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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Titon Holdings Plc | LSE:TON | London | Ordinary Share | GB0008941402 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 85.00 | 80.00 | 90.00 | 85.00 | 85.00 | 85.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
Manufacturing Industries,nec | 22.33M | -686k | -0.0610 | -13.93 | 9.56M |
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.
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