annu al repor t 2002
tt electr onics plc
tt electr onics plc  annu al repor t 2002
tt electronics plc
clive house
1218 queens road
weybridge
surrey kt13 9xb
tel 44 0 1932 841310
fax 44 0 1932 836450
wwwttelectronicscom
tomorrow’s technology contents
highlights and ﬁnancial information 1
chairman’s statement 2
group overview 4
chief executive’s review 6
financial review 14
directors and company secretary 16
directors’ report 17
directors’ remuneration report 21
report of the independent auditors 25
consolidated proﬁt and loss account 26
consolidated balance sheet 27
consolidated cash ﬂow statement 28
statement of total recognised gains and losses 29
reconciliation of movements in shareholders’ funds 29
company balance sheet 30
accounting policies 31
notes to the ﬁnancial statements 33
historical record 53
financial calendar 53
notice of meeting 54
principal operating subsidiaries 56
advisors and registered ofﬁce 56
designed and produced by linnett associates printed by ctd capita limited tt electronics plc annual report 2002 1


Summary:
 6 tt electronics plc annual report 2002
chief executive ’s review
overview
our investment over the years in new
electronic products for the automotive
industry has ensured continued growth 
in this market during the year contrasting
with the very depressed demand from the
telecom market which failed to make any
recovery throughout the year
our strategy over this period and which
will remain for the foreseeable future has
been to continue to invest both in product
development and capital expenditure to
service the group’s marketplaces and in
particular the automotive sector as well 
as other markets we are developing such
as medical and aerospace where sales
growth can be increased with an acceptable
return on capital employed a tight control
on costs including headcount reductions 
sheridan comonte
chief executive
our investment over the years in new electronic products for the automotive industry
has ensured continued growth in this market over the last 18 months we have done
much to reduce headcount and costs merged and relocated more of our manufacturing
to low labour cost areas to reduce unit costs and increased our efforts to develop new
markets we feel conﬁdent that we have the right organisation and skills to maximise
future opportunities in our various markets
2002 marked the third factory expansion of our german operation since it joined
the group this new facility includes a clean room for the production of specialised
customer speciﬁc components
the chassis height sensor is manufactured at this location using fully automated
production lines
factory expansion tt electronics plc annual report 2002 7
of a further 8 per cent during the year and
factory mergers have been undertaken
where there is exposure to depressed
markets such as telecom and computers
this strategy has ensured that the group
has continued to be cash generative with
a strong balance sheet and is well positioned
to take advantage of market opportunities
when the world economies recover
the group’s businesses
the group develops sells and manufactures
a range of electronic electromechanical
and electrical products using our core
technologies our customers include many
of the major worldwide original equipment
manufacturers tier 1 automotive system
suppliers electronic manufacturing services
companies specialist distributors in the
automotive industry telecom computer
and general industrial businesses including
aerospace medical and utilities
whilst a united kingdom based plc
tt electronics is an international business
with factories and technical sales operations
in 18 countries which enables us to service
our global customers’ needs at cost
competitive prices a central part of the
group’s philosophy is to develop a lasting
relationship with selected customers as the
majority of the products sold are customer
speciﬁc rather than standard
manufacturing
we are a global manufacturing company
and have developed a considerable
expertise by utilising best manufacturing
principles gained from different countries’
management teams it is important that
as new products are designed the
development engineers and the production
and process engineering teams integrate
their efforts so that products can be
manufactured efﬁciently on cost effective
automated equipment which repetitively
produces identical quality product
developing automated production
equipment is as important as the product
itself and we have adopted the principle 
of planning the manufacturing process and
then designing the equipment which is
constructed by outside specialists or using
inhouse expertise
in many cases our customers prefer that
we manufacture relatively close to their
main assembly plants to minimise lead
times and transport costs between sites
where this is not practical due to a high
labour content or small runs not suitable
for automated equipment there is a growing
trend to utilise one of our manufacturing
units in low labour cost countries such as
mexico malaysia india and barbados as
well as our recently established assembly
operation in the ukraine
tt electronics’ policy is to manufacture
using the most cost effective methods
where the products have a high labour
content manufacturing is transferred 
to one of our low labour cost factories
during 2002 we have successfully
transferred the production of our range 
of ferrite cores from the united kingdom
to a sister factory in india
moving to low cost areas 8 tt electronics plc annual report 2002
chief executive ’s review continued
once the manufacture of a product has
started teams of specialists including our
operatives use modern manufacturing
methodologies such as the toyota lean
manufacturing principles six sigma and
kaizen to minimise scrap and produce
products ‘right ﬁrst time’ which eliminates
costly rework activities
computerised factory planning systems 
are essential for effective control of raw
materials machine loadings and inventories
the group has invested and continues 
to invest in systems which help drive 
down manufacturing costs reduce unit
prices and ensure that we meet our
customers’ expectations for 100 per cent
on time delivery
it is not possible to compete in our
marketplaces without manufacturing the
highest quality products many of our
factories surpass the quality requirement 
of iso9000 and are now achieving the
new global standard of isots16949
product development
the group relies on product development
for the future growth of our business and
the design and continuous development 
of new products is a key strength
however it is unusual for the group to
develop new products in isolation and
our practice is to work closely with our
customers to provide solutions to their
engineering challenges which enhance
their product offering
this way of working is reliant on longterm
relationships or strategic partnerships with
all levels of our customers’ management
teams from design and development
engineering purchasing departments
process engineering and administrative
functions
each of our main business units specialises
in a particular technology or technologies
and is responsible for achieving their new
product developments regular interaction
between the business units ensures that
innovations are shared design effort does
not overlap and resources are not wasted
forming strategic partnerships is core to ensuring the development of the group’s
sales growth these partnerships are established by close working relationships with
our customers’ engineers thereby ensuring that our technologies are incorporated
into their product offering the design of complex climate control units is an
example of this close cooperation
customer partnerships tt electronics plc annual report 2002 9
electronic sector
automotive market – represents 
59 per cent of the electronic 
sector turnover
the automotive industry represents the
largest marketplace for our electronic
components and systems and over 50 per
cent of all cars manufactured in europe
and north america contain at least one
of our manufactured products our
customers include the world’s largest
car manufacturers tier 1 system suppliers 
as well as smaller specialist suppliers
some years ago we identiﬁed the growth
in automotive electronics as an ideal
marketplace for our technologies growth
of automotive electronics has been at the
rate of 6 per cent per annum in recent
years and is expected to remain at this 
rate over the next ﬁve years by focusing
and expanding on our key technologies 
the group has since 1998 increased its
automotive sales by 70 per cent the growth
of the group’s automotive sensors and
electronic systems for 2002 was 6 per cent
but has been offset by reduced sales of
pcbs and laminations to tier 1 suppliers
we have been successful in winning new
contracts for the automotive electronics
businesses which were in excess of
£180 million in 2002 these will provide
sales growth over the next few years at
currently forecast car production levels
the growth in automotive electronics 
is driven by a combination of factors
legislation which continues to reduce
exhaust emissions thereby producing 
less pollutants and improving fuel
consumption safety legislation and safety
innovation to reduce road deaths and
injuries and demand from customers for
additional comfort for driver and
passenger such as improved climate
control and incar entertainment
the automotive industry is highly competitive
and uses innovative engineering however
once a component or system has been
speciﬁed for a new car platform the
contract is most likely to last around ﬁve
the electronic accelerator pedal module developed using our patented hall effect
technology is an important feature of the drivebywire system this replaces the traditional
throttle linkages by transmitting the driver’s pedal inputs to the engine electronically rather
than mechanically
this product has received the society of plastic engineering award for outstanding innovation
all current models of mercedes benz and bmw cars including the award winning mini 
and the new rolls royce use our system
award winning products 10 tt electronics plc annual report 2002
chief executive’s review continued
years albeit with contracted price reductions
this enables appropriate product speciﬁc
automated equipment to be utilised and
depreciated over the product life the 
cost effective longterm material supply 
to be negotiated and an indepth training
of operatives
our range of automotive products includes
rotating and position sensors temperature
and pressure sensors climate control
modules switches and body electronics
hybrid circuits trimmers resistors and
printed circuit boards our contacting 
and contactless sensor technologies were
originally adopted for ‘drive brake and
steerbywire’ applications on german
luxury cars such as mercedes benz and
bmw these products are now used on 
a wide range of cars and continue to 
be designed in on new model platforms
we are currently producing over 11000
units per day of our award winning
accelerator pedal modules we were the
innovator of the chassis height sensor
starting with the range rover model and
now our chassis height sensors are used to
improve comfort and safety as well as load
levelling in conjunction with ‘high intensity
discharge headlights’ tt electronics now
produces over 20000 units per day for
cars assembled in europe and america we
have just completed the third extension to
one of our german factories in the last ﬁve
years to house the production equipment
to service this growth
one of our businesses in south wales
specialises in the design and manufacture
of complex climate control systems which
can take up to 12000 man hours to develop
utilising the latest sophisticated integrated
design and production engineering
computer systems success with this
product range particularly with american
car manufacturers drove the decision three
years ago to manufacture climate control
products in our automotive factory in
north carolina where the number of units
assembled has risen from 45000 units in
1999 to 408000 units in 2002
the group engineers products so that they can be manufactured in
the most economical way utilising automated production lines an
example is the steering sensor which had originally been designed
for manual assembly in a low labour cost area when tt electronics
acquired this business in 2000 the sensor was redesigned it now
incorporates enhanced features and is manufactured on an
automated production line this has reduced the labour content 
by 60 per cent and improved product quality
automated production tt electronics plc annual report 2002 11
telecom market – represents 11 per
cent of the electronic sector turnover
much publicity has been given over the
last two years to the implosion of the
telecom industry which has left the 
world’s leading service providers and
equipment manufacturers struggling for
survival one of the group’s major and 
long established marketplaces for many
years was the world’s leading telecom and
internet equipment manufacturers such as
ericsson siemens lucent nortel alcatel
and cisco who continue to report falling
sales to this market
in the peak telecom year of 2000 the
group sold £86 million of products into
this market as against £38 million in 2002
this unprecedented low level of demand
continued throughout 2002 despite the
earlier consensus of expectations that the
market would recover during the latter part
of last year a major feature holding back
the recovery was the high stocks of
ﬁnished goods and components held 
by our customers it is reported that 
much of this stock has been consumed
which should open the way for increasing
sales as service providers’ demand returns
to normality
those of our operations which had a 
heavy bias to telecom products were
particularly badly affected and considerable
headcount reductions and reorganisation
have taken place these include the closure
of our united kingdom based ferrite
manufacturing plant with the production
being moved to the group’s operation 
in india
our products based on thick and thin ﬁlm
hybrid circuits and resistive technologies
are used in a wide range of applications
such as switching for ﬁxed line mobile
base stations as well as ﬁbre optic systems
many of our components are used in
internet infrastructure equipment such 
as servers and routers as well as in
communication satellites despite the low
demand for our products our development
engineers continue to work with our
customers on the next generation designs
to win sales as the market recovers
computer market – represents 8 per
cent of the electronic sector turnover
the majority of the world’s leading
computer manufacturers use our electronic
components in their products the lower
level of production of computers in 2002
together with component stocks still ﬁlling
the supply chain reduced demand for our
resistors inductors transformers ferrite
cores and ﬁlters with sales to this market
dropping from £62 million in 2000 to 
£28 million in 2002 forecasts predict 
a slight upturn in computer sales in 2003
which will be beneﬁcial if these predictions
materialise we have maintained our
technical sales and application engineering
staff and also opened up a sales ofﬁce 
in southern mainland china to service
customers better who have moved their
production to this area making china 
one of the major electronic manufacturing
centres of the world we continue to
develop products applicable to the next
generation of pcs and laptops which
should be launched into the market 
during 2003
group turnover by market
automotive
industrial
telecom
computer
power generation
power transmission
group turnover by product
sensors and electronic systems
electronic components
magnetics
electronic manufacturing services
power and data transmission
power systems
tt electronics has developed in the 
usa for one of the largest mould press
manufacturers in the world a mould
heater nozzle utilising our “thick ﬁlm 
on steel” resistive technology
this successful joint development has
achieved the initial goal of an “easy on
easy off” nozzle other beneﬁts include
improved reliability and yields as well 
as 2530 per cent energy saving
innovative products 12 tt electronics plc annual report 2002
chief executive ’s review continued
industrial market – represents 22 per
cent of the electronic sector turnover
due to the major downturn in the telecom
market we have been working hard to
increase sales into the industrial market
this has required a redirection of our
engineering focus and product
development to meet the challenges of this
market which is large overall but diverse
and very fragmented and is represented by
numerous companies ranging from global
original equipment manufacturers to small
family owned businesses
whilst we have had successes in this
market it has been difﬁcult due to the
weak demand in a number of sectors
notably aerospace and control
instrumentation our focus on the medical
market has won us orders for components
into deﬁbrillators pacemakers and a range
of diagnostic equipment and we expect
this to continue to grow our electronic
manufacturing business has won a contract
worth £20 million over the next four years
for subassemblies for use in high
frequency radio systems for the ministry
of defence bowman programme
electrical sector 
power generation – represents 
31 per cent of the electrical 
sector turnover
our businesses in the united kingdom and
mexico design and build electrical power
generating units of between 50 and
2000kva for both standby and continuous
power generation we export generator
sets to africa the middle east china and
the far east central and south america
the global market for power generation
declined by 12 per cent in 2002 causing
stiff competition we commenced delivery
of a large contract worth £58 million that
was won at the end of 2002 for an oil
project in north africa this proved to
require a more stringent speciﬁcation than
was anticipated and has utilised more
engineering time than had been planned
thus reducing our margin on the positive
side the group’s operation based in mexico
achieved another excellent year of proﬁt
and our uninterruptible power supply
business in the united kingdom which 
has been suffering from the downturn in
telecom won a substantial contract for
equipment for the new generation 3g base
stations in singapore our ground power
generation company which manufactures
units for airlines and airports suffered 
from the substantial cut back on capital
expenditure in this industry we were
however successful in winning an order
worth £43 million spread over three years
for airstart units for the ministry of defence
the harsh environment connector business
also won a contract ultimately for the
ministry of defence for output panels
harnesses and connectors for ﬁeld power
systems worth £77 million over a three
year period
power transmission – represents 
69 per cent of the electrical 
sector turnover
whilst these businesses improved their
performance in 2002 the lack of an
expected large subsea cable contract was
disappointing but we now anticipate the
contract for which our cable has been
modern day medical technologies utilise
advanced electronics tt electronics is
addressing this growing £10 billion
market
the group has developed specialised ultra
reliable products for use in deﬁbrillators
pacemakers mri scanners and 
a range of diagnostic equipment
potential new markets ready for new technology
tt electronics plc annual report 2002 13
speciﬁed to be placed in late 2003 the
cable industry is still suffering from over
capacity with competitive pricing from
eastern european countries however our
cable accessories and specialist compound
businesses again produced good results
some time ago we identiﬁed that offshore
wind farms which the government are
partially funding as sources of renewable
energy would require our speciﬁcation of
subsea cable and late last year we won 
a contract worth £32 million which will 
be delivered in the ﬁrst half of 2003
outlook
we expect 2003 to be a demanding
environment in which to grow our sales
over the last 18 months we have done
much to reduce headcount and costs
merged and relocated more of our
manufacturing to low labour cost areas to
reduce unit costs and increased our efforts
to develop new markets we feel conﬁdent
that we have the right organisation and
skills to maximise future opportunities 
in our various markets
sheridan w a comonte
chief executive
17 march 2003
the group’s specialist uninterruptible power supply operation has added to its product
range by developing a modular dc power system this has been successfully sold to mobile
one in singapore for the rollout of its 3g system for mobile telephony other customers in
the united kingdom hungary and thailand are also planning to use our latest technology
to achieve the greater functionality required for the latest infrastructures