Environmental Social and Governance Report

Titon prepared its first separate report on Environmental, Social and Governance (ESG) last year. ESG reporting remains increasingly important for investors and we also want to continue demonstrating that we recognise our own responsibilities to the environment. In 2019 we publicly committed to becoming a net zero company by 2050.

The UK Government introduced regulations in April 2022 that require climate-related financial disclosures to be made for publicly quoted companies, large private companies and LLPs. For companies quoted on AIM this applies if the business has more than 500 employees, so Titon is not currently required to make these disclosures but again, the direction of travel is clear and supports our intentions.

One of the key questions raised by investors in the context of ESG is "Does this company make the world a better place?" Within this question there are many different ways of measuring whether a company achieves this, and it is not possible to use a single equation or methodology to arrive at an answer. Different stakeholders will have different requirements in answering this question but as a Board we have a duty to enshrine this principle in every action we take. One way of answering this question is to look at the products we make and how they benefit the community: we design, manufacture and sell ventilation equipment and this boils down to providing an essential need for every person, which is clean air. All of our ventilation products are designed to provide fresh, clean air to homes and buildings' occupants and to dispel moisture, carbon dioxide and volatile organic chemicals from those buildings, any of which could cause respiratory illnesses or allergies to those occupants. In many countries in which we sell our products local building regulations require ventilation to be included in all new house building. We are also seeing more commitment from governments in ensuring that in the retrofit market attention is paid to ventilation: if a building is insulated then the natural pathways for air to flow in and out are blocked up and it becomes essential that new routes to allow clean air in are provided.

In the drive for energy efficiency and ensuring that buildings are adequately ventilated we work with a network of stakeholders including our customers in the window and door market and the house building market in the UK and Europe. We also work with our trade associations, Beama Ltd and FETA to promote ventilation in the UK and a number of other organisations, including the UK All Party Parliamentary Group for Healthy Homes and Buildings and the Air Pollution APPG.

Environmental Pillar

The Board recognises its responsibility to minimise the impact of the Group's activities on the environment.

The Group seeks to reduce its environmental impact in a way that benefits a broad group of stakeholders, including customers, shareholders, employees and the local community. The Group follows ISO 14001:2015 for Environmental Management Systems within its UK manufacturing operation and places great emphasis on ensuring that it conducts its operations such that:

·    Emissions to air, releases to water and land filling of waste do not cause unacceptable environmental impacts and do not offend the community.

·    Significant plant and process changes are assessed and positively pursued to prevent adverse   environmental impacts.

·    Energy is used efficiently and consumption is monitored.

·    Natural resources are used efficiently.

·    Raw material waste is minimised.

·    Waste is reduced, reused or recycled where practicable.

·    The amount of packaging used for our products is minimised.

As part of its processes, the Group's environmental performance is reviewed regularly by senior management and a programme of continuous improvement for the benefit of customers, employees and the environment has been adopted. We remain focussed on reducing our energy usage and maintain detailed records of each area's gas and electricity consumption with the aim of taking prompt action if any unexplained increase is observed. Based on the latest energy figures available our UK electricity usage decreased by 9% in 2022 against 2021 whilst UK gas usage decreased by 4%. UK motor vehicle fuel usage has decreased by 23% over 2021.

 

 

 

In accordance with Statutory Instrument 2008/410 the Group presents the following information in respect of its CO2 emissions during the period.

Global Greenhouse Gas (GHG) emissions data for the period are:

	2022	2021
Source:	tCO2e	tCO2e
Combustion of fuel and operation of facilities	535	553
Electricity, heat, steam and cooling purchased for own use	235	304
Total tonnes of CO2 equivalent	770	857
CO2 emissions normalised per £ million of sales of manufactured products	45.6	50.1

These sources fall within our consolidated financial reporting. We do not have responsibility for any emission sources outside of our consolidated financial reporting, including those of our Associate Company.

We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition), data gathered to fulfil our requirements under the CRC Energy Efficiency scheme, and emission factors from UK Government's GHG Conversion Factors for Company Reporting 2022.

We have taken action over recent years to reduce our environmental footprint and will continue to do so. Actions we have already taken include:

·    An investment of over £150,000 in solar panels, which are installed on the roof of our Haverhill factory. These panels continue to generated over 125 Mwh of electricity per year, which we use in the factory or sell back to the National Grid;

·    Installation of LED lighting throughout the Colchester Office and the Haverhill factory;

·    Replacing all diesel cars in the company car fleet with electric vehicles, wherever possible, when they come up for renewal. We have EV charging points installed at both the Colchester office and Haverhill site;

·    Replacement of older fixed asset plant and machinery with new, more efficient units, for example our Amada Press which we purchased in April 2021. In 2023 we are planning to make such investments in our Mould Shop.

·    Installation of a reverse osmosis plant in our paint facility, which has reduced the usage of caustic soda and hydrochloric acid by 50%, with an added health and safety benefit.

·    We have an ongoing initiative to reduce single use packaging for raw material supplies and have replaced our own plastic packaging with either cardboard or recycled plastic, wherever possible.

·    We have a target to reduce waste to landfill from the Haverhill production site by 50% by end 2023, with a further goal of zero waste to landfill in subsequent years.

 

We apply the waste hierarchy, as laid down in law, and which forms part of our ISO 14001:2015 certification. The basic principles are "Reduce, Reuse and Recycle" and are incorporated in the Titon Recycling Policy under which we aim to reduce waste in all our packaging, products and processes.

We will continue to take all actions that reduce our energy, water and waste usage. We will also look to report our environmental footprint using a third-party reporting mechanism.

Social Pillar

The Group has various published policies relating to the Social pillar. These are communicated through our Intranet, noticeboards and the Employee Handbook. Our comprehensive Employee Handbook published in 2021 includes all of our employment policies, a summary of the Health and Safety policy, our Diversity Policy, our Safeguarding and IT Security and our Environmental policies. The chapter entitled "Valuing Diversity and Respect at Work" covers the following matters:

·    Equal Opportunities Policy: Titon is committed to encouraging equality and diversity among our workforce. Our objective is to create a working environment in which there is no unlawful discrimination and where all decisions are based on merit. The policy applies to all employees, workers, agency workers, contractors and job applicants and covers all of the nine protected characteristics set out in the Equality Act 2010.

·    Bullying and Harassment Policy: we are committed to providing a working environment free from bullying and harassment and this policy covers both at work and out of the workplace, including work trips, work-related events and social functions. It also includes all employees, agency, casual workers and independent contractors.

·    Grievance Policy: every employee has the right to raise a grievance if they have a genuine complaint about their job, work or terms and conditions of employment and the policy principles are written down in the Handbook.

·    Disciplinary Policy: the policy sets out the process for dealing with disciplinary and performance issues and to ensure that any matters are dealt with fairly and consistently.

·    Whistleblowing Policy: Titon is committed to the highest possible standards of ethical, moral and legal business conduct. The policy aims to provide a route for employees to raise any concerns they may have on matters that could have a serious impact on Titon such as incorrect financial reporting, unlawful actions or serious improper conduct.

 

I can report that there have been no occurrences under any of these policies during the financial year.

 

The Safeguarding and IT Security Policy includes the policies on Anti-corruption and Modern Slavery and Human Trafficking. Under the Anti-Corruption Policy the Titon Group lists a number of fundamental principles and values which it believes are the foundation of sound and fair business practice and which are important to uphold. It is the Titon policy to comply with all laws, rules and regulations governing anti-bribery and corruption in all countries in which Titon operates. As a UK company Titon is also bound by English law which covers our conduct both in the UK and abroad. The penalties for breaching this law are significant both for the individuals involved and the Company and we take our legal obligations very seriously.

Titon is committed to the principles of the Modern Slavery Act 2015 and the abolition of modern slavery and human trafficking. We do not enter into business with any organisation which knowingly supports or is found to be involved in slavery, servitude and forced or compulsory labour. Due to the nature of our business, we have assessed that we have a low risk of modern slavery in our business and supply chains. Our supply chains are limited, and we procure goods and services from a restricted range of UK and overseas suppliers. We will continue to embed these principles through our procurement and employment policies and practices.

Employee Gender Breakdown

As at the end of the financial year the analysis by gender of employees, was as follows:

			2022		2022		2022		2021		2021		2021
			Male		Female		Total		Male		Female		Total
Directors		5		2		7		8		-		8
Senior Managers		6		2		8		8		2		10
Other		121		73		194		131		65		196
Total		132		77		209		147		67		214

 

 

We continue to support a number of local and national charities throughout the year. Our colleagues in Colchester and Haverhill also carry out a number of charity collections during the year.

We are committed to respecting human rights across our business operations and aim to comply with all local and international legislation and standards. 

Corporate Governance Pillar

We have presented our Corporate Governance position for many years, firstly under the UK Corporate Governance Code when we were quoted on the Main Market of the London Stock Exchange and since 2020 under the Quoted Companies Alliance (QCA) code after we moved to AIM. Please see page 37 of this Report for the detailed Corporate Governance Report. Our website also contains more details of the governance disclosure including how we apply the 10 principles identified by the QCA Code.

In summary, I am confident that we have applied the 10 principles identified by the QCA Code throughout the accounting period in question and will continue to do so in the current financial year.

Health and safety

Health and safety is a top priority for the Group and we expect all employees to take responsibility for keeping themselves and each other safe. It is critical as a manufacturing business that our employees operate in a safe environment and that our Health and Safety culture, policies and practices are as good as they can be. We are always looking to improve them and importantly adhere to them. We continually review and update our Health and Safety policies and have a dedicated Health and Safety Manager role in the business. During 2022 we have put increased focus on hazard spotting, reporting and resolution by all employees in order to further improve the safety of our work environment. We are pleased to witness significant improvements in this area. The Group has also developed a Health and Safety roadmap that allows us to track and manage our health and safety compliance, training and priority projects.

The approach to health and safety management for the Group is as follows:

Board of Directors	Overall responsibility for setting policy and performance, promoting excellence in EHS as a personal and organisational core value and role modelling the expected behaviours.
Senior leadership team	Meets weekly to review statistics, every reported incident and the status of the EHS roadmap. The Chief Executive, Chief Financial Officer and all executive directors attend. Also promotes excellence in EHS and shows the expected behaviours.
Local management	Meets daily to review health and safety incidents and issues. Responsible for setting expectations, following the rules set, managing EHS risks and promptly addressing EHS incidents and issues, including non-compliance.
All employees	Have the responsibility to look after the health and safety of themselves and others by proactive hazard reporting and resolution, prompt reporting of all incidents and cooperating with instruction and training.
Health and Safety Manager	Responsible for driving a positive health and safety culture, supporting resolution of day-to-day issues, leading on incident investigation and implementing lessons learned, and implementation of changes to policy.
Health and Safety Committee	Is represented by operational team members across all departments and is chaired by the Operations Director with support from the Health and Safety Manager. The committee meets monthly to discuss and address operational health and safety issues. Minutes are produced and distributed along with an action plan.

The accident statistics for our UK operations are as follows:

·    January to December 2021              17 reported accidents, 0 RIDDOR reported

·    January to December 2022              51 reported accidents, 0 RIDDOR reported

Compared to 2021 we have seen a significant increase in the number of accidents reported, although the vast majority of these are minor. This is due to an improved reporting culture and the focus applied to a 'safety first' approach, and not a reflection of a drop in health and safety performance. We have improved our reporting processes for all incidents (including accidents, hazards, and near misses) and have also improved our processes for sharing lessons learned. The Group is very pleased to see this improvement in culture. Alongside the increase in accident reporting we have also seen a significant increase in hazard reporting which we know helps prevent the occurrence of more serious incidents.

RIDDOR is the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013. These Regulations require employers, the self-employed and those in control of premises to report specified workplace incidents. As at 31 December 2022, we had reached 1,506 days without a RIDDOR report being required, which is a reflection of the minor severity rating of our incidents.

 

Statement by the Directors in relation to their statutory duty in accordance with section 172(1) of the Companies Act 2006

Stakeholder Group	Why do we engage with them?	How does the Board engage with them?
Shareholders	The Board needs to know investors' views so they can be considered when making strategic and governance decisions.   We aim to provide fair, balanced and understandable information about the business to enable informed investment decisions to be made.	We have regular dialogue with institutional Investors and individual shareholders in order to develop an understanding of their views. We listen to the views of our Nominated Adviser in this respect. Our AGM is an important forum for private shareholders to meet the board and ask any questions they may have. Our website has an investors section which gives investors direct access to reports, press releases and other information. There is also a contact mailbox facility.
Employees	Employee engagement is critical to our success. We aim to create a diverse and inclusive workplace where employees can reach their full potential. This ensures we can retain and develop talented people.   We have the highest regard for the health, safety and wellbeing of our employees.	We engage with our employees through site communications, consultation with employees, briefings, question boxes, performance reviews, surveys, newsletters and notice boards. Employees are also written to individually on matters which are deemed important. Every employee is issued with a comprehensive employee handbook with all of the employment conditions and policies set out clearly so that everyone can see what is expected of them. We have another employee survey planned for 2023. We continue to make every effort to protect our employees.
Customers	Our strategy of attaining sustainable growth in profit and building goodwill in our brands will only be achieved through an understanding of the needs of our customers and the markets we serve.	We engage with our customers through: ·     Regular visits and meetings including virtual meetings ·     Industry exhibitions ·     Customer site tours and presentations ·     Our website ·     Supplying samples and supporting literature ·     Delivering a high standard of technical support ·     Providing design services and support ·     Providing accredited Continuing Professional Development (CPD) courses
Suppliers	Our suppliers make an important contribution to our business success. Engaging with our supply chain means that we can ensure security of supply and speed to market. Carefully selected high-quality suppliers ensure we deliver market leading innovative products to meet our customers' expectations.	Our supplier relationship management is led by our procurement team and supported by R&D and Sales. We engage with our suppliers by holding regular meetings with them and via a feedback process through monitoring their performance.
Community/ Environment	The Board has a full understanding of the importance of good community relations. We aim to contribute positively to the communities and environment in which we operate.	We provide ventilation products that are beneficial to health and that are better for the environment. Many of our capital expenditure projects focus on improving energy efficiency and reducing environmental emissions from our factories. We have ISO 14001 Accreditation in the UK. We work with our stakeholders to promote good indoor air quality. We support local charities through fundraising and donations.
Government and Regulatory Bodies	Government set the regulatory framework within which we operate. We engage to ensure we can help in shaping new policies, regulations and standards, which assist in improving indoor air quality, and ensure compliance with existing legislation.	We participate in industry bodies and working groups and our directors chair ventilation groups within the trade associations. We attend All-Party Parliamentary Groups and plenary sessions. We participate in and respond to industry and government consultations.

 

In compliance with the Companies Act 2006, the Board of Directors are required to act in accordance with a set of general duties. During the year to 30 September 2022, the Board of Directors consider that they have, individually and collectively, acted in a way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its shareholders as a whole, having regard to a number of broader matters including the likely consequence of decisions for the long term and the Company's wider relationships. In doing so, the Board holds regard to the matters contained in section 172(1) (a)-(f) of the Companies Act 2006.

The Directors fulfil their duties by ensuring that there is a strong governance structure in place across the Group's operations, backed up by robust processes.

The strategy for the Group is regularly monitored by the Board during the year. In respect of major matters discussed at board level, the likely impact on all stakeholders are carefully considered and where possible, decisions are carefully explained and discussed with affected stakeholders before actions are implemented to engender the necessary support.

The Group's key stakeholders and why and how we engage with them are set out below:

Application of s.172 during the year

During the year the Board has, amongst other things, recruited a new Chief Executive to drive change in the business, looked at the structure of the Titon Holdings and Titon Hardware boards and developed the growth strategy of the business.  We have also implemented a new ERP system for the operations and finance parts of our business, which has generated many issues which we have had to resolve. In Korea we have discussed and considered a re-structure of the Korean businesses to simplify the arrangement.

We have continued to comply with the requirements under s.172 in the period of the Covid-19 pandemic and the easing of restrictions in early 2022. Key decisions made included:

·    Enabling office-based staff and sales executives to work from home by providing them with laptops and appropriate software applications.

·    Implementing Covid-19 Health & Safety procedures in line with Government guidelines.

·    Providing lateral flow tests to all employees and daily monitoring of Covid-19 outbreaks in our sites.

 

Report on Risk Management

Principal risks and uncertainties

The Group has established procedures for monitoring and controlling principal operational risks and these are detailed below. The Board is responsible for ensuring that the Group maintains an effective risk management system. It determines the Group's approach to risk, its policies and the procedures that are implemented to mitigate exposure to risk.

Process for managing risk

The Board continually assesses and monitors the key risks in the business and has developed a risk management matrix to identify, report and manage its principal risks and uncertainties. This includes the recording of all principal risks and uncertainties, which are reviewed annually. Risks are fully analysed, their potential impact on the business assessed and relevant mitigations established. The risk matrix is reviewed regularly at Board Meetings along with the appropriateness and effectiveness of the key mitigating controls.

The table below highlights the principal risks and uncertainties which could have a material impact on the Group's performance and prospects and the mitigating activities which are aimed at reducing the impact or likelihood of a major risk materialising. The Board does recognise, however, that it will not always be possible to eliminate these risks entirely.

Risk Matrix

Risk	Potential Impact	Mitigations
Associate companies   The Group is exposed to the risks related to working with associate companies over which it does not have full operating control through its equity holding.	Failure to maintain good working relationships and to exert sufficient control and influence in respect of our South Korean Associate Company, Browntech Sales Co. Ltd could affect the Group's ability to deliver on its objectives in this market.	The Group's senior management has a regular schedule of visits to meet with the Associate Company's management in South Korea.   A formal Distribution Agreement exists between Titon Korea Co. Ltd and Browntech Sales Co. Ltd which aligns those companies for trading purposes. The Group is evaluating options for streamlining the corporate structure and operations of the Korean business.
Business disruption   The Group's manufacturing and distribution operations could be subjected to disruption due to factors including incidents such as a major fire, a failure of essential IT equipment or a major cyber-attack on the Group. There is also a risk of business disruption if key sub-contractors experience an incident on their site or were to cease trading.	Incidents such as a fire at the Group's or sub-contractor premises or the failure of IT systems could result in the temporary cessation in activity or disruption of the Group's production facilities impeding the Group's ability to deliver its products to its customers. A cyber-attack could leave the Group open to a ransom demand or compromise data security both for the Group and customers.	The Group has developed business continuity and disaster recovery plans.   The Group maintains a significant amount of insurance to cover business interruption and damage to property from such events. Additional measures have been taken to ensure the security of the Group and customer data. The Group gets a fire risk assessment carried out by an external party (last completed 6 September 2022) and actions/suggestions raised are reviewed and actioned accordingly. A fire suppression system is installed in relevant manufacturing areas. Visits take place by the local fire service to review and provide feedback on fire safety systems and practices.   The Group implemented multifactor authentication for relevant employees. The Group has implemented a Cyber Security training and awareness programme for all employees. The Group's strategy is to maintain essential systems in the Cloud. The Group has an email security gateway system in place. The Group has a register of Titon owned tooling held at sub-contractors. The Group looks to review sub-contractor insurance and business continuity policies.
Reliance on key customers and suppliers   Parts of the Group's business are dependent on key customers and key suppliers.	Failure to manage relationships with key customers and suppliers could lead to a loss of business affecting the financial results of the Group.	The Group's strategic objective is to broaden its customer base wherever possible.   The Group focuses on delivering high levels of customer service and maintains strong relationships with major customers through direct engagement at all levels. We also maintain close links with suppliers to ensure products are up-to-date and service levels are maintained.   The Group maintains ISO 9001 standard and a robust complaints process.   The Group closely manages its pricing, rebates and commercial terms with its customers and suppliers to ensure that they remain competitive. The Group has a policy of dual sourcing key components where possible.
Supply chain risks   The risk of extended lead times beyond forecast windows due to restricted component availability.   The risk of continued material price inflation and hence margin erosion.	Decrease in cash due to increased stock holding. Loss of customers due to an inability to meet demand or uncompetitive pricing. Increased risk of obsolescence.	The Group operates strategic purchasing of key long lead time items. The Group holds weekly Sales Inventory and Operations Planning reviews. The Group has a policy of dual sourcing key components where possible. The Group ensures robust supplier relationship management. The Group can implement customer agreements to incorporate specification changes if required.
Recruitment and retention of key staff   The Group is dependent on the continued employment and performance of its senior management and other skilled personnel.	Loss of any key staff without adequate and timely replacement could disrupt business operations and the Group's ability to implement and deliver its growth strategies and financial targets.	The Group will be preparing a formal succession plan in 2023.   The Group aims to provide competitive remuneration packages and bonus schemes to retain and motivate key staff.
Risk	Potential Impact	Mitigations
Recruitment and retention of staff   The Group is dependent on the continued employment and performance of all staff.	Failure to maintain adequate staffing levels could impact on all business activities and the Group's ability to meet its defined targets.	The Group reviews market conditions, cost of living and the National Living Wage and aims to provide competitive remuneration packages and bonus schemes to retain and motivate staff.   The Group has a robust recruitment and onboarding process.   The Group has several employee engagement initiatives in place including training and personal development opportunities and performance review and objective setting processes. The Group has a two-way employee feedback process in place.
Economic conditions   The Group is dependent on the level of activity in the construction industry in the countries in which it markets its products and is therefore susceptible to any changes in economic conditions.	Lower levels of construction industry activity within any of the key markets in which the Group operates could reduce sales and production volumes adversely, thus affecting the Group's financial results. This is considered to be a high risk to the Group given the current inflationary pressures and prospects of a recession in our markets.	The Group closely monitors trends in the industry using a wide range of external data including Experian's reports and forecasts for the UK and other reports in the rest of the world. Current forecasts for residential new-build and refurbishment markets in the UK and South Korea for 2022/23 suggest a slowing in activity. However, the social housing sector is expected to remain fairly strong.   The Group spreads its risk by having product lines and customer bases across new-build, refurbishment and social housing sectors, and is not reliant on single key customers.   The Group monitors product demand on a weekly basis and is able to respond accordingly in re-allocating or varying resources.   The Group continually seeks to expand the geographical markets into which it sells its products.
Government action and policy The Group's business is significantly affected by Building Regulations in its core markets as well as by Government action and policies relating to public and private investment.	Many of the Group's products are provided to customers in order to help them to comply with Building Regulations in respect of ventilation. Changes to Regulations could adversely impact on sales volumes affecting the Group's financial results. Additionally, significant downward trends in Government spending could have an adverse impact on the construction industry which could impact on sales and production volumes affecting the Group's financial results.	The Group closely monitors and attempts to influence Building Regulations through its work with industry working groups. The UK ventilation and heat and power use regulations will be subject to a comprehensive review by 2025. The Group structures its operations so that it has a balanced exposure to the construction sectors and the refurbishment sector to reduce the impact of any adverse Government action or policy on any one of these sectors.
Risk	Potential Impact	Mitigations
Product liability The Group manufactures electrical products that could cause injury to people or property. The Group's products are also often incorporated into the fabric of a building or dwelling, which could be difficult to access, repair, recall or replace in the event of product failure.	A product safety issue or a failure or recall could result in a liability claim for personal injury or other damage leading to substantial money settlements, damage to the Group's brand reputation, costs and expenses and diversion of key management's attention from the operation of the Group, which could all affect the Group's financial results.	The Group operates comprehensive quality assurance systems and procedures within its UK manufacturing processes and is subject to regular external audit as part of its ISO 9001 accreditation. Comprehensive end of line testing is carried out on all in-house manufactured electrical products. Sample testing is carried out on bought-in hardware products. Wherever required, the Group obtains certifications over its products to the relevant standards of the countries in which it markets its products. These certifications incorporate electrical safety testing. The Group endeavors to ensure that its products are in compliance with relevant fire safety regulations. The Group maintains product liability insurance to cover personal injury and property damage claims from product failures as well as professional indemnity cover for areas of the business where advice about products is provided as part of the sales process.
Financial risk management   The Group's operations expose it to a variety of financial risks including fraud, credit and foreign exchange risk.	Losses from any of these financial risks could impact the Group's financial results.	The Group has financial risk management procedures and controls in place that seek to limit the adverse effects of the financial risks.

 

This Strategic Report was approved by the Board on 25 January 2023 and signed on its behalf by:

 

 

A French

Chief Executive

 

Directors' Report

 

The Directors present their report and the Group and Company financial statements for the year ended 30 September 2022.

 

The Directors of Titon Holdings Plc throughout the financial year or subsequent to the year-end are listed on page 35.

A detailed commentary on the results for the year and discussion of future developments is given in the Chair's Statement on pages 2 to 7 and an explanation of the Group's business strategy is included within the Strategic Report on pages 9 to 12.

The Group's compliance with the QCA Code is set out in the report on page 37.

Substantial shareholders

As at 30 September 2022, the Company had been notified of the following voting interests in its ordinary share capital, other than Directors' holdings, of 3 per cent or more in the ordinary share capital of the Company:

Name	Shares	%
Rights & Issues Investment Trust PLC	1,265,000	11.28
Harwood Capital LLP	980,000	8.74
Ms A J Farrar Mr D J Barry	663,079 338,000	5.91 3.01

Share capital

The total issued ordinary share capital at 30 September 2022 consisted of 11,218,750 Titon Holdings Plc shares of 10p each. 25,000 new ordinary shares were issued during the year to satisfy share option exercises.

 

Details of the authorised and issued share capital of the Company as at 30 September 2022 are set out in note 19 of the Notes to the Financial Statements.

 

All of the Company's shares are ranked equally and the rights and obligations attaching to the Company's shares are set out in the Company's Articles of Association, copies of which can be obtained from Companies House in England and Wales and on the Company's website at www.titon.com/uk/investors/.

There are no restrictions on the voting rights of shares and there are no restrictions on their transfer other than:

·    certain restrictions as may from time to time be imposed by laws and regulations (for example insider trading laws); and

·    pursuant to Article 19(11) of 'UK MAR' (the EU Market Abuse Regulation as amended by the Market Abuse Exit Regulations 2020) whereby Directors of the Company require approval to deal in the Company's shares (see https://www.fca.org.uk/markets/market-abuse/regulation).

Additionally, the Company is not aware of any agreements between shareholders of the Company that may result in restrictions on the transfer of ordinary shares or voting rights.

Proposed dividends

The Directors recommend the payment of a final ordinary dividend of 0.5 pence (2021: 3.0 pence) per ordinary share. An interim dividend of 1.5 pence per share was paid during the year (2021: 1.5 pence) so the total dividend for the year ended 30 September 2022 is 2.0 pence per share (2021: 4.5 pence). Titon operates a dividend reinvestment programme for shareholders details of which are available from our registrars, Link Group.

Research and development

The Directors consider that research and development continues to play an important role in the Group's success as the need to provide increasingly energy efficient ventilation products remains a feature of our market over the coming years. Further details on our research and development activities can be found in the Strategic Report.

Investment in research and development amounted to £629,000 during the year (2021: £509,000). Development expenditure capitalised in 2022 amounted to an additional £130,000 (2021: £166,000). See note 11 of the Financial Statements. Financial risk management

The Directors assess the financial risks facing the business and spend appropriate time considering them. The Group has a system of risk management, which identifies these items and seeks ways of mitigating such risks as far as is possible. The Report on Risk Management set out on pages 23 to 26 includes information on financial risk and also see note 21 to the Financial Statements.

 

Employees

The Group recognises the importance of its employees in achieving its objectives and has contractual arrangements in place to encourage and reward loyalty and to safeguard the interests of the Group.

Employees are provided with information about the Group's activities via consultation with employees, other staff meetings and staff notice boards. The Group aims to foster an environment in which employees and management can enjoy a free flow of information and ideas. 

The Group is an equal opportunities employer and its policies for recruitment, training, career development and promotion are based on the aptitude and abilities of the individual. All of these policies are included in the Employee Handbook which is issued to every employee. See the Strategic Report for more details.

The Group recognises the importance of its employees in achieving its objectives and has contractual arrangements in place to encourage and reward loyalty and to safeguard the interests of the Group.

Employees are provided with information about the Group's activities via the Employee Consultative Committee, other staff meetings and staff notice boards. The Group aims to foster an environment in which employees and management can enjoy a free flow of information and ideas. 

The Group is an equal opportunities employer and its policies for recruitment, training, career development and promotion are based on the aptitude and abilities of the individual.

The Group's approach and responsibilities for social and community issues are not covered in this report.

Disabled employees

The Group gives full consideration to the career development and promotion of disabled persons, and to applications for employment from disabled persons, where the requirements of the job can be adequately fulfilled by a handicapped or disabled person.

The Group considers the training requirements of each disabled person on an individual basis. Where an employee becomes disabled during the course of their employment, the Group will consider providing the employee with such means, including appropriate training, as will enable the employee to continue to carry out their job, where it reasonably can, or will attempt to provide an alternative suitable position.

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, so that it can continue to provide returns for its shareholders and benefits for its other stakeholders.

The Group considers its capital to comprise ordinary share capital, share premium, the capital redemption reserve and accumulated retained earnings (see 'Consolidated Statement of Changes in Equity' on page 53). The translation reserve is not considered as capital. In order to maintain or adjust its working capital at an acceptable level and to meet strategic investment needs, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders or sell assets.

The Group does not seek to maintain any particular debt to capital ratio but will consider investment opportunities on their merits and fund them in the most effective manner.

Environmental issues

An explanation of how the Group deals with its environmental responsibilities is included within the Strategic Report, under the heading Environmental Social and Governance.

Directors' responsibilities

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. The Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards and International Financial Reporting Standards adopted in the United Kingdom ("UK adopted IFRS"). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that period.

 

In preparing these financial statements, the Directors are required to:

·    Select suitable accounting policies and then apply them consistently.

·    Make judgements and accounting estimates that are reasonable and prudent.

·    State whether they have been prepared in accordance with IFRSs,, subject to any material departures disclosed and explained in the financial statements.

·    Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business; and

·    Prepare a Directors' Report, a Strategic Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

·    Prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

 

 

Directors' responsibilities (continued)

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring that the annual report and the financial statements are made available on a website. Financial statements are published on the Company's website, which can be found at www.titon.com/uk/investors/ in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors are also responsible for disclosing additional information under Rule 26 of the AIM Rules, which is available at www.titon.com/uk/investors/. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

The Directors confirm to the best of their knowledge:

·    the Group financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the IASB and adopted by the UK and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and

·    the Annual Report includes a fair review of the development and performance of the business and the financial position of the Group and the parent company, together with a description of the principal risks and uncertainties that they face.

Directors' statement as to disclosure of information to auditors

The Directors at the time of approving the Directors' Report are listed on page 35. Having made enquiries of fellow Directors and of the Officers of the Company, each of the Directors confirms that:

·    to the best of each Director's knowledge and belief, there is no relevant audit information of which the Company's auditors are unaware; and

·    each Director has taken all steps a Director ought to have taken to make themselves aware of any information needed by the Company's auditors for the purpose of their audit and to establish that the Company's auditors are aware of that information.

Directors' liability insurance and indemnity

The Company has purchased liability insurance cover, which remained in force at the date of the report, for the benefit of the Directors of the Company which gives appropriate cover for legal action brought against them. The Company also provides an indemnity for its Directors (to the extent permitted by law) in respect of liabilities which could occur as a result of their office. This indemnity does not provide cover should a Director be proved to have acted fraudulently or dishonestly.

Purchase of own shares

The Company has authority from shareholders to purchase up to 10% of its own ordinary shares in the market. This authority was not used during the year nor in the period to 25 January 2023 and the Board intends to seek shareholder approval to renew the authority at the forthcoming Annual General Meeting.

In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003, companies are permitted to hold purchased shares rather than cancelling them. At 30 September 2022 and 25 January 2023 the Company held nil shares in treasury. The Company may use this power in the future depending on market conditions and the financial position of the Company.

 

Events after the reporting date

 

There have been no events after the reporting date that materially affect the position of the Group.

Going concern

The Group's business activities, its financial position, together with the factors likely to affect the Group's performance, are set out in the Strategic Report. In addition, note 21 to the financial statements includes the Group's risk management objectives and policies, managing its financial risk and its exposures to credit risk, foreign exchange risk and liquidity risk.

 

The financial statements have been prepared on a going concern basis. In adopting the going concern basis the Directors have considered all of the above factors, including the principal risks set out on pages 23 to 26. Under the worst-case scenario considered, which is severe and considered highly unlikely, the Group remains liquid for a period of 12 months from the date of reporting and the Directors therefore believe, at the time of approving the financial statements that the Group is well placed to manage its business risks successfully and remains a going concern. The key facts and assumptions in reaching this determination are summarised below.

The financial position remains robust with cash of £1.7m available to the Group and no debt and therefore no bank covenants in place. Our base case scenario has been prepared using forecasts from each of our operating companies, with each considering both the challenges and opportunities they are facing because of various market forecasts and also supply chain challenges. Due to the strength of the Group's balance sheet and market outlook, the Directors believe there is no material uncertainty around going concern. To this end a reverse stress test scenario has also been modelled, with the most extreme conditions being considered. 50% of budgeted revenue was removed for all operating companies within the Group from 1 April 2023 to 31 January 2024 with all overheads being reduced accordingly. All discretionary expenditure was reduced or removed such as capital expenditure and dividends. The result of this scenario is that we remain cash positive within 12 months of the signing date. This extreme scenario excludes all other resources we would have at our disposal as means of raising further cash, such as:

·      the Group owns the freehold interest in our Haverhill site which had a fair value of £5.4 million in September 2022. This could be used as collateral to borrow funds from our bank in the form of a mortgage;

·      the Group has significant fixed assets that would have a second-hand market value that could be realised;

·      a rights issue could be made;

·      the Group has a large stock balance that could be sold on if there was reduced production;

·      salary costs could be reduced by virtue of either restructuring or through pay reductions;

·      BTS, our associate Company, has £3.4m of cash which could be paid to shareholders in the form of a dividend.

 

Annual General Meeting

 

The Annual General Meeting of Titon Holdings Plc ("the Company") will be held at the Company's premises at Falconer Road, Haverhill, CB9 7XU on 22 March 2023 commencing at 10.00 a.m. A Notice convening the Annual General Meeting of the Company for the year ended 30 September 2022 may be found on page 86 of this document.

 

Shareholders are being asked to vote on various items of ordinary business, being Resolutions 1 to 10 inclusive, as listed below.

Resolution 1 - to receive and adopt the audited accounts

The Directors recommend that shareholders adopt the reports of the Directors and the Auditors and the audited accounts of the Company for the year ended 30 September 2022.

The Directors' Report was approved by the Board on 25 January 2023 and signed by order of the Board.

 

Resolution 2 - to declare a final dividend

The Directors recommend a final dividend of 0.5 pence per ordinary share. Subject to approval by shareholders, the final dividend will be paid on 31 March 2023 to shareholders on the register on 10 February 2023.

 

Resolution 3 - to re-elect Mr Tyson Anderson as a Director

The Chair confirms that following performance evaluation Mr Anderson continues to be effective and demonstrates commitment in his role.

 

Resolution 4 - to re-elect Mr Keith Ritchie as a Director

The Deputy Chair confirms that following performance evaluation Mr Ritchie continues to be effective and demonstrates commitment in his role.

 

Resolution 5 - to re-elect Mr Nicholas Howlett as a Director

The Chair confirms that following performance evaluation Mr Howlett continues to be effective and demonstrates commitment in his role.

 

Resolution 6 - to re-elect Mr Paul Hooper as a Director

The Chair confirms that following performance evaluation Mr Hooper continues to be effective and demonstrates commitment in his role.

 

Resolution 7 - to re-elect Mr Jeff Ward as a Director

The Chair confirms that following performance evaluation Mr Ward continues to be effective and demonstrates commitment in his role.

 

Resolution 8 - to re-elect Miss Alexandra French as a Director

The Chair confirms that following performance evaluation Miss French continues to be effective and demonstrates commitment in her role.

 

Resolution 9 - to re-elect Ms Carolyn Isom as a Director

The Chair confirms that following performance evaluation Ms Isom continues to be effective and demonstrates commitment in her role.

 

Resolution 10 - to re-appoint MacIntyre Hudson LLP as auditors

This resolution proposes that MacIntyre Hudson LLP should be re-appointed as the Company's Auditors and authorises the Directors to determine their remuneration.

 

Resolution 11 - to approve the Directors' Remuneration Report

Resolution 11 in the Notice of Annual General Meeting, which will be proposed as an Ordinary Resolution, is to receive and approve the Directors' Remuneration Report as set out on pages 33 to 36 and also to approve a new Executive Management Bonus Structure, details of which are contained in the Directors' Remuneration Report.

 

Resolution 12 - authority to allot shares

The Companies Act 2006 prevents directors of a public company from allotting unissued shares, other than pursuant to an employee share scheme, without the authority of shareholders in general meeting. In certain circumstances this could be unduly restrictive. The Directors' existing authority to allot shares, which was granted at the Annual General Meeting held on 23 February 2022, will expire at the forthcoming Annual General Meeting.

Resolution 12 in the notice of Annual General Meeting will be proposed, as an Ordinary Resolution, to authorise the Directors to allot ordinary shares in the capital of the Company up to a maximum nominal amount of £270,000, representing approximately 24% of the nominal value of the ordinary shares in issue on 25 January 2023.

The authority conferred by the resolution will expire on 22 June 2024 or, if sooner, at the 2024 Annual General Meeting.

The Directors have no present plans to allot unissued shares other than on the exercise of share options under the Company's employee share option schemes. However, the Directors believe it to be in the best interests of the Company that they should continue to have this authority so that such allotments can take place to finance appropriate business opportunities that may arise.

 

Resolution 13 - to disapply pre-emption rights

Unless they are given an appropriate authority by shareholders, if the Directors wish to allot any of the unissued shares for cash or grant rights over shares or sell treasury shares for cash (other than pursuant to an employee share scheme) they must first offer them to existing shareholders in proportion to their existing holdings. These are known as pre-emption rights. 

The existing disapplication of these statutory pre-emption rights, which was granted at the Annual General Meeting held on 23 February 2022 will expire at the forthcoming Annual General Meeting. Accordingly, Resolution 13 in the Notice of Annual General Meeting will be proposed, as a Special Resolution, to give the Directors power to allot shares or sell treasury shares without the application of these statutory pre-emption rights: first, in relation to offers of equity securities by way of rights issue, open offer or similar arrangements; and second, in relation to the allotment of equity securities for cash up to a maximum aggregate nominal amount of £160,000 (representing approximately 14.3% of the nominal value of the ordinary shares in issue on 25 January 2023). The power conferred by this Resolution will expire on 22 June 2024 or, if sooner, at the 2024 Annual General Meeting.

In addition, there is one item of special business, being Resolution 14, as listed below.

 

Resolution 14 - Company's authority to purchase its own shares

Resolution 14 in the Notice of Annual General Meeting, which will be proposed as a Special Resolution, will authorise the Company to make market purchases of up to 1,121,875 ordinary shares. This represents approximately 10% of the Company's ordinary shares in issue on 25 January 2023. The maximum price per share that may be paid shall be the higher of: (i) 5% above the average of the middle market quotations for an ordinary share for the five business days immediately before the day on which the purchase is made (exclusive of expenses); and (ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out (exclusive of expenses). The minimum price shall not be less than 10p per share. The authority conferred by this resolution will expire on 22 June 2024 or, if sooner, at the 2024 Annual General Meeting.

 

Your directors are committed to managing the Company's capital effectively and although they have no plans to make such purchases, buying back the Company's ordinary shares is one of the options they keep under review. Purchases would only be made after considering the effect on earnings per share and the benefits for shareholders generally.

The Company may hold in treasury any of its own shares that it purchases in accordance with the Companies Act 2006 and the authority conferred by this resolution. This would give the Company the ability to re-issue treasury shares quickly and cost effectively and would provide the Company with greater flexibility in the management of its capital base. The Company does not currently hold any shares in treasury.

As at 25 January 2023 there were options outstanding over 437,000 ordinary shares which, if exercised at that date, would have represented 3.90% of the Company's issued ordinary share capital. If the authority given by Resolution 14 was to be fully used, these would then represent 4.33% of the Company's issued ordinary share capital.

 

Recommendation

The Directors believe that the resolutions which are to be proposed at the Annual General Meeting are in the best interests of the Company and its shareholders as a whole and recommend that all shareholders vote in favour of them, as each of the Directors intends to do, in respect of his or her beneficial holding.

The Directors' Report was approved by the Board on 25 January 2023 and signed on its behalf by:

 

 

 

 

C V Isom

Company Secretary

Directors' Remuneration Report

 

Statement from the Chair of the Committee

I am pleased to present the Directors' Remuneration Report for the year ended 30 September 2022.

There has been no change to the Directors' Remuneration Policy during the period and there have been no significant changes in individual Director's levels of remuneration during the year, except as a result of the performance related elements, which are linked to the amount by which the Group's results exceeds budget. For this period no payments were made in respect of performance related elements.

Details of the Directors' Remuneration Policy are shown on the Group's website in the Corporate Governance section. The Directors' Remuneration Policy was approved in its entirety at the 2018 AGM. An Ordinary Resolution will be put to shareholders at the forthcoming Annual General Meeting to be held on 22 March 2023, to receive and adopt the Directors' Remuneration Report and to approve a new bonus arrangement for Titon Holdings executive management that includes financial performance-based targets as well as individual performance.

The new Executive Management bonus structure has a base level bonus of 35% for the Chief Executive and 25% for the Chief Financial Officer of base salary. It consists of four components, the majority of which is based on Group PBT with smaller contributions from Group Revenue, Group Quick Ratio and personal objective performance. Personal objectives are directly linked to the business imperatives that will drive the business back to profit. The maximum possible bonus payable where targets are significantly exceeded is 63% and 45% of base salary for the Chief Executive and Chief Financial Officer respectively.

The Directors' interests in the ordinary share capital of the Company at the year-end are reported below on page 35.

 

Remuneration Committee

The Committee presently consists of Mr J Ward, Mr G P Hooper, Mr N Howlett, all Non-executive Directors and Mr K Ritchie, Non-executive Chair. The Committee has been established by the Board to set Remuneration Policy and to deal with all matters relating to Directors' Remuneration and reporting thereon. It has clear Terms of Reference established by the Board.

 

Directors' remuneration compared to certain other distributions are as follows:

 

	2022	2021	Percentage change
	£'000	£'000	%
Directors' remuneration	831	901	(10%)
Other employee remuneration	6,179	5,794	7%
Dividend payments to shareholders	502	390	28%

 

Other employee remuneration includes grant income relating to the Coronavirus Job Retention Scheme of £nil (2021: £0.008m).

 

Directors' remuneration

The remuneration paid to the Directors during the year, together with a comparison of the previous year, is as follows:

Year ended 30 September		Salary and fees (a) (k)	Benefits in kind	Short term performance related remuneration                 (b)	Pension benefits	Total
Executive Directors:		£'000	£'000	£'000	£'000	£'000
T N Anderson	2022	97	-	-	8	105
	2021	99	-	26	8	133
T D Gearey (c)	2022	84	8	-	37	129
	2021	58	8	20	28	114
K A Ritchie	2022	160	7	-	-	167
	2021	157	13	41	-	211
D A Ruffell (d)	2022	-	-	-	-	-
	2021	170	13	-	10	193
M J Norris (e)	2022	61	-	-	5	66
	2021	37	-	10	3	50
C V Isom (f)	2022	112	-	-	15	127
	2021	-	-	-	-	-
A C French (g)	2022	76	-	-	5	81
	2021	-	-	-	-	-
Non-executive Directors:
J N Anderson (h)	2022	21	-	-	-	21
	2021	37	-	-	-	37
N C Howlett	2022	63	-	-	5	68
	2021	66	-	-	5	71
K Sargeant (i)	2022	13	-	-	-	13
	2021	46	-	-	-	46
B Ratzke (i)	2022	13	-	-	-	13
	2021	46	-	-	-	46
G P Hooper (j)	2022	20	-	-	-	20
	2021	-	-	-	-	-
J Ward (j)	2022	20	-	-	-	20
	2021	-	-	-	-	-
Totals	2022	740	16	-	75	831
	2021	716	34	97	54	901

 

(a)  A 'salary sacrifice' system is in operation, where the Company makes a pension contribution on behalf of each Director, where applicable, and their salary is reduced by a corresponding amount.

(b) In accordance with the proposals adopted by shareholders, performance related remuneration is not due for this period to Executive Directors.

(c) T D Gearey was a beneficiary of an agreement with the Company relating to his departure from the Company on 6 April 2022 entitling him to a payment of £30,000 which is included in salary above as well as payment in lieu of notice amounting to £46,000.

(d) D A Ruffell was a beneficiary of an agreement with the Company relating to his departure from the Company on 30 April 2021 entitling him to a payment of £90,000 which was included in salary above. 

(e) M J Norris joined the Board on 12 July 2021 and left the Board on 8 February 2022.

(f) C V Isom joined the Board on 22 December 2021.

(g) A C French joined the Board on 3 May 2022.

(h) J N Anderson left the Board on 31 March 2022.

(i)  B Ratzke and K Sargeant both left the Board on 7 December 2021.

(j) G P Hooper and J Ward both joined the Board on 1 April 2022.

(k) The remuneration package of each Executive Director includes non-cash benefits, which for K Ritchie, D A Ruffell, T D Gearey, T N Anderson and C V Isom also included the provision of a company car. The aggregate gains made by Directors on the exercise of share options during 2022 were £11,220 (2021: £33,200). It also includes any discretionary amounts payable, as agreed by the Remuneration Committee, where applicable.

 

Directors and their interests in shares

The Directors of the Company during the year and at the year-end and their beneficial interests in the ordinary share capital were as follows:

	30 September 2022 Ordinary shares of 10p each		30 September 2021 Ordinary shares of 10p each
K A Ritchie*	Non-executive Chair	1,031,381	981,381
D A Ruffell*	Chief Executive Officer (left 30 April 2021)	-	178,500
M J Norris	Chief Executive Officer (left 8 February 2022)	-	-
A C French	Chief Executive Officer (joined 3 May 2022)	12,738	-
C V Isom	Chief Financial Officer (joined 22 December 2021)	-	-
J N Anderson*	(left 31 March 2022)	-	1,737,802
T N Anderson*	Deputy Chair	693,750	693,750
T D Gearey	I.T. Director (left 6 April 2022)	-	20,500
N C Howlett*	Non-executive Director	63,500	38,500
K Sargeant	Non-executive Director (left 7 December 2021)	-	10,000
B Ratzke	Non-executive Director (left 7 December 2021)	-	10,000
G P Hooper	Non-executive Director (joined 1 April 2022)	35,498	-
J Ward	Non-executive Director (joined 1 April 2022)	-	-

 

There were no other changes in Directors' beneficial shareholdings between 30 September 2022 and 25 January 2023.

* Includes spouses' holdings

 

Share options

Details of the interests of Directors, who served during the year, in options over ordinary shares are as follows:

 

		Exercise price per share	At 1 October  2021	Granted during  the year	Exercised during  the year	Lapsed during  the year	At 30 September  2022
			Number	Number	Number	Number	Number
T N Anderson	(a)	58.0p	25,000	-	-	-	25,000
T D Gearey	(b)	156.5p	18,000	-	-	18,000	-
N C Howlett	(a)	58.0p	25,000	-	25,000	-	-
K A Ritchie	(a)	58.0p	50,000	-	50,000	-	-
M J Norris	(c)	138.5p	150,000	-	-	150,000	-
C V Isom	(c)	138.5p	50,000	-	-	-	50,000
A C French	(d)	95.0p	-	150,000	-	-	150,000

No other directors had interests in options over shares during the year.

There have been no changes to the number of share options held by Directors between 30 September 2022 and 25 January 2023.

 

 

Share options

Share options are exercisable between the following dates:

(a)	15 January 2017	and	15 January 2024
(b)	30 January 2021	and	30 January 2028
(c)	15 July 2024	and	15 July 2031
(d)	15 June 2025	and	15 June 2032

The Directors may only exercise share options if the growth in the earnings per share of the Company over any period of three consecutive financial years of the Company following the date of grant, exceeds the growth in the retail price index over the same period by at least 9 per cent.

At 30 September 2022 the market price of the Company's shares was 81p. The range during the year was 75p to 115p.

 

Approval

The Directors' Remuneration Report was approved by the Remuneration Committee on 25 January 2023 and signed on its behalf by:

 

 

 

J Ward

Remuneration Committee Chair

 

 

Corporate Governance Report

 

Chair's Introductory Statement

As noted in our ESG report we present the Corporate Governance Report for the last financial year. As I have said in the past, we take our corporate governance responsibilities very seriously. We continue to apply the Quoted Companies Alliance Corporate Governance Code ("QCA Code") as this fits more naturally with our listing on the AIM Market. The QCA Code is available from the QCA and it involves us following ten general principles and ensuring that a number of minimum disclosure requirements are made in the Annual Report or on the Company's website, www.titon.com/uk/investors/. The website also contains more details of the governance disclosures. It is then up to us to determine how the ten principles will be applied.

As shareholders will be aware a number of Board changes have taken place during the year as part of a process to strengthen the Board and to allow the Board to focus on delivering the Group's strategy and financial performance while ensuring that operational matters are managed at the level of the main subsidiary.

 

K A Ritchie

Chair

 

Compliance with QCA Code

The Board is accountable to the Company's shareholders for good corporate governance and the Company's website sets out how the 10 principles identified in the QCA Code are applied by the Company. Titon's business approach is based on openness and high levels of accountability and there is a commitment to high standards of corporate governance throughout the Group. With an international presence, the Group acts in accordance with the national laws of the various countries in which it operates and encourages the highest standards of business practice and procedure.

I am confident that the goals and strategy that we have set for our business have been followed during the year under review. As noted above we have certainly had some difficult times during the year but we have continued to treat our employees fairly, to invest in research and development and to communicate openly and honestly with our shareholders, to highlight three of our specific goals.

The Board seeks to instil a healthy corporate culture in all of its dealings with its stakeholders and believes that Titon is regarded by those stakeholders in a positive light and will meet its obligations in a fair and transparent way.  The Board acknowledges that there have been some challenges in meeting customer demands during the year due to supply chain issues and the implementation of the new ERP system. However, a considerable amount of senior management time has been spent on trying to resolve these issues and plans to catch-up with demand are now bearing fruit.

 

Please see the Audit Committee Report for a description of the main features of the internal control process and the risk management system in relation to the financial reporting process adopted by the Group. The disclosure of information on significant shareholdings in the Company is shown in the Directors' Report.

The Directors consider that the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

The Group consolidated accounts are prepared by the Group Finance Manager and are reviewed by the Chief Financial Officer and the Chief Executive. The review includes a detailed inspection of the accounts of all the constituent companies that comprise the Group along with the relevant consolidation adjustments and journals.

 

Composition and operation of the Board of Directors

As at 30 September 2022 the Board consisted of the Non-executive Chair, the Chief Executive, the Chief Financial Officer, and four Non-executive Directors. 

The Board as a whole comprises a wealth of skills and experience from the wide range of activities undertaken by its individual members, as follows:

Keith Ritchie joined the Company in 2012, having had a 25-year career in the City of London. He is a member of the Institute of Chartered Accountants in England and Wales and has extensive experience of finance, legal, tax and commercial matters. He is also a Non-executive director of Beama Ltd, the trade association for the electro-technical manufacturers association and is Chair of the Ventilation Group, within Beama Ltd. As a result of these different activities, he continues to utilise the skills gained over his working career. Keith became Non-executive Chair of the Board on 1 October 2022 and has a service contract which terminates at the 2023 Annual General Meeting unless he is re-elected;

Alexandra French joined the Board on 3 May 2022 as Chief Executive Officer. She was previously at Johnson Matthey, where she spent 25 years working in a number of commercial, operational, technical, sales and marketing roles. Alexandra graduated from the University of Cambridge with a degree in Natural Sciences;

Tyson Anderson has been with the Company since 1993, when he joined the Marketing team and was elected to the board of Titon Hardware Limited in 1999. Tyson joined the Board on 1 January 2004 as Marketing Director, was appointed Sales & Marketing Director on 1 February 2007 and now acts as Business Projects Director in Titon Hardware Limited. Tyson was appointed as a Non-executive Director and Deputy Chair in April 2022.  In his role as Deputy Chair he has a service contract which terminates at the 2023 Annual General Meeting unless he is re-elected.

Carolyn Isom joined Titon in December 2019 as Finance Director of Titon Hardware and was appointed to the Titon Holdings Board as CFO in December 2021. She is ACCA qualified and has worked for a number of companies in the construction sector.

Nicholas Howlett joined Titon in 1991 and has held a number of positions within the Group since then. He was appointed to the Board in 2002 and became a Non-executive Director with effect from 1 October 2017. He has a service contract which terminates at the 2023 Annual General Meeting unless he is re-elected. Nick has carried out many roles for Titon, including Production Director at the Haverhill factory, head of Research & Development and then Managing Director of Ventilation Systems in the UK and Europe. Nick works closely with UK trade associations involved in the ventilation industry and on the impact of building regulations and other Government laws both for Titon and the wider industry;

Jeff Ward joined the Board of Titon on 1 April 2022. Jeff is currently CEO of Guardian Fall, one of the largest independent height safety companies in the world. He was previously CEO of Centurion Safety Products from December 2015 until July 2020 and before then held a number of leadership roles in hardware and safety businesses where he was responsible for a range of activities, including sales, marketing, supply chain and strategy. Jeff holds an MBA from Warwick Business School and also serves as a Director of the British Safety Industry Federation. Jeff has a service contract which terminates at the 2023 Annual General Meeting unless he is re-elected;

Paul Hooper joined the Board of Titon on 1 April 2022. Paul is currently Chief Executive of The Alumasc Group plc, a position he has held since April 2003. Alumasc is a UK-based supplier of sustainable building products and solutions. He joined Alumasc in April 2001 as Group Managing Director. His earlier career included a first Managing Director role with BTR plc in 1992. He subsequently joined Williams Holdings plc in Special Operations, implementing acquisitions in Europe and North America, prior to joining Rexam PLC as a Divisional Managing Director with responsibility for operations in Europe and South East Asia. Paul holds an MBA from Cranfield School of Management. Paul has a service contract which terminates at the 2023 Annual General Meeting unless he is re-elected;

 

All Executive Directors are subject to annual appraisals of their performance and membership of relevant board committees, as appropriate, during the financial year. This takes the form of a review of the targets and objectives for the period, a meeting with the appraiser and the setting of targets and objectives for the current year. It also includes a process whereby a failure to meet the targets is discussed and changes are agreed to improve performance. A continuing failure to meet targets or performance could lead ultimately to dismissal. The Non-executive Directors also provide feedback and appraisal of the Executive Directors on an ad hoc basis, and this is included in the appraisals of the relevant individuals.

 

The Non-executive Chair has a range of responsibilities to perform including, inter alia, the proper functioning of the Board of Directors and over-seeing the strategic development of the Company and Group. The Chief Executive has a specific range of responsibilities including setting the strategic development of the Group, the day-to-day management of the Group and implementing the strategy agreed by the Board. The five current Non-executive Directors provide a range of skills and wide experience to the Group alongside the necessary independence, as required under principle 5, as follows:

 

1.   Mr N C Howlett is deemed to be independent for the purposes of the Code despite his previous service and role as an executive director of the Company due to his independence of character and judgment;

2.   Mr T N Anderson is not deemed to be independent as he is a significant shareholder and has an existing service contract with a Group subsidiary;

3.   Mr G P Hooper is deemed to be independent for the purposes of the Code as he has no previous links with the Company;

4.   Mr J Ward is deemed to be independent for the purposes of the Code as he has no previous links with the Company.

5.   Mr K A Ritchie is not deemed to be independent due to his previous service and role as an executive director of the Company and his significant shareholding.

 

The Board has a schedule of matters specifically reserved to it for decision including major capital expenditure decisions, business acquisitions and disposals and the setting of treasury policy. This also includes matters such as material financial commitments, commencing or settling major litigation and appointments to main and subsidiary company boards. The Executive Directors are involved with day-to-day matters arising and the size of the Group allows the Board to have rapid access to any issues which arise in dealings with stakeholders.

Scheduled Board meetings in 2022 took place monthly with further ad hoc meetings arranged as necessary. To enable the Board to function effectively and Directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board meetings, this consists of comprehensive management reporting information and discussion documents regarding specific matters. All directors commit sufficient time to the Group to discharge their responsibilities: the executive directors on a full-time basis, the Non-executive Directors, as required by the needs of the business.

 

The individual attendance by Executive Directors and Non-executive Directors at the Board and principal Board Committee Meetings held during the financial year is shown in the table below.

	Main Board	Remuneration Committee	Audit Committee	Nominations Committee
Total meetings held	10	1	3	2
K A Ritchie	10	1	3	2
M J Norris	6	-	-	-
T N Anderson	10	-	-	-
T D Gearey	6	-	-	-
C V Isom	10	-	3	-
A C French	4	-	-	-
N C Howlett	10	1	-	2
K Sargeant	2	-	-	-
J N Anderson	6	-	-	-
B Ratzke	2	-	-	-
G P Hooper	4	-	2	-
J Ward	3	-	-	-

 

There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company's expense. This is in addition to the access which every Director has to the Company Secretary. The Company Secretary is charged by the Board with ensuring that Board procedures are followed.

When new members are appointed to the Board, they are provided with advice from the Company Secretary in respect of their role and duties as a public company director. Furthermore, all Directors have ongoing access to the Company Secretary for advice during the course of their appointment.

Appointments to the Board of both Executive and Non-executive Directors are considered by the Nominations Committee for endorsement by the Board as a whole.

Any Director appointed during the year is required, under the provisions of the Company's Articles of Association, to retire and seek election by the shareholders at the next Annual General Meeting. The Articles of Association also require that one third of the Directors retire by rotation each year and seek re-election at the Annual General Meeting. The Directors required to retire are those in office longest since their previous re-election and in practice this means that each Director retires at least every three years, in accordance with the requirements of the Code. It is the Company's practice that all of the Non-executive Directors will seek re-election at each Annual General Meeting.

 

All of the Directors retire at the next AGM and being eligible, offer themselves for re-election.

A statement of Directors' interests and copies of their service contracts are available for inspection during usual business hours at the registered office of the Company, on any weekday (excluding public holidays), and will be available at the place of the Annual General Meeting for at least fifteen minutes prior to and during the meeting.

 

The Remuneration Committee

The Remuneration Committee Report is set out on pages 33 to 36. The Remuneration Committee's terms of reference, established by the Board, are to:

·    determine and to keep under review the Group's policy on remuneration;

·    determine the basic salaries and non-cash emoluments payable to all Executive Directors, including Executive Directors of subsidiary Group companies, giving due consideration to individual responsibility and performance and to salaries paid to Executive Directors of similar companies in comparable business sectors;

·    select the performance targets for the Executive Directors' bonus arrangements;

·    select the performance conditions relating to the Group's Share Option Schemes. Such performance conditions to be aimed to align Directors' interests to shareholder value;

·    make recommendations to the Board of Directors on other matters relating to remuneration in the Group; and

·    prepare an annual report on remuneration to the Company's shareholders for approval by the Board for submission to a vote of shareholders at the Company's Annual General Meeting and to advise the Board if it believes that, in any year, there are particular matters relating to remuneration which should be put to the Company's shareholders.

 

Nominations Committee

The Nominations Committee is responsible for proposing candidates as Directors of Titon Holdings Plc for endorsement by the Board. The selection of suitable candidates will be based on the suitability of the person for the position regardless of age, ethnicity or gender. Candidates may be either internal or external and executive search consultants may be used in the process. The Nominations Committee met a number of times during the year to recruit the new Non-executive Directors and the new Chief Executive. The Nominations Committee at 30 September 2022 comprised Mr N C Howlett, Mr J Ward and Mr G P Hooper.

 

Communications with shareholders

The Board recognises the importance of communications with shareholders. The Strategic Report on pages 8 to 26 gives a detailed review of the business, and there is regular dialogue with institutional shareholders at the time of the Group's preliminary announcement of the year end results and at the half year. The main contact with shareholders is through the Chair or Chief Executive.

The Group's results and other announcements are published on the London Stock Exchange RNS service and on the Company's website.

The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomes their participation.

The Corporate Governance Report was approved by the Board on 25 January 2023 and signed on its behalf by:

 

 

 

 

K A Ritchie

Chair

 

Audit Committee Report

 

The Audit Committee reports to the Board on matters concerning the Group's internal financial controls, financial reporting and risk management systems, identifying any matters in respect of which it considers that action or improvement is needed and making recommendations as to the steps to be taken.

Composition of the Audit Committee

The Audit Committee is appointed by the Board for a period of three years and comprised Mr K A Ritchie ACA who has financial reporting experience and Mr G P Hooper, who has extensive accounting experience from his career and position as Chief Executive of The Alumasc Group Plc. I confirm that the Titon Audit Committee continues to have competence relevant to the sector in which the Company operates.

 

Role of the Audit Committee

The Audit Committee operates within defined terms of reference and its main functions are:

·    to monitor the internal financial control and risk management systems on which the Group is reliant;

·    to consider whether there is a need for the Group to have its own internal audit function;

·    to monitor the integrity of the Group's financial statements and formal announcements relating to the Group's financial performance, reviewing significant financial reporting judgements contained in them;

·    to review arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting or any other matter;

·    to meet the independent Auditor of the Group to review their proposed audit programme of work and the subsequent Audit Report and to assess the effectiveness of the audit process and the levels of fees paid in respect of both audit and non-audit work;

·    to make recommendations to the Board in relation to the appointment, re-appointment or removal of the Auditor, and to negotiate their remuneration and terms of engagement on audit and non-audit work; and

·    to monitor and review annually the external Auditor's independence, objectivity, effectiveness, resources and qualification.

 

Review of financial statements and risks identified

Financial statements issued by the Company need to be fair, balanced, and understandable. The Audit Committee reviews the Annual Report as a whole and makes recommendations to the Board. The Audit Committee has advised the Board that, in its opinion, the Annual Report and Financial Statements are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy. The Company's unaudited interim results are also reviewed by the Audit Committee prior to their publication.

The Audit Committee assesses annually whether it is appropriate to prepare the Group's financial statements on a going concern basis and makes its recommendation to the Board. The Board's conclusions are set out in the Directors' Report. As noted in the Strategic Report and the Directors' Report a considerable amount of work has been carried out to assess the Group's financial position as a result of the pandemic. The Audit Committee has been fully involved in all of the financial forecasting that has been performed and the cash management steps which have been taken and has made a recommendation to the Board that the Group should continue to prepare the financial statements on a going concern basis.

In planning its own work, and reviewing the audit plan of the Auditors, the Audit Committee takes account of the most significant issues and risks, both operational and financial, likely to impact on the Group's financial statements.

The Committee considers that the timing of revenue recognition is a significant area of risk to accurate financial reporting and ensures that necessary credit note provisions and warranty provisions are made. In relation to activities in South Korea, revenues are only recognised once the third-party customer has accepted the successful installation of either the first fix or the second fix products into buildings rather than the delivery of such product from our factory.

The carrying value of the Group's assets is an area where the Committee places great emphasis. In particular, calculating the carrying value for the Group's inventory is a vital factor as the Group has a wide range of product lines that may fluctuate regularly in terms of their sales volumes. Consequently, every product line is assessed at the year-end to ensure that accurate provisions for obsolescence are made.

A significant risk considered by the Committee is the Group's investment in its South Korean business and in particular the accuracy of accounting information. The Committee manage this risk through senior management making regular trips to South Korea combined with the receipt of detailed monthly management accounts from South Korea. As noted above travel to South Korea was opened up during 2022, before then regular video calls with senior managers were held instead.

Internal audit

The Board believes that due to the size of the business there is currently no requirement for an internal audit function. This matter is reviewed annually.

Internal control

The respective responsibilities of the Directors in connection with the financial statements are set out on pages 28 and 29, and those of the Auditors are detailed in the Independent Auditor's Report on page 48.

The Audit Committee is responsible for ensuring that suitable internal controls systems to prevent and detect fraud and error are designed and is also responsible for reviewing the effectiveness of such controls. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group in line with the FRC's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting, published in September 2014 and the FRC's Guidance on Audit Committees published in April 2016. This process has been in place for the year under review and up to the date of approval of this report and accords with the guidance. In particular, the Committee has reviewed and updated the process for identifying and evaluating the significant risks affecting the Group and policies by which these risks are managed. The risks of any failure of such controls are identified in a Risk Matrix (set out in the Risk Management Report on pages 23 to 26) which is regularly reviewed by the Board and which identifies the likelihood and severity of the impact of such risks and the controls in place to mitigate the probability of such risks occurring.

Internal control systems are designed to meet the Group's particular needs and the risks to which it is exposed. They do not eliminate the risk of failure to achieve business objectives. The following are the key components which the Group has in place to provide effective internal control:

·    an appropriate control environment through the definition of the organisation structure and authority levels;

·    the identification of the major business risks facing the Group and the development of appropriate procedures and controls to manage these risks;

·    a comprehensive budgeting and reporting system with monthly results compared with budgets and with previous years; and

·    the principal aspects of the Group's internal control processes used in preparing the Group's consolidated accounts include second reviews of consolidation workings and Board review of the composition of the Group's financial information.

The Directors acknowledge that they are responsible for establishing and maintaining the Group's system of internal control and risk management and reviewing their effectiveness, which they have done during the year. Internal control systems are designed to meet the particular needs of the Group and the risks to which it is exposed and by their nature can provide reasonable but not absolute assurance against material misstatement or loss.  Appropriate risk monitoring systems have been in place throughout the year and up to the date of approval of the Annual Report and have been regularly reviewed by the Board. The Report on Risk Management sets out the principal risks identified by the Directors, the potential impact and the mitigation measures which apply. No significant weaknesses have been identified in this report by the Directors during the year.

The Company has a shareholding in an associate company. Controls within this entity are not reviewed as part of the Company's formal review processes due to the local delegation of managerial responsibilities, but instead are reviewed as part of regular management process.

 

External audit process

During the year BDO LLP decided to resign as Group Auditors. The Audit Committee met to discuss this situation and agreed to recommend the appointment of MacIntyre Hudson LLP for the current year. The Audit Committee meets at least twice a year with the Auditor, who provides a planning report in advance of the annual audit and a report on the annual audit. The Committee has an opportunity to question and challenge the Auditor in respect of each of these reports. No significant deficiencies were noted by the Auditor in respect of the period ended 30 September 2022. The Committee also discussed the basis of preparation of the going concern opinion and the key audit matters with the Auditor.

After each audit, the Audit Committee reviews the audit process and considers its effectiveness.

 

Auditor assessment and independence

The Group's external auditor is MacIntyre Hudson LLP (MHA), who replaced BDO LLP during the period.

The Audit Committee reviewed MHA's independence policies and procedures including quality assurance procedures and it was confirmed that those policies and procedures were fit for purpose. Accordingly, the Audit Committee recommends that MHA should be reappointed as the Group's auditor for the next financial year and a resolution to that effect will be proposed at the 2023 AGM.

The fees for audit services provided by MHA for 2022 were £143,000 (2021: £116,000). The Audit Committee discussed the non-audit services provided by MHA during the year. The cost of non-audit services provided by the Auditor for the financial year ended 30 September 2022 was £1,000 (2021: £1,450).

 

K A Ritchie

Audit Committee Chair

25 January 2023

 

Independent Auditor's Report

To the Members of Titon Holdings Plc

For the purpose of this report, the terms "we" and "our" denote MHA MacIntyre Hudson in relation to UK legal, professional and regulatory responsibilities and reporting obligations to the members of Titon Holdings Plc. For the purposes of the table that sets out the key audit matters and how our audit addressed the key audit matters, the terms "we" and "our" refer to MHA MacIntyre Hudson. The Group financial statements, as defined below, consolidate the accounts of Titon Holdings Plc and its subsidiaries (the "Group"). The "Parent Company" is defined as Titon Holdings Plc. The relevant legislation governing the Parent Company is the United Kingdom Companies Act 2006 ("Companies Act 2006").

Opinion

We have audited the financial statements for Titon Holdings Plc, for the year ended 30 September 2022, which comprise:

·    the consolidated income statement;

·    the consolidated statement of comprehensive income;

·    the consolidated statement of financial position;

·    the company statement of financial position;

·    the consolidated statement of changes in equity;

·    the company statement of changes in equity;

·    the Group and Company statement of cash flows; and

·    the notes to the consolidated financial statements 1 to 26.

 

The financial reporting framework that has been applied in the preparation of the group and parent company's financial statements is applicable law and United Kingdom adopted International Financial Reporting Standards (UK Adopted IFRS).

 

In our opinion:

·    the financial statements give a true and fair view of the state of the Group's and the Parent Company's affairs as at 30 September 2022 and of the Group's loss for the year then ended;

·    the financial statements have been properly prepared properly prepared in accordance with International Financial Reporting Standards and Interpretations (collectively "IFRSs'") as adopted in the United Kingdom ("UK-adopted IFRS"); and

·    the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the entity's ability to continue to adopt the going concern basis of accounting included:

·    The consideration of inherent risks to the Group's and parent Company's operations and specifically its business model.

·    The evaluation of how those risks might impact on the Group's available financial resources.

·    Review of the mathematical accuracy of the cashflow forecast model prepared by management and corroboration of key data inputs to supporting documentation for consistency of assumptions used with our knowledge obtained during the audit.

·    Challenging management for reasonableness of assumptions in respect of the timing and value of cash receipts and payments included in the cash flow model.

·    Where additional resources may be required the reasonableness and practicality of the assumptions made by the Directors when assessing the probability and likelihood of those resources becoming available.

·    Holding discussions with management regarding future financing plans, corroborating these where necessary and assessing the impact on the cash flow forecast.

·    Evaluating the accuracy of historical forecasts against actual results to ascertain the accuracy of management's forecasts.

 

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Overview of our audit approach

Materiality	The overall materiality that we used for the Group financial statements was £221,000 (2021: £250,000), which was determined as 1% of turnover (2021: 1.1% of turnover).   The overall materiality for the Parent Company financial statements was £138,000 (2021: £150,000), which was determined as 2% of net assets (2021: 60 of group materiality).   Performance materiality was set at 60% (2021: 60%) of materiality for both the Group and Parent.
Scope	Our Group audit was scoped by obtaining an understanding of the Group including the Parent Company, and its environment, including the Group's system of internal control, and assessing the risks of material misstatement in the financial statements.  We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the directors that may have represented a risk of material misstatement.   The Group consists of five reporting components, four of which were considered to be significant components: Titon Holdings Plc, Titon Hardware Ltd, Titon Korea Co. Ltd and Browntech Sales Co. The significant components were subjected to full scope audits for the purposes of our audit report on the Group financial statements. The other component, Titon Inc. is not deemed significant and was subject to specific audit procedures for the purposes of our audit report on the Group financial statements. Material subsidiaries were determined based on: 1)    financial significance of the component to the Group as a whole, and 2)    assessment of the risk of material misstatements applicable to each component.   Our audit scope results in all major operations of the Group being subject to audit work, with Titon Korea Co, Ltd and Browntech Sales Co. being audited by BTI Korea acting on specific instructions.
Key audit matters	In addition to the matters described in the Basis for opinion section, we have determined the matters described below to be the key audit matters at Group level to be communicated in our report: ·      Inventory valuation ·      Management override of controls ·      Revenue recognition
First-year audit transition	We developed a detailed audit transition plan, designed to deliver an effective transition from the Group's predecessor auditor, BDO LLP ("BDO"). Our audit planning and transition commenced on 25 August 2022, following our appointment. Our transition activities were performed for components located in the UK and South Korea, which included (but were not limited to) reviewing the Audit Committee meeting minutes and reviewing BDO's 2021 audit working papers. Our transition focused on obtaining an understanding of the Group's system of internal control, evaluating the Group's accounting policies and areas of accounting judgement, and meeting with management across all major divisions.

 

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement, whether or not due to fraud, that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.

 

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the Key Audit Matters to be communicated in our report.

 

Inventory valuation including provisions
Key audit matter description	The inventory held by the Group is a key material area to the financial statements and accounts for a large amount of the Group's current assets. Due to the nature of the Group's operations, the inventory balance is inherently linked to both the purchases and the sales cycles.   The Group uses a standard costing model to determine the value of inventory. This carries a risk of material misstatement due to the use of key management judgements in respect of overhead and labour recovery rates.   We consider inventory to be a key audit matter due to its significant importance to the Group's operations and its linkage to multiple areas of the financial statements.
How the scope of our audit responded to the key audit matter	Our audit work included, but was not restricted to the following:   ·      We have attended the year end stock count including sample testing of stock items recorded on stock count sheets to physical stock location in the warehouses and vice versa and physically inspecting inventory held for indication of obsolescence or impairment.   ·      We have reviewed the inventory listing and stock physically present in the warehouses for any slow-moving or obsolete inventory items which require write off or providing for and then also reviewed and considered the appropriateness of the provision made by management, as well as reperforming the calculations made by management.   ·      We have performed substantive testing for a sample of inventory items held at the year end to the original purchase invoice and also to post year end sales to ensure inventory is held at the lower of cost and net realisable value in the financial statements.   ·      We have obtained and reviewed managements calculations and key judgements regarding the standard costing model used and assessed the appropriateness of the costs included. We have also sample tested payroll and overhead costs back to source invoices and documentation to confirm the accuracy of the figures used.   ·      We have reviewed the audit working papers completed by the component auditor to ensure that the work performed on overseas subsidiaries sufficiently addresses the risk at group level.
Key observations	Based on the outcome of our procedures we identified no material issues with the valuation of inventory or the provisions for slow moving, damaged or obsolete goods.

 

Management override of controls
Key audit matter description	In accordance with ISA 240 (UK) management override is presumed to be a significant risk.    The ability to override controls puts management in a unique position to perpetrate or conceal the effects of fraud. This may take a number of forms such as falsifying accounting entries in order to conceal misappropriation of assets or other manipulation of accounting entries intended to result in the production of financial statements which give a misleading view of the entity's financial position or performance.
How the scope of our audit responded to the key audit matter	Our audit work included, but was not restricted to the following:   ·      We evaluated the design and implementation of key controls, in particular high-level management review controls.   ·      We evaluated whether the judgements and decisions made in determining the accounting estimates included in the financial statements, even if they are individually reasonable, indicated a possible bias on the part of the entity's management that may represent a risk of material misstatement due to fraud. ·      We utilised our data analytics software to identify journals deemed to carry the highest risk or fraud or error. These journals were then queried and the business rationale confirmed as appropriate.   ·      We have tested the consolidation workings for mathematical accuracy and reviewed the consolidation workings and journals to confirm their appropriateness.   ·      We have also reviewed the journals and processes used and applied with regard to the change in accounting system which occurred during the year. •
Key observations	No issues have been identified from the audit procedures performed over management override of controls.

 

 

Revenue recognition
Key audit matter description	Revenue is one of the most prominent key performance indicators for the business.   There is a risk that revenue is not recognised in line with IFRS15 in the appropriate period with regards to the cut-off of transactions around the year-end. This is a heightened risk in Korea where the revenue is recognised over time due to the requirements to perform a second fix on components fitted, therefore resulting in a deferral of revenue at the year end.
How the scope of our audit responded to the key audit matter	Our audit work included, but was not restricted to the following:   ·      We have completed a walkthrough of each of the key revenue streams from start to finish, documenting details of the current internal processes, systems and controls to better understand them.   ·      We have completed cut-off testing by selecting a sample of sales transactions across the various streams either side of the year end to ensure the revenue has been accounted for in the correct period.   ·      Substantive testing has been carried out across the different income streams by picking samples from finance system and tracing to the appropriate supporting documentation.   ·      We have evaluated the Group's revenue recognition in the context of the 5-step approach as set out within IFRS15.   ·      We have reviewed the audit working papers completed by the component auditors regarding the method of revenue recognition, its compliance with the principles of IFRS15 and consideration of the adequacy of the work performed.
Key observations	We are satisfied, based on the results of the testing performed, that the recognition criteria employed by management is materially consistent with the requirements of IFRS15.   It is noted that adjustments are made at group level to ensure income is correctly recognised in light of IFRS15, these consolidation adjustments have been confirmed as accurate.

 

Our application of materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

 

Our definition of materiality considers the value of error or omission on the financial statements that, individually or in aggregate, would change or influence the economic decision of a reasonably knowledgeable user of those financial statements.  Misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Materiality is used in planning the scope of our work, executing that work and evaluating the results.

 

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

 

	Group financial statements	Parent Company financial statements
Overall materiality	£221,000 (2021: £250,000)	£138,000 (2021: £150,000)
How we determined it	1% of turnover (2021: 1.1% of turnover)	2% of net assets (2021: 60% of group materiality)
Rationale for the benchmark applied	We consider turnover to be the main measure by which the users of the financial statements assess the financial performance and success of the Group and is a Key Performance Indicator identified by management. Therefore, we consider this to be the most appropriate benchmark for Group materiality.	The Parent Company is largely a holding company incurring limited costs and therefore net assets has been considered the most appropriate benchmark for materiality.

 

Performance materiality is the application of materiality at the individual account or balance level, set at an amount to reduce, to an appropriately low level, the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.  

 

We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group and the Parent Company performance materiality was set at 60% (2021: 60%) of Group and Parent Company materiality respectively for the 2022 audit being £132,600 for the Group and £82,800 for the Parent Company. In determining performance materiality, we considered our understanding of the entity, including the quality of the control environment and whether we were able to rely on controls, and the nature, volume and size of uncorrected misstatements in the previous period. 

 

We agreed with management that we would report to them all audit differences in excess of £11,050 (2021: £5,000) for the Group and £6,850 (2021: £5,000) for the Company as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to management on disclosure matters that we identified when assessing the overall presentation of the financial statements.

 

Overview of the scope of our audit

Our assessment of audit risk, evaluation of materiality and our determination of performance materiality sets our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. This assessment takes into account the size, risk profile, organisation / distribution and effectiveness of group-wide controls, changes in the business environment and other factors such as recent internal audit results when assessing the level of work to be performed at each component.

 

In assessing the risk of material misstatement to the consolidated financial statements, and to ensure we had adequate quantitative and qualitative coverage of significant accounts in the consolidated financial statements, of the 5 reporting components of the group, 2 of which are based in the UK and audited by the Group audit team, being Titon Holdings Plc and Titon Hardware Ltd, 2 of which are based in South Korea and audited by BTI Korea being Titon Korea Co. Ltd and Browntech Sales Co. and the other being Titon Inc. based in the USA.

 

The audit procedures undertaken covered the following percentage of the group benchmarks below:

 

	Number of components	Revenue	Total assets	Loss before tax
Full scope audit	4	99%	100%	91%
Specific procedures	1	1%	0%	9%
Total	5	100%	100%	100%

 

 

Other Information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

 

We have nothing to report in this regard.

 

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

· the information given in the Strategic Report and the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

· the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.

 

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.

 

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

 

· adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

· the financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of Directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

 

Responsibilities of the Directors

As explained more fully in the Directors' responsibilities statement, as set out on pages 28 to 29, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Group's and the Parent Company's ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

 

Auditor responsibilities for the audit of the financial statements

 

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

 

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.

The specific procedures for this engagement and the extent to which these are capable of detecting irregularities, including fraud is detailed below:

· Enquiry of management to identify any instances of non-compliance with laws and regulations.

· Enquiry of management around actual and potential litigation and claims.

· Enquiry of management to identify any instances of known or suspected instances of fraud.

· Discussing among the engagement team regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.

· Reviewing minutes of meetings of those charged with governance.

· Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business, and reviewing accounting estimates for bias.

· Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations.

· Challenging assumptions and judgements made by management in their significant accounting estimates, in particular with respect to provisions for claims incurred but not reported.

 

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities.

www.frc.org.uk/auditorsresponsibilities

 

This description forms part of our auditor's report.

 

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

Andrew Moyser FCA FCCA (Senior Statutory Auditor)

For and on behalf of MHA MacIntyre Hudson, Statutory Auditor

London

25 January 2023

 

Consolidated Income Statement

for the year ended 30 September 2022

			2022	2021
		Note	£'000	£'000
Revenue		3	22,087	23,412
Cost of sales			(16,270)	(16,070)
Grant Income		4	-	8
Gross profit			5,817	7,350
Distribution costs			(1,393)	(1,144)
Administrative expenses			(4,586)	(4,521)
Administrative expenses - exceptional		26	(349)	-
Research and development expenses			(629)	(582)
Other income			21	16
Operating (loss) / profit			(1,119)	1,119
Finance income		5	9	-
Finance expense		5	(16)	(16)
Share of post-tax (loss) / profit from associate		13	173	(28)
(Loss) / profit before tax		6	(953)	1,075
Income tax credit / (expense)		7	410	(72)
(Loss) / profit after income tax			(543)	1,003
Attributable to:
Equity holders of the parent			(436)	1,028
Non-controlling interest			(107)	(25)
(Loss) / profit for the year			(543)	1,003
(Loss) / earnings per share attributed to equity holders of the parent:
Basic		9	(3.89p)	9.24p
Diluted		9	(3.89p)	9.18p

 

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2022                                                                

			2022	2021
			£'000	£'000
(Loss) / profit for the year		(543)		1,003
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		112		(284)
Total comprehensive income for the year		(431)		719
Attributable to:
Equity holders of the parent		(333)		793
Non-controlling interest		(98)		(74)
		(431)		719

The notes on pages 56 to 84 form part of these financial statements.

 

Consolidated Statement of Financial Position

At 30 September 2022

					2022	2021
			Note		£'000	£'000
Assets
Property, plant and equipment		10		3,321		3,476
Right-of-use assets		10		553		546
Intangible assets		11		915		925
Investments in associates		13		2,909		2,681
Deferred tax assets		16		697		278
Total non-current assets				8,395		7,906
Inventories		14		6,571		5,042
Trade and other receivables		15		4,920		4,224
Cash and cash equivalents		20		1,726		4,794
Total current assets				13,217		14,060
Total Assets				21,612		21,966
Liabilities
Lease liabilities		18		378		402
Total non-current liabilities				378		402
Trade and other payables		17		5,051		4,554
Lease liabilities		18		232		193
Total current liabilities				5,283		4,747
Total Liabilities				5,661		5,149
Equity
Share capital		19		1,122		1,119
Share premium		19		1,091		1,077
Capital redemption reserve				56		56
Treasury shares		19		-		(27)
Foreign exchange reserve				198		96
Retained earnings				13,179		14,093
Total Equity attributable to equity holders of the parent				15,646		16,414
Non-controlling Interest				305		403
Total Equity				15,951		16,817
Total Liabilities and Equity				21,612		21,966

The notes on pages 56 to 84 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board on 25 January 2023 and signed on its behalf by:

K A Ritchie
Chair

 

Company Statement of Financial Position

at 30 September 2022

Company No. 01604952

 

				2022	2021
	Note			£'000	£'000
Assets
Property and motor vehicles		10		1,773	1,836
Investments in subsidiaries		12		554	554
Investments in associates		13		225	225
Deferred tax assets		16		4	-
Total non-current assets				2,556	2,615
Trade and other receivables		15		4,769	3,818
Cash and cash equivalents		20		4	1,324
Total current assets				4,773	5,142
Total Assets				7,329	7,757
Liabilities
Deferred tax		16		-	274
Total non-current liabilities				-	274
Trade and other payables		17		135	168
Total current liabilities				135	168
Total Liabilities				135	442
Equity
Share capital		19		1,122	1,119
Share premium account		19		1,091	1,077
Capital redemption reserve				56	56
Treasury shares		19		-	(27)
Retained earnings				4,925	5,090
Total Equity				7,194	7,315
Total Liabilities and Equity				7,329	7,757

 

 

As permitted by section 408(3) of the Companies Act 2006 the Company has elected not to present its own Statement of Profit and Loss for the year. Titon Holdings Plc reported a profit before tax for the financial year ended 30 September 2022 of £35,000 (2021: £243,000). The notes on pages 56 to 84 form part of these financial statements.

These financial statements were approved and authorised for issue by the Board on 25 January 2023 and signed on its behalf by:

 

K A Ritchie

Chair

 

Consolidated Statement of Changes in Equity

at 30 September 2022

 

	Share Capital	Share  premium	Capital redemption reserve	Foreign exchange reserve	Treasury shares		Retained earnings	Total	Non- controlling interest	Total  Equity
	£'000	£'000	£'000	£'000	£000		£'000	£'000	£'000	£'000
At 30 September 2020	1,113	1,049	56	327	(27)	13,425		15,943	868	16,811
Translation differences on overseas operations	-	-	-	(231)	-	(4)		(235)	(49)	(284)
Profit for the year	-	-	-	-	-	1,028		1,028	(25)	1,003
Total Comprehensive Income for the year	-	-	-	(231)	-	1,024		793	(74)	719
Dividends paid	-	-	-	-	-	(390)		(390)	-	(390)
Dividends paid to NCI in subsidiary	-	-	-	-	-	-		-	(391)	(391)
Share-based payment expense	-	-	-	-	-	34		34	-	34
Exercise of share options	6	28	-		-	-		34	-	34
At 30 September 2021	1,119	1,077	56	96	(27)	14,093		16,414	403	16,817
Translation differences on overseas operations	-	-	-	102		1		103	9	112
Loss for the year	-	-	-	-	-	(436)		(436)	(107)	(543)
Total Comprehensive Income for the year	-	-	-	102	-	(435)		(333)	(98)	(431)
Dividends paid	-	-	-	-	-	(502)		(502)	-	(502)
Dividends paid to NCI in subsidiary	-	-	-	-	-	-		-	-	-
Share-based payment expense	-	-	-	-	-	23		23	-	23
Exercise of share options	3	14	-		-	-		17	-	17
Transfer of treasury shares	-	-	-		27	-		27	-	27
At 30 September 2022	1,122	1,091	56	198	-	13,179		15,646	305	15,951

 

The notes on pages 56 to 84 form part of these financial statements.

The following describes the nature and purpose of each reserve within equity:

Reserve	Description and purpose
Share capital Share premium	Nominal value of the issued share capital of the Company Premium on shares issued in excess of nominal value
Capital redemption	Amounts transferred from share capital on redemption of issued shares
Treasury shares	Weighted average cost of own shares held in Treasury
Foreign exchange reserve	Cumulative gains/losses arising on retranslating the net assets of overseas operations into Sterling
Retained earnings	All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere
Non-controlling interest	Interest in subsidiaries not owned by Titon Holdings Plc shareholders

 

 

Company Statement of Changes in Equity

at 30 September 2022

	Share Capital	Share  premium	Capital redemption reserve	Treasury shares	Retained earnings	Total  Equity
	£'000	£'000	£'000	£000	£'000	£'000
At 30 September 2020	1,113	1,049	56	(27)	5,203	7,394
Profit for the year	-	-	-	-	243	243
Total Comprehensive Income for the year	-	-	-	-	243	243
Share-based payment expense	-	-	-	-	34	34
Dividends paid	-	-	-	-	(390)	(390)
Exercise of Share options	6	28	-	-	-	34
At 30 September 2021	1,119	1,077	56	(27)	5,090	7,315
Profit for the year	-	-	-	-	314	314
Total Comprehensive Income for the year	-	-	-	-	314	314
Share-based payment expense	-	-	-	-	23	23
Dividends paid	-	-	-	-	(502)	(502)
Exercise of Share options	3	14	-	-	-	17
Transfer of Treasury shares	-	-	-	27	-	27
At 30 September 2022	1,122	1,091	56	-	4,925	7,194

 

The notes on pages 56 to 84 form part of these financial statements.

 

The following describes the nature and purpose of each reserve within equity:

                                                  

Reserve	Description and purpose
Share capital	Nominal value of the issued share capital of the Company
Share premium	Premium on shares issued in excess of nominal value
Capital redemption	Amounts transferred from share capital on redemption and cancellation of issued shares
Treasury shares	Weighted average cost of own shares held in Treasury
Retained earnings	All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere

Group and Company Statement of Cash Flows

for the year ended 30 September 2022

 

		Group		Company
		2022	2021	2022	2021
	Note	£'000	£'000	£'000	£'000
Cash generated from operating activities
(Loss) / profit before tax		(953)	1,075	35	(99)
Depreciation of property, plant & equipment	10	518	479	64	68
Depreciation of right-of-use assets	10	232	164	-	-
Amortisation of intangible assets	11	298	240	-	-
Profit on sale of plant & equipment		(19)	(7)	-	(1)
Share based payment expense - equity settled	23	23	34	23	34
Finance income	5	(9)	-	(1)	-
Finance costs	5	16	16	-	-
Share of associate's post-tax (profit) / (loss)	13	(173)	28	-	-
		(67)	2,029	121	2
(Increase) in inventories		(1,529)	(640)	-	-
(Increase) / decrease in receivables		(696)	(428)	(952)	1
Increase / (decrease) in payables and other current liabilities		498	206	(32)	(715)
Cash generated (used in) / generated by operations		(1,794)	1,167	(863)	(712)
Income taxes paid		-	(22)	-	-
Net cash (used in) / generated by operating activities		(1,794)	1,145	(863)	(712)
Cash flows from investing activities
Purchase of plant & equipment	10	(386)	(502)	-	-
Purchase of intangible assets	11	(288)	(412)	-	-
Proceeds from sale of plant & equipment		44	25	-	6
Finance income	5	9	-	1	-
Dividends received from subsidiary companies		-	-	-	385
Net cash (used in) / generated by investing activities		(621)	(889)	1	391
Cash flows from financing activities
Dividends paid to equity shareholders of the parent	8	(502)	(390)	(502)	(390)
Dividends paid to non-controlling shareholders of a subsidiary	24	-	(391)	-	-
Payment of lease liability	18	(226)	(198)	-	-
Finance costs	5	(16)	(16)	-	-
Exercise of share options	23	44	34	44	34
Net cash used in financing activities		(700)	(961)	(458)	(356)
Net decrease in cash		(3,115)	(705)	(1,320)	(677)
Effect of exchange rate changes		47	(73)	-	-
Cash at beginning of the year		4,794	5,572	1,324	2,001
Cash and Cash Equivalents at end of the year		1,726	4,794	4	1,324

 

The notes on pages 56 to 84 form part of these financial statements.

 

Notes to the Consolidated Financial Statements

at 30 September 2022

General information

The consolidated financial statements of the Group for the year ended 30 September 2022 incorporates Titon Holdings Plc ("the Company") and its subsidiaries (together referred to as "the Group").

Titon Holdings Plc shares are publicly traded on the AIM market of the London Stock Exchange. The nature of the Group's operations and its principal activities are set out in the Strategic Report on page 8. The consolidated financial statements were authorised for release on 25 January 2023.

1        Summary of significant accounting policies

(a)   Basis of preparation

Statement of compliance

The Group and Parent Company financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations (collectively "IFRSs'") as adopted in the United Kingdom ("UK-adopted IFRS").

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

The consolidated financial statements are presented in GBP and all values are rounded to the nearest thousand (£000), except as otherwise indicated.

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

There were no new or amended standards that were required to be adopted by the Group in these financial statements. The Group does not expect any standards issued by the IASB, but not yet effective, to have a material impact on the group.

 

Going concern

The financial statements have been prepared on a going concern basis. In adopting the going concern basis the Directors have considered potential worst-case scenarios that could have a material impact on the business and from its other principal risks set out on pages 23 to 26. Under the worst-case scenario considered, which is severe and considered highly unlikely, the Group remains liquid for a period of more than 12 months from the date of reporting and the Directors therefore believe, at the time of approving the financial statements that the Group is well placed to manage its business risks successfully and remains a going concern. The key facts and assumptions in reaching this determination are detailed on pages 29 to 30.

 

Use of judgement and estimates

In the application of the Group's accounting policies, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of the assets and liabilities within the next financial year are described under the relevant notes.

 

(b)   Basis of consolidation

Subsidiaries

The Group's consolidated financial statements incorporate the financial statements of the Company (Titon Holdings Plc) and the entities controlled by the Company (its subsidiaries) made up to 30 September 2022. Control exists when the Company is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the financial statements.

Non-controlling interests

A non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling interests at the end of reporting period represent the non-controlling shareholders' portion of the fair values of the identifiable assets and liabilities of the subsidiary at the acquisition date and the non-controlling interests' portion of movements in equity since the date of the combination. Non-controlling interest is presented within equity, separately from the parent's shareholders' equity.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in deficit balance.

Associates

Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the Consolidated Statement of Financial position at cost.

The Group's share of post-acquisition profits and losses is recognised in the consolidated profit or loss, except that losses in excess of the Group's investment in the associate are not recognised unless there is an obligation to make good those losses. Profits or losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate.

 

The investors' share in the associate's profits or losses resulting from these transactions is eliminated against the carrying value of the associate. Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. The carrying amount of the investment in associates is subject to impairment in the same way as goodwill arising on a business combination (see accounting policy (h)).

 

Business combinations

The consolidated financial statements incorporate the results of business using the purchase method. In the Consolidated Statement of Financial Position, the Group's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The Group's share of the results of acquired operations are included in the consolidated income statement from the date on which control is obtained.Foreign currency

Transactions entered into by group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the consolidated profit or loss.

On consolidation, the results of overseas operations are translated into Sterling, which is the presentational currency of the Company and Group, at rates approximating those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in other comprehensive income.

Upon disposal of all overseas operations, exchange differences arising from the translation of the financial statements of foreign operations are recycled and taken to the consolidated profit or loss as part of the profit or loss on disposal. The Company has elected, in accordance with IFRS 1, that in respect of all foreign operations, any differences that have arisen before 1 October 2004 have been set to zero. Any gain or loss on the subsequent disposal of those foreign operations would exclude translation differences that arose before the date of transition to IFRS and include only subsequent translation differences.

More than 92% (2021: 89%) of sales from the Group's UK business are invoiced in Sterling.

 

(c)   Property, plant and equipment

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for intended use. All other repairs and maintenance costs are recognised in the income statement as incurred.

Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and equipment to write down the cost to their residual values over the estimated useful lives. It is applied at the following rates:

Freehold buildings                                   - 2% per annum straight line

Improvements to leasehold property    - 10% to 20% per annum straight line (or the lease term, is shorter)

Plant and equipment                               - 10% to 33.3% per annum straight line

Motor vehicles                                           - 25% per annum straight line

 

The estimated useful lives, residual values and depreciation methods are reviewed at each year end, with the effect of any changes in estimates accounted for on a prospective basis.

The gain or loss arising on the disposal of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the statement of comprehensive income.

 

The carrying values of tangible property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable (see accounting policy (h)).

 

The Group also recognises right-of-use assets and lease liabilities under IFRS 16 (see note 18), for most leases with the exception of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less. Right-of-use assets, which include Property (factory units and office accommodation), plant and equipment and motor vehicles are initially measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments, and are depreciated on a straight-line basis to write off the carrying value of the assets over the contractual term of each lease.

The carrying values of right-of-use assets are reviewed for impairment when events, such as a change in the term of the lease, or in other circumstances indicate the carrying value may not be recoverable (see accounting policy (h)).

(e) Intangible assets

Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses (see accounting policy (h)). Amortisation is charged to Administrative Expenses within the Consolidated Income Statement. The gain or loss arising on the disposal of an intangible asset, other than goodwill, is determined as the difference between the sales proceeds (where appropriate) and the carrying amount of the asset and is recognised in the statement of comprehensive income.

 

i   Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets of the acquired subsidiary or associate at the date of acquisition and subject to annual impairment testing. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill associated with the acquisition of associates is included within the investment in associates. 

Goodwill is not subject to amortisation but is tested for impairment annually. On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal.

ii   Internally generated intangible assets (development costs)

Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed.

Expenditure on internally developed products is capitalised if all of the following can be demonstrated:

·    it is technically feasible to complete the intangible asset so that it will be available for use or sale;

·    there is an intention to complete the intangible asset and use or sell it;

·    an ability to use or sell the intangible asset;

·    how the intangible asset will generate probable future economic benefits;

·    the availability of adequate technical, financial and other resources to complete the development; and

·    the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Development costs are amortised using the straight-line method over their remaining estimated useful lives from the date that the products are available for sale to customers, which is normally between 3 and 5 years. The remaining useful lives of such development assets are assessed by the Directors annually.

Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects is recognised in the consolidated income statement as incurred.

iii   Computer software

Costs incurred on the acquisition of computer software are capitalised if they meet the recognition criteria of IAS 38 as described above. Computer software costs recognised as assets are written off over their estimated useful lives, which is normally between 3 and 10 years.

iv   Other intangible assets 

Other intangible assets arising on business combinations, including patents, are recorded at fair value at the date of acquisition. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives, which is normally 5 years. The remaining useful lives of such assets are assessed by the Directors annually.

v   Assets under development

Assets under development are not amortised until they are complete and in use by the Group.

vi    Subsequent expenditure

Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated as follows:

Raw materials and Bought In finished goods              -  cost of purchase

Work in progress and manufactured finished goods    -              cost of raw materials and labour, together with
   attributable overheads based on the normal level
   of activity

                                                                                    

Net realisable value is based on estimated selling price less further costs to completion and disposal. Slow moving and obsolete inventory is written off to profit or loss. The charge is reviewed at each balance sheet date.

(g) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, bank overdrafts and treasury deposits for cash flow purposes. The Group has no long-term borrowings and any available cash surpluses are placed on deposit.

 

(h) Impairment

The carrying amount of the Group's assets, other than deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. Impairment losses are recognised in profit or loss.

 

Reversals of impairment

Other than in respect of goodwill, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(i) Employee benefits

Share-based payment transactions

The Company provides share option schemes for Directors and for other members of staff.

In accordance with IFRS 2 - Share-based Payments, the fair value of the employee services received in exchange for the grant of options is recognised as an expense to the income statement over the vesting period of the option and the corresponding credit recognised to the Retained Earnings within equity. The Black-Scholes option pricing model has been used for calculating the fair value of the Group's share options. The Directors believe that this model is the most suitable for calculating the fair value of the equity-based share options.

The fair value of the options is determined excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date the Group revises its estimates of the number of option awards that are expected to vest. The impact of the revision of original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity. No adjustment is made for failure to achieve market vesting conditions providing all other vesting conditions are met.

Pension costs

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds. Contributions to the pension scheme are charged to the income statement in the year in which they become payable.

Accrued holiday pay

Provision is made at each balance sheet date for holidays accrued but not taken at the salary of the relevant employee at that date.

(j) Provisions

A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. They are discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability.

(k) Revenue

Revenue is derived principally from the sale of goods and is measured at the fair value of consideration received or receivable, after deducting discounts, settlement discounts, rebates and is net of value added tax. The Group has concluded that it is the principal in its revenue arrangements as it has control of those goods before transferring them to the customer.

Sale of goods arises from sales of products to third parties and related parties. Revenue from the sale of goods is recognised when the control of the goods is transferred to the buyer. This occurs when the goods are transferred to the customer in accordance with the terms of the trade contract. Before a contract is entered into, customers are assessed using a credit reference agency before credit is granted and where sufficient credit cannot be granted, payment is required in advance of the goods being delivered and is held under other creditors until the goods are delivered and the revenue is then recognised.

Some goods sold by the group include warranties which require the group to either replace or mend a defective product during the warranty period if the goods fail to comply with agreed upon specifications. In accordance with IFRS 15, such warranties are not accounted for as separate performance obligations and hence no revenue is attached to them. Instead, a provision is made for the costs of satisfying the warranties in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Extended warranties are not offered to customers.

(l) Finance income

Finance income comprises interest receivable on funds invested.

(m) Corporation and deferred taxes

Tax on the profit or loss for the periods presented comprises current and deferred tax.

Current tax

Current tax is the expected corporation tax payable on the taxable income for the year, using rates and laws enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax

Deferred tax is provided using the balance sheet liability method, using rates and laws enacted or substantively enacted at the balance sheet date, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Temporary differences are not provided on goodwill that is not deductible for tax purposes or on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·    the same taxable group company; or

·    different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

 

(n) Leased assets

All leases are accounted for by recognising a right-of-use asset and a lease liability except for:

·    Leases of low value assets; and

·    Leases with a duration of twelve months or less.

Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the Group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes:

·    Amounts expected to be payable under any residual value guarantee;

·    The exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option;

·    Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised.

Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:

·    Lease payments made at or before commencement of the lease;

·    Initial direct costs incurred; and

·    The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations - see Note 18).

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are depreciated on a straight-line basis over the remaining term of the lease or over the remaining estimated useful life of the asset if, rarely, this is judged to be shorter than the lease term.

When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised. In both cases

an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.