TIDMTON
RNS Number : 0203Z
Titon Holdings PLC
15 May 2019
LEI: 213800ZHXS8G27RM1DD7
15 May 2019
Titon Holdings PLC
Unaudited interim results for the six months to 31 March
2019
Titon Holdings Plc ("Titon", the "Group" or the "Company"), a
leading international manufacturer and supplier of ventilation
systems and window and door hardware, today announces its Interim
Results for the six months ended 31 March 2019.
Financial Results
Six months Six months % Change
ended 31 March ended 31 March
2019 2018 (restated)*
Net revenue GBP14.29m GBP14.24m -
Underlying EBITDA(1) GBP1.35m GBP1.05m +29%
EBITDA GBP1.17m GBP1.05m +12%
Underlying profit before
tax(1) GBP1.30m GBP1.04m +26%
Profit before tax GBP1.12m GBP1.04m +8%
Underlying earnings per
share(1) 8.69p 7.25p +20%
Interim dividend per
share 1.75p 1.75p -
Financial highlights
-- Underlying EBITDA increased 29% to GBP1.35 million
-- Underlying profit before tax rose 26% to GBP1.30 million
-- Underlying earnings per share ("EPS") were 20% higher at 8.69 pence
-- Interim dividend is maintained at 1.75 pence per share
-- Net cash of GBP3.84 million (2018: GBP2.74 million)
-- Return on net assets ("RONA") (2) was 19.9% (2018: 16.3%)
Operational highlights
-- South Korea's profit before tax increased 21% to GBP0.9
million; and it remains the Group's largest income generator
-- Strong sales growth in mechanical ventilation systems in the UK and Continental Europe
-- Revenue in the US rose 55% to GBP0.5 million
-- The mechanical ventilation product range for the UK and
Continental Europe was expanded in the period, including a new
mechanical ventilation heat recovery ("MVHR") unit for larger
homes
-- UK showroom and meeting area upgraded
Executive Chairman Keith Ritchie said: "By any yardstick, the
Group's first half performance was a very good one with both
underlying profit before tax and earnings rising by a fifth or
more. Despite the previously announced weak housing market in
Korea, group net revenue was resilient and against these headwinds
our Korean business performed well".
"Titon has a diversified and growing presence in international
markets, together with an established and expanding range of
products. We have a strong balance sheet and a team that I am proud
of. As previously announced, testing conditions continue in South
Korea but I look forward to results for the Group in the second
half of the year in line with market expectations".
*Prior period figures for the year to 30 September 2018 and the
six months to 31 March 2018 have been restated pursuant to the
announcement made by the Company on 19 March 2019, further details
of which are included in note 2 of the Interim Statement.
For further information please contact
Titon Holdings Plc
Keith Ritchie: +44 (0) 1206 713821
Shore Capital
Dru Danford +44 (0)20 7408 4090
Edward Mansfield
Daniel Bush
Notes:
(1) Underlying EBITDA, Operating profit, Profit before tax and
EPS in the period are calculated by adding back an exceptional item
of GBP181,000 which relates to transaction related costs in respect
of a potential acquisition which did not proceed
(2) RONA is calculated by dividing Underlying profit before tax
by Net Assets (including non-controlling interests, net of cash and
intangibles) and expressed as an annualised figure. Asset Turn is
calculated by dividing the group's net revenue by Net Assets as
defined above.
Titon Holdings PLC
Interim results for the six months to 31 March 2019
Chairman's statement
Income Statement
In the six months to 31 March 2019, Titon's net revenue (which
excludes inter-segment activity) rose 0.4%, to GBP14.3 million
(2018: GBP14.2 million). The 2018 comparatives have been restated,
where appropriate, due to an accounting change, which is explained
below.
Gross margin improved to 29.3% (2018: 27.6%) due to the
geographical mix of sales with the European and US operations
providing an increased contribution in the period and an
improvement in the profitability of mechanical ventilation systems
in the UK and in Europe. At the same time, underlying EBITDA(1) was
29% higher at GBP1.35 million (2018: GBP1.05 million), whilst
underlying operating profit(1) increased by 40% to GBP0.98 million
(2018: GBP0.70 million) which meant that the Group's operating
margin also rose to 6.9% (2018: 4.9%). The share of profits from
the Group's associate, Browntech Sales Co., Ltd (BTS) in South
Korea, dipped marginally to GBP0.31 million (2018: GBP0.33 million)
as a result of the previously announced weaker housing market in
Korea. In turn, underlying profit before tax(1) was 26% higher at
GBP1.30 million (2018: GBP1.04 million).
Reported profit before tax rose by 8%, to GBP1.12 million (2018:
GBP1.04 million). This is stated net of GBP181,000 of costs
relating to a potential acquisition under consideration during the
period which did not proceed, and which is shown separately in the
income statement.
Underlying earnings per share(1) increased by a fifth to 8.69
pence (2018: 7.25 pence) with the apportionment of profits to
minority shareholders higher at GBP0.22 million (2018: GBP0.16
million) which reflected the higher contribution from the Group's
51% owned subsidiary, Titon Korea.
An unchanged interim dividend in respect of the six months ended
31 March 2019 of 1.75 pence per share (2018: 1.75 pence) was
approved by the Directors of Titon Holdings Plc on 14 May 2019. The
interim dividend is payable on 21 June 2019 to shareholders on the
register at 24 May 2019. The ex-dividend date is 23 May 2019.
Restatement
In an announcement on 19 March 2019, the Group explained that
certain costs associated with products sold by Titon Korea in
earlier accounting periods, up to and including 30 September 2018,
had, in error, not been wholly taken into account in the relevant
periods. This related to the incorrect accounting apportionment of
costs and revenues between first and second fix installations of
products manufactured by our 51% owned subsidiary Titon Korea and
sold by BTS, our 49% owned associated company. We have now
completed an analysis of this issue and I can confirm that the
total equity attributable to equity holders of Titon as at 30
September 2018 has been reduced by GBP826,000 (or 5.1%) from the
figure shown in the 2018 Annual Report. Subsequently, this and
other comparative 2018 numbers, where they were impacted by the
adjustment, have been restated. In terms of the income statement,
there has also been a restatement of the results for the six months
to 31 March 2018 and for the year to 30 September 2018. In the six
months to 31 March 2018 revenue has been reduced by GBP248,000 to
GBP14.2 million and profit before tax by GBP301,000 to GBP1.04
million. Similarly, in the fiscal year to 30 September 2018,
revenue has been reduced by GBP172,000 to GBP29.8 million and
profit before tax has been reduced by GBP209,000 to GBP2.77
million. See note 2 of the Interim Statement for further
details.
Balance sheet and cash flow
Net assets including non-controlling interests rose 9.9% or
GBP1.59 million to GBP17.6 million (31 March 2018: GBP16.0 million)
with net cash of GBP3.84 million (31 March 2018: GBP2.74 million,
30 September 2018: GBP3.42 million) which is equivalent to 21.8% of
net assets (31 March 2018: 17.1%, 30 September 2018: 19.9%). Of
this net cash, GBP1.01 million (31 March 2018: GBP0.04 million) is
held in Titon Korea and we expect a proportion of this amount to be
distributed to the Company and to minority shareholders as a
dividend in the second half of the year.
The half year saw cash generated from operations of GBP1.45
million (2018: outflow of GBP0.28 million). Of the GBP1.45 million,
almost GBP1.33 million has been generated in Titon Korea where
there has been a GBP0.75 million reduction in inventories since the
year-end and where other working capital components have fallen in
line with reducing levels of activity as noted in the segmental and
operational review below. In the UK, inventories have increased by
GBP0.30 million in the half year due to the decision to make
additional purchases from Continental Europe ahead of the planned
Brexit deadline of 29 March 2019. Capital expenditure in the period
was also higher at GBP0.46 million (2018: GBP0.13 million) as we
invested in new moulding machines, specialist tooling for new
mechanical ventilation products plus the refurbishment of our
showroom and meeting facilities at Haverhill. Net current assets
were GBP10.0 million (2018: GBP9.5 million) with a Quick Ratio(3)
of 2.08 (2018: 1.67).
RONA(2) was 19.9% (2018: 16.3%) with Asset Turn at 2.19 (2018:
2.24).
Segmental and operational review
UK and Continental Europe
Revenue in the UK increased 4% to GBP7.6 million (2018: GBP7.3
million) despite a degree of economic uncertainty in and around the
run up to the planned Brexit date of 29 March 2019. In our Window
and Door Hardware business in the UK, this included increased
demand for our trickle vents, whilst sales of Titon's branded
window and door hardware products also rose. I am pleased to
report, too, that our UK Ventilation Systems division sales
increased by more than 6% in the period as the reorganisation of
our sales force began to make itself felt. We also have a number of
new products in the research and development pipeline which we
expect will contribute to our leading market positions when they
emerge. The UK's segmental underlying profit before tax(1) declined
in the period by 5% to GBP461,000 (2018: GBP484,000), which was due
to higher costs in our Window and Door Hardware division.
Export sales of Ventilation Systems products also grew in the
period by 28%. In fact, the majority of our key markets in Western
Europe have seen good growth and we are beginning to establish good
levels of business in Eastern Europe, where we have developed cold
climate products for our customers.
Once again, we have expanded the range of mechanical ventilation
products for UK and European markets and have introduced our
largest heat recovery unit to date. The latter should prove
particularly popular in export markets, where house sizes are
typically larger than in the UK.
South Korea
On 14 February 2019, we announced a trading update in respect of
our South Korean business. During the period, two factors
contributed to the Group's performance in South Korea. Firstly, the
domestic residential development market slowed down much faster
than anticipated, which is reflected in a decline in housing
permits issued of 13.7% in calendar 2018 in South Korea. At the
same time, virulent dust-based air pollution, largely from China,
intensified. The latter effect meant that demand for mechanical
ventilation units rose at the expense of natural ventilation
products. In turn, this meant that the trading performance of Titon
Korea was expected to be substantially lower than market forecasts
at that time. However, overheads have been reduced and the gross
margin actually improved in the period.
BTS, the Group's associate company, which primarily distributes
ventilation products in South Korea, was also affected by lower
sales in the half year. Here again, a focus on reducing costs has
meant that its contribution has not been significantly impacted. As
noted earlier, the profit recognised in respect of associates
(which is all BTS) was just 4% lower at GBP313,000 (2018:
GBP326,000). In addition to its trading activities, there have been
no changes in the status of BTS's investments in the residential
real estate market.
In terms of the segmental contribution from South Korea, the two
businesses, Titon Korea and BTS are added together. The revenue is
solely Titon Korea (because the Company's share of BTS's profits
are accounted for as an associate) which was 12% lower at GBP4.8
million (2018: GBP5.4 million). The profit contribution for South
Korea, however, was 21% higher at GBP864,000. Note, too, that South
Korea is the largest contributor to Group underlying profit before
tax(1) with a 66% share in the first six months of fiscal 2019
(2018: 69%). At the post-tax level the contribution from Korea for
the period was GBP743,000 (2018: GBP629,000) which represents 63%
(2018: 66%) of the Group's underlying post-tax profits(1) .
The Group has continued to take steps to re-design its existing
natural ventilation products and to introduce new products for the
Korean market. We expect that that these will be available for sale
early in 2020.
United States
The results from our US business have improved significantly in
the period following the sharp decline experienced last year. Sales
for the six months increased by 55% year-on-year to GBP510,000
(2018: GBP330,000) and we are pleased that the pipeline of
opportunities remains healthy. Although Titon Inc. recorded a small
statutory loss for the period under review (GBP12,000) this was
sharply reduced from the 2018 half year loss (GBP77,000). It is
important to note, too, that when the results are combined with the
inter-segmental profits made in our UK factory on products sold in
North America, the overall contribution is positive and exceeded
our budget.
Website
I am pleased to report that we have upgraded our website to one
which, we believe, possesses a much more contemporary feel. It also
contains a lot more information about our products, which customers
will find useful, plus we have added new product selector tools to
assist users in easily finding the product they need. Please visit
www.titon.com which also includes a new Investors tab.
Board
I would like to welcome Bernd Ratzke to the Titon Board. He
joined at the end of March as an independent Non-Executive Director
and brings a wealth of business experience from his long career as
a corporate lawyer in the City and specifically as a former Head of
Corporate at Baker & McKenzie. We look forward to his
contribution and counsel.
Employees
Once again, I am indebted to all of Titon's employees for their
talent and hard work. Without them, we would not have such a high
quality and diversified business. To all of them, I offer my and
the Board's sincere thanks.
Investors
We continue to work with Hardman & Co., the corporate
research house, to raise our visibility in investment markets with,
in my view, high quality research on the Group. The Company, last
year, moved from the Main Market of the London Stock Exchange to
AIM. The Board believes that AIM provides a more suitable
regulatory environment for a business of Titon's size and
structure, and provides more flexibility in relation to corporate
transactions and equity fundraising, should such opportunities or
initiatives arise or become relevant to the Group in the future.
Once again, I reiterate the existence of Titon's dividend
reinvestment programme. This is a straight-forward and
cost-effective potential way to increase a shareholding in Titon;
and it can be accessed by visiting the portal for our Registrars,
Link Market Services Limited.
Outlook
By any yardstick, the Group's first half performance was a very
good one with both underlying profit before tax(1) and earnings
rising by a fifth or more. In February, however, we updated the
market on current trading in our prime market of South Korea, where
there has been a slow-down and a structural shift in product
preference; both of which will impact the Group this year. It is
not in Titon's nature to sit on its hands and already we have
reduced overheads in South Korea and will be bringing on new
products early next year.
Titon has operated in South Korea since 2008 and it is the
market leader in natural ventilation products. For a number of
years, too, South Korea has been the Group's largest profit
contributor and in the half year, this remained the case with South
Korea accounting for 63% of underlying profit after tax(1) . The
domestic economy also ranks number 12 in the World and, although
GDP growth forecasts have been reduced, Statista is forecasting GDP
growth of 2.6% in 2019 and 2.8% in 2020, the envy of many of South
Korea's peers. Specifically, too, government expenditure is rising
and serving to replace some private sector activity; and we
anticipate that this will underpin a modest return to growth in the
housing market over the coming years. However, we also believe that
the growing popularity of mechanical ventilation units at the
expense of natural products will continue and we have already
agreed with our South Korean partners to develop and sell
mechanical units, which will happen in 2020. At the same time,
domestic building regulations in South Korea continue to provide
for the use of natural ventilation, which is cost effective,
sustainable and environmentally friendly. Consequently, we are
designing new natural ventilation products with a much higher level
of filtering to deal with the intensity of the dust-borne
pollution, for our customers that wish to continue with this cost
effective and environmentally friendly means of providing
ventilation.
In the UK we had reasonable growth in the markets for our
products through the winter. UK GDP rose by 0.5% in the three
months to end January this year and, whilst GDP is set to grow
below historical trends, consensus forecasts are for GDP to
increase at between 1% and 2% per annum in 2019 and 2020
respectively. Similarly, Experian is forecasting average volume
growth in UK housebuilding of 3.3% per annum in 2019 through to
2021. This is despite the continued uncertainty surrounding the
Brexit negotiations and the fact that the UK did not leave the EU,
as scheduled, on 29 March 2019. The uncertainty is not helpful to
business and particularly for medium sized companies like Titon,
which do not have the resources to cater for every possible outcome
of Brexit.
The Government has announced that there will be a review of
building regulations concerning ventilation, as part of its
response to the Hackitt report following the desperately tragic
Grenfell fire. A consultation paper is to be issued over the summer
and any change in regulations may create new opportunities for
Titon; I believe that we are very well positioned to benefit from
these. Above all, the Government and the industry want to make
buildings safer, more sustainable and healthier.
Titon has a diversified and growing spread of international
markets together with an established and expanding range of
attractive products. We have a strong balance sheet and a team that
I am proud of. As previously announced, testing conditions continue
in South Korea but I look forward to results for the Group in the
second half of the year in line with prevailing market
expectations.
Principal risk and uncertainties
The key financial and non-financial risks faced by the Group are
disclosed in the Group's Annual Report and Accounts for the year
ended 30 September 2018 within the Strategic Report (page 6)
available at www.titon.com. The Board considers that these remain a
current reflection of the risks and uncertainties facing the
business. The Board also considers that it is appropriate to adopt
the going concern basis of accounting in preparing these financial
statements and has not identified any material uncertainties which
would prevent us so doing.
A list of current directors is maintained on the Group's website
www.titonholdings.com.
On behalf of the Board
KA Ritchie
Chairman
14 May 2019
Notes
1 Underlying EBITDA, Operating profit, Profit before tax and EPS
in the period are calculated by adding back an exceptional item of
GBP181,000 which relates to transaction related costs in respect of
a potential acquisition which did not proceed
2 RONA is calculated by dividing Underlying profit before tax by
Net Assets (including non-controlling interests, net of cash and
intangibles) and expressed as an annualised figure. Asset Turn is
calculated by dividing the group's net revenue by Net Assets as
defined above.
3. The Quick Ratio measures liquidity and is calculated by
dividing Current Assets-less-inventories by Current Liabilities
Titon Holdings Plc
Consolidated Interim Income Statement
for the six months ended 31 March 2019
6 months 6 months Year to
to 31.3.19 to 31.3.18 30.9.18
restated* restated*
unaudited unaudited audited
Note GBP'000 GBP'000 GBP'000
Revenue 2,3 14,290 14,237 29,774
Cost of sales 2 (10,097) (10,300) (21,170)
---------------------------------------- ---- ---------- ---------- ----------
Gross profit 4,193 3,937 8,604
Distribution costs 2 (728) (714) (1,454)
Administrative expenses (2,258) (2,278) (4,707)
Research and development expenses (232) (247) (446)
Transaction related expenses (181) - -
Other income 6 3 19
---------------------------------------- ---- ---------- ---------- ----------
Operating profit 800 701 2,016
Finance income 7 9 13
Share of post-tax profits from
associates 313 326 741
---------------------------------------- ---- ---------- ---------- ----------
Profit before tax 1,120 1,036 2,770
Income tax expense 4 (118) (78) (315)
Profit after income tax 1,002 958 2,455
---------------------------------------- ---- ---------- ---------- ----------
Attributable to:
Equity holders of the parent 782 795 2,007
Non-controlling interest 220 163 448
---------------------------------------- ---- ---------- ---------- ----------
Profit for the period 1,002 958 2,455
---------------------------------------- ---- ---------- ---------- ----------
Earnings per share attributed to equity
holders of the parent:
Basic 6 7.06p 7.25p 18.21p
Diluted 6 6.97p 7.15p 17.94p
* See note 2 for details regarding the restatement of prior year
results
Consolidated Interim Statement of Comprehensive Income
for the six months ended 31 March 2019
6 months 6 months Year to
to 31.3.19 to 31.3.18 30.9.18
restated* restated*
unaudited unaudited audited
GBP'000 GBP'000 GBP'000
Profit for the period 1,002 958 2,455
Other comprehensive income - items
which may be reclassified to profit
or loss in subsequent periods:
Exchange difference on re-translation
of net assets of overseas operations (219) 195 423
-------------------------------------- ---------- ---------- ----------
Total comprehensive income for the
period 783 1,153 2,878
Attributable to:
Equity holders of the parent 649 930 2,293
Non-controlling interest 134 223 585
-------------------------------------- ---------- ---------- ----------
783 1,153 2,878
-------------------------------------- ---------- ---------- ----------
* See note 2 for details regarding the restatement of prior year
results
Titon Holdings Plc
Consolidated Interim Statement of Financial Position
at 31 March 2019
31.3.19 31.3.18 30.9.18 30.9.17
restated* restated* restated*
unaudited unaudited audited audited
Note GBP'000 GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,853 3,418 3,655 3,548
Intangible assets 687 530 737 638
Investments in associates 2,831 2,105 2,586 1,713
Deferred tax assets 204 436 348 375
--------- ---------- ---------- ----------
Total non-current assets 7,575 6,489 7,326 6,274
--------- ---------- ---------- ----------
Inventories 5,246 5,721 5,667 4,670
Trade and other receivables 5,977 8,103 7,799 6,644
Income tax receivable 33 79 12 79
Cash and cash equivalents 3,839 2,735 3,415 3,269
--------- ---------- ---------- ----------
Total current assets 15,095 16,638 16,893 14,662
Total Assets 22,670 23,127 24,219 20,936
---------------------------------------------- --------- ---------- ---------- ----------
Liabilities
Deferred tax liability 11 51 37 39
--------- ---------- ---------- ----------
Total non-current liabilities 11 51 37 39
--------- ---------- ---------- ----------
Trade and other payables 5,088 6,859 6,901 5,802
Income tax payable - 235 154 63
Total current liabilities 5,088 7,094 7,055 5,865
Total Liabilities 5,099 7,145 7,092 5,904
---------------------------------------------- --------- ---------- ---------- ----------
Equity
Share capital 1,113 1,113 1,113 1,098
Share premium reserve 1,049 1,049 1,049 985
Capital redemption reserve 56 56 56 56
Treasury shares (27) (27) (27) (27)
Foreign exchange reserve 369 351 502 216
Retained earnings 13,171 11,680 12,728 11,167
---------------------------------------------- --------- ---------- ---------- ----------
Total Equity attributable
to the equity holders
of the parent 15,731 14,222 15,421 13,495
Non-controlling Interest 1,840 1,760 1,706 1,537
Total Equity 17,571 15,982 17,127 15,032
Total Liabilities and
Equity 22,670 23,127 24,219 20,936
---------------------------------------------- --------- ---------- ---------- ----------
* See note 2 for details regarding the restatement of prior year
results
Titon Holdings Plc
Consolidated Interim Statement of Changes in Equity
at 31 March 2019
Share Share Capital Foreign Treasury Retained Total Non- Total
capital premium redemption exchange Shares earnings controlling Equity
reserve reserve reserve interest
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30
September
2017 as
previously
stated 1,098 985 56 216 (27) 11,887 14,215 1,986 16,201
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Restatement
of post-tax
profit for
prior
years * - - - - - (720) (720) (449) (1,169)
At 30
September
2017 (as
restated) 1,098 985 56 216 (27) 11,167 13,495 1,537 15,032
Translation
differences
on overseas
operations - - - 135 - - 135 60 195
Profit for the
period (as
restated) - - - - - 795 795 163 958
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Total
comprehensive
income for
the
period - - - 135 - 795 930 223 1,153
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Dividends paid - - - - - (295) (295) - (295)
Share-based
payment
credit - - - - - 13 13 - 13
Ordinary
shares
issued 15 64 - - - - 79 - 79
At 31 March
2018 (as
restated) 1,113 1,049 56 351 (27) 11,680 14,222 1,760 15,982
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Translation
differences
on overseas
operations - - - 151 - - 151 77 228
Profit for the
period (as
restated) - - - - - 1,212 1,212 285 1,497
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Total
comprehensive
income for
the
period - - - 151 - 1,212 1,363 362 1,725
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Dividends paid - - - - - (194) (194) - (194)
Dividends paid
to NCI in
subsidiary - - - - - - - (416) (416)
Share-based
payment
credit - - - - - 30 30 - 30
At 30
September
2018 (as
restated) 1,113 1,049 56 502 (27) 12,728 15,421 1,706 17,127
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Accounting
policy
change IFRS
9 - - - - - (38) (38) - (38)
At 1 October
2018 1,113 1,049 56 502 (27) 12,690 15,383 1,706 17,089
Translation
differences
on overseas
operations - - - (133) - - (133) (86) (219)
Profit for the
period - - - - - 782 782 220 1,002
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Total
comprehensive
income for
the
period - - - (133) - 782 649 134 783
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
Dividends paid - - - - - (332) (332) - (332)
Share-based
payment
credit - - - - - 31 31 - 31
At 31 March
2019 1,113 1,049 56 369 (27) 13,171 15,731 1,840 17,571
--------------- --------- --------- ----------- --------- --------- ---------- -------- ------------ --------
* See note 2 for details regarding the restatement of prior year
results
Titon Holdings Plc
Consolidated Interim Statement of Cash Flow
for the year ended 31 March 2019
6 months 6 months Year to
to 31.3.19 to 31.3.18 30.9.18
restated* restated*
unaudited unaudited audited
Note GBP'000 GBP'000 GBP'000
Cash generated from operating activities
Profit before tax 1,120 1,036 2,770
Depreciation of property, plant &
equipment 266 233 448
Amortisation of intangible assets 107 112 209
Profit on sale of plant & equipment - (12) (16)
Share based payment - equity settled 31 13 43
Finance income (7) (9) (13)
Share of associate's post-tax profit (313) (326) (741)
----------
1,204 1,047 2,700
Decrease / (increase) in inventories 335 (934) (836)
Decrease / (increase) in receivables 1,675 (1,235) (890)
(Decrease) / increase in payables
and other current liabilities (1,769) 845 964
------------------------------------------- ---- ------------ ---------- ----------
Cash generated / (used) from operations 1,445 (277) 1,938
------------------------------------------- ---- ------------ ---------- ----------
Income taxes (paid) / refunded (175) 45 (132)
------------------------------------------- ---- ------------ ---------- ----------
Net cash generated from/(used in)
from operating activities 1,270 (232) 1,806
------------------------------------------- ---- ------------ ---------- ----------
Cash flows from investing activities
Purchase of plant & equipment (464) (125) (578)
Purchase of intangible assets (57) (4) (315)
Proceeds from sale of plant & equipment - 34 46
Finance income 7 9 13
Net cash used in investing activities (514) (86) (834)
------------------------------------------- ---- ------------ ---------- ----------
Cash flows from financing activities
Exercise of share options - 79 79
Dividends paid to equity shareholders
of the parent 5 (332) (295) (489)
Dividends paid to Non-controlling
shareholders of a subsidiary - - (416)
Cash withdrawn from / (transferred
to) treasury deposit accounts 900 (300) 300
Net cash generated from/(used in)
from operating activities 568 (516) (526)
------------------------------------------- ---- ------------ ---------- ----------
Net increase / (decrease) in cash
(excluding movement on treasury deposits) 1,324 (834) 446
Cash at beginning of the period (excluding
treasury deposits) 2,515 2,069 2,069
------------------------------------------- ---- ------------ ---------- ----------
Cash at end of the period (excluding
treasury deposits) 3,839 1,235 2,515
------------------------------------------- ---- ------------ ---------- ----------
The Group cash and cash equivalents figure on the Consolidated
Interim Statement of Financial Position includes both the cash at
31 March 2019 and the cash on treasury deposit of GBPnil (March
2018: GBP1,500,000, September 2018: GBP900,000) and totals
GBP3,839,000 at 31 March 2019 (March 2018: GBP2,735,000, September
2018: GBP3,415,000).
In respect of this change in presentation of the Consolidated
Interim Statement of Cash Flows, the comparative figures have been
amended.
Notes to the Condensed Consolidated Interim Statements
at 31 March 2019
1 Accounting policies
a) General information
Titon Holdings Plc (the 'Company') is incorporated and domiciled
in England and its shares are publicly traded on AIM. The
registered office address is 894 The Crescent, Colchester Business
Park, Colchester, Essex, CO4 9YQ. The company's registered number
is 1604952. The principal activities of the Group are as described
in Note 3.
The Board considers the principal risks and uncertainties
relating to the Group for the next six months to be the same as
detailed in the last Annual Report and Financial Statements to 30
September 2018. The Group's financial risk management objectives
and policies are consistent with those disclosed in the
consolidated financial statements as at and for the year ended 30
September 2018.
b) Basis of preparation
These condensed consolidated interim financial statements of the
Group for the six months ended 31 March 2019 comprise the Company
and its subsidiaries (together referred to as the 'Group'). The
prior year results for the six months to 31 March 2018 and twelve
months to 30 September 2018 shown throughout this interim report
have been restated where appropriate. See Note 2.
The condensed consolidated interim financial statements have
been prepared in accordance with the AIM rules. Neither the six
months results for 2019 nor the restated 6 months results for 2018
have been audited nor reviewed pursuant to guidance issued by the
Auditing Practices Board. This condensed Interim Group financial
Statements do not comprise statutory accounts within the meaning of
Section 435 of the Companies Act 2006. The comparative figures for
the year ended 30 September 2018 do not constitute statutory
accounts within the meaning of Section 435 of the Companies Act
2006, but they have been derived from the audited Report and
Accounts for that year, which have been filed with the Registrar of
Companies as amended by the restatement described. The independent
auditors' report on those accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain a
statement under Section 498(2) or (3) of the Companies Act
2006.
This report should be read in conjunction with the Group's
Annual Report and Accounts for the year ended 30 September 2018,
which have been prepared in accordance with IFRS's as adopted by
the European Union.
These unaudited interim Group financial Statements were approved
for issue on 14 May 2019. Copies will be sent to shareholders
within the next few weeks and is available on the Group's website
at www.titonholdings.com and from the Company's registered office
at 894 The Crescent, Colchester Business Park, Colchester, Essex
CO4 9YQ
c) Accounting policies
These condensed consolidated interim financial statements have
been prepared in accordance with the recognition and measurement
requirements of International Financial Reporting Standards as
adopted by the European Union as effective for periods beginning on
or after 1 January 2018.
In preparing these condensed consolidated interim financial
statements the Board have considered the impact of new standards
which will be applied in the 2019 Annual Report and Accounts. Other
than the adoption of IFRS 15 Revenue from Contracts with Customers
and IFRS 9 Financial Instruments, which are both effective for
accounting periods starting on or after 1 January 2018, there are
not expected to be any changes in the accounting policies compared
to those applied at 30 September 2018.
A full description of accounting policies is contained with our
2018 Annual Report and Financial Statement, which is available on
our website.
New accounting standards
The Group has adopted the following new standards (effective 1
January 2018) in these condensed consolidated interim financial
statements:
-- IFRS 15 Revenue from contracts with customers. IFRS 15 sets
out a single and comprehensive framework for revenue recognition.
The guidance in IFRS 15 is considerably more detailed than previous
IFRS's for revenue recognition (IAS 11 Construction Contracts and
IAS 18 Revenue and associated Interpretations). An assessment of
the impact of IFRS 15 has been completed, including a comprehensive
review of the contracts that exist across the Group's revenue
streams.
The key performance obligation of the Group has been identified
as the point at which it delivers its products to its customers;
apart from in Korea, where the additional performance obligation
requiring the product to be installed to the customer's
satisfaction has also been identified. As such, the Group's sale of
goods performance obligations are satisfied when the customer
receives the goods, apart from in Korea, where it is the point when
the customer accepts that the product has been satisfactorily
installed.
Revenue is recognised by the Group at a single point in time
when control of goods passes on delivery, except for in Korea,
where revenue is recognised over time when initial and secondary
activities are completed.
In carrying out the review, no differences were identified
between the effects of using the risk and rewards approach to
determining when to recognise revenue under IAS 18 and the passing
of control over goods and services for satisfied performance
obligations under IFRS 15. As a result no material changes have
been identified.
-- IFRS 9 Financial instruments. IFRS 9 addresses the
classification and measurement of financial assets and liabilities
and replaces IAS 39. Among other things, the standard introduces a
forward-looking credit loss impairment model whereby entities need
to consider and take into account losses that may occur in the
future (an "expected loss" model). The Board has considered the
potential impact of the introduction of IFRS9 and determined that a
reduction in reserves of GBP38,000 as at 30 September 2018 is
necessary. This amount relates to a provision against amounts due
from the Group's associate. No additional provisions are considered
necessary for the transition of the Group's previous methodology to
the expected credit loss approach.
The impact of new standards that have been issued but are not
yet effective has also been considered, the most significant being
IFRS 16. Whilst the Board has reviewed the implications for the
Group and determined the likely impact, they have decided that
early adoption is not appropriate.
-- IFRS 16 Leases. IFRS 16 sets out the principles for
recognition, measurement, presentation and disclosure of leases and
will replace IAS 17 Leases. Adoption of IFRS 16 will result in the
Group recognising right of use assets and lease liabilities for all
qualifying contracts that are, or contain, a lease. Instead of
recognising an operating expense for its operating lease payments,
the Group will instead recognise interest on its lease liabilities
and amortisation on its right-of-use assets, impacting profit from
operations and the finance expense. The standard is effective for
accounting periods beginning on or after 1 January 2019 and
contains several options and exemptions which are available at
initial adoption. The Board has reviewed the expected impact of
this standard and their current assessment, based on applying the
modified retrospective transition method and adopting certain
practical expedients, is that there will be a material impact on
the Group's Statement of Financial Position when they are accounted
for differently under IFRS16.
2 Restatement of prior year results
In March 2019 the Company discovered that correct accounting
policy had not been followed at its Korean subsidiary and associate
and that the Consolidated Statement of Financial Position as at
previous year ends, up to and including 30 September 2018, had been
misstated. A full explanation of the reason for the adjustment is
included within the Chairman's Statement above and the required
restatements have been included within these interim results.
The effect of the restatement on the relevant lines within the
Consolidated Statement of Financial Position as at 30 September
2017 and 30 September 2018 is as follows:
Originally Adjustment Restated Originally Adjustment Restated
stated as at stated as at
as at 30/09/2017 as at 30/09/2018
30/09/2017 30/09/2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Assets
Investments in
Associates 1,966 (253) 1,713 2,876 (290) 2,586
Deferred tax assets 116 259 375 52 296 348
------------ ----------- ------------ ------------ ----------- ------------
2,082 6 2,088 2,928 6 2,934
Liabilities
Trade and other
payables 4,627 1,175 5,802 5,554 1,347 6,901
Equity
Total Equity attributable
to the equity
holders of the
parent 14,215 (720) 13,495 16,247 (826) 15,421
Non-controlling
interest 1,986 (449) 1,537 2,221 (515) 1,706
--------------------------- ------------ ----------- ------------ ------------ ----------- ------------
Total Equity 16,201 (1,169) 15,032 18,468 (1,341) 17,127
--------------------------- ------------ ----------- ------------ ------------ ----------- ------------
The effect on the relevant lines of the Income Statement for the
6 months to March 2018 and the 12 months to September 2018 is as
follows:
6 months to March 2018 12 months to September
2018
Originally Adjustment Restated Originally Adjustment Restated
stated stated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 14,485 (248) 14,237 29,946 (172) 29,774
Profit before
tax 1,337 (301) 1,036 2,979 (209) 2,770
Income tax (expense)/credit (132) 54 (78) (352) 37 (315)
----------------------------- ----------- ----------- --------- ----------- ----------- ---------
Profit after income
tax 1,205 (247) 958 2,627 (172) 2,455
----------------------------- ----------- ----------- --------- ----------- ----------- ---------
Attributable to:
Equity holders
of the parent 947 (152) 795 2,113 (106) 2,007
Non-controlling
interest 258 (95) 163 514 (66) 448
Earnings per share
attributable to
equity holders
of the parent
Basic 8.64p 7.25p 19.17p 18.21p
Diluted 8.53p 7.15p 18.88p 17.94p
Additionally, during the period, the Directors have determined
that it better reflects the classifications on the Income Statement
to show carriage outwards as a Distribution Cost rather than being
included within Cost of Sales. As a result of this, Distribution
Costs for the 6 month period ended 31 March 2018 have been
increased by GBP386,000 to GBP714,000 (previously reported as
GBP328,000) and for the 12 month period to 30 September 2018 have
been increased by GBP750,000 to GBP1,454,000 (previously reported
as GBP704,000). Cost of Sales for the 6 month period ended 31 March
2018 have been reduced by GBP386,000 to GBP10,300,000 (previously
reported as GBP10,686,000) and for the 12 month period to 30
September 2018 have been reduced by GBP750,000 to GBP21,170,000
(previously reported as GBP21,920,000). There has been no overall
impact on profit before tax or any Statement of Financial Position
line item in any period as a result of this reclassification.
3 Revenue and segmental information
In identifying its operating segments, management follows the
Group's reporting lines, which represent the main geographic
markets in which the Group operates. The segment reporting below is
shown in a manner consistent with the internal reporting provided
to the Board, which is the Chief Operating Decision Maker (CODM).
These operating segments are monitored and strategic decisions are
made on the basis of segment operating results. The Group operates
four main business segments which are:
Segment Activities undertaken include:
United Kingdom Sales of passive and powered ventilation products
to house builders, electrical contractors and window
and door manufacturers. In addition to this, it
is a leading supplier of window and door hardware.
South Korea Sales of passive ventilation products to construction
companies.
North America Sales of passive ventilation products to window
and door manufacturers.
All other Sales of passive and powered ventilation products
countries to distributors, window manufacturers and construction
companies
Inter-segment revenue is transacted on an arm's length basis and
charged at prevailing market prices for a specific product and
market or cost plus where no direct comparative market price is
available. Segment results include items directly attributable to a
segment as well as those that can be allocated on a reasonable
basis. Research and development entity-wide financial expenses are
allocated to the business activities for which R&D is
specifically performed. Sales Administration and Other Expenses are
currently allocated to operating segments in the Group's reporting
to the CODM. Other Expenses include mainly central and parent
company overheads relating to Group management, the finance
function and regulatory requirements.
The measurement policies the Group uses for segment reporting
under IFRS 8 are the same as those used in its financial
statements.
The total assets for the segments represent the consolidated
total assets attributable to these reporting segments. Parent
company results and consolidation adjustments reconciling the
segmental results and total assets to the consolidated financial
statements are included within the United Kingdom segment figures
stated over below.
Operating segment United South North All other Total
Kingdom Korea America countries
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended 31 March
2019
Segment revenue 7,819 4,769 510 1,449 14,547
Inter-segment revenue (257) - - - (257)
------------------------------- --------- -------- --------- ----------- --------
Total Revenue 7,562 4,769 510 1,449 14,290
------------------------------- --------- -------- --------- ----------- --------
Segment profit / (loss) 280* 864 (12) (12) 1,120
Income tax expense (118)
------------------------------- --------- -------- --------- ----------- --------
Profit for the period 1,002
------------------------------- --------- -------- --------- ----------- --------
Depreciation and amortisation 334 39 - - 373
------------------------------- --------- -------- --------- ----------- --------
Total assets 14,034 8,246 381 - 22,670
------------------------------- --------- -------- --------- ----------- --------
Total assets include:
Investments in associates 2,831 - - - 2,831
Additions to non-current
assets (other than financial
instruments and deferred
tax assets) 521 - - - 521
------------------------------- --------- -------- --------- ----------- --------
* Costs charged to the United Kingdom segment include GBP181,000
of transaction related costs.
The South Korean Segment profit includes the Group's share of
the post-tax profit from the Group's associate undertaking,
Browntech Sales Co. Ltd. Sales to Browntech Sales Co. Ltd. of
GBP4.8 million represent 33% of Group Revenue. There are no other
concentrations of revenue above 10% during the year. (see Note 7 -
Related party transactions).'
IFRS 8 requires entity-wide disclosures to be made about the
regions in which it earns its revenues and holds its non-current
assets which are shown below.
6 months ended 31 March United Europe North Asia All other Total
2019 Kingdom America regions
Revenues GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
by entities' country of
domicile 9,011 - 510 4,769 - 14,290
by country from which
derived 7,530 1,479 510 4,769 2 14,290
------------------------- --------- -------- --------- -------- ---------- --------
Non-current assets
By entities' country of
domicile 4,585 - 30 2,960 - 7,575
------------------------- --------- -------- --------- -------- ---------- --------
Operating segment United South North All other Total
Kingdom Korea America countries
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended 31 March
2018
(restated)*
Segment revenue 7,457 5,417 330 1,237 14,441
Inter-segment revenue (204) - - - (204)
------------------------------- --------- -------- --------- ----------- --------
Total Revenue 7,253 5,417 330 1,237 14,237
------------------------------- --------- -------- --------- ----------- --------
Segment profit / (loss) 484 714 (77) (85) 1,036
Income tax expense (78)
------------------------------- --------- -------- --------- ----------- --------
Profit for the period 958
------------------------------- --------- -------- --------- ----------- --------
Depreciation and amortisation 299 46 - - 345
------------------------------- --------- -------- --------- ----------- --------
Total assets 12,815 9,972 340 - 23,127
------------------------------- --------- -------- --------- ----------- --------
Total assets include:
Investments in associates 2,105 - - - 2,105
Additions to non-current
assets (other than financial
instruments and deferred
tax assets) 129 - - - 129
------------------------------- --------- -------- --------- ----------- --------
* See note 2 for details regarding the restatement of prior year
results
The South Korean Segment profit includes the Group's share of
the post-tax profit from the Group's associate undertaking,
Browntech Sales Co., Ltd. Sales to Browntech Sales Co., Ltd of
GBP5.4 million represent 38% of Group Revenue. There are no other
concentrations of revenue above 10% during the year. (see Note 7 -
Related party transactions).
IFRS 8 requires entity-wide disclosures to be made about the
regions in which it earns its revenues and holds its non-current
assets which are shown below.
6 months ended 31 United Europe North Asia All other Total
March 2018 (restated)* Kingdom America regions
Revenues GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
by entities' country
of domicile 8,490 - 330 5,417 - 14,237
by country from
which derived 7,005 1,419 330 5,473 10 14,237
------------------------- --------- -------- --------- -------- ---------- --------
Non-current assets
By entities' country
of domicile 4,109 - 1 2,372 - 6,482
------------------------- --------- -------- --------- -------- ---------- --------
Operating segment United South North All other Total
Kingdom Korea America countries
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
12 months ended 30 September
2018 (restated)*
Segment revenue 15,221 11,389 652 2,941 30,203
Inter-segment revenue (429) - - - (429)
------------------------------- --------- -------- --------- ----------- --------
Total Revenue 14,792 11,389 652 2,941 29,774
------------------------------- --------- -------- --------- ----------- --------
Segment profit / (loss) 1,005 1,875 (109) (1) 2,770
Income tax expense (315)
------------------------------- --------- -------- --------- ----------- --------
Profit for the period 2,455
------------------------------- --------- -------- --------- ----------- --------
Depreciation and amortisation 607 49 1 - 657
------------------------------- --------- -------- --------- ----------- --------
Total assets 14,087 9,894 238 - 24,219
------------------------------- --------- -------- --------- ----------- --------
Total assets include:
Investments in associates 2,586 - - - 2,586
Additions to non-current
assets (other than financial
instruments and deferred
tax assets) 889 4 - - 893
------------------------------- --------- -------- --------- ----------- --------
* See note 2 for details regarding the restatement of prior year
results
The South Korea Segment profit includes the Group's share of the
post-tax profits from Browntech Sales Co. Ltd. Sales to Browntech
Sales Co. Ltd. of GBP11.4m represent 38% of Group Revenue. There
are no other concentrations of revenue above 10% during the year
(see Note 7 - Related party transactions).
IFRS 8 requires entity-wide disclosures to be made about the
regions in which it earns its revenues and holds its non-current
assets which are shown below.
12 months ended United Europe North Asia All other Total
Kingdom America regions
30 September 2018
(restated)*
Revenues GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
by entities' country
of domicile 17,733 - 652 11,389 - 29,744
by country from
which derived 14,792 2,804 652 11,389 137 29,744
---------------------- --------- -------- --------- -------- ---------- --------
Non-current assets
By entities' country
of domicile 4,439 - 23 2,858 - 7,320
---------------------- --------- -------- --------- -------- ---------- --------
4 Taxation
6 months 6 months Year to
to 31.3.19 to 31.3.18 30.9.18
Restated Restated
* *
Current income tax: GBP'000 GBP'000 GBP'000
Corporation tax expense - (127) (307)
Adjustment in respect of prior years - - 17
---------- ---------- --------
- (127) (290)
---------- ---------- --------
Deferred tax:
Origination and reversal of temporary
differences (118) 49 (25)
Income tax expense (118) (78) (315)
-------------------------------------- ---------- ---------- --------
Taxation for the interim period is charged at 10.5% (six months
to 31 March 2018: 13.8%) representing the best estimate of the
average annual income tax rate for the full financial year.
5 Dividends
An interim dividend in respect of the six months ended 31 March
2019 of 1.75p per share, amounting to a total dividend of
GBP193,965 was approved by the Directors of Titon Holdings Plc on
14 May 2019. These consolidated interim statements do not reflect
the dividend payable.
The interim dividend will be payable on 21 June 2019 to the
shareholders on the register on 24 May 2019. The ex-dividend date
is 23 May 2019.
The following dividends have been recognised and paid by the
Company:
6 months 6 months Year
to
to 31.3.19 to 31.3.18 30.9.18
Date Pence
Paid per GBP'000 GBP'000 GBP'000
share
Final in respect of the
year end 30.09.17 27.02.18 2.70 - 295 295
Interim in respect of the
year end 30.09.18 22.06.18 1.75 - - 194
Final in respect of the
year end 30.09.18 26.02.19 3.00 332 - -
---------- ---------- ---------
332 295 489
---------- ---------- ---------
6 Earnings per ordinary share
Basic earnings per share has been calculated by dividing the
profits attributable to shareholders of Titon Holdings Plc by the
weighted average number of ordinary shares in issue during the
period, being 11,083,750 (six months ended 31 March 2018:
10,964,409; year ended 30 September 2018: 11,024,243).
Diluted earnings per share has been calculated by dividing the
profits attributable to shareholders by the weighted average number
of ordinary shares and potential dilutive ordinary shares during
the period, being 11,225,961 (six months ended 31 March 2018:
11,101,308; year ended 30 September 2018: 11,189,455).
7 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between subsidiary companies
and the associate company, which is a related party, were as
follows:
Sale of goods Amount owed by related
party
6 months 6 months Year 6 months 6 months Year
to 31.3.19 to 31.3.18 to to 31.3.19 to 31.3.18 to
restated* to 30.9.18 restated* to 30.9.18
restated* restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Browntech Sales
Co. Ltd 4,769 5,417 11,389 1,118 1,990 2,712
------------ ------------ ------------ ------------ ------------ ------------
*See note 2 for details regarding the restatement of prior year
results.
There have been no additional significant or unusual related
party transactions to those disclosed in the Group's Annual Report
for 30 September 2018.
8 Liability statement
Neither the Group nor the Directors accept any liability to any
person in relation to the interim statement except to the extent
that such liability could arise under English Law. Accordingly, any
liability to a person who has demonstrated reliance on any untrue
or misleading statement or omission shall be determined in
accordance with section 90A of the Financial Services and Markets
Act 2000.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR AIMATMBJBBIL
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May 15, 2019 02:00 ET (06:00 GMT)
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