Titon Share Discussion Threads

[rainmaker] 09/9/2013 13:04

You're most welcome, WD. I think it's a lovely opportunity trading at a discount to it's 49p of liquid assets less liabilities then there's a further 31p of tangible fixed assets at no cost to the Investor and of course the valuable patents their own for MVHR for free. The problem is that there are far too many Investors watching the share price rather than focusing on the underlying business, it's markets, it's customers and the wider economy.It's very clear that the Company will make a good return on it's tangible net assets of some 80p a share once normal conditions return, which they surely will so IMHO we can look forward to a share price above that level.I also think that Nuaire,being a much larger concern with natural inherent economies of scale advantages, which did a lot of damage to Titon's MVHR business as Titon were complaining of price competition on this product without spelling out who was to blame but Investors should do their own research and then read between the lines and draw an obvious conclusion. Now that Nuaire have been forced to withdraw this product we should see a real difference to both Titon's volume and margins.There's absolutely no reason for Titon, a conservatively run and well managed business with a strong balance sheet to fail. Furthermore in an increasingly energy efficient world, MVHR is very much a product for the future for which demand, all other factors being equal, should increase exponentially.

DYOR, AIMHO

regards

[wad collector] 09/9/2013 11:11

Thank you for those thoughtful posts.
If it has survived the last 5 yrs recession , it would be surprising if it crashed now. I hope.

[rainmaker] 05/9/2013 20:22

Hi Glen, I'm an "out and out", diehard Value Investor, I'm also a shareholder and I know this Company well.

There's been excellent 30%+ growth in exports but unfortunately some 80% of it's of business is in the UK where conditions have been "sluggish". The key indicator for this business are housing starts, which are some 48% lower than their cyclical peak in 2006 and some 28% down on their 22 year average-I've checked. To gain optimum efficiency ventilation products are ideally fitted to modern air tight buildings.

Titon are market leaders in the UK in their two respective businesses, the manufacture of door handles and window frame fittings which has suffered from local authority cutbacks and could well be a sale candidate and secondly their ventilation produts division.

It's true that some of Titon ventilation products can be described as a "commodity type" business but they have a "mechanical ventilation with heat recovery(MVHR)" a patented product which removes air from a room then transfers the heat via a heat exchanger into the incoming air. I've seen figures that suggest a 58% reduction in heating costs and the product meets the upper eschelons of the UK Government code for sustainable homes.Clearly in an increasingly energy efficient/energy consumption conscious world this product has an excellent future under more normal trading conditions.
Furthermore MVHR is protected by patents and Titon recently won a case against much larger Nuaire(£65mln ann t/o, 450 staff) which resulted in their rival having to withdraw their popular X-Boxer range and pay a £250k settlement to end the case.

There have been several improvements made to Titon's operating efficiency in recent years ie their joint manufacturing venture in South Korea in 2008 where costs are half those in the UK, and staff numbers in the UK have been cut by a third(even though staff numbers overall have risen due to expansion in SK)but poor trading conditions have meant these changes have gone vitually unnoticed.

I'm very confident here. I'm a shareholder in a well managed, financially sound business with a 5% dividend yield which will clearly make a return over and above the cost of capital once conditions improve as I believe they will soon.

AIMHO, DYOR

regards

[profdoc] 05/9/2013 15:34

I'm new here, but hope I can add to the debate. As has been stated Titan has a balance sheet which suggests a net current asset value investing (NCAV) bargain. However, we need some reassurance with regard to (a) the industry economics, (b) managerial quality and (c) financial stability.

Market capitalisation is £3.9m at a share price of 39p. The interim results to March 2013 show inventory of £3m, receivables of £3.2m and cash of £2.1m. There is no bank debt and only £3m of payables and £0.2m of deferred tax to deduct to arrive at NCAV of £5.1m. Even if inventory and receivables are marked down as suggested by Graham M.Cap is less than NCAV. Also consider that £3.3m of property, plant and equipment is shown in the BS, over £2m of which is freehold land and buildings. No pension deficit.

(a) Industry economics. Titan operates in a very competitive industry and I see no reason for this to change. There is easy industry entry by new firms and little customer captivity. It is largely a commoditised sector. This is reflected in the poor profits over five years: roughly breakeven on average. However, even commoditised sectors can improve and allow leading players to raise ROCE to an acceptable (or even above acceptable) level in a rising demand situation. The highly cyclical house building and construction sector may allow this to occur over the next three years or so. In addition, Titan have developed products (R&D budget of c. £400,000 pa) for the whole house ventilation with heat recovery market. This is likely to be a growth sector as building regulations get ever tighter regarding air-tightness (buildings are almost air sealed, therefore oxygen has to let in from somewhere; opening a window seems wasteful so heat-exchanged fresh air makes sense for many (currently too expensive to install for the houses I'm building though). There is a high degree of free entry to even this industry, but at least Titan are established. The recent improvement of the company's fortunes in its overseas markets might indicate what happens to profits in an economic upswing to commoditised cyclical business.

(b) Managerial quality. In the recession costs were cut and senior managers/directors pay was restrained with the highest paid director receiving £108,000 pa: not evidence of scamming the shareholders there. A younger team of directors is now leading the company with advice from the founder and other old hands. All the directors have many years of experience in this industry in this firm. The CEO joined in 1988, joined main board in 1997 as FD, becoming CEO in 2002. While over the past five years the combined record is merely break-even, the company stayed sufficiently financially strong and cash generative to pay for over £1m of dividends, £0.5m of new computer equipment and £0.4m pa of R&D. And yet, throughout this period PPE only declined from £4.4m to £3.5m, cash declined from £2.6m to £2.1m, net current assets (as defined by firm) declined from £5.8m to £5.1m, and shareholder's funds declined from £10.2m to £9m. If this managerial team are simply managing decline then this has to count as very slow decline – and at a time of enormous general economic pressure.

(c) Financial stability. With no debt other than payables and a very high NCAV this company does not seem like a candidate for solvency or liquidity trouble. Profits (or rather break-evenness) is also stable.

WHAT MIGHT CAUSE A RECOVERY IN SHARE PRICE?
(a) General economic/industry improvement? Most likely of the four.
(b) Managerial turnaround? Possible. Still investing in innovation. Still cost cutting. Korea and other overseas performances are encouraging.
(c) Takeover? Possible (management control around 40% of shares)
(d) Liquidation. Unlikely

Questions
(1) Will margins recover?
(2) Will cash/NCAV/shareholder equity remain a downward course year after year while director continue to offer jam tomorrow?
(3) Will they be competed out of existence by a bigger beast in the industry?

For more on NCAV investing (including a paper on its effectiveness in UK) see

[wad collector] 28/8/2013 16:25

The creep upwards continues ; not really a traders share with this spread , bit of a double or quits stock.

[gingerplant] 26/7/2013 11:59

Well IMHO it's too cheap. Some see it as a value trap. And it kind of is but given NTAV of over 81p per share (Net working capital of approximately 51p a share)this is a real Ben Graham net net share - any kind of profit is great news and Korean progress is what we've been waiting for.

In some ways it's "cheaper" now we know what we know - i.e. re profitability. If we see a recovery in the UK housing mkt as has been mooted, then it could look very cheap. Remember, the shares were a more reasonable >60p as recently as early 2011.

The fact that just >40% of the shares are owned by directors or PIs means we shouldn't get screwed either - i.e. that's just about perfect IMO for such a tiddler.

[wad collector] 26/7/2013 11:36

Ah !
The RNS board is so quiet I didn't notice.
This appears to have become a company with all Hope based in Korea.

[gingerplant] 25/7/2013 16:05

Didn't you see this wad collector?



Still worth a lot more IMO.

[wad collector] 25/7/2013 15:58

One year high , wonder why....

[wad collector] 30/5/2013 18:07

Six month high and the spread has narrowed to 1p.

[horridharry] 28/5/2013 20:28

Bought into this recently, I do not believe there is any risk of delisting and anyone who thinks so should talk to management. I had a conversation prior to buying. Good company.

[orinocor] 22/5/2013 10:58

strong risk of delisting means this should be avoided at all costs.

[rainmaker] 09/5/2013 20:40

Unchanged 1p dividend declared, goes ex on 22 May and is paid on 24 June which is nice-equates to a 6.44% dividend yield at 31p with IMHO a definite increase if things continue to improve. At current levels net cash covers 65% of the share price.

regards

[rainmaker] 09/5/2013 20:30

WC-I've been thinking about that for a couple of years. Clearly in MVHR they have a product for which demand,barring another financial crisis, will only grow so the Company have an exciting future, no question.Although 80% of their output is for the UK market, did I read in the results that exports rose 66%? Edit 20.40, no I didn't as they only rose 33% I think at one time MVHR was going to be mandatory in all new buildings and then it only became "best practice".

regards

[wad collector] 09/5/2013 18:17

Hadn't really been thinking about the green angle , good thoughts.

[rainmaker] 09/5/2013 13:20

WC-just think what the Company will do once new builds return to more normal levels-Mechanical Ventilation with Heat Recovery(MVHR) is only effective for modern (new) airtight buildings with energy and pollution savings of 58% in the figures I have seen. At 30p there's also a 6.66% dividend yield whilst you wait which will surely be raised when results improve. IMHO an very exciting opportunity as not only do I expect results to improve dramatically but also this Company could easily attract a stellar rating from Investors given it's "green" credentials. The Company meets the specifications for the upper escheleons of the Government's code for sustainable homes.

DYOR, AIMHO

regards

[wad collector] 09/5/2013 13:05

Worst behind us ?

Financial performance

Profit before Taxation for the six-month period ended 31 March 2013 was GBP79,000 (2012: Loss of GBP400,000) on Revenues 2.5% lower at GBP7,340,000 (2012: GBP7,532,000).

Earnings per share for the period were 0.57p (2012: losses per share 2.79p) and the Directors have declared an unchanged interim dividend of 1.0p per share (2012: 1.0p per share).

Net Cash Balances at 31 March 2013 were GBP2,118,000 (2012: GBP2,226,000).

Trading commentary

In the 2012 Annual Report we stated that the overriding objective of the Directors is to return the business to profit in the current financial year. I am pleased to report that we have made a profit for the six months ended 31 March 2013 compared to the loss we suffered in the comparable period. However, this positive position is largely due to two factors: the improved return from our Korean operations which is now profitable again as we anticipated at the beginning of the financial year and the cash settlement that we received from Nuaire Limited in the period.

From the UK perspective trading conditions have remained difficult as consumers have generally not felt confident enough to invest in new doors and windows. We are also now seeing the full effects of the decline in social housing that we anticipated in the Annual Report. Both of these factors are symptomatic of the UK economy's well discussed problems: a weak consumer sector accompanied by the Government's austerity programme which has contributed to a reduction in capital projects. This is shown clearly by the very weak construction numbers in the Gross Domestic Product statistics in the last two years. We are in the process of introducing new hardware and ventilation systems products to our customers although we do not expect that there will be any significant impact on our sales in this financial year.

As reported at the last year end, we have taken significant action to reduce our overheads and will continue to seek cost savings in our UK business to reflect the weak trading conditions. Our UK overheads for the 6 months are GBP266,000 lower than for the same period last year.

I am pleased to report that total revenues from our operations in Korea have improved significantly to GBP2.2m against GBP1.3m for the comparable period last year. This is due largely to increased sales to the private house building market than in prior years although the government funded house building market is still an important source of business for us. Higher revenues have also generated pre tax profits in our subsidiary, Titon Korea and our associate company, Browntech Sales. We are very conscious that our partners in Korea have worked very hard to build up this business and we thank them for their efforts.

Elsewhere outside the UK, revenues generated in our export markets have improved by 33% in the six months to 31 March 2013 compared to the comparable period. This is largely due to increased sales to the USA, Germany and Denmark. We will continue to focus on export markets to offset lost sales in the UK.

We have already announced to shareholders that we have reached an agreement to settle our legal action for alleged patent infringement against Nuaire Limited. Nuaire has agreed to cease the sale and marketing of one of its ventilation products and has paid Titon a cash sum disclosed as 'Other income' in the Income Statement. We will take whatever steps are necessary in future to defend our intellectual property as we continue to invest significant resources in developing new products and processes.

Page 1

Board Changes

We have already announced that that Peter Fitt and Professor Patrick O'Sullivan have left the Titon Holdings Board in the period. Peter Fitt has been on the Board since the flotation of the Company in 1988 and has been a source of wise counsel for over 25 years. Professor O'Sullivan has been a consultant to the Company since the early 1980's and has been on the Board since 2003 and has contributed significantly to the expertise we have accumulated on ventilation products. We thank them both for their service to Titon and wish them both well for the future.

Prospects

We are encouraged that a small increase in private house building in 2013 is expected but this is countered by the stagnation of social house construction. As I have noted above a large part of our business depends on consumers buying new windows and doors. However, consumer confidence remains fragile and we see few signs of this changing for the positive in the next few months. Over time the Government's Green Deal, which provides funding for people and businesses to become more energy efficient will, hopefully, lead to increased spending on new doors and windows by consumers, but for the immediate future we remain cautious about the prospects for both our UK and export markets in the second half year.

We are optimistic that our operations in Korea will continue to grow during 2013 and we will continue to support them, particularly on the design side, wherever possible.

Our balance sheet remains strong and we have significant cash balances of GBP2.118,000 (2012: GBP2,226,000), which will allow us to continue to invest in new products and markets in 2013.

[liarspoker] 04/2/2013 23:14

Well I have a good mind to go to the AGM and tell the directors I think that the assets should be sold and the cash returned to shareholders.

Read the Management chapter in Security Analysis and you will see where I am coming from.

BTW if you want to win an investment book of your choice, plus a free report on two sub cash shares, look here ( my site btw ):

[sleepy] 04/2/2013 21:40

Spob - ???

[begineerbrown] 16/1/2013 23:45

What's the thoughts on these???

[wad collector] 04/1/2013 21:25

I see that todays directors options are based on 24.5p exercise price.Shame that this wasn't awarded a couple of months ago at 35p ; then they might have to work quite hard to exercise them.Mind you , will it still be solvent in 3yrs time?

[baner] 04/1/2013 08:39

Liarspoker

I totally agree with you, this is a real stinker!