

key assumptions occurring at the end of the reporting period.

The amounts recognised in respect of the pension surplus in the consolidated balance sheet are:

£million 2022 2021

Equities

UK Unquoted – 0.9

Overseas Quoted 4.8 4.8

Unquoted – 35.7

Government bonds

UK Fixed 15.4 149.2

Index-linked – 208.1

Overseas – 7.0

Corporate bonds 1.0 120.8

Cash and cash equivalents 14.0 37.1

Derivatives – 20.2

Insured assets 357.9 14.9

Other 3.7 53.2

Fair value of assets 396.8 651.9

Present value of defined benefit obligation (368.4) (577.4)

Net surplus recognised in the consolidated balance sheet 28.4 74.5

TT Electronics plc Annual Report and Accounts 2022198

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 199

22 Retirement benefit schemes continued

The schemes’ assets are unquoted unless otherwise stated and do not include the Group’s financial instruments, any property

occupied by, or other assets used by the Group. All of the funds included in the asset split are pooled investment vehicles for which

due diligence has been completed. We have classified all of the Scheme’s investments other than the cash held at the custodian,

government bonds and the exchange traded funds (ETFs) as unquoted assets.

Amounts recognised in the consolidated income statement are:

£million 2022 2021

Scheme administration costs (1.2) (1.7)

Net (loss)/gain on pension projects (excluded from adjusted operating profit) (13.8) 0.3

Net interest credit 2.1 0.9

Amounts recognised in the consolidated statement of comprehensive income are a loss of £35.9 million (2021: gain of £35.8 million)

which comprises of; the actual return on scheme assets excluding interest income, a loss of £215.5 million (2021: gain of £11.3 million)

and the remeasurement of the schemes obligations, a gain of £179.5 million (2021: £24.5 million).

Changes in the present value of the defined benefit obligation are:

£million 2022 2021

Defined benefit obligation at 1 January 577.4 618.2

Past service charge and settlements (20.3) (1.8)

Interest on obligation 11.9 9.6

Remeasurements:

Effect of changes in demographic assumptions (0.5) (1.2)

Effect of changes in financial assumptions (197.2) (13.2)

Effect of experience adjustments 18.2 (10.1)

Benefits paid (22.6) (24.2)

Exchange 1.5 0.1

Defined benefit obligation at 31 December 368.4 577.4

TT Group (1993) 357.9 564.7

Southern & Redfern – 0.9

USA schemes 10.5 11.8

368.4 577.4

TT Electronics plc Annual Report and Accounts 2022 199

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

200 TT Electronics plc Annual Report and Accounts 2022

22 Retirement benefit schemes continued

Changes in the fair value of the schemes’ assets are:

£million 2022 2021

Fair value of schemes’ assets at 1 January 651.9 648.7

Interest income on defined benefit scheme assets 14.0 10.5

Return on scheme assets, excluding interest income (215.4) 11.3

Contributions by employer 1.3 7.3

Pension scheme expenses (1.2) (1.7)

Settlements (32.1) –

Benefits paid (22.6) (24.2)

Exchange 0.9 –

Fair value of schemes’ assets at 31 December 396.8 651.9

23 Share capital

Share capital

£million 2022 2021

Issued and fully paid

176,486,627 (2021: 176,244,624) ordinary shares of 25p each 44.1 44.1

During the period the Company issued 242,003 ordinary shares as a result of share options being exercised under the Sharesave

scheme and Share Purchase plans.

The performance conditions of the Long-term Incentive Plan awards issued in 2019 and Restricted Share Plan awards issued in

2019, 2020 and 2021 were met and shares were allocated to award holders from existing shares held by an Employee Benefit Trust

for £nil consideration.

The aggregate consideration received for all share issues during the year was £382,814 which was represented by a £60,501 increase

in share capital and a £322,314 increase in share premium.

TT Electronics plc Annual Report and Accounts 2022200

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 201

24 Other reserves

£million

Share Based

Payment

Reserve

Employee

Benefit Trust

Share options

reserve

Hedging

Reserve

Merger

reserve

Total

At 1 January 2021 (3.1) (0.2) (3.3) 5.4 3.4 5.5

Share based payment charge 3.8 – 3.8 – – 3.8

Awards made to employees (0.2) 0.2 – – – –

Deferred tax on share based payments 0.5 – 0.5 – – 0.5

Issue of new shares – (0.3) (0.3) – – (0.3)

Loss on cash flow hedges taken to equity

less amounts taken to income statement

– – – (3.2) – (3.2)

Deferred tax on gain on cash flow hedges – – – 0.5 – 0.5

Other movement 0.3 – 0.3 – – 0.3

At 1 January 2022 1.3 (0.3) 1.0 2.7 3.4 7.1

Share based payment charge 4.8 – 4.8 – – 4.8

Awards made to employees (0.8) 0.4 (0.4) – – (0.4)

Deferred tax on share based payments (1.0) – (1.0) – – (1.0)

Funding of employee benefit trust – (0.5) (0.5) – – (0.5)

Loss on cash flow hedges taken to equity

less amounts recycled to income statement

– – – (2.9) – (2.9)

Deferred tax on movement in cash flow hedges – – – 0.2 – 0.2

Other movement – – – – – –

At 31 December 2022 4.3 (0.4) 3.9 – 3.4 7.3

25 Non-controlling interests

During the year RODCO limited, a subsidiary of TT Electronics Plc which is owned 60% by TT Electronics Plc and 40% Prysmian

Cables & Systems Limited (‘Prysmian’) received payment for a £5.0 million receivable due from TT Electronics Plc and Prysmian

in proportion to their shareholdings.

These funds received were subsequently returned to the shareholders as a dividend, with TT Electronics Plc receiving £3.0 million

and Prysmian receiving £2.0 million. The dividend paid to Prysmian eliminated the non-controlling interest in the opening balance

sheet for the Group.

Below is RODCO’s balance sheet for the year ended 31 December 2022.

£million 2022 2021

ASSETS

Current assets

Trade and other receivables – 5.0

Total assets – 5.0

EQUITY

Share capital – 5.0

Total equity – 5.0

Equity attributable to TT Electronics Plc – 3.0

Non-controlling Prysmian Cables & Systems Limited – 2.0

TT Electronics plc Annual Report and Accounts 2022 201

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

202 TT Electronics plc Annual Report and Accounts 2022

26 Share-based payment plans

The Company has the following share-based payment plans in operation at 31 December 2022:

• Long-term Incentive Plan (“LTIP”) for senior executives;

• Restricted Share Plan (“RSP”) for certain senior executives; and

• Sharesave plans for UK employees and a Share Purchase plan for US employees.

The LTIP and RSP schemes have been classified as equity settled schemes. The terms of the LTIP and RSP schemes state that the

Group has the right as to how to settle these awards and it is the Group’s intention to settle these with equity. At the date of vesting

the Group will settle the awards either with new issue shares or shares purchased on the market at an earlier point in time.

The Group offers the employees the option for the Group to settle the tax liability, which the employee would incur upon receipt of

the award, on behalf of the employee with the relevant tax authority. In this circumstance the Group may choose to pay, in cash, the

tax liability due on behalf of the employee to the tax authority and the employee would receive the remaining value of their award in

equity. In 2022 the Group paid £0.9 million to settle the employees’ tax liabilities (2021: £0.3 million). The Group estimates that the

future cashflows associated with the above would remain consistent in future years with the 2021 outflows. The Group also offers

the employee the option for the Group to sell the remaining shares on the employees’ behalf and to forward that cash to the

employee, although the Group is not compelled to do so no matter what the employee chooses. In 2022 £40.0 thousand was used

for these purposes (2021: £36.6 thousand). The Group estimates that the future cashflows associated with the above would remain

consistent in future years with the 2022 outflows. These arrangements do not change the assessment that the share-based

payments are equity settled.

The Sharesave scheme has also been classified as an equity settled scheme. The rules of this scheme state that the participant

must always be paid in equity and that neither party can request settlement in any other way.

a) Long-term Incentive Plans

Details of the LTIP awards outstanding during the year are as follows:

2022 2021

Number of

share awards

Number of

share awards

At 1 January 5,379,293 5,031,921

Granted 650,871 1,806,500

Forfeited (1,614,554) (1,246,053)

Exercised/Vested (457,321) (213,075)

At 31 December 3,958,289 5,379,293

Exercisable at 31 December – –

During 2022 grants of awards were made under the LTIP for the issue of shares in 2025. An award is a contingent right to receive

shares in the future, subject to continued employment and the achievement of predetermined performance criteria. The performance

targets attached to awards require the achievement of earnings per share (‘EPS’) and total shareholder return (‘TSR’) targets as detailed

in the Directors’ Remuneration Report on page 128.

On 14 March 2022 grants of awards were made under the LTIP for the issue of up to 650,871 shares in 2025.

On 16 March 2021 grants of awards were made under the LTIP for the issue of up to 1,763,817 shares in 2024.

On 1 October 2021 grants of awards were made under the LTIP for the issue of up to 42,683 shares in 2024.

The fair value of the shares was estimated at the grant date using a Monte Carlo simulation model, considering the terms and

conditions upon which the shares were granted. This model simulates the TSR and compares it against the group of comparator

companies. It considers historic dividends and share price fluctuations to predict the distribution of relative share price performance.

TT Electronics plc Annual Report and Accounts 2022202

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 203

26 Share-based payment plans continued

The following table lists the inputs to the model:

Grant date

Number of

awards

Fair value at

grant date

Share price at

grant date Exercise price

Expected

volatility

Vesting period

(years)

2022

14 March 2022 650,871 164.9p 202.5p £nil 37% 3.0

2021

16 March 2021 1,763,817 218.4p 256.0p £nil 39% 3.0

1 October 2021 42,683 215.8p 253.0p £nil 39% 3.0

The award of shares is not affected by the risk free rate of interest since no investment is required by the recipient, and therefore

no interest could be earned elsewhere. Expected volatility is based on historical share price movements.

During the year nil (16 March 2021: 48,070) notional ‘LTIP’ share awards were granted to senior executives which will ultimately

be settled in cash.

The performance conditions of the LTIP grants made in 2019 that reached the end of their performance periods in 2022 were

partially met and shares were allocated to award holders from existing shares held by an Employee Benefit Trust for £nil

consideration.

b) Restricted Share Plan

During the year the Group granted 1,219,914 shares (2021: 1,018,880) under the restricted plan. Awards are typically subject to

continuing employment with no other vesting criteria.

Details of the restricted share plan awards outstanding during the year are as follows:

2022 2021

Number of

share awards

Number of

share awards

At 1 January 2,193,182 1,485,970

Granted 1,219,914 1,018,880

Forfeited/Lapsed (476,619) (61,862)

Exercised/Vested (646,604) (249,806)

At 31 December 2,289,873 2,193,182

Exercisable at 31 December – –

During the year 59,874 (2021: 90,989) notional RSP share awards were granted to senior executives which will ultimately be settled

in cash.

The performance conditions of the RSP grants made in 2019 that reached the end of their performance periods in 2022 were partially

met and shares were allocated to award holders from existing shares held by an Employee Benefit Trust for £nil consideration.

TT Electronics plc Annual Report and Accounts 2022 203

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

204 TT Electronics plc Annual Report and Accounts 2022

26 Share-based payment plans continued

The following table lists the inputs to the model:

Grant date

Number of

awards

Fair value at

grant date

Share price at

grant date

Exercise

price

Expected

volatility

Vesting

period

(years)

Vesting

criteria

2022

10 January 2022

14,053 264.0p 264.0p £nil 37% 3.0

Note 1

14 March 2022

948,429 202.5p 202.5p £nil 37% 3.0

Note 1

14 March 2022

107,413 202.5p 202.5p £nil 37% 3.0

Note 1

6 June 2022

49,342 200.5p 200.5p £nil 37% 3.0

Note 1

20 June 2022

60,677 187.0p 187.0p £nil 37% 3.0

Note 1

21 November 2022

40,000 170.0p 170.0p £nil 37% 3.0

Note 1

Grant date

Number of

awards

Fair value at

grant date

Share price at

grant date

Exercise

price

Expected

volatility

Vesting

period (years)

Vesting

criteria

2021

21 January 2021 20,000 208.0p 208.0p £nil 39% 2.7 Note 1

3 February 2021 54,290 201.0p 201.0p £nil 39% 0.9 Note 2

5 February 2021 135,467 203.0p 203.0p £nil 39% 1.1 Note 2

16 March 2021 185,153 206.0p 206.0p £nil 39% 3.0 Note 1

16 March 2021 237,425 206.0p 206.0p £nil 39% 3.0 Note 1

18 August 2021 14,613 277.0p 277.0p £nil 39% 1.7 Note 1

24 September 2021 273,747 278.0p 278.0p £nil 39% 3.0 Note 1

1 October 2021 92,341 253.0p 253.0p £nil 39% 3.0 Note 1

1 November 2021 5,844 252.0p 252.0p £nil 39% 3.0 Note 1

Note 1 – these awards are subject to continuing employment with the Group.

Note 2 – these awards are subject to continuing employment with the Group as well as achievement of certain personal objectives.

TT Electronics plc Annual Report and Accounts 2022204

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 205

26 Share-based payment plans continued

c) Sharesave schemes

The Group operates a Sharesave scheme for participating employees in the UK under a three-year plan. Employees may purchase

the Group’s shares at a 20% discount to the market price on the day prior to the commencement of the offer up to a maximum

contribution value of £6,000 in any one year. Monthly contributions are saved with Lloyds Bank plc, via Equiniti Ltd, the Registrars, in

the employee’s share savings plan and will only be released to employees who remain in the Group’s employment for a period of

three years from commencement of the savings contract. Options become exercisable on completion of the three-year term or

within six months of leaving in certain circumstances. All Sharesave scheme awards are accounted for as equity settled.

Details of the save as you earn share plan awards outstanding during the year are as follows:

2022 2021

Number of

share awards

Number of

share awards

At 1 January 2,465,154 2,760,427

Granted 1,930,800 459,495

Forfeited (690,808) (384,156)

Exercised 44,730 (370,612)

At 31 December 3,749,876 2,465,154

Exercisable at 31 December 507,668 73,563

The fair value of the shares at grant date was as follows:

Date price set Market price Option price Fair value

Options

outstanding

30 August 2019 237.0p 190.0p 83.5p 480,798

30 August 2020 187.0p 151.0p 84.0p 1,033,266

7 September 2021 271.0p 226.0p 110.9p 329,713

6 September 2022 149.3p 119.5p 67.5p 1,906,099

pence 2022 2021

Fair value at grant date 67.5 110.9

The Group operates a Stock Purchase Plan for participating US employees. Under the plan employees may purchase the Group’s

shares at a 15% discount to the market price at the date of acquisition, up to a maximum of $6,500 per annum. Employees save

on a monthly basis and shares are purchased each quarter.

The total share-based payment charge for the year excluding a social security credit of £0.2 million (2021: £0.5 million charge)

arising from the above share scheme plans was £4.8 million (2021: £3.8 million).

TT Electronics plc Annual Report and Accounts 2022 205

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

206 TT Electronics plc Annual Report and Accounts 2022

27 Reconciliation of net cash flow to movement in net debt

Net cash of £61.3 million (2021: £67.2 million) comprises cash at bank and in hand of £65.0 million (2021: £68.3 million) and

overdrafts of £3.7 million (2021: £1.1 million).

£million Net cash Lease liabilities Borrowings Net debt

At 1 January 2021 69.0 (15.9) (137.0) (83.9)

Cash flow (2.8) – – (2.8)

Repayment of borrowings – – 86.9 86.9

Proceeds from borrowings – – (96.4) (96.4)

Payment of lease liabilities – 3.9 – 3.9

New leases – (10.8) – (10.8)

Amortisation of loan arrangement fees – – 0.2 0.2

Exchange differences 1.0 0.2 (0.8) 0.4

At 31 December 2021 67.2

(22.6) (147.1)

(102.5)

Cash flow (9.2)

–

– (9.2)

Businesses acquired – (0.2) – (0.2)

Repayment of borrowings

– – 149.3

149.3

Proceeds from borrowings

–

(174.3)

Payment of lease liabilities

– 4.3 –

4.3

New leases – (2.3)

–

(2.3)

Net movement in loan arrangement fees

– – 0.7

0.7

Exchange differences 3.3

(2.3) (5.2)

(4.2)

At 31 December 2022 61.3

(23.1) (176.6)

(138.4)

TT Electronics plc Annual Report and Accounts 2022206

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 207

28 Changes in liabilities arising from financing activities

£million Lease liabilities Borrowings

Interest rate

swaps

Liabilities

arising from

financing

activities

At 1 January 2021 (15.9) (137.0) (1.0) (153.9)

Cash movements

Cash flows 4.7 (6.7) 0.4 (1.6)

Non cash movements

Fair value movements – – 0.3 0.3

Interest accrued (0.8) (2.4) – (3.2)

Net movement in loan arrangement fees – (0.2) – (0.2)

New leases (10.8) – – (10.8)

Exchange differences 0.2 (0.8) – (0.6)

At 1 January 2022

(22.6) (147.1) (0.3)

(170.0)

Cash movements

Cash flows 5.1 (17.9) 0.1 (12.7)

Non cash movements

Fair value movements

– – 0.8

0.8

Business acquired (0.2)

–

– (0.2)

Interest accrued

(0.8)

(7.1) – (7.9)

Net movement in loan arrangement fees

– 0.7 –

0.7

New leases (2.3)

–

– (2.3)

Reassessment of lease liabilities

– – –

–

Exchange differences

(2.3)

(5.2)

– (7.5)

At 31 December 2022

(23.1)

(176.6) 0.6 (199.1)

TT Electronics plc Annual Report and Accounts 2022 207

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the Consolidated financial statements

continued

208 TT Electronics plc Annual Report and Accounts 2022

29 Contingent liabilities

The Group is subject to claims which arise in the ordinary course of business. Other than those for which provisions have been

made and included within note 19, the Directors consider the likelihood of any other claims giving rise to a significant liability to

be remote.

30 Capital commitments

£million 2022 2021

Contractual commitments for the purchase of property, plant and equipment 2.7 3.1

31 Leases

The total cash outflow for leases is £5.1 million (2021: £4.7 million) comprising lease repayments of £4.3 million (2021: £3.9 million),

interest on lease liabilities of £0.8 million (2021: £0.8 million).

Interest on lease liabilities is shown in note 5, the maturity of the lease liabilities is shown in note 21(e) and the corresponding

assets to which the lease liabilities relate are shown in note 12.

32 Related party transactions

Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

No related party transactions have taken place in 2022 or 2021 that have affected the financial position or performance of the Group.

Key management personnel and Directors’ emoluments are disclosed in note 11.

TT Electronics plc Annual Report and Accounts 2022208

FINANCIAL STATEMENTS

Company statement of financial position

at 31 December 2022

TT Electronics plc Annual Report and Accounts 2022 209

£million Note 2022 2021

Non current assets

Right-of-use assets 2 0.5 0.6

Property, plant and equipment 2 0.5 0.6

Intangible assets 2 0.9 1.6

Investments 3 126.4 174.2

Deferred tax asset 11 2.8 3.4

Pensions 10 31.3 78.4

Debtors 4 121.2 113.7

Total fixed assets 283.6 372.5

Current assets

Debtors 4 20.5 14.4

Cash at bank and in hand 13 0.5 2.3

Total current assets 21.0 16.7

Current liabilities

Lease liabilities 6 0.2 0.2

Creditors: amounts falling due within one year 5 9.0 9.0

Total current liabilities 9.2 9.2

Net current assets 11.8 7.5

Non current liabilities

Lease liabilities 6 0.5 0.6

Deferred tax liability 11 11.0 19.6

Total non current liabilities 11.5 20.2

Net assets 283.9 359.8

Capital and reserves

Called up share capital 7 44.1 44.1

Share premium account 7 22.9 22.6

Share options reserve 8 3.9 1.0

Merger reserve 3.4 3.4

Profit and loss account 9 209.6 288.7

Shareholders’ funds 283.9 359.8

The Company reported a loss for the financial year ended 31 December 2022 of £38.2 million (2021: profit of £53.1 million).

Approved by the Board of Directors on 7 March 2023 and signed on their behalf by:

Richard Tyson Mark Hoad

Director Director

TT Electronics plc Annual Report and Accounts 2022 209

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Company statement of changes in equity

at 31 December 2022

210 TT Electronics plc Annual Report and Accounts 2022

£million

capital

premium

Merger

reserve

Share options

reserve

Profit and loss

account

Total

At 1 January 2021 43.6 21.7 3.4 (3.3) 223.5 288.9

Profit for the year – – – – 53.1 53.1

Other comprehensive income

Remeasurement of defined benefit

pension schemes

– – – – 34.8 34.8

Tax on remeasurement of defined

benefit pension schemes – – – – (11.3) (11.3)

Total comprehensive income – – – – 76.6 76.6

Transactions with owners recorded

directly in equity

Dividends paid by the Company – – – – (11.4) (11.4)

Share-based payments – – – 3.8 – 3.8

Deferred tax on share-based

payments – – – 0.5 – 0.5

New shares issued 0.5 0.9 – – – 1.4

At 31 December 2021

44.1 22.6 3.4 1.0 288.7

359.8

Loss for the year

– – –

–

(38.2)

Other comprehensive income

Remeasurement of defined benefit

pension schemes

– – –

–

(37.5)

Tax on remeasurement of defined

benefit pension schemes

– – – – 6.8

6.8

Total comprehensive expense

– – –

–

(68.9)

Transactions with owners recorded

directly in equity

Dividends paid by the Company

– – –

–

(10.2)

Share-based payments

– – – 4.8 –

4.8

Deferred tax on share-based

payments

– –

–

(1.0) – (1.0)

Other movements

– –

– (0.9) – (0.9)

New shares issued

– 0.3 – – –

0.3

At 31 December 2022

44.1 22.9 3.4 3.9 209.6

283.9

TT Electronics plc Annual Report and Accounts 2022210

FINANCIAL STATEMENTS

Notes to the Company financial statements

TT Electronics plc Annual Report and Accounts 2022 211

1 Significant accounting policies

a) Basis of preparation

The financial statements of TT Electronics plc (the “Company”) were prepared in accordance with Financial Reporting Standard 101

Reduced Disclosure Framework (“FRS 101”).

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of

International Financial Reporting Standards, but makes amendments where necessary in order to comply with Companies Act 2006

and has set out below where advantage of the FRS 101 disclosure exemptions has been taken.

In these financial statements, the Company has applied the exemptions available under FRS 101 in respect of the following disclosures:

• a cash flow statement and related notes;

• disclosures in respect of transactions with wholly owned subsidiaries;

• disclosures in respect of capital management;

• the effects of new but not yet effective IFRSs;

• disclosures in respect of the compensation of key management personnel;

• comparable movement tables for tangible and intangible fixed assets; and

• disclosures in respect of leases

The accounting policies set out in note 2 of the Consolidated financial statements have, unless otherwise stated, been applied in the

preparation of the Company financial statements.

Change in accounting policy

There have been no changes to accounting policies during the year. Adoption of new and amendments to published standards and

interpretations effective for the Group for the year ended 31 December 2022 did not have any impact on the financial position or

performance of the Group.

b) Estimation uncertainty

During the year there were no judgements made by the Directors, in the application of the adopted accounting policies, deemed

to have a significant effect on the financial statements nor were there any estimates deemed to carry a significant risk of material

adjustment in the next year.

Details of the Directors’ assessment of the Company’s ability to continue in operational existence for at least twelve months from

the date of signing these financial statements are shown in note 1 of the Consolidated financial statements and in the Governance

and Directors’ Report on page 89.

c) Investments

Fixed asset investments in subsidiaries are carried at cost less provision for impairment.

d) Own shares held by Employee Benefit Trust

Transactions of the Company-sponsored Employee Benefit Trust are treated as being those of the Company and are therefore

reflected in the Company’s financial statements. In particular, the Trust’s purchases of shares in the Company are debited directly

to equity.

TT Electronics plc Annual Report and Accounts 2022 211

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the company financial statements

continued

212 TT Electronics plc Annual Report and Accounts 2022

2 Non Current Assets

£million

Intangible

Assets

Plant,

equipment and

vehicles

Right-of-use

assets

Cost

At 1 January 2022 19.4 1.2 1.2

Disposals (1.6) – –

Additions 0.2 – –

At 31 December 2022

18.0 1.2

1.2

Depreciation

At 1 January 2022 17.8 0.6 0.6

Disposals (1.6) – –

Depreciation charge 0.9 0.1 0.1

At 31 December 2022

17.1 0.7

0.7

Net book value

At 31 December 2022

0.9 0.5

0.5

At 31 December 2021 1.6 0.6 0.6

Intangible assets solely relate to software, within this balance is software which is under construction of £0.4 million.

Disposals in the year relate to redundant intangible assets which held a carrying value of £nil at the start of the year.

3 Investments

£million Subsidiary undertakings

Cost

At 1 January 2022 253.0

Disposals (1.0)

At 31 December 2022 252.0

Provisions

At 1 January 2022 78.8

Impairment 46.8

At 31 December 2022 125.6

Net book value

At 31 December 2022 126.4

At 31 December 2021 174.2

During the year an impairment of £46.8 million was recognised to reduce the investment in IoT Solutions UK Limited to its carrying

value of £nil (2021: £46.8 million). The significant assumptions in determining the impairment are the future cash flows and the

discount rate. A 10% improvement in future cashflows would have reduced the impairment by £2.6 million and a 10% worsening

of the cashflows would have increased the impairment by £nil. An increase in the discount rate by 1.0% would have increased the

impairment by £nil and a 1.0% reduction in the discount rate would have decreased the impairment by £4.0 million.

During the year RODCO limited, a subsidiary of TT Electronics Plc which was owned 60% by TT Electronics Plc and 40% Prysmian

Cables & Systems Limited (‘Prysmian’) received payment for a £5.0 million receivable due from TT Electronics Plc and Prysmian

in proportion to their shareholdings.

These funds received were subsequently returned to the shareholders as a dividend with TT Electronics Plc receiving £3.0 million

and Prysmian receiving £2.0 million. The investment in RODCO, with a carrying value of £1.0m as at 31 December 2021 was

eliminated as part of this transaction. The value of the dividend received over and above the value of the investment disposed

of was £2.0 million and recognised within the profit and loss statement.

The Company’s subsidiary undertakings and their locations are shown in note 14. Shareholdings are held indirectly for all principal

operating subsidiary undertakings.

TT Electronics plc Annual Report and Accounts 2022212

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 213

4 Debtors

£million 2022 2021

Current debtors

Amounts owed by subsidiary undertakings 19.4 13.3

Prepayments, accrued income and other receivables 1.1 1.1

Amounts due within one year 20.5 14.4

Non Current debtors

Amounts owed by subsidiary undertakings 121.2 113.7

Amounts due later than one year 121.2 113.7

Total 141.7 128.1

‘Amounts owed by subsidiary undertakings’ have been considered for impairment using the 12 months expected credit loss model

because there was no change in credit risk since initial recognition. The expected credit loss is considered immaterial because the

probability of default is negligible.

As at 31 December 2022 £121.2 million (2021: £113.7 million) of debtors have been classified as non current due to management’s

expectation that these will not be settled within 12 months.

5 Creditors

£million 2022 2021

Amounts falling due within one year

Trade creditors 2.0 2.1

Amounts owed to subsidiary undertakings 1.4 1.3

Taxation and social security 1.4 0.9

Accruals and deferred income 4.2 4.7

9.0 9.0

TT Electronics plc Annual Report and Accounts 2022 213

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the company financial statements

continued

214 TT Electronics plc Annual Report and Accounts 2022

6 Lease obligations

£million

Current lease

liabilities

Non-current

lease liabilities

Total

At 31 December 2021 0.2 0.6 0.8

Capital repayments – (0.1) (0.1)

At 31 December 2022

0.2 0.5

0.7

7 Share capital

£million 2022 2021

Issued, called up and fully paid

176,486,627 (2021: 176,244,624) ordinary shares of 25p each 44.1 44.1

During the period the Company issued 242,003 ordinary shares as a result of share options being exercised under the Sharesave

scheme and Share Purchase plans.

The performance conditions of the Long-term Incentive Plan awards issued in 2019 and Restricted Share Plan awards issued in

2019, 2020 and 2021 were met and shares were allocated to award holders from existing shares held by an Employee Benefit Trust

for £nil consideration.

The aggregate consideration received for all share issues during the year was £382,814 which was represented by a £60,501

increase in share capital and a £322,314 increase in share premium.

8 Share-based payments

Details of share-based payments are shown in note 26 of the Consolidated financial statements. Any charge associated with share-

based payments made to employees of subsidiaries are recharged out to the relevant subsidiaries within the same financial year.

9 Profit for the year

As permitted by Section 408 of the Companies Act 2006, the Company has elected not to present its profit and loss account for the

year. The loss after tax of the Company for the year was £38.2 million (2021: profit of £53.1 million). The auditor’s remuneration for

audit services is disclosed in note 6 to the Consolidated financial statements.

TT Electronics plc Annual Report and Accounts 2022214

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 215

10 Pension schemes

Defined benefit scheme

In November 2022, the Trustees of the TT Group Scheme entered into a bulk annuity insurance contract with an insurer in respect

of the liabilities of the defined benefit scheme. This type of deal is also known as a ‘buy-in’. The insurer, Legal & General, will pay into

the Scheme cash matching the benefits due to members. The Trustee is of the opinion that this investment decision is appropriate,

reduces the risks in the Scheme and provides additional security for the benefits due to members of the Scheme. The Trustee

continues to be responsible for running the Scheme and retains the legal obligation for the benefits provided under the Scheme.

As the buy-in policy is a qualifying insurance asset, the fair value of the insurance policy is deemed to be the present value of the

obligations that have been insured. The policy secured matches the benefits due to Scheme members under the Scheme's Trust

Deed and Rules.

Since the assets of the Scheme were greater than the premium required to secure the liabilities through the buy-in, the Scheme is

in a net asset position at 31 December 2022 of £31.3 million. The buy-in has resulted in a re-measurement of the Scheme’s assets,

with a total re-measurement loss of £37.5 million recognised in the Company Statement of Changes in Equity. A “true-up

premium/refund” may be payable to/from the insurer during 2023, subject to a data cleanse exercise to formally agree the final

benefits that are covered by the buy-in contract.

The last triennial valuation of the TT Group scheme as at April 2019 showed a net surplus of £0.3 million against the Trustee’s

statutory funding objective. As the scheme was fully funded at the 2019 triennial valuation date, there is no requirement for the

Company to pay pension contributions. In addition to the statutory funding objective, the Trustee and Company agreed to move

towards a ‘self-sufficiency’ funding target, under which once full funding is achieved the likelihood of the Trustee requiring

subsequent contributions from the Company is significantly reduced. To support the scheme’s long-term funding target of self-

sufficiency the Company agreed to pay additional fixed contributions of £5.7 million and £4.4 million in the years 2022 and 2023

respectively. As a result of the completed buy-in policy, the Trustees and Company agreed that there was no requirement for any

contributions falling due after 30 September 2022 to be paid to the Scheme. The next triennial valuation of the TT Group scheme,

as at December 2022, is expected to be completed by July 2023 and will take account of the new buy-in policy held by the Trustee.

The Group has set aside £0.2 million (2021: £0.6 million) under a legal agreement to be utilised in agreement with the Trustee for

reducing liabilities of the pension scheme.

The Trustee and Company agreed that the Trustee should undertake an exercise during 2022, whereby deferred members were

offered an enhanced transfer value option. In the year ended 31 December 2022 a £11.8 million settlement cost was recognised

as a result of this exercise.

Defined contribution scheme

The Company operates a Group personal pension plan for employees and pays contributions to administered pension insurance

plans. The Company has no further payment obligation once the contributions have been paid. Payments to the defined

contribution scheme are charged as an expense as they are incurred. The total contributions charged by the Company including

employee salary exchange contributions in respect of the year ended 31 December 2022 were £0.5 million (2021: £0.6 million).

11 Deferred tax

The deferred tax asset of £2.8 million comprises £0.7 million asset in respect of share-based payments (2021: £1.8 million asset)

the movement in which has been recognised in equity (£1.0 million) and profit (£0.1 million); £1.4 million in respect of non-current

assets (2021: £1.1 million asset) the movement in which has been recognised in profit (£0.3 million); and £0.7 million in respect of

tax losses (2021: £0.5 million) the movement in which has been recognised in profit (£0.2 million).

The deferred tax liability of £11.0 million is in respect of the pension asset (2021: £19.6 million liability), the movement in which has

been recognised in equity (£6.8 million) and profit (£2.8 million).

12 Employee information

The average number of full time equivalent employees (including Directors) during the year was 78.

13 Related party transactions

During 2022 and 2021, the Company did not have any related party transactions other than with wholly owned subsidiaries.

TT Electronics plc Annual Report and Accounts 2022 215

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the company financial statements

continued

216 TT Electronics plc Annual Report and Accounts 2022

14 Subsidiary undertakings

The following entities are 100% owned with only ordinary shares in issue, unless otherwise stated. The country of incorporation

matches the country in which the registered office/principal place of business is located.

Name of subsidiary undertaking

Registered office/principal

place of business

Dongguan Arlec Electrical Products Co. Limited (capital contribution) (1)

Shanghai Hongbian Electronics Co. Limited (capital contribution) (2)

TT Electronics Integrated Manufacturing Services (Suzhou) Co., Ltd (3)

Ying Si Ke Electrical Products Co. Limited (capital contribution) (1)

TT Electronics SAS (4)

TT Electronics GmbH (5)

Stadium Asia Limited (6)

STMC Limited (6)

TT Electronics Srl (7)

BI Technologies Corporation SDN BHD (ordinary and preference shares) (8)

BI Technologies S.A. de C.V. (9)

Optron de Mexico S.A. de C.V. (10)

TT Electronics Asia Pte Ltd (11)

TT Electronics Sweden AB (12)

AB Connectors Limited (13)

AB Electronic Components Limited (14)

Abtest Limited

(15)

Aero Stanrew Group Limited (ordinary and preference shares)

1,2

(16)

Aero Stanrew Limited (16)

Automotive Electronic Systems Limited

(14)

BI Technologies Limited

(14)

Commendshaw Limited

(14)

Controls Direct Limited

(14)

Crystalate Electronics Limited (14)

Dale Electric International Limited

1, 2

(14)

Deltight Washers Limited

(14)

Ferrus Power Limited

(14)

Fox Industries Limited

(14)

Hale End Holdings Limited

(14)

Kingslo Limited

(14)

KRP Power Source (UK) Limited

(14)

Linton and Hirst Group Limited

(14)

Midland Electronics Limited (14)

MMG Linton and Hirst Limited

(14)

Nulectrohms Limited

(14)

Rodco Limited (60% owned)

1,2

(14)

Roxspur Measurement & Control Limited (14)

Semelab Limited

(14)

Sensit Limited

(14)

Stadium Electrical Holdings Limited

(14)

Stadium Electronics Limited

(14)

Stadium IGT Limited (14)

Stadium Power Limited

(14)

TT Electronics plc Annual Report and Accounts 2022216

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 217

14 Subsidiary undertakings continued

Name of subsidiary undertaking

Registered office/principal

place of business

Stadium United Wireless Limited

(14)

Stadium Wireless Devices Limited

(14)

Stadium Zirkon UK Limited

(14)

Stontronics Limited

(14)

The Brearley Group Limited

(14)

TT Asia Holdings Limited (14)

TT Automotive Electronics Limited

(14)

TT Electronics Europe Limited

1,2

(14)

TT Electronics Fairford Limited (17)

TT Electronics Group Holdings Limited

(14)

TT Electronics Holdco Limited (14)

TT Electronics Integrated Manufacturing Services Limited (15)

TT Electronics IoT Solutions Limited

(14)

TT Electronics Power Solutions (UK) Limited (14)

TT Group Limited

(14)

TT Power Solutions Limited

(14)

TTE Trustees Limited

1,2

(14)

TTG Investments Limited

(14)

TTG Nominees Limited

1,2

(14)

TTG Pension Trustees Limited

1,2

(14)

TTG Properties Limited

(14)

Valuegolden Limited

(14)

Welwyn Components Limited (18)

Welwyn Electronics Limited

(14)

Wolsey Comcare Limited

(14)

Zirkon Holdings Limited

(14)

AB Interconnect, Inc. (19)

Apsco Holdings, Inc (19)

BI Technologies Corporation (19)

Cletronics N.A. Inc, (20)

International Resistive Company Inc (19)

International Resistive Company of Texas, LLC (21)

Optek Technology Inc (19)

Power Partners, Inc (22)

Precision, Inc (23)

Torotel, Inc (24)

Torotel Products, Inc (24)

TT Electronics Integrated Manufacturing Services, Inc (25)

TT Electronics Power Solutions (US), Inc (20)

TT Group Industries, Inc. (19)

TT Electronics plc Annual Report and Accounts 2022 217

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Notes to the company financial statements

continued

218 TT Electronics plc Annual Report and Accounts 2022

14 Subsidiary undertakings continued

(1) 4

Building, F Zone, Zheng Wei Science Park, Dongkeng Town, Dongguan City, Guangdong, China

(2) Room 404-A69, East of Building 1, 29 Jia Tai Road, China (Shanghai) Pilot Free Trade Zone, China

(3) 158-24 Hua Shan Road, Snd Suzhou, 215129, China

(4) 4 place Louis Armand, 75012 Paris, France

(5) Max-Lehner-Strasse 31, 85354, Freising, Germany

(6) Unit A, 3/F, Bamboos Centre, 52 Hung To Road, Kwun Tong, Kowloon, Hong Kong

(7) Via Santa Redegonda N. 11, Milano, Italy

(8) Lot 6.05, Level 6, KPMG tower, 8 First Avenue, Bandar Utama 47800 Petaling Jaya, Selangor, Darul Ehsan, Malaysia

(9) Ave Circulo de la Amistad No.102, Parque Industrial Mexicali IV, Mexico

(10) Ave Rio Bravo 1551-a, Parque Industrial Rio Bravo, CD. Juarez Chihuahua, Mexico

(11) 2 Shenton Way, #18-01 SGX Centre 1, 068804, Singapore

(12) Gullfossgatan 3, 164 40 Kista, Sweden

(13) Abercynon, Mountain Ash, Rhondda Cynon Taff, CF45 4SF, Wales

(14) Fourth Floor, St Andrews House, West Street, Woking, Surrey, GU21 6EB, England

(15) Unit 1, Tregwilym Industrial Estate, Rogerstone, Newport, Gwent, NP10 9YA, Wales

(16) Unit 1 Gratton Way, Roundswell Business Park, Barnstaple, Devon, EX31 3AR, England

(17) London Road, Fairford, Gloucestershire, GL7 4DS, England

(18) Welwyn Electronics Park, Bedlington, Northumberland, NE22 7AA, England

(19) Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, United States

(20) CT Corporation System, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801, United States

(21) Corporation Service Company, 211 East 7

Street, Suite 620, Austin, TX 78701-3218, United States

(22) 155 Northboro Road, Suite #9, Southborough, MA 01772, USA

(23) 1700 Freeway Boulevard, Minneapolis, MN 55430, United States

(24) 520 N Rogers Road, Olathe, KS66062, United States

(25) CT Corporation System, 4400 Easton Commons Way, Suite 125, Columbus, OH43219, United States

1 Shares held directly by TT Electronics plc

2 Dormant UK subsidiary

UK Registered Subsidiaries exempt from audit

The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for

the year ended 31 December 2022. The following entities are 100% owned and have a single class of ordinary share with a nominal

value of £1, unless otherwise stated. All subsidiaries below are registered at Fourth floor, St Andrews House, West Street, Woking

GU21 6EB, United Kingdom.

Name of subsidiary undertaking Company number

AB Electronic Components Limited 00578077

Automotive Electronic Systems Limited

01518303

Crystalate Electronics Limited 00691591

Midland Electronics Limited 00675333

TT Asia Holdings Limited 02464046

TT Electronics Group Holdings Limited

1,2

00299275

1 Shares held directly by TT Electronics plc

2 Single class of ordinary share with a nominal value of £0.25.

TT Electronics plc Annual Report and Accounts 2022218

FINANCIAL STATEMENTS

Five year record

TT Electronics plc Annual Report and Accounts 2022 219

£million (unless otherwise stated) 2022 2021 2020 2019

2,3

2018

Revenue 617.0 476.2 431.8 478.2 429.5

Operating profit (3.4) 19.3 6.6 16.9 16.5

Adjusted operating profit

47.1 34.8 27.5 38.1 33.4

Profit before taxation

(10.1) 16.0 2.9 13.2 14.6

Adjusted profit before taxation

1,2

40.4 31.5 23.8 34.4 31.5

Earnings (continuing)

(13.2) 12.8 1.3 12.4 13.0

Adjusted earnings

1,2

32.0 25.3 19.5 29.0 26.2

Earnings per share – continuing (pence)

(7.5) 7.3 0.8 76.0 8.0

Adjusted earnings per share (pence)

1,2

18.2 14.5 11.7 17.8 16.2

Dividends – paid and proposed

11.1 9.9 8.2 11.4 10.5

Dividend per share – paid and proposed (pence)

6.3 5.6 4.7 7.0 6.5

Average number of shares in issue 175.8 174.8 166.5 163.1 161.8

Net (debt)/funds (138.4) (102.5) (83.9) (69.1) (41.7)

Total equity

2,3

297.0 330.0 298.0 268.0 280.1

1 Adjusted operating profit, profit before taxation, adjusted earnings and adjusted earnings per share exclude the impact of restructuring costs, asset impairments and acquisition

and disposal related costs.

2 Results for 2017 have been re-presented for IFRS 15

3 Profit measures for 2019 and equity for 2019 and 2018 have been restated.

4 Equity for 2019 has been restated for an adjustment to the assessment of IFRS15.

5 2022 shows the cashflows/value of the proposed 2022 dividend. 2021 and before shows the cashflows/value of the actual dividends relating to that particular year.

TT Electronics plc Annual Report and Accounts 2022 219

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Reconciliation of KPIs and non IFRS measures

continued

220 TT Electronics plc Annual Report and Accounts 2022

In accordance with the Guidelines on APMs issued by the European Securities and Markets Authority (ESMA), additional

information is provided on the APMs used by the Group below.

To assist with the understanding of earnings trends, the Group has included within its financial statements APMs adjusted operating

profit and other adjusted profit measures. The APMs used are not defined terms under IFRS and therefore may not be comparable to

similar measures used by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

Management uses adjusted measures to assess the operating performance of the Group, having adjusted for specific items

as detailed in note 7. They form the basis of internal management accounts and are used for decision making, including capital

allocation, with a subset also forming the basis of internal incentive arrangements. By using adjusted measures in segmental

reporting, this enables readers of the financial statements to recognise how incentive performance is targeted. Adjusted measures

are also presented in this announcement because the Directors believe they provide additional useful information to shareholders

on comparable trends over time. Finally, this presentation allows for separate disclosure and specific narrative to be included

concerning the adjusting items; this helps to ensure performance in any one year can be more clearly understood by the user

of the financial statements.

Income statement measures:

Alternative

Performance

Measure

Closest equivalent

statutory measure

Note reference to

reconciliation to

statutory measure Definition and purpose

Adjusted

operating

profit

Operating profit Adjusting items as

disclosed in note 7

Adjusted operating profit has been defined as operating profit from

continuing operations excluding the impacts of significant

restructuring programmes, significant one-off items including

property disposals, impairment charges significant in nature and/or

value, business acquisition, integration, and divestment related

activity; and the amortisation of intangible assets recognised on

acquisition. Acquisition and disposal related items include the

writing off of the pre-acquisition profit element of inventory written

up on acquisition, other direct costs associated with business

combinations and adjustments to contingent consideration related

to acquired businesses. Restructuring includes significant changes

in footprint (including movement of production facilities) and

significant costs of management changes.

To provide a measure of the operating profits excluding the impacts

of significant items such as restructuring or acquisition related activity

and other items such as amortisation of intangibles which may not be

present in peer companies which have grown organically.

Adjusted

operating

margin

Operating profit

margin

Adjusting items as

disclosed in note 7

Adjusted operating profit as a percentage of revenue.

To provide a measure of the operating profits excluding the impacts

of significant items such as restructuring or acquisition related activity

and other items such as amortisation of intangibles which may not be

present in peer companies which have grown organically.

Adjusted

earnings

per share

Earnings per share

See note 10 for the

reconciliation and

calculation of

adjusted earnings

per share

The profit for the year attributable to the owners of the Group

adjusted to exclude the items not included within adjusted operating

profit divided by the weighted average number of shares in issue

during the year.

To provide a measure of Earnings per Share excluding the impacts

of significant items such as restructuring or acquisition related

activity and other items such as amortisation of intangibles which

may not be present in peer companies which have grown

organically.

TT Electronics plc Annual Report and Accounts 2022220

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 221

Income statement measures continued:

Alternative

Performance

Measure

Closest equivalent

statutory measure

Note reference to

reconciliation to

statutory measure

Definition and purpose

Adjusted

diluted

earnings

per share

Diluted earnings

per share

See note 10 for the

reconciliation and

calculation of

adjusted diluted

earnings per share

The profit for the year attributable to the owners of the Group adjusted

to exclude the items not included within adjusted operating profit

divided by the weighted average number of shares in issue during the

year, adjusted for the effects of any potentially dilutive options.

To provide a measure of Earnings per Share excluding the impacts of

significant items such as restructuring or acquisition related activity

and other items such as amortisation of intangibles which may not be

present in peer companies which have grown organically.

Organic

revenue

Revenue See note APM 1

This is the percentage change in revenue from continuing

operations in the current year compared to the prior year, excluding

the effects of currency movements, acquisitions and disposals. This

measures the underlying growth or decline of the business.

To provide a comparable view of the revenue growth of the

business from period to period excluding acquisition and foreign

exchange impacts.

Adjusted

effective tax

charge

Effective tax charge See note APM 2 Tax charge adjusted to exclude tax on items not included within

adjusted operating profit divided by adjusted profit before tax, which

is also adjusted to exclude the items not included within adjusted

operating profit.

To provide a tax rate which excludes the impact of adjusting items

such as restructuring or acquisition related activity and other items

such as amortisation of intangibles which may not be present in

peer companies which have grown organically.

Return on

invested

capital

None See note APM 3 Adjusted operating profit for the year divided by average invested

capital for the year. Average invested capital excludes pensions,

provisions, tax balances, derivative financial assets and liabilities,

cash and borrowings and is calculated at average rates taking

twelve monthly balances.

This measures how efficiently assets are utilised to generate returns

with the target of exceeding the cost to hold the assets.

TT Electronics plc Annual Report and Accounts 2022 221

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Reconciliation of KPIs and non IFRS measures

continued

222 TT Electronics plc Annual Report and Accounts 2022

Statement of financial position measures:

Alternative

Performance

Measure

Closest equivalent

statutory measure

Note reference to

reconciliation to

statutory measure

Definition and purpose

Net debt Cash and cash

equivalents less

borrowings and lease

liabilities

Reconciliation of

net cash flow to

movement in net

debt (note 27)

Net debt comprises cash and cash equivalents and borrowings

including lease liabilities.

This is additional information provided which may be helpful

to the user in understanding the liquidity and financial structure

of the business.

Leverage (bank

covenant)

Cash and cash

equivalents less

borrowings

N/A

Leverage is the net debt defined as per the banking covenants

(net debt (excluding lease liabilities) adjusted for certain terms

as per the bank covenants) divided by EBITDA excluding items

removed from adjusted profit and further adjusted for certain

terms as per the bank covenants.

Provides additional information over the Group’s financial

covenants to assist with assessing solvency and liquidity.

Net capital and

development

expenditure

(net capex)

None See note APM 4 Purchase of property, plant and equipment net of government

grants (excluding property disposals), purchase of intangibles

(excluding acquisition intangibles) and capitalised development.

A measure of the Group’s investments in capex and

development to support longer term growth.

Dividend per

Dividend per share Not applicable Amounts payable by dividend in terms of pence per share.

Provides the dividend return per share to shareholders.

TT Electronics plc Annual Report and Accounts 2022222

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 223

Statement of cash flows measures:

Alternative

Performance

Measure

Closest equivalent

statutory measure

Note reference to

reconciliation to

statutory measure

Definition and purpose

Adjusted

operating

cash flow

Operating cash flow See note APM 5 Adjusted operating profit, excluding depreciation of property, plant

and equipment (depreciation of right-of-use assets is not excluded)

and amortisation of intangible assets (amortisation of acquisition

intangibles is not excluded) less working capital and other non-

cash movements.

An additional measure to help understand the Group’s operating

cash generation.

Adjusted

operating

cash flow

post capex

Operating cash flow See note APM 6

Adjusted operating cash flow less net capital and development

expenditure.

An additional measure to help understand the Group’s operating

cash generation after the deduction of capex.

Working

capital

cashflow

Cashflow –

inventories payables,

provisions and

receivables

See note APM 7 Working capital comprises of three statutory cashflow figures:

(increase)/decrease in inventories, increase/(decrease) in payables

and provisions, and (increase)/decrease in receivables.

To provide users a measure of how effectively the group is

managing its working capital and the resultant impact on liquidity.

Free cash

flow

Net increase/

decrease in cash

and cash

equivalents

See note APM 8 Free cash flow represents cash generated from trading after all

costs including restructuring, pension contributions, tax and interest

payments. Cashflows to settle share based payment schemes

are excluded.

Free cash flow provides a measure of how successful the company

is in creating cash during the period which is then able to be used by

the Group at its discretion.

Cash

conversion

None See note APM 9

Adjusted operating cash flow post capex (less any property

disposals which were part of restructuring programmes) divided by

adjusted operating profit.

Cash conversion measures how effectively we convert profit into

cash and tracks the management of our working capital and

capital expenditure.

R&D cash

spend as a

percentage of

revenue

None See note APM 10 R&D cash spend and R&D investment as a percentage of revenue

excludes Global Manufacturing Solutions which is a manufacturing

services business and therefore has no R&D.

To provide a measure of the company’s expenditure on R&D relative

to its overall size which may be helpful in considering the Group’s

longer term investment in future product pipeline.

TT Electronics plc Annual Report and Accounts 2022 223

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Reconciliation of KPIs and non IFRS measures

continued

224 TT Electronics plc Annual Report and Accounts 2022

Non-financial measures:

Alternative

Performance

Measure

Closest equivalent

statutory measure

Note reference to

reconciliation to

statutory measure

Definition

Employee

engagement

Not applicable Not applicable We use our employee survey to measure how our employees feel

about working in TT using a scale of 1 (low) to 7 (high) against eight

factors (as surveyed by Best Companies Ltd). A company is awarded

between zero and three stars based on the employee feedback.

Provides a measure of employee sentiment and engagement.

Safety

performance

Not applicable Not applicable

Safety performance is defined as the number of occupational

injuries resulting in three or more days’ absence per 1,000

employees. This KPI allows us to compare our performance with

that of our peers. We use a UK benchmark published by the Health

and Safety Executive and apply this to all our facilities worldwide,

reflecting our commitment to raising standards globally.

Provides users additional information about the Group’s

commitment and achievements in the area of health and safety.

APM 1 – Organic revenue:

£million

Power and

Connectivity

Global

Manufacturing

Solutions

Sensors and

Specialist

Components Total

2022 revenue 154.2 323.0 139.8 617.0

Acquisitions 7.9 – – 7.9

2022 revenue (excluding acquisitions) 146.3 323.0 139.8 609.1

2021 revenue 140.2 220.1 115.9 476.2

Foreign exchange impact 7.2 15.4 8.9 31.5

2021 revenue at 2022 exchange rates 147.4 235.5 124.8 507.7

Organic revenue increase (%) (1%)

37% 12%

20%

£million

Power and

Connectivity

Global

Manufacturing

Solutions

Sensors and

Specialist

Components Total

2021 revenue 140.2 220.1 115.9 476.2

Acquisitions 15.2 – – 15.2

2021 revenue (excluding acquisitions) 125.0 220.1 115.9 461.0

2020 revenue 125.1 197.5 109.2 431.8

Foreign exchange impact (3.4) (4.1) (5.2) (12.7)

2020 revenue at 2021 exchange rates 121.7 193.4 104.0 419.1

Organic revenue increase (%) 3% 14% 11% 10%

TT Electronics plc Annual Report and Accounts 2022224

FINANCIAL STATEMENTS

TT Electronics plc Annual Report and Accounts 2022 225

APM 2 – Effective tax charge:

£million 2022 2021

Adjusted operating profit 47.1 34.8

Net interest (6.7) (3.3)

Adjusted profit before tax 40.4 31.5

Adjusted tax (8.4) (6.2)

Adjusted effective tax rate 20.8% 19.6%

APM 3 – Return on invested capital:

£million 2022 2021

Adjusted operating profit 47.1 34.8

Average invested capital 448.6 382.4

Return on invested capital 10.5% 9.1%

APM 4 – Net capital and development expenditure (net capex):

£million 2022 2021

Purchase of property, plant and equipment (11.4) (14.6)

Proceeds from sale of investment property, plant and equipment and capital grants received 0.3 9.3

Capitalised development expenditure (2.3) (1.9)

Purchase of other intangibles (0.6) (0.5)

Net capital and development expenditure (14.0) (7.7)

APM 5 – Adjusted operating cash flow:

£million 2022 2021

Adjusted operating profit 47.1 34.8

Adjustments for:

Depreciation 13.9 13.6

Amortisation of intangible assets 2.2 2.5

Share based payment expense 4.8 3.8

Other items 0.5 1.1

Increase in inventories (40.4) (42.6)

Increase in receivables (26.3) (15.7)

Increase in payables and provisions 27.9 42.0

Adjusted operating cash flow 29.7 39.5

Special payments to pension funds – (5.5)

Restructuring and acquisition related costs (11.1) (15.0)

Net cash generated from operations 18.6 19.0

Net income taxes paid (5.9) (4.7)

Net cash flow from operating activities 12.7 14.3

TT Electronics plc Annual Report and Accounts 2022 225

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

Reconciliation of KPIs and non IFRS measures

continued

226 TT Electronics plc Annual Report and Accounts 2022

APM 6 – Adjusted operating cash flow post capex:

£million 2022 2021

Adjusted operating cash flow 29.7 39.5

Purchase of property, plant and equipment (11.4) (14.6)

Proceeds from sale of property, plant and equipment and government grants received 0.3 9.3

Capitalised development expenditure (2.3) (1.9)

Purchase of other intangibles (0.6) (0.5)

Adjusted operating cash flow post capex 15.7 31.8

APM 7 – Working capital cashflow:

£million 2022 2021

Increase in inventories (40.4) (42.6)

Increase in receivables (26.3) (15.7)

Increase in payables and provisions 27.9 42.0

Items reported within other items in the statutory cashflow:

Increase in provisions over trade receivables – 1.6

Working capital cashflow (38.8) (14.7)

APM 8 – Free cash flow:

£million 2022 2021

Net cash flow from operating activities 12.7 14.3

Net cash flow from investing activities (22.3) (8.2)

Add back: Acquisition of business 8.3 0.5

Payment of lease liabilities (4.3) (3.9)

Interest paid (7.5) (4.0)

Free cash flow (13.1) (1.3)

APM 9 – Cash conversion:

£million 2022 2021

Adjusted operating profit 47.1 34.8

Adjusted operating cash flow post capex 15.7 31.8

Exclude: Property disposal proceeds as part of restructuring programmes – (9.1)

Adjusted operating cash flow post capex and excluding property disposals 15.7 22.7

Cash conversion 33% 65%

APM 10 – R&D cash spend as a percentage of revenue:

£million 2022 2021

Revenue (excluding GMS) 294.0 256.1

R&D cash spend 11.0 11.4

R&D cash spend as a percentage of revenue 3.7% 4.5%

TT Electronics plc Annual Report and Accounts 2022226

FINANCIAL STATEMENTS

SHAREHOLDER

INFORMATION

Ex-dividend date for final dividend

27 April 2023

Record date for final dividend

28 April 2023

AGM and trading update

9 May 2023

Final dividend payment

26 May 2023

2022 half-year results

3 August 2023

Preliminary announcement

of 2023 results

March 2024

Annual Report 2023

April 2024

DIVIDENDS

See page 32 for details on the dividend

amount per share.

ANNUAL GENERAL MEETING

(AGM)

The next AGM will be held on 9 May

2023 at 4.00 p.m. Details of the AGM

procedure for 2023 are set out in detail

in the enclosed Notice of Annual General

Meeting.

ARTICLES OF ASSOCIATION

The Company’s Articles of Association

may only be amended by special

resolution approved at a general meeting

of the shareholders.

SHARE CAPITAL

The Company’s issued share capital

comprises a single class of share capital

divided into ordinary shares of 25 pence

each. All issued shares are fully paid. The

share capital during the year is shown

in Note 23 to the consolidated financial

statements. The rights and obligations

attaching to the Company’s ordinary

shares are set out in the Company’s

Articles of Association, a copy of which

can be obtained from Companies House

in the United Kingdom or by writing to the

Group General Counsel and Company

Secretary. Subject to applicable statutes,

shares may be issued with such rights

and restrictions as the Company may

decide by ordinary resolution, or (if there

is no such resolution or so far as it does

not make specific provision) as the Board

maydecide.

Holders of ordinary shares are entitled

to speak at general meetings of the

Company, to appoint one or more proxies

and, if they are corporations, to appoint

corporate representatives and to exercise

voting rights. Holders of ordinary shares

may also receive a dividend, and on a

liquidation may share in the assets of

the Company. In addition, holders of

ordinary shares are entitled to receive the

Company’s Annual Report and Accounts.

Subject tomeeting certain thresholds,

holders of ordinary shares may require

a general meeting of the Company to

be held or the proposal of resolutions

atAnnual General Meetings.

VOTING RIGHTS AND

RESTRICTIONS ON TRANSFER

OF SHARES

On a show of hands at a general meeting

of the Company, every holder of ordinary

shares present in person or by proxy,

and entitled to vote, has one vote and on

a poll, every member present in person

or by proxy, and entitled to vote, has one

vote for every ordinary share held. You

can find further details regarding voting

at the Annual General Meeting in the

Notice of the Annual General Meeting

which accompanies this document.

None of the ordinary shares carries any

special rights with regard to control of

the Company. Electronic and paper proxy

appointments and voting instructions

must be received by the Company’s

Registrars not later than 48 hours before

a general meeting. A shareholder can

lose their entitlement to vote at a general

meeting where that shareholder has

been served with a disclosure notice

and has failed to provide the Company

with information concerning interests in

those shares. The Directors may refuse

to register a transfer of a certificated

share which is not fully paid, provided

the refusal does not prevent dealings in

shares in the Company from taking place

on an open and proper basis.

The Directors may also refuse to register

a transfer of a certificated share unless

the instrument of transfer: (i) is lodged,

duly stamped (if stampable), at the

registered office of the Company or any

other place decided by the Directors

accompanied by the certificate for the

share to which it relates and/or such

other evidence as the Directors may

reasonably require to show the right of

the transferor to make the transfer; (ii)

is in respect of only one class of shares;

(iii) is in favour of a person who is not a

minor, bankrupt or a person in respect

TT Electronics plc Annual Report and Accounts 2022 227

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

ofwhom an order has been made on the

grounds that such person is suffering

from a mental disorder or is otherwise

incapable of managing their affairs;

or (iv) is in favour of not more than

fourtransferees.

Transfers of uncertificated shares must

be carried out using CREST and the

Directors can refuse to register a transfer

of an uncertificated share in accordance

with the regulations governing the

operation of CREST.

The Directors may decide to suspend

the registration of transfers for up to

30 days a year, by closing the register

of shareholders. The Directors cannot

suspend the registration of transfers

of any uncertificated shares without

obtaining consent from CREST.

There are no other restrictions on

the transfer of ordinary shares in the

Company except: certain restrictions

may from time to time be imposed

by laws and regulations (for example,

insider trading laws or the Market Abuse

Regulations 2015); pursuant to the

Company’s share dealing code whereby

the Directors and certain employees

of the Group require approval to deal

in the Company’s shares; and where a

shareholder with at least a 0.25 per cent

interest in the Company’s certificated

shares has been served with a disclosure

notice and has failed to provide the

Company with information concerning

interests in those shares.

The Company is not aware of any

agreements between shareholders that

may result in restrictions on the transfer

of ordinary shares or on voting rights.

SHARE DEALING SERVICES

Shareview Dealing is a telephone and

internet service provided by Equiniti.

It offers a simple and convenient way

of buying and selling TT Electronics

plcshares.

Log on to www.shareview.co.uk/dealing

or call 03456 037 037 between 8.00 a.m.

and 4.30 p.m., Monday to Friday (except

bank holidays), for more information

about this service and for details of the

rates and charges. Please note that

telephone lines remain open until 6.00

p.m. for enquiries.

A daily postal dealing service is also

available and a form, together with

terms and conditions, can be obtained

by calling 0371 384 2248*. Commission

is 1.90 per cent with a minimum charge

of£70.

SHAREGIFT

ShareGift is a charity share donation

scheme for shareholders, administered

by The Orr Mackintosh Foundation.

Itis especially for those who may wish

to dispose of a small parcel of shares

whose value makes it uneconomical

to sell on a commission basis. Further

information can be obtained at

www.sharegift.org or from Equiniti.

MULTIPLE ACCOUNTS ON THE

SHAREHOLDER REGISTER

If you have received two or more copies

of this document, this means that there

is more than one account in your name

on the shareholder register. This may be

caused by either your name or address

appearing on each account in a slightly

different way. For security reasons,

the Registrars will not amalgamate the

accounts without your written consent.

If you would like any multiple accounts

combined into one account, please write

to Equiniti Limited at the address given

on this page.

SUBSTANTIAL SHAREHOLDING

NOTIFICATIONS

The Company had been notified of the

following voting rights attaching to TT

Electronics plc shares in accordance with

the Disclosure and Transparency Rules

at 6 March 2023 and 31 December 2022.

So far as has been ascertained, no

other person or corporation holds or is

beneficially interested in any substantial

part of the share capital of the Company.

SHAREHOLDER ENQUIRIES

Equiniti maintains the register of

members of the Company. If you

have any queries concerning your

shareholding, or if any of your details

change, please contact the Registrars:

Equiniti Limited

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

Telephone 0371 384 2396* (or +44 121

415 7047 if calling from outside the

United Kingdom)

Equiniti also offers a range of

shareholder information on-line at www.

shareview.co.uk

WEBSITE

Information on the Group’s financial

performance, activities and share price

isavailable at www.ttelectronics.com

* Lines are open from 8.30 a.m. to 5.30 p.m., Monday to

Friday (except bank holidays).

6 March 2023 31 December 2022

Number % Number %

BlackRock, Inc 16,966,544 9.7 16,966,544 9.7

Aberforth Partners LLP 14,832,779 9.1 14,832,779 9.1

FIL Limited 9, 037,5 71 5.1 9,0 37,571 5.1

Bennbridge Limited 8,984,103 4.9 8,984,103 5.1

Schroders plc 8,942,311 5.1 8,942,311 5.1

Slater Investments Ltd 8,915,000 5.1 8,915,000 5.1

M&G plc 8,764,166 5.0 8,764,166 5.0

Polar Capital LLP 8,539,130 4.9 8,539,130 4.9

Aberdeen Asset Management Ltd 7,835,07 7 4.8 7,8 35,077 4.8

NN Group N.V. 7,815,000 4.8 7,815,000 4.8

Franklin Templeton Management Ltd 7,590,000 4.6 7,590,000 4.6

TT Electronics plc Annual Report and Accounts 2022228

GLOSSARY

Alternating Current AC

Annual General Meeting AGM

Alternative Performance Measure APM

A TT employee performance initiative BE Inspired

Department for Business, Energy & Industrial Strategy BEIS

Basis point bps

Command, Control, Communications, Computers,

Integration, Surveillance and Reconnaissance C4ISR

Compound annual growth rate CAGR

Carbon Disclosure Project CDP

Chief Operating Officer COO

Chief Executive Officer CEO

Chief Financial Officer CFO

Cash Generating Unit CGU

Consumer Prices Index CPI

Certificateless Registry for Electronic Share Transfer CREST

Defined Benefit DB

Direct Current DC

Digital Flight Control System DFCS

Deferred Share Benefit Plan DSBP

Employee Assistance Programme EAP

Earnings Before Interest, Taxes, Depreciation

and Amortisation EBITDA

Employee Benefit Trust EBT

Equality, Diversity and Inclusion ED&I

Electronics Industry Citizenship Coalition EICC

Executive Leadership Team ELT

Electro-Magnetic EM

Earnings Per Share EPS

Enterprise Resource Planning ERP

Environmental, Social and Governance ESG

European Union EU

Fair, Balanced and Understandable FBU

Financial Conduct Authority FCA

Financial Reporting Council FRC

Financial Reporting Standards FRS

Financial Times Stock Exchange FTSE

Foreign Exchange FX

Financial Year FY

Generally Accepted Accounting Principles GAAP

Pounds Sterling (£) GBP

Gross Domestic Product GDP

Greenhouse Gas GHG

Global Manufacturing Solutions GMS

Global Positioning System GPS

Health and safety H&S

Half (year) H

Human Resources HR

Health Safety & Environmental HSE

International Accounting Standards IAS

International Accounting Standards Board IASB

International Financial Reporting Standards IFRS

Internet of Things IoT

Intellectual Property IP

Investor Relations IR

International Organisation for Standardisation ISO

Information Technology IT

Key Performance Indicator KPI

Light Emitting Diode LED

London Interbank Offered Rate LIBOR

Limited liability partnership LLP

Long-Term Incentive LTI

Long-Term Incentive Plan LTIP

Mergers and Acquisitions M&A

Million M/m

Magnetic Resonance Imaging MRI

Morgan Stanley Capital International MSCI

Megawatt-hour MWh

Non-Executive Director NED

Net Promoter Score NPS

Organisation for Economic Co-operation

and Development OECD

Original Equipment Manufacturer OEM

Power & Connectivity P&C

Profit Before Tax PBT

Printed Circuit Board Assembly PCBA

Public Limited Company PLC

Purchasing Managers’ Index PMI

The TT Remuneration Policy Policy

Private Placement PP

People, Social, Environmental and Ethics PSEE

Quarter (year) Q

Questions & Answers Q&A

Research and Development R&D

Responsible Business Alliance RBA

Revolving Credit Facility RCF

Chinese Yuan RMB

Regulatory News Service RNS

Return On Capital Employed ROCE

Return on Invested Capital ROIC

Retail Price Index RPI

Restricted Share Plan RSP

Sensors & Specialist Components S&SC

Save As You Earn SAYE

Science Based Targets initiative SBTi

Streamlined Energy and Carbon Reporting SECR

Senior Independent Director SID

Sales, Inventory and Operations Planning SIOP

Senior Leadership Team SLT

Short-Term Incentive Plan STIP

Science, Technology, Engineering and Mathematics STEM

Size, Weight, Power and Cost SWaP-C

Tonne t

Task Force on Climate-related Financial Disclosures TFCD

The Board of Directors of TT Electronics plc the Board

UK Corporate Governance Code the Code

TT Electronics plc the Company

The Directors of TT Electronics plc the Directors

TT Electronics plc and its subsidiaries the Group

Total Shareholder Return TSR

TT Electronics plc TT

TT’s values TT Way

United Kingdom of Great Britain and Northern Ireland UK

United Nations UN

Underlying Earnings Before Interest,

Taxes, Depreciation and Amortisation Underlying EBITDA

United States of America US/USA

Weighted Average Cost of Capital WACC

TT Electronics plc Annual Report and Accounts 2022 229

FINANCIAL STATEMENTSGOVERNANCE & DIRECTORS’ REPORTSTRATEGIC REPORT ADDITIONAL INFORMATION

TT Electronics plc Annual Report and Accounts 2022230

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the printer are registered to the Environmental Management System ISO14001 and are

Forest Stewardship Council

(FSC

) chain-of custody certified.

The Forest Stewardship Council

is dedicated to the promotion of responsible forest

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This Report is recyclable and Bio-degradable’

TT Electronics plc

Fourth Floor

St Andrews House

West Street

Woking

Surrey

GU21 6EB

Tel +44(0) 1932 825300

Fax +44(0) 1932 836450

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our business please visit