Interim Statement for 6 months to 31 March 2018

Titon Holdings PLC                                                                                           LEI: 213800ZHXS8G27RM1DD7

Interim results for the six months to 31 March 2018

Titon Holdings Plc, a leading international manufacturer and supplier of ventilation systems and window and door hardware, today announces its Interim Results for the six months ended 31 March 2018.

TITON DELIVERS DOUBLE DIGIT PROFIT GROWTH IN HALF YEAR

Financial Results

Financial highlights

·      Group net revenue rose 3% to £14.5 million (2017: £14.0 million) or 5% on a constant currency basis

·      EBITDA increased 11% to £1.29 million (2017: £1.17 million)

·      Profit before tax of £1.34 million, up 13% (2017: £1.18 million) or 16% on a constant currency basis

·      Earnings per share (EPS) rose 42% to 8.64 pence (2017: 6.01 pence)

·      17% increase in the interim dividend to 1.75 pence per share (2017: 1.50 pence)

·      Net cash of £2.74 million (2017: £2.71 million); and a Quick Ratio² of 1.93 (2017: 1.94)

·      Return on net assets (RONA) ³ was 18.9% (2017: 19.1%) with Asset Turn³ of 2.1x (2017: 2.3x)

Operational highlights

·      South Korea's net profit after tax contribution rose by 22% to £0.9 million and it is the Group's largest income generator on this basis; and in Q1 of calendar 2018, South Korean GDP grew by 2.8%

·      The UK saw its contribution rise significantly as there was no repeat of the previous year's business closure costs

·      Window and door hardware in the UK produced a good result as both revenue and profit rose

·      A new fully accredited Passivhaus mechanical ventilation-with-heat-recovery unit has been introduced to the UK and continental European markets

Executive Chairman Keith Ritchie said: "It was another very good six months for Titon with a 13% increase in profit before tax to £1.34 million. The interim dividend was also increased by 17%.

"In South Korea, the geopolitical climate has taken an extraordinarily positive shift with the recent summit between South Korean President Moon Jae-in and North Korea's Leader Kim Jong-un. This was unthinkable even at the turn of the year and has been welcomed in Asia and around the Globe. It remains to be seen whether full de-nuclearisation in North Korea will follow, but this new openness, and a prospective meeting between Donald Trump and Kim Jong-un, is very good news. In any event, South Korea is an extraordinarily robust economy. GDP grew at 2.9% last year and FocusEconomics is forecasting growth of 2.9% in both 2018 and 2019.

"In the UK we expect stronger seasonal growth in demand for our products through the summer. UK GDP was impacted by the weather in the first quarter of the calendar year and, while it is set to grow below trend, consensus forecasts put GDP at between +1 and 2% this year and next. At the same time, while the pace of UK housebuilding activity is expected to slow, Experian is forecasting average volume growth of more than 3% per annum through020. This is despite continued uncertainty surrounding the Brexit negotiations and the absence of even a transitional agreement.

"Titon has a unique international spread of markets, particularly given its relative scale. We make good products, some of them prosaic, some truly innovative. Backing this up is a traditionally strong balance sheet and a team that I am proud of. I look forward to further progress in the second half of the year in line with market expectations".

For further information please contact Keith Ritchie: +44 (0) 1206 713821

Titon Holdings PLC                                                                                          

Interim results for the six months to 31 March 2018

Chairman's statement

It was a very good half year result for Titon with revenue of £14.5 million and a 13% increase in profit before tax to £1.34 million. The interim dividend was also increased by 17% with cover at 4.1 times.

Income Statement

In the six months to 31 March 2018, Titon's net revenue (which excludes inter-segment activity) rose 3% to £14.5 million (2017: £14.0 million). On a constant currency basis, however, the increase is 5%.

The gross margin dipped from 28.4% to 26.2% due largely to poor trading in the US. Meantime, EBITDA was 11% higher at £1.29 million (2017: £1.17 million). Earnings before interest and tax (EBIT) or operating profit also rose 11% to £0.95 million (2017: £0.85 million) and the operating margin increased from 6.1% to 6.6%. Net interest contributed £9,000 (2017: £7,000) while the share of profits from the Group's associate rose 18% to £379,000 (2017: £320,000) resulting in profit before tax of £1.34 million, which was an increase of 13% (2017: £1.18 million) or, on a constant currency basis, the rise was 16%.

EPS were a very significant 42% higher at 8.64 pence (2017: 6.09 pence) which was driven by a much lower effective rate of tax i.e. 24% down to 10% which was on account of trading losses in the US.

Finally, the non-controlling interests' or minorities' deduction increased 9% from £237,000 to £258,000 which reflects the higher contribution from Titon Korea, 51% owned.

An Interim Dividend in respect of the six months ended 31 March 2018 of 1.75 pence per share (2017: 1.50 pence) was approved by the Directors of Titon Holdings Plc on 9 May 2018. The Interim Dividend is payable on 21 June 2018 to shareholders on the Register at 18 May 2018. The ex-dividend date is 17 May 2018.

Balance sheet and cash flows

Net assets including non-controlling interests rose 11% or £1.8 million to £17.4 million (2017: £15,6 million) with net cash at £2.74 million (2017: £2.71 million) which is equivalent to 15.7% of net assets (2017: 17.3%). Net cash at the end of the fiscal year to 30 September 2017 was £3.3 million.

In the half year, there was a £277,000 outflow at the 'cash generated from operations' line (2017: inflow of £995,000). This was driven by a seasonal spike in working capital, largely debtors at £1.24 million. In mitigation, capital expenditure was lower but dividends were 20% higher. This meant that between 30 September 2017 and 31 March 2018, there was a net cash outflow of £534,000 (2017: inflow of £267,000).

Net current assets were £11.0 million (2017: £9.6 million) with a Quick Ratio² of 1.93 (2017: 1.94).

RONA³ was 18.9% (2017: 19.1%) with Asset Turn at 2.1 (2017: 2.3).

Operations

In South Korea, Titon's subsidiary company, Titon Korea (51% owned), manufactures natural window ventilation products and is the national market leader. In the half year, it increased revenue by 25% to £5.7 million. A significant shortage of labour, combined with a government policy of aggressively increasing minimum wage rates, has led to a substantial increase in labour costs and has been the main factor in limiting Titon Korea's profit growth to 7% at £635,000 for the six months (2017: £593,000). Net Margin remained very healthy at 11.2% (2017:13.1%).

The Group's associate company, Browntech Sales Co. Limited ('BTS') also operates exclusively in South Korea and it generated an 18% increase in its contribution in the half year to £379,000 (2017: £320,000), which is the entire Associate contribution in the Group Income Statement. In terms of activity, BTS distributes ventilation products in South Korea as well as investing and developing in the domestic residential real estate market.

The combined contribution to Group Net profit after Taxation by the two South Korean companies was up 13% to £0.88 million (2017: £0.78 million). South Korea remains the most profitable area of operation for the Group, generating 74% of Group net profit after tax in the period (2017: 87%).

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Titon Holdings PLC                                                                                          

Interim results for the six months to 31 March 2018

Operations (continued)

Revenue derived from the UK was flat at £7.5 million (2017: £7.5 million) which reflects the absence of the closure costs of the fabrication venture. The UK's segment contribution, however, increased markedly to almost £500,000 which is a 32% rise year-on-year after the exit costs are added back to the corresponding half year. Margins also rose, on the same basis, from 4.9 to 6.5%.

At home, our window and door hardware business produced a good result in the half year as both sales and profit rose. We have been pleased, too, with rising demand for a number of the Group's new trickle vents. In addition, sales of both Titon manufactured and bought-in hardware products have continued to grow. Elsewhere, sales in our Ventilation Systems Division edged up in the half year. Several new sales staff have also been added here as we expand our coverage throughout the UK. Export sales of our Ventilation Systems products, however, were not as strong in the first six months of the fiscal year as we had anticipated. In response, we have developed products for cold climates in Eastern Europe, which will allow us to broaden our market coverage in this region. We also continue to expand our range of mechanical ventilation products for UK and European markets and have also just introduced a fully accredited Passivhaus mechanical-ventilation-with heat-recovery unit for highly energy efficient homes, which distinguishes Titon from a number of its competitors here.

Finally, in the US, revenue was sharply lower in the period which led to a trading loss for our US based subsidiary, Titon Inc., and which compares with a profit in the period ended 31 March 2017. However, the region made a positive contribution because its products are manufactured at our UK facility. After a number of years of rising sales in the US, this is a disappointing result. There has been a general market slowdown in one of our core markets in Washington State as well as the completion of several profitable contracts in other areas.

Employees

In my outlook statement, I say that we have "a team that I am proud of"; and we do.  Without them, we would not have the high quality, diversified business that is Titon. To all of them, I offer my and the Board's sincere thanks.

Investors

We continue to work with Hardman & Co., the corporate research house, to expand our presence in the private investor world. Hardman writes and distributes, in my view, highly cogent research on the Group. This has had a very positive effect on the Group's share price.

Since January this year, MiFID II (Markets in Financial Instruments Directive, Number 2) has been implemented across 17 EU countries including the UK. Essentially, it means that investment banks are now legally bound to charge fund managers for investment research. As a result of this Directive, it was predicted that less notes would be written on many companies particularly the small and middle-sized such as Titon. This prediction has proved to be correct and, in fact, the coverage of small market capitalisation companies is in steeper decline than expected before the change. The corporate research sector, including Hardman & Co., is not impacted by MiFID II.

Finally, I reiterate Titon's dividend reinvestment programme. This is a straight-forward and cost-effective way to increase a shareholding in Titon. It can be achieved by visiting the portal for our Registrars, Link Market Services Limited.

Outlook

It was another very good six months for Titon with a 13% increase in profit before tax to £1.34 million. The interim dividend was also increased by 17%.

In South Korea, the geopolitical climate has taken an extraordinarily positive shift with the recent summit between South Korean President Moon Jae-in and North Korea's Leader Kim Jong-un. This was unthinkable even at the turn of the year and has been welcomed in Asia and around the Globe. It remains to be seen whether full de-nuclearisation in North Korea will follow, but this new openness, and a prospective meeting between Donald Trump and Kim Jong-un, is very good news. In any event, South Korea is an extraordinarily robust economy. GDP grew at 2.9% last year and FocusEconomics is forecasting growth of 2.9% in both 2018 and 2019.

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Titon Holdings PLC                                                                                          

Interim results for the six months to 31 March 2018

 Outlook (continued)

In the UK we expect stronger seasonal growth in demand for our products through the summer. UK GDP was impacted by the weather in the first quarter of the calendar year and, while it is set to grow below trend, consensus forecasts put GDP at between +1 and 2% this year and next. At the same time, while the pace of UK housebuilding activity is expected to slow, Experian is forecasting average volume growth of more than 3% per annum through 2020. This is despite continued uncertainty surrounding the Brexit negotiations and the absence of even a transitional agreement.

Titon has a unique international spread of markets, particularly given its relative scale. We make good products, some of them prosaic, some truly innovative. Backing this up, is a traditionally strong balance sheet and a team that I am proud of. I look forward to further progress in the second half of the year in line with market expectations".

Principal risk and uncertainties

The key financial and non-financial risks faced by the Group are disclosed in the Group's Annual Report and Accounts for the year ended 30 September 2017 within the Strategic Report (page 6) 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                                                                                             

9 May 2018

Notes:

^1. EBIT is shown before the contribution from the Associate.

². The Quick Ratio measures liquidity and is calculated by dividing Current Assets-less-inventories by Current Liabilities

³ RONA is calculated by dividing Profit before tax by Net Assets including non-controlling interests, net of cash and intangibles and here it is an annualised number; Asset Turn is calculated by dividing the group's net revenue by Net Assets as defined above.

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Titon Holdings Plc

Consolidated Interim Income Statement

for the six months ended 31 March 2018

Consolidated Interim Statement of Comprehensive Income

for the six months ended 31 March 2018

 The notes on pages 8 to 15 form an integral part of this condensed interim information.

Page 4

Titon Holdings Plc

Consolidated Statement of Financial Position

at 31 March 2018

The notes on pages 8 to 15 form an integral part of this condensed interim information.

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