Interim Statement - 6m to 31 March 2017

Thursday 11 May 2017

Titon Holdings Plc                                                                                                             

Interim Results for the six months ending 31 March 2017

TITON DELIVERS A 60% RISE IN FIRST HALF PROFIT BEFORE TAX

Financial Results

Six months ending                             31 March 2017                    31 March 2016    % change

Net Revenue                                          £14.0m                                  £10.9m                  +29

EBITDA                                                  £1.17m                                  £0.83m                  +41

Operating Profit                                      £0.85m                                  £0.55m                  +56

Profit before Tax                                     £1.18m                                 £0.74m                   +61

EPS                                                          6.09p                                     4.55p                   +34

DPS                                                          1.50p                                     1.25p                   +20

Financial Highlights

·     Net Revenue rose 29% to a record £14.0 million (2016: £10.9 million)

·     EBITDA increased 41% to £1.17 million, which is also a half year record (2016: £0.83 million)

·     Profit before Tax of £1.18 million up 61% (2016: £0.74 million)

·     Earnings per share (EPS) rose 34% to 6.09 pence (2016: 4.55 pence)

·     20% increase in the Interim Dividend per share (DPS) to 1.5 pence (2016: 1.25 pence)

·     Net cash of £2.71 million (31 March 2016: £2.46 million)

Operational highlights

·     Good performances from core businesses in the UK, albeit offset by the decision to discontinue commercial ducting fabrication business

·     Strong performance from South Korea, which accounts for the largest share of Profit before Tax

·     Good result from Titon Inc. in the US

·     Increased exports to continental Europe and additional resources committed

Keith Ritchie, Chairman of Titon, said:

"I am very pleased to report a record half year for Titon with revenue growth of 29% and a 61% increase in Profit before Tax. Earnings per share also rose significantly (+34%) and the Interim Dividend is raised by 20%. This performance would have been even better without the costs associated with the Group's exit from commercial ducting fabrication in the UK.

In the UK, both the Brexit negotiations and the imminent General Election create degrees of uncertainty. Nonetheless, we expect our core UK businesses to continue to grow in the second half. Another strong performance is also expected from South Korea and, while the US is a smaller region for Titon right now, it is doing well and we intend to commit further resources there. The same goes for the Group's exports to continental Europe.

This geographical diversity is a strength and, particularly, when it is combined with great products, great people and a strong balance sheet. I am confident that we will have a good result for the year".

For further information please contact Keith Ritchie, Chairman.

Tel: +44 (0) 1206 713821

Titon Holdings Plc          

Business Review                                                                          

Financial performance

 I am very pleased to report a record half year for Titon, with a 61% increase in Profit before Tax and top line growth of 41%. Earnings per share also rose significantly (+34%) and the Interim Dividend is to be raised 20%. This performance would have been even better, too, without the costs associated with the Group's exit from commercial ducting fabrication in the UK referred to under Operations below.

Income Statement

In six months ended 31 March 2017, Titon's net revenue (which excludes inter-segment activity) rose 29.1% to £14.01 million. On a constant currency basis, however, the increase was 20.4%.

The Gross Margin was sustained at 28.4% (2016: a restated 28.7% due to a re-classification of Research and Development expenses). EBITDA was £1.17 million (2016: £0.83 million) while Operating Profit or EBIT (Earnings before interest and tax) rose 56% to £0.85 million with operating margins at 6.1% (2016: 5.1%).

Net interest contributed £7,000 (2016: £4,000) while the share of profits from the Group's associate soared 75% to £320,000 (2016: £183,000) resulting in Profit before Tax of £1.18 million which was an increase of 61% year-on-year (2016: £0.74 million). The weakness of the British Pound added £143,000 to Profit before Tax, which means that on a constant currency basis, it would have been £1.04 million and 41% higher year-on-year.

Earnings per share for the half year increased 34% to 6.09 pence (2016: 4.55 pence). Taxation was sharply higher at 23.8% (2016: 16.8%) due to the higher proportion of profits made outside the UK in the period while the Non-controlling Interest's share of group profits almost doubled from £130,000 to £237,000.

An Interim Dividend in respect of the six months ended 31 March 2017 of 1.50 pence per share was approved by the Directors of Titon Holdings Plc on 10 May 2017. The Interim Dividend will be payable on 24 June 2017 to shareholders on the Register at 3 June 2017. The ex-dividend date is 2 June 2017.

Balance Sheet and Cash Flow

Total Equity rose £2.92 million to £15.61 million with net cash at £2.71 million (31 March 2016: £2.46 million) which is equivalent to 17.3% of net assets (31 March 2016: 19.4%). There was a net cash inflow in the half year of £247,000 (2016: inflow of £45,000) which was driven primarily by cash generated from operations. Total capital expenditure in the half year was £279,000 (2016: £422,000).

Net current assets were £9.57 million (2016: £7.64 million).

Operations

In the UK, the performance of our window and door hardware business has improved, with the value of sales from the Timber, PVCu and Aluminium divisions exceeding last year by 14% and also making good contributions to profits. Similarly, we have seen encouraging sales of the new hardware products which have been developed in the last few years and this should continue in the second half.

Sales in the Ventilation Systems division have continued to grow with UK revenue up 13% year on year with Export Sales more than doubling. We continue to achieve good sales of our MVHR products (Mechanical Ventilation with Heat Recovery) and the Group's increasingly wide range of such products affords a significant competitive advantage in the market place.

As already noted, sales of our core products in the UK were good in the half year. However, their profit contribution has been eroded by a decision to withdraw from a new venture which commenced some 12 months ago.  Its focus was the fabrication, in partnership, of a new commercial ducting product. However, it was not embraced by the market at the prices that we had expected and would only have done so, we believe, with a greater focus on specification selling and significant investment by Titon. Both strategies would have been expensive and would have had no guarantee of success. As a result, and in conjunction with our partners, it was decided to cease our activities in this market. In turn, we have had to make provisions for stock, fixed assets and debts which we may not recover in the future totalling £234,000. This combined with the initial losses of the project means that Titon Hardware made a small loss in the first half.

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Titon Holdings Plc          

Business Review (continued)

The performance by our South Korean businesses, however, has been very positive in the period and Profit before Tax for Titon Korea (51% owned) nearly doubled. This reflects increased penetration, by the Company, of the domestic market in natural ventilation products and credit goes to our team on the ground. Our second South Korean business is the Associate company, Browntech Sales or BTS (49% owned) which distributes ventilation products in South Korea and invests in and develops schemes in the domestic residential real estate market. BTS recently purchased a greenfield site in an exclusive area of Seoul and expects to start work in the June quarter. We remain cognisant, of course, of both the geopolitical tensions on the Korean Peninsula at large and South Korea's complex domestic politics. Be that as it may, in Q1 of 2017, South Korea's GDP expanded at its fastest quarterly rate (0.9%) since Q2 2016. It was also 2.7% up on a year ago.

In the US, we have seen another good contribution to the Group's Profit before Tax. The US market for natural ventilation is small and the Group has developed a good domestic reputation and trades profitably. Titon also continues to develop new products specifically for the American market and new opportunities continue to emerge.

Investors

The Group's initiative with Hardman & Co., the corporate research house, is more than a year old now and continues very satisfactorily for shareholders. Note, too, that its reports can be accessed via the London Stock Exchange Regulatory News Service or RNS (http://www.investegate.co.uk).  In addition, I was interviewed by Lord John Lee, who is also a shareholder, for his programme on Share Radio. This is the first UK national radio station dedicated to business, finance and money. Later this month, too, I am due to present Titon to a group of investors at an event organised by the UK Shareholders' Association, which is the oldest shareholder campaigning organisation in the UK. Indeed, we welcome all contact with shareholders or potential shareholders.

Outlook

In the UK, both the Brexit negotiations and the imminent General Election create degrees of uncertainty. Nonetheless, we expect our core UK businesses to continue to grow in the second half. Another strong performance is also expected from South Korea and, while the US is a smaller region for Titon right now, it is doing well and we intend to commit further resources here. The same goes for the Group's exports to continental Europe.

This geographical diversity is a strength and, particularly, when it is combined with great products, great people and a strong balance sheet. I am confident that we have will have a good result for the year.

Principal risk and uncertainties

The key financial and non-financial risks faced by the Group are disclosed in the Group's Annual Report and Accounts for the year ended 30 September 2016 within the Strategic Report (page 5) available at www.titonholdings.com.  The Board considers that these remain a current reflection of the risks and uncertainties facing the business. The Board also considers that it is appropriate to adopt the going concern basis of accounting in preparing these financial statements and has not identified any material uncertainties which would prevent us so doing.

Responsibility Statement

The Directors confirm that, to the best of their knowledge, this condensed set of consolidated financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that this Interim Report  includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

The Directors of Titon Holdings Plc are listed on page 15 of this document.  A list of current directors is maintained on the Group's website www.titonholdings.com.

On behalf of the Board                                     

KA Ritchie                                                                                            

Chairman                                                                                             

10 May 2017

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Titon Holdings Plc

Consolidated Interim Income Statement

for the six months ended 31 March 2017

Consolidated Interim Statement of Comprehensive Income

for the six months ended 31 March 2017

 The notes on pages 7 to 14 form an integral part of this condensed interim information.

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