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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 | 3,462 | 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 |
From Apr 2019 to Apr 2024
TIDMTON
RNS Number : 5904W
Titon Holdings PLC
12 December 2019
12 December 2019 LEI: 213800ZHXS8G27RM1DD7
Titon Holdings Plc
Preliminary results for the year to 30 September 2019
Titon Holdings Plc ("Titon", the "Group" or the "Company"), a leading international manufacturer and supplier of ventilation systems, and window and door hardware, announces its preliminary results for the year ended 30 September 2019.
Summary Financial Results
Hot Features
Premium
2019 2018* Change (%)
(restated)*
Net revenue GBP27.2m GBP29.8m -9%
Underlying EBITDA(1) GBP2.58m GBP2.67m -3%
EBITDA GBP2.40m GBP2.67m -10%
Underlying profit before
tax(1) GBP2.15m GBP2.77m -22%
Profit before tax GBP1.97m GBP2.77m -29%
Underlying basic earnings
per share (EPS)(1) 14.5p 18.2p -20%
Full year dividends
per share 4.75p 4.75p -
Financial Highlights
-- Net revenue declined 9% to GBP27.2 million (2018: GBP29.8 million) as a result of the previously announced slowdown in South Korea
-- Gross profit margin increased from 28.9% to 30.2% -- Underlying EBITDA(1) fell by 3% to GBP2.58 million -- Underlying profit before tax of GBP2.15 million (2018: GBP2.77 million)
-- Proposed final dividend of 3.0 pence per share, (2018: 3.0 pence), which maintains the dividend for the full year at 4.75 pence per share
-- Net cash at 30 September 2019 increased 34% to GBP4.59 million (2018: GBP3.42 million) -- GBP480,000 paid in dividends by Titon Korea to the Company during the period -- Underlying return on capital employed (ROCE)(2) 14.6% (2018: 15.5%)
Operational highlights
-- The Group's UK and European based businesses saw revenue rise 1% in the year:
-- mechanical ventilation systems again performed well, with growth in the UK of 7% and overall growth of 4%;
-- revenue from the UK window & door hardware business was slightly lower than in 2018 overall whilst Titon branded door and window products recorded further growth of 20% in revenue;
-- Export sales of mechanical and hardware products fell by 5.7% as European markets weakened.
-- Titon Korea's revenue fell 27% and its net profit after tax fell by 23% as a result of the slowdown in residential construction activity and the market shift towards mechanical ventilation. However, South Korea in total (Titon Korea and Browntech Sales Co.), contributed 54% of underlying profit before tax(1) (2018: 68%);
-- Sales in the USA grew by 51% to GBP983,000 in the year;
-- The Group has continued to promote the benefits of good indoor air quality in the UK, working closely with the relevant trade associations;
-- Continuing focus on product development where new products are to be introduced in UK and European Ventilation Systems and Window & Door Hardware divisions in 2020, together with the launch of new products to meet changing demand in South Korea.
Executive Chairman, Keith Ritchie, said:
"It has been a more challenging year for Titon with revenue lower by 9% at GBP27.2 million, year-on-year and, whilst the gross margin rose and underlying EBITDA was just 3% lower, underlying profit before tax declined by 22% to GBP2.15 million. The prime factor in this performance was the slow-down in South Korea, which I reported on earlier in the year. During the year, too, Titon was profitable and cash generative; and the dividend for the year is maintained.
The UK economy continues to grow at between 1% and 2% which is below trend. However, it continues to be positive during what has been a prolonged period of political and economic uncertainty. In South Korea, the Group's largest net profit contributor, 2019 saw growth in GDP of about 2.0%, which is also below trend. In 2020 and 2021, GDP is forecast to grow by 2.2% and 2.3% respectively(3) as the Government continues its expansionary fiscal stance together with two interest rate cuts by the Bank of Korea. For Titon, it will be a year of transition for its natural ventilation products in South Korea as economic growth recovers and new products are launched. Revenue at Titon Korea in fiscal 2020 will be lower than in 2019.
Our business model is robust but we continue to face political and economic uncertainties which have contributed to a challenging first two months of the fiscal year. Titon builds and delivers popular products across a unique geographical spread and a number of core market positions. We have good people, a strong balance sheet and continue to seek new growth opportunities in our target markets".
For further information please contact:
Titon Holdings Plc
Keith Ritchie, Executive Chairman Tel: +44 (0)1206
713821
Shore Capital - Nominated Adviser and Tel: +44 (0)20
Broker 7408 4090
Dru Danford
Edward Mansfield
Daniel Bush
*Prior period figures for the year to 30 September 2018 have been restated pursuant to the announcement made by the Company on 19 March 2019, further details of which are included in note 6 of the Preliminary Announcement
Notes:
(1) Underlying EBITDA, underlying profit before tax and underlying 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) Underlying ROCE is calculated by dividing Underlying EBIT by capital employed (capital employed being the sum of shareholders' funds, non-controlling interests and all debt less intangible assets and cash)
(3) Focus Economics forecasts
Chairman's Statement
As announced in early 2019, a slow-down in trading coupled with changing product preferences towards mechanical ventilation units in South Korea has resulted in a reduction in the Group's underlying profit before tax of 22%. Our UK, European and US operations have, however, traded satisfactorily and the total dividend for the year has been maintained. At the same time, our balance sheet has continued to strengthen as net cash increased significantly to GBP4.6 million.
Profit and loss
As noted below, all 2018 amounts, where relevant, have been restated. In the year ended 30 September 2019, the Group's net revenue (which excludes inter-segment activity) reduced by 9% to GBP27.2 million (2018: GBP29.8 million). On a constant currency basis, there was no material change to the 2019 net revenue (2018: an increase of 8%).
The Group's gross margin increased from 28.9% to 30.2% as a result of changes in the geographical mix of sales. Underlying operating profit(1) fell 10.2% to GBP1.8 million (2018: GBP2.0 million) and the Group realised an underlying operating profit margin(1) of 6.7% (2018: 6.8%).
Net interest contributed GBP12,000 (2018: GBP13,000) while the share of profits from the Group's South Korean associate fell from GBP741,000 to GBP329,000 resulting in underlying profit before tax(1) of GBP2.15 million (2018: GBP2.77 million). On a constant currency basis there was no material change to the 2019 or the 2018 profit before tax.
Underlying EBITDA(1) was 3.4% lower at GBP2.58 million (2018: GBP2.67 million) and underlying earnings per share(1) for the year was 14.5 pence (2018: 18.2 pence). The underlying effective rate of taxation(1) of the Group fell to 10.2% (2018: 15.5%).
The Directors are proposing a final dividend of 3.0 pence per share (2018: 3.0 pence). When added to the interim dividend of 1.75 pence, paid on 21 June 2019 (2018: 1.75 pence), this represents a total dividend for the year of 4.75 pence (2018: 4.75 pence). If approved by shareholders at the forthcoming Annual General Meeting on 18 February 2020, the dividend will be payable on 21 February 2020 to shareholders on the register at 16 January 2020. The ex-dividend date is 17 January 2020.
Statements of financial position and cash flows
The Group benefits from a robust and liquid balance sheet. Net assets, including non-controlling interests, rose by GBP0.63 million to GBP17.7 million in the year to 30 September 2019, at which point net cash stood at GBP4.59 million (2018: GBP3.41 million), which is equivalent to 25.9% of net assets (2018: 20.0%). Inventory levels at the year-end fell by GBP783,000 on 2018 due to a reduction in stock levels in South Korea. This, along with a reduction in the level of other working capital required in South Korea, has contributed to cash generated from operations increasing to GBP3.28 million (2018: GBP1.94 million). Capital expenditure increased slightly to GBP902,000 (2018: GBP893,000) and the Group paid dividends to the shareholders of Titon Holdings Plc of GBP526,000 (2018: GBP489,000). During the course of the year Titon Korea paid a further dividend to Titon Holdings Plc and non-controlling shareholders, resulting in GBP480,000 of cash being paid to Titon Holdings Plc and a cash outflow from the Group to Non-Controlling Interests of Titon Korea of GBP488,000 (2018: GBP416,000). The overall effect has been a net increase in the Group's cash reserves in the period of GBP1.17 million (2018: GBP146,000). Net current assets at 30 September 2019 were GBP10.1 million (2018: GBP9.8 million) with a Quick Ratio(2) of 2.1 (2018: 1.6). Underlying ROCE(3) was 14.6% (2018: 15.5%).
Segment analysis
The Directors look initially at geographical areas to evaluate the Group's performance and then consider product splits at the secondary level.
UK and Europe
Overall, revenue from the UK and Europe increased by 1% in fiscal 2019.
Revenue from the Hardware business, comprising sales of our traditional trickle vents plus window and door hardware, was slightly lower in the year as export sales fell by 19% and sales into the PVCu, Timber and Aluminium sectors of the UK market were flat as markets weakened. Sales of Titon branded door and window hardware products continued to show growth of 20% in the fiscal year.
In our Ventilation Systems business, the revenues from mechanical ventilation products increased by 4%, with sales in the UK up 7% despite a slowdown in our key London and South East markets where delays in projects are being experienced. Mechanical ventilation sales in mainland Europe were slightly down on 2018 as a number of the major European economies slowed and the uncertainty caused by Brexit led to customers' normal purchasing patterns being disrupted.
Titon continues to invest in research and development which, in turn, yields a continuing number of new products for both the Ventilation Systems and Hardware businesses; and this will continue in 2020. A focus on the importance of air quality, both outdoors and indoors, continues to sharpen as the impact of poor-quality air on health is better understood by the medical profession, governments and consumers. For our part, we continue to work with our trade associations to promote ventilation and specifically with Beama (British Electrotechnical & Allied Manufacturers Association), which represents manufacturers of electro-technical products, such as ventilation products, to promote the benefits of good indoor air quality. Beama also continues to sponsor the Healthy Homes and Buildings All Party Parliamentary Group and the Air Pollution All Party Parliamentary Group.
In October 2019 the Ministry of Housing, Communities and Local Government (MHCLG) published "The Future Homes Standard", which includes a consultation on changes to Part L (Conservation of fuel and power) and Part F (Ventilation) of the Building Regulations for new dwellings. Both of these Building Regulations are important to the sale of our ventilation products in the UK. We will be commenting on the proposed changes to both sets of Building Regulations before the closing date in January 2020. MHCLG have indicated that they hope to bring into force the proposed changes by mid/late 2020 although this date will, of course, be subject to the usual parliamentary priorities. Our initial view is that the proposals may alter the mix of ventilation products supplied to the market. We await proposals from MHCLG on the refurbishment sector, non-domestic buildings and over-heating in due course.
The value of UK private and public housebuilding output is forecast to increase in 2019 by 2.3% against calendar 2018 according to Experian's most recent UK Construction forecast, and by a further 2.3% in 2020. At the same time, the expected value of repair, maintenance and improvement (RMI) in the private and public residential sectors is forecast to be down by 1% in 2019 against 2018, although it is then expected to rise by 2.3% in 2020.
South Korea
In South Korea, the Group's subsidiary, Titon Korea (51% owned), manufactures natural window ventilation products and remains the national market leader with an estimated market share in this core sub-sector in excess of 75%. In February 2019 we issued a trading update in respect of our South Korean business identifying a slowdown in the domestic residential development market and the presence of dust-based air pollution, largely from China. The latter impact increased the relative demand for mechanical ventilation products which, in turn, reduced the demand for natural ventilation products. These factors have resulted in a reduction in revenue to GBP8.3 million (2018: GBP11.4 million) whilst the contribution to Group profit before tax declined to GBP0.82 million (2018: GBP1.1 million).
The Group's associate company (49% owned), Browntech Sales Co. Limited ('BTS'), which principally distributes Titon Korea's natural ventilation products, was accordingly impacted by the downturn experienced by Titon Korea. The profit recognised in respect of associates (which is all BTS) was 56% lower in 2019 at GBP329,000 (2018: GBP741,000). In addition to distributing ventilation products in South Korea, BTS invests in and develops schemes in the domestic residential real estate market. There have been no further changes to the status of BTS's investments in the South Korean residential real estate market since the 2019 Interim Results. Despite the reduction in profits from South Korea that we have experienced this year and taking Titon Korea and BTS together, South Korea remains the largest contributor to the Group's profit before tax at GBP1.15 million for the year (2018: GBP1.84 million). We have continued to commit resources to designing new products for the South Korean market and a new natural ventilation product with increased filtration has been designed by our Research & Development team in the UK and it is now in the process of being tooled up in Korea. The product will be on sale in the second half of fiscal 2020.
United States
Finally, as I noted in the 2019 Interim Results Statement, results from our US business have improved significantly in the period. Sales for the twelve months increased by 51% to GBP983,000 (2018: GBP652,000) and, while Titon Inc. made no statutory profits in the full year, it generates a return for our UK manufacturing business and makes a contribution to Group income.
Board
As noted in the Interim Report, we appointed Mr Bernd Ratzke to the Titon Board as an independent Non-executive Director and he has immediately made a contribution to the Board's discussions and to other legal matters impacting the day-to-day activities of the Group. There have been no other changes to the Board during the fiscal year.
Employees
As ever, I offer my sincere thanks to all of the employees of Titon as the success of the Group is down to their hard work and talents. Although the business has not grown this year as we would have liked, this is not down to their contribution which, as usual, has been substantial.
Restatement
As reported in the 2019 Interim Results Statement, we announced in March 2019 that certain costs and revenues associated with products sold by Titon Korea in earlier accounting periods, up to and including 30 September 2018, had, in error, not been correctly accounted for 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% subsidiary, Titon Korea and sold by Browntech Sales Co. Ltd., our 49% owned associate company. The result of this error was a non-cash reduction of total equity attributable to equity holders of Titon by GBP826,000 from the figure shown in the 2018 Annual Report. In this Statement the total equity and other comparative 2018 numbers have been restated. For 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.
Investors
We have now been listed on the AIM market for one year since our move from the Main Market of the London Stock Exchange and I hope that shareholders have benefited from this move.
We have continued to engage the corporate research house Hardman & Co. which regularly writes and distributes investment research on Titon and which we believe has both widened interest in the Group and continues to have a positive impact in the share price over the past four years. Shore Capital, our Nominated Adviser and broker, has initiated research coverage on Titon during the year by publishing a research note on the Group in August 2019 entitled "Improving the air that we breathe", a sentiment we share. Finally, I would like to mention again the Group's dividend reinvestment programme (DRIP) which has operated for a number of years. This represents a straight-forward and cost effective way for shareholders to increase their holdings in Titon should they wish to do so.
Outlook
Despite the previously reported challenges in the Korean market, the Group remained profitable and cash generative. The dividend for the year was maintained at the same level as 2018, whilst our net cash reserves also increased significantly, further strengthening the Group's balance sheet.
The UK economy continues to grow, albeit at a slower rate than forecast at this time last year. How much of this slower growth is down to Brexit is difficult to say but sentiment amongst many consumers and businesses in the UK (and within the wider EU) is that uncertainty about Brexit has hit confidence and impacts adversely on trading. At Titon, we increased the buying of stock in advance of a possible Brexit date twice in 2019, to no benefit. We urge our politicians, of whichever party wins the General Election, to give certainty to the Country. Without it, of course, it is difficult to plan and commit funds to new investments. As a business and sector, too, we are subject to amendments to the current UK regulatory regime for ventilation and conservation of fuel and power, which could change demand for our passive and powered ventilation products.
In South Korea, the Group's largest net profit contributor, 2019 saw modest growth in GDP throughout the year of about 2.0%, which is below trend. The South Korean economy should continue to grow in 2020 with Focus Economics forecasting a rise in GDP in 2020 of 2.2% and 2.3% in 2021 as the Government continues its expansionary fiscal stance together with the impact of two interest rate cuts by the Bank of Korea. As noted above, we are in a transitionary period for our natural ventilation products in South Korea as market requirements change. Whilst we will be launching new products for this market in the second half of 2020, we expect adoption over a period of time. As a result, we anticipate that sales in Titon Korea in fiscal 2020 will be lower than in 2019.
Our business model is robust but we continue to face political and economic uncertainties which have contributed to a challenging first two months of the fiscal year. Titon builds and delivers popular products across a unique geographical spread and a number of core market positions. We have good people, a strong balance sheet and continue to seek new growth opportunities in our target markets.
On behalf of the Board.
K A Ritchie
Chairman
11 December 2019
Notes:
(1) Underlying Operating profit, Underlying Profit before tax, Underlying EBITDA and Underlying EPS in the period are non-IFRS measures which 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) The Quick Ratio measures liquidity and is calculated as follows. Current Assets-less-Stocks divided by Current Liabilities.
(3) Underlying ROCE is calculated by dividing Underlying EBIT by capital employed (capital employed being the sum of shareholders' funds, non-controlling interests and all debt less intangible assets and cash).
Unaudited Consolidated Income Statement
for the year ended 30 September 2019
Unaudited Restated*
2019 2018
GBP'000 GBP'000
Revenue 27,157 29,774
Cost of sales (18,959) (21,170)
------------------------------------------- ----------- -----------
Gross profit 8,198 8,604
Distribution costs (1,489) (1,454)
Administrative expenses (4,415) (4,707)
Research and development expenses (504) (446)
Transaction related expenses (181) -
Other income 20 19
------------------------------------------- ----------- -----------
Operating profit 1,629 2,016
Finance income 12 13
Share of post-tax profits from associate 329 741
------------------------------------------- ----------- -----------
Profit before tax 1,970 2,770
Income tax expense (186) (315)
------------------------------------------- ----------- -----------
Profit after income tax 1,784 2,455
------------------------------------------- ----------- -----------
Attributable to:
Equity holders of the parent 1,423 2,007
Non-controlling interest 361 448
Profit for the year 1,784 2,455
------------------------------------------- ----------- -----------
Earnings per share attributed to equity
holders of the parent:
Basic 12.84p 18.21p
Diluted 12.68p 17.94p
* See note 6 for details regarding the restatement of prior year results
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 30 September 2019
Unaudited Restated*
2019 2018
GBP'000 GBP'000
Profit for the year 1,784 2,455
Other comprehensive income - items which
may be reclassified to profit or loss
in subsequent periods:
Exchange difference on retranslation
of net assets of overseas operations (201) 423
Total comprehensive income for the year 1,583 2,878
Attributable to:
Equity holders of the parent 1,323 2,293
Non-controlling interest 260 585
------------------------------------------- ----------- -----------
1,583 2,878
------------------------------------------- ----------- -----------
* See note 6 for details regarding the restatement of prior year results
Unaudited Consolidated Statement of Financial Position
at 30 September 2019
Unaudited Restated* Restated*
30.9.19 30.9.18 01.10.17
GBP'000 GBP'000 GBP'000
Assets
Property, plant and equipment 3,799 3,655 3,548
Intangible assets 718 737 638
Investments in associates 2,894 2,586 1,713
Deferred tax assets 281 348 375
Total non-current assets 7,692 7,326 6,274
----------- ----------- -----------
Inventories 4,884 5,667 4,670
Trade and other receivables 5,446 7,799 6,644
Income tax receivable - 12 79
Cash and cash equivalents 4,587 3,415 3,269
----------- ----------- -----------
Total current assets 14,917 16,893 14,662
----------------------------------- ----------- ----------- -----------
Total Assets 22,609 24,219 20,936
----------------------------------- ----------- ----------- -----------
Liabilities
Deferred tax liability 83 37 39
----------- ----------- -----------
Total non-current liabilities 83 37 39
----------- ----------- -----------
Trade and other payables 4,793 6,901 5,802
Income tax payable 12 154 63
Total current liabilities 4,805 7,055 5,865
----------------------------------- ----------- ----------- -----------
Total Liabilities 4,888 7,092 5,904
----------------------------------- ----------- ----------- -----------
Equity
Share capital 1,113 1,113 1,098
Share premium reserve 1,049 1,049 985
Capital redemption reserve 56 56 56
Treasury shares (27) (27) (27)
Foreign exchange reserve 402 502 216
Retained earnings 13,669 12,728 11,167
----------------------------------- ----------- ----------- -----------
Total Equity attributable
to equity holders of the parent 16,262 15,421 13,495
----------------------------------- ----------- ----------- -----------
Non-controlling Interest 1,459 1,706 1,537
----------------------------------- ----------- ----------- -----------
Total Equity 17,721 17,127 15,032
----------------------------------- ----------- ----------- -----------
Total Liabilities and Equity 22,609 24,219 20,936
----------------------------------- ----------- ----------- -----------
* See note 6 for details regarding the restatement of prior year results
Unaudited Consolidated Statement of Changes in Equity
at 30 September 2019
Share Share Capital Foreign Treasury Retained Total Non- Total
Capital premium redemption exchange shares earnings controlling Equity
reserve reserve reserve interest restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 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)
----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- -----------
30 September
2017 and at 1
October 2017
(as restated) 1,098 985 56 216 (27) 11,167 13,495 1,537 15,032
----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- -----------
Translation
differences
on overseas
operations - - - 286 - - 286 137 423
Profit for the
year - - - - - 2,007 2,007 448 2,455
----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- -----------
Total
Comprehensive
Income for the
year* - - - 286 - 2,007 2,293 585 2,878
----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- ----------- Dividends paid - - - - - (489) (489) - (489) Dividends paid to NCI in subsidiary - - - - - - - (416) (416) Share-based payment expense - - - - - 43 43 - 43 Ordinary shares issued 15 64 - - - - 79 - 79 ----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- ----------- 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 - - - - - (19) (19) (19) (38) At 1 October 2018 1,113 1,049 56 502 (27) 12,709 15,402 1,687 17,089 Translation differences on overseas operations - - - (100) - - (100) (101) (201) Profit for the year - - - - - 1,423 1,423 361 1,784 ----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- ----------- Total Comprehensive income for the year - - - (100) - 1,423 1,323 260 1,583 ----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- ----------- Dividends paid - - - - - (526) (526) - (526) Dividends paid to NCI in subsidiary - - - - - - - (488) (488) Share-based payment expense - - - - - 63 63 - 63 At 30 September 2019 1,113 1,049 56 402 (27) 13,669 16,262 1,459 17,721 ----------------- --------- --------- ------------ ---------- ---------- ---------- --------- ------------- -----------
* See note 6 for details regarding the restatement of prior year results
Unaudited Consolidated Statement of Cash Flows
for the year ended 30 September 2019
Unaudited Restated*
2019 2018
GBP'000 GBP'000
Cash generated from operating activities
Profit before tax 1,970 2,770
Depreciation of property, plant & equipment 543 448
Amortisation of intangible assets 228 209
Profit on sale of plant & equipment - (16)
Share based payment expense - equity settled 63 43
Finance income (12) (13)
Share of associate's post-tax profit (329) (741)
------------------------------------------------- ------------------- -------------------
2,463 2,700
Decrease / (increase) in inventories 690 (836)
Decrease / (increase) in receivables 2,153 (890)
(Decrease) / increase in payables and
other current liabilities (2,033) 964
Cash generated from operations 3,273 1,938
------------------------------------------------- ------------------- -------------------
Income taxes paid (203) (132)
------------------------------------------------- ------------------- -------------------
Net cash generated from operating activities 3,070 1,806
------------------------------------------------- ------------------- -------------------
Cash flows from investing activities
Purchase of plant & equipment (694) (578)
Purchase of intangible assets (209) (315)
Proceeds from sale of plant & equipment 7 46
Finance income 12 13
Net cash used in investing activities (884) (834)
------------------------------------------------- ------------------- -------------------
Cash flows from financing activities
Exercise of Share Options - 79
Dividends paid to equity shareholders
of the parent (526) (489)
Dividends paid to Non-controlling shareholders
of a subsidiary (488) (416)
Cash withdrawn from treasury deposit accounts 900 300
Net cash used in financing activities (114) (526)
------------------------------------------------- ------------------- -------------------
Net increase in cash (including movement
on treasury deposits)** 2,072 446
Cash at beginning of the year (excluding
treasury deposits) 2,515 2,069
Cash at end of the year (excluding treasury
deposits) 4,587 2,515
------------------------------------------------- ------------------- -------------------
* See note 6 for details regarding the restatement of prior year results
The Group cash and cash equivalents figure on the Consolidated Statement of Financial Position includes both the cash at the year end and the cash on treasury deposit of GBPnil (2018: GBP900,000) and totals GBP4,587,000 at 30 September 2019 (2018: GBP3,415,000).
**The net increase in Group cash including the movements on treasury deposits for the year is GBP1,172,000 (2018: GBP146,000).
Notes to the Preliminary Announcement for the year ended 30 September 2019
1 Earnings per ordinary share
The calculation of the basic and diluted earnings per share is based on the following data:
2019 2018
restated*
GBP'000 GBP'000
Numerator
Earnings for the purposes of basic earnings
per share being
earnings after tax attributable to members
of Titon Holdings Plc 1,423 2,007
------------------------------------------------ ------------ ------------
Denominator Number Number
Weighted average number of ordinary shares
for the purposes of basic
earnings per share 11,083,750 11,024,243
Effect of dilutive potential ordinary shares:
Share options 142,560 165,212
------------ ------------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 11,226,310 11,189,455
------------ ------------
Earnings per share (pence)
Basic 12.84p 18.21p
Diluted 12.68p 17.94p
------------------------------------------------ ------------ ------------
* See note 6 for details regarding the restatement of prior year results
2 Dividends
2019 2018
GBP'000 GBP'000
Final 2018 dividend of 3.00 pence (2017:
2.70 pence) per ordinary
share proposed and paid during the year relating
to the
previous year's results 332 295
Interim dividend of 1.75 pence (2018: 1.75
pence) per ordinary
share paid during the year 194 194
526 489
---------------------------------------------------- ------------------ ---------
The Directors are proposing a final dividend of 3.0 pence (2018: 3.0 pence) per share. This will result in a final dividend totalling GBP332,512 (2018: GBP332,512), subject to approval by the shareholders at the Annual General Meeting. This dividend has not been accrued at the balance sheet date.
3 Revenue and segmental information
In identifying its operating segments, management generally 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 in four main business segments which are:
Segment Activities undertaken include:
United Kingdom Sales of passive and powered ventilation products
to housebuilders, 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 below.
Operating segment
The Directors' primary review of performance is by geographical regions.
For the year ended United South North All other
30 September 2019 Kingdom Korea America countries Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 15,567 8,329 983 2,774 27,653
Inter-segment revenue (496) - - - (496)
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Total Revenue 15,071 8,329 983 2,774 27,157
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Segment profit 878 1,186 - (94) 1,970
Tax expense (186)
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Profit for the year 1,784
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Depreciation and amortisation 706 65 - - 771
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Total assets 14,459 7,846 304 - 22,609
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Total assets include:
Investments in associates 2,669 - - - 2,669
Additions to non-current
assets
(other than financial
instruments
and deferred tax
assets) 866 36 - - 902
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
The South Korea Segment profit includes the Group's share of the profits from Browntech Sales Co. Ltd., (BTS), the Group's associate undertaking in South Korea, of GBP329,000.
Sales to BTS of GBP8.33m represented 31% of Group Revenue (2018: GBP11.39m - 38%). There are no other concentrations of revenue above 10% during the year (see Note 5 - 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.
For the year ended United Europe USA and South All other Total 30 September 2019 Kingdom Canada Korea regions Revenues GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 By entities' country of domicile 17,845 - 983 8,329 - 27,157 By country from which derived 15,073 2,742 983 8,329 30 27,157 ------------------------ ---------- --------- --------- --------- ----------- --------- Non-current assets By entities' country of domicile 4,642 - 30 3,020 - 7,692 ------------------------ ---------- --------- --------- --------- ----------- ---------
Operating segment
For the year ended North All other
30 September 2018 United South America countries
(restated)* Kingdom Korea Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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 1,005 1,875 (109) (1) 2,770
Tax expense (315)
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
Profit for the year 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
-------------------------------- ---------- --------- ---------- ------------ --------------------------------
The South Korea Segment profit includes the Group's share of the profits from Browntech Sales Co. Ltd., (BTS), the Group's associate undertaking in South Korea, of GBP778,000.
Sales to BTS of GBP11.39m represented 38% of Group Revenue (2017: GBP9.53m - 34%). There are no other concentrations of revenue above 10% during the year (see Note 5 - 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.
For the year ended United Europe USA and South All other Total 30 September 2018 Kingdom Canada Korea regions (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 ------------------------ ---------- --------- --------- --------- ----------- ---------
* See note 6 for details regarding the restatement of prior year results
Information about the Group's products
Within geographical segments the Directors also monitor the revenue performance of the Group within its two identified business streams. The Group's operations are separated between trickle ventilation and window and door hardware products and mechanical ventilation products. The following table provides an analysis of the Group's external revenue, irrespective of the geographical region of sale.
2019 2018
GBP'000 GBP'000
Trickle ventilation and window and door
hardware products 20,134 23,022
Mechanical ventilation products 7,023 6,752
----------------------------------------- --------- ---------
Revenue 27,157 29,774
----------------------------------------- --------- ---------
4 Tax expense
2019 2018
restated*
Current income tax: GBP'000 GBP'000
Corporation tax expense (73) (307)
Adjustment in respect of prior years - 17
--------- ------------
(73) (290)
Deferred tax:
Origination and reversal of temporary differences (113) (25)
Income tax expense (186) (315)
---------------------------------------------------- --------- ------------
The charge for the year can be reconciled
to the profit
per the income statement as follows:
Profit before tax
Effect of: 1,970 2,770
Expected tax charge based on the standard
rate of
Corporation tax in the UK of 19.0% (2018:
19.0%) (374) (526)
Additional deduction for R&D expenditure 148 148
Effect of Associate's results reported net
of tax 63 144
Expenses deductible / (not deductible) for
tax purposes 25 (31)
Difference in overseas tax rates (48) (71)
Adjustments in respect of prior periods - 17
Income tax expense (186) (315)
--------------------------------------------- ------- -------
5 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.
Titon Korea Co. Ltd., the Company's 51% owned subsidiary, paid a dividend during the year to its shareholders amounting to GBP996,000 (2018: GBP849,000). Of this amount, GBP508,000 (2018: GBP433,000), before withholding tax, was paid to the Company with the other GBP488,000 (2018: GBP416,000) being paid to the non-controlling interests.
Transactions for the year between Group companies and the associate company, which is a related party, were as follows:
Sales of goods Amount owed by
related party
Restated*
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
------------------ --------- ----------- --------- ---------
Browntech Sales
Co. Ltd 8,329 11,389 1,975 4,059
------------------ --------- ----------- --------- ---------
* See note 6 for details regarding the restatement of prior year results
Trading debts between subsidiaries and BTS are created only when the ultimate customer has accepted the successful inclusion of our products into buildings.
Key management who hold the authority and responsibility for planning, directing and controlling activities of the Group are comprised solely of the Directors. Aside from compensation arrangements, there were no transactions, agreements or other arrangements, direct or indirect, during the year in which the Directors had any interest.
6 Restatement of prior year results
In March 2019 the Company discovered that the 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. An explanation of the reason for the adjustment is included within the Chairman's Statement and the required restatements have been included within these preliminary 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 Adjust-ment Restated Originally Adjust-ment Restated
stated as at as at stated as at
30/09/2017 30/09/2017 as at 30/09/2018
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
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 12 months to September 2018 is as follows:
12 months to September 2018
Originally Adjustment Restated
stated
GBP'000 GBP'000 GBP'000
Revenue 29,946 (172) 29,774
Profit before tax 2,979 (209) 2,770
Income tax (expense)
/ credit (352) 37 (315)
---------------------------------- ------------ ------------ ----------
Profit after income
tax 2,627 (172) 2,455
---------------------------------- ------------ ------------ ----------
Attributable to:
Equity holders of the
parent 2,113 (106) 2,007
Non-controlling interest 514 (66) 448
---------------------------------- ------------ ------------ ----------
2,627 (172) 2,455
---------------------------------- ------------ ------------ ----------
Earnings per share attributable
to equity holders of
the parent
Basic 19.17p 18.21p
Diluted 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 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 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.
7 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 Report on Risk Management (pages 13 to 18) available at www.titonholdings.com. The Board considers that these remain a current reflection of the risks and uncertainties facing the business.
8 Basis of preparation
The financial information for the year ended 30 September 2019 together with the comparative year has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The accounting policies of the Group under International Financial Reporting Standards (IFRSs) are set out in detail in the 2018 Financial Statements which are available from the Group's website at www.titonholdings.com.
The Group has adopted the following new standards (effective 1 January 2018) in these preliminary results:
* 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 and the new standard applied.
The key performance obligation of the Group has been identified
as the point at which it delivers its products to its customers.
As such, the Group's sale of goods performance obligations
are satisfied at the point in time when the customer receives
the goods. In South Korea this takes place in stages and
the Group has determined that revenue is to be recognised
over time, as first fix shipments receive customer acceptance
that the product has been satisfactorily installed; and second
fix shipments when they are provided to the customer
Revenue is recognised by the Group at a single point in time
when control of goods passes on delivery, except for in South
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 impact of the introduction of
IFRS9 and determined that a reduction in Group
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 information in this preliminary announcement does not constitute the statutory accounts of the Group and Parent Company within the meaning of Section 435 of the Companies Act 2006 for the year ended 30 September 2019 or 2018.
The financial information for the year ended 30 September 2018 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under s498(2) or s498(3) of the Companies Act 2006.
The financial information for the year ended 30 September 2019 is unaudited. The statutory accounts for that year will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 18 February 2020.
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
FR GGGQGPUPBPUG
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