Titon Regulatory News (TON)

11 May 2006 07:01

Titon Holdings PLC11 May 2006 Titon Holdings Plc 2006 Interim Statementfor the six months ended 31 March 2006 Chairman's Statement FINANCIAL PERFORMANCE Profit before taxation for the six months to 31 March 2006 was 24.9% lower than the same period last year at £420,000 (2005: £559,000) on turnover 3.5% higherat £8,195,000 (2005: £7,917,000). Basic earnings per share were 22.9% lower at2.86p (2005: 3.71p) and the Directors have declared an unchanged interimdividend of 2.3p (2005: 2.3p). Capital expenditure during the six months was high at £1,142,000. Of this amount£416,000 relates to investment in our Plastic Injection Moulding Plant and £247,000 is in respect of tooling for new products. These are the first results published under International Financial ReportingStandards (IFRS). The previously published results for 2005, prepared under UKGenerally Accepted Accounting Principles (UK GAAP), have been restated and allcomparative figures are in accordance with IFRS. The adjustments to the resultsfor 2005 are shown in the notes to the 2006 Interim Statement. TRADING COMMENTARY Sales of Titon manufactured products continue to be affected by tough UK marketcompetition. The 3.5% sales growth experienced during the period relates to products that were bought in for resale; with our own product sales falling slightly. Two of the areas of our business in which we have recently invested in direct sales staff, namely 'Ventilation Systems' and 'Aluminium Fittings', are predominantly selling bought in products. These sectors of operation continue to grow steadily, whilst our traditional markets remain challenging. This is due to a combination of increased competition and reduced customer demand, as evidenced in many other markets in the UK. Our export sales are 33% ahead of last year, which is most encouraging. I reported in my end of year statement that the Draft of the new Building Regulations (England & Wales) for Ventilation had been published giving us somedirection for the future. Subsequently, the final document was issued in April,which included some significant changes in content and timings from the Draftdocument. As a result of the very short timescale between publication and proposed implementation, the requirement to fit trickle ventilators in replacement windows has been deferred until October 2006 delaying any expected benefits. I have, over recent years, consistently reported significant capital investment in production processes to drive down the cost of manufacturing and this has been maintained during the past 6 months. Despite this, the increases in cost of basic raw materials, and other associated production and distribution costs have continued to impact on our margins. PROSPECTSGeneral conditions within the UK window and door market remain difficult and delayed implementation of the new Building Regulations means they are unlikely to offer much short term improvement. In the longer term, however, we are confident it will provide us with opportunities for growth - particularly as we consolidate our ability to provide total ventilation systems to the industry. Significantly, we are shortly to launch a new improved version of the Trimvent Select Ventilator range designed specifically for the new regulations. The products, which are to be marketed under the brand name 'Trimvent Select Xtra', give an improved level of airflow over the current products and will enable easier compliance for both developers and window fabricators. Unfortunately, given the factors noted above, and particularly the delays in Regulation implementation, I expect that second half earnings will be broadly similar to the first half. J N AndersonChairman10 May 2006 Titon Holdings Plc Consolidated Interim Income Statementfor the six months ended 31 March 2006 Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 Note £'000 £'000 £'000 Revenue 2 8,195 7,917 16,436Operating profit 354 482 1,028 Interest income 66 77 151 -------- -------- -------- Profit before taxation 420 5599 1,179Taxation expense 3 (118) (168) (328) -------- -------- --------Profit for the period attributable tothe members of Titon Holdings Plc 7 302 391 851 -------- -------- -------- Earnings per share - basic 6 2.86p 3.71p 8.08p - diluted 6 2.85p 3.70p 8.06p Consolidated Statement of Recognised Income & Expensefor the six months ended 31 March 2006 Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 Note £'000 £'000 £'000 Profit for the period attributable tothe members of Titon Holdings Plc 5 302 391 851 Exchange difference on re-translationof net assets of subsidiaryundertakings 9 12 - (3) -------- -------- --------Total recognised income & expenserelating to the period 314 391 848 -------- -------- -------- Titon Holdings Plc Consolidated Interim Balance Sheetat 31 March 2006 31.3.06 31.3.05 30.9.05 Note £'000 £'000 £'000AssetsIntangible assets 57 8 6Property, plant and equipment 4,984 4,134 4,242 -------- -------- --------Total non-current assets 5,041 4,142 4,248 Stocks 2,863 2,563 2,511Trade and other receivables 3,828 3,468 3,695Cash at bank and in hand 2,473 3,154 3,380 -------- -------- --------Total current assets 9,164 9,185 9,586 -------- -------- -------- Total Assets 14,205 13,327 13,834 -------- -------- -------- LiabilitiesDeferred tax liability 104 95 104 -------- -------- --------Total non-current liabilities 104 95 104 Trade and other payables 2,850 2,113 2,406Bank overdraft 81 - 21Corporation tax liabilities 166 182 144Employee benefits 33 15 21 -------- -------- --------Total current liabilities 3,130 2,310 2,592 -------- -------- --------Total Liabilities 3,234 2,405 2,696 -------- -------- -------- EquityCalled up share capital 1,055 1,053 1,053Share premium 863 841 841Capital redemption reserve 56 56 56Translation reserve 9 - (3)Share schemes reserve 4 2 - 1Retained earnings 8,986 8,972 9,190 -------- -------- --------Total Equity 5 10,971 10,922 11,138 -------- -------- -------- -------- -------- --------Total Liabilities and Equity 14,205 13,327 13,834 -------- -------- -------- Titon Holdings Plc Consolidated Interim Statement of Cash Flowsfor the six months ended 31 March 2006 Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 Note £'000 £'000 £'000Cash flows from operating activitiesProfit before tax 420 559 1,179Adjustments for:Depreciation 335 297 599Interest income (66) (77) (151)Share based payment expense 1 - 1Increase in trade and other (130) (267) (494)receivables (Increase) / decrease in stocks (343) 17 69Increase/ (decrease) in trade andother payables 456 (28) 270 Profit on sale of plant & equipment (10) (2) (19) -------- -------- --------Cash generated from operations 663 499 1,454 -------- -------- -------- Interest income 66 77 151Corporation taxes paid (96) (82) (271) -------- -------- --------Net cash generated from operatingactivities 633 494 1,334 -------- -------- -------- Cash used in investing activitiesPurchase of plant & equipment andintangible assets 8 (1,142) (151) (569) Proceeds from sale of plant & 24 5 30equipment -------- -------- --------Net cash used in investing activities (1,118) (146) (539) -------- -------- --------Cash flows used in financingactivitiesDividends paid 6 (506) (505) (747) Shares issued under the Company's 24 - -share option scheme -------- -------- --------Net cash used in financing activities (482) (505) (747) -------- -------- -------- Net (decrease) / increase in cash &cash equivalents (967) (157) 48Cash & cash equivalents at beginning of period 3,359 3,311 3,311 -------- -------- --------Cash & cash equivalents at end ofperiod 2,392 3,154 3,359 -------- -------- -------- Cash & cash equivalents comprise:Cash at bank 2,473 3,154 3,380Bank overdraft (81) - (21) -------- -------- --------Cash & cash equivalents at end ofperiod 2,392 3,154 3,359 -------- -------- -------- Titon Holdings Plc 1 Significant accounting policies The consolidated interim financial statements of the Group for the six monthsended 31 March 2006 incorporates Titon Holdings Plc ("the Company") and itssubsidiaries (together referred to as "the Group"). The consolidated interim financial statements were authorised for release on 10May 2006. (a) Basis of preparation Prior to 2005, the Group prepared its audited annual financial statements andunaudited interim results under UK Generally Accepted Accounting Principles (UKGAAP). From 1 October 2005, the Group is required under European Unionregulation 1606/2002 to prepare its Group consolidated annual financialstatements in accordance with International Financial Reporting Standards (IFRS)as endorsed by the European Union and implemented in the UK. These consolidated interim financial statements have been prepared on the basisof IFRS that are effective or available for early adoption at the Group's firstIFRS annual reporting date, 30 September 2006. Based on IFRS, the Board ofDirectors have made assumptions about the accounting policies expected to beadopted when the first IFRS annual financial statements are prepared for theyear ended 30 September 2006. These are the Group's first IFRS consolidated interim financial statements forpart of the period covered by the first IFRS annual financial statements. IFRS 1First-time Adoption of International Financial Reporting Standards has beenapplied that includes allowable exemptions. The consolidated interim financialstatements do not include all of the information required for full annualfinancial statements and do not comply with all the disclosures in IAS 34Interim Financial Reporting and are, therefore, not in full compliance withIFRS. An explanation of how the transition to IFRS has affected the reported financialposition and financial performance of the Group is provided in notes 7, 9 and10. The restated figures are based on current interpretations of IFRS which may besubject to change as industry practice develops. This statement includesreconciliations of equity and the income statement for comparative periodsreported under UK GAAP (previous GAAP) to those reported for those periods underIFRS. No adjustments have been made for any changes in estimates made at the time ofapproval of the UK GAAP financial statements for the year ended 30 September2005 or the interim statement for the period ended 31 March 2005 on which theIFRS financial information is based, as required by IFRS 1. The financial statements are presented in pounds sterling, rounded to thenearest thousand. The IFRS that will be effective or available for voluntary early adoption in thefinancial statements for the period ended 30 September 2006 are still subject tochange and to the issue of additional interpretation(s) and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for that annualperiod that are relevant to this interim financial information will bedetermined only when the first IFRS financial statements are prepared at 30September 2006. The preparation of the consolidated interim financial statements in accordancewith IFRS resulted in changes to the accounting polices compared with the mostrecent annual financial statements prepared under UK GAAP. The accountingpolicies set out below have been applied consistently to all periods presentedin these consolidated interim financial statements. They have also been appliedin preparing an opening IFRS balance sheet at 1 October 2004 for the purposes oftransition to IFRS, as required by IFRS 1. The impact of the transition from UKGAAP to IFRS is explained in notes 7, 9 and 10. The Group results for the year ended 30 September 2005 and the balance sheet asat that date are abridged (after adjustment for IFRS conversion) from theCompany's Annual Report and Financial Statements 2005 which have been deliveredto the Registrar of Companies. The auditors' report on those FinancialStatements was unqualified and did not contain a statement under Section 237(2)or (3) of the Companies Act 1985. These abridged results as restated for IFRS conversion, along with the resultsfor the six month periods ended 31 March 2005 and 31 March 2006, and the balancesheets at those dates, have not been audited. The interim statement does not constitute full accounts within the meaning ofSection 240 of the Companies Act 1985. This statement is being sent to shareholders and will be available from theCompany's registered office at International House, Peartree Road, Stanway,Colchester, Essex CO3 0JL. (b) Basis of consolidation Subsidiaries are entities controlled by the Company. Control exists when theCompany has the power, directly or indirectly to govern the financial andoperating policies of an entity so as to obtain benefits from its activities. The Group's consolidated interim financial statements incorporate the financialstatements of the Company together with those of subsidiaries. Intragroupbalances, and any unrealised gains and losses or income and expenses arisingfrom intragroup transactions, are eliminated in preparing the interim financialstatements. (c) Foreign currency i Foreign currency transactionsForeign currency transactions are translated at the rates ruling on thetransaction date or at the contracted rate if the transactions have been enteredinto at a fixed rate. Foreign currency monetary assets and liabilities areretranslated at the rates ruling at the balance sheet date, or if applicable atthe contracted rate. Any differences on exchange are taken to the incomestatement.All sales from the Group's UK business are invoiced in sterling. Purchases madeby the UK business from one overseas supplier are invoiced to the Group in thelocal currency of that supplier. Any currency risk is mitigated by the Groupfixing an exchange rate with that supplier on a quarterly basis. ii Financial statements of foreign operationsThe financial statements of overseas subsidiaries are translated into sterlingat the rates of exchange ruling at the balance sheet date. The exchangedifference arising on the retranslation of opening net assets is taken directlyto the translation reserve.The revenues and expenses of foreign operations are translated to poundssterling at rates approximating to the foreign exchange rates ruling at thedates of the transactions. iii Net investment in foreign operationsExchange differences arising from the translation of the net investment inforeign operations are taken to the translation reserve. They are recycled andtaken to the income statement upon disposal of the operation. The Company haselected, 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. (d) Property, plant and equipment i Owned assetsItems of property, plant and equipment are stated at cost or deemed cost lessaccumulated depreciation (see below) and impairment losses (see accountingpolicy (i)). ii Subsequent costsThe Group recognises in the carrying amount of an item of property, plant andequipment the cost of replacing part of such an item when that cost is incurred,if it is probable that the future economic benefits embodied within the itemwill flow to the Group and the cost of the item can be measured reliably. Allother costs are recognised in the income statement as incurred. iii DepreciationDepreciation is provided to write off the cost, less estimated residual values,of all fixed assets, except freehold land, over their expected useful lives. Itis calculated, on a straight line basis, at the following annual rates: Freehold buildings - 2%Improvements to leasehold property - 20%Plant and equipment - 10% to 33%Motor vehicles - 25% The carrying values of tangible fixed assets are reviewed for impairment whenevents or changes in circumstances indicate the carrying value may not berecoverable. (e) Intangible assetsi GoodwillPrior to the adoption of FRS 10 all goodwill was set off against reserves as amatter of accounting policy. If a subsidiary is subsequently sold, any goodwillarising on acquisition that was written off directly to reserves is taken intoaccount in determining the profit or loss on sale.The accounting treatment of business combinations that occurred prior to 1October 2004 has not been restated in preparing the Group's opening IFRS balancesheet at 1 October 2004. ii Other intangible assetsIntangible assets other than goodwill that are acquired by the Group are statedat cost less accumulated amortisation (see below) and impairment losses (seeaccounting policy (i)). iii Subsequent expenditureSubsequent expenditure on capitalised intangible assets is capitalised only whenit increases the future economic benefits embodied in the specific asset towhich it relates. All other expenditure is expensed as incurred. iv AmortisationAmortisation is charged to the income statement on a straight-line basis overthe estimated useful lives of intangible assets from the date that they areavailable for use. (f) StocksStocks are stated at the lower of cost and net realisable value. Cost iscalculated as follows: Raw materials - cost of purchase on first in, first out basis.Work in progress and finished goods - cost of raw materials and labour, togetherwith attributable overheads based on the normal level of activity.Net realisable value is based on estimated selling price less further costs tocompletion and disposal.A charge is made to the income statement for the change in value of slow movingfinished goods stocks. This provision is reviewed at each balance sheet date. (g) Trade and other receivablesTrade and other receivables are stated at their cost less the estimatedimpairment (see accounting policy (i)). (h) Cash and cash equivalentsCash at bank comprises cash balances and treasury deposits.The Group has no long term borrowings and any available cash surpluses areplaced on deposit. (i) ImpairmentThe carrying amount of the Group's assets, other than deferred tax assets arereviewed at each balance sheet date to determine whether there is any indicationof impairment. If any such indication exists, the assets recoverable amount isestimated. Other intangible assets were tested for impairment at 1 October 2004, the dateof transition to IFRS, and at 30 September 2005 and 31 March 2006. i Reversals of impairmentIn respect of other assets, an impairment loss is reversed if there has been achange in the estimates used to determine the recoverable amount. An impairmentloss is reversed only to the extent that the assets carrying amount does notexceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment loss had been recognised. (j) Employee benefitsi Pension costsThe Group operates a defined contribution pension scheme. The assets of thescheme are held separately from those of the Group in independently administeredfunds. Contributions to the pension scheme are charged to the income statementin the year in which they become payable. ii Share-based payment transactionsThe Company provides share option schemes for Directors and for other members ofstaff. The fair value of the employee services received in exchange for the grant ofoptions is recognised as an expense to the income statement. Fair value has beendetermined by using IFRS accepted valuation methodologies (see note 4). Theamount expensed to the income statement over the vesting period is determined byreference to the fair value of the options, excluding the impact of anynon-market vesting conditions. Non-market vesting conditions are included inassumptions about the number of options that are expected to vest. At eachbalance sheet date the Group revises its estimates of the number of optionsawards that are expected to vest. The impact of the revision of originalestimates, if any, is recognised in the income statement, with a correspondingadjustment to equity, over the remaining vesting period. No adjustment is madefor failure to achieve market vesting conditions. iii Accrued holiday payProvision is made at each balance sheet date for holidays accrued but not takenat the salary of the relevant employee at that date. (k) ProvisionsA provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation. (l) Trade and other payablesTrade and other payables are stated at cost. (m) Research and development expenditureExpenditure on research is charged to the income statement in the period inwhich it is incurred. Development costs are capitalised where they meet thecriteria set out in IAS 38 - Intangible Assets. (n) TurnoverTurnover (revenue) represents the value of goods despatched to outside customersat invoiced amounts, less value added tax, net of customer settlement discounts. (o) Interest incomeInterest income comprises interest receivable on funds invested net of interestpayable on bank overdrafts. (p) Corporation and deferred taxTax on the profit or loss for the periods presented comprises current anddeferred tax. i Corporation taxCurrent tax is the expected tax payable on the taxable income for the year,using tax rates enacted or substantially enacted at the balance sheet date, andany adjustment to tax payable in respect of previous years. ii Deferred taxationDeferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill notdeductible for tax purposes, the initial recognition of assets or liabilitiesthat affect neither accounting nor taxable profit, and the differences relatingto investments in subsidiaries to the extent that they will probably not reversein the foreseeable future. The amount of deferred tax provided is based on theexpected manner of realisation or settlement of the carrying amount of asset andliabilities, using tax rates enacted or substantively enacted at the balancesheet date. A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. (q) Leased assetsOperating leases represent leasing agreements that do not give rightsapproximating to ownership. Annual rentals are charged to the income statementon a straight-line basis over the lease term. Titon Holdings Plc 2 Segment reporting Segment information is presented in the interim financial statements in respectof the Group's geographic segments, which reflect management and internalreporting structures and also the Group's operating segments. The Group's business is comprised of the following reportable geographicsegments: United KingdomRest of the World Inter-segment pricing is determined on an arm's length basis. Segment resultsinclude items directly attributable to a segment as well as those that can beallocated on a reasonable basis. Geographic segments United Kingdom Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 £'000 £'000 £'000 Revenue 7,180 7,162 14,592 Segment 1,079 1,329 2,601 result Rest of the World Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 £'000 £'000 £'000 Revenue 1,015 755 1,844 Segment 98 29 145result Consolidated Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 £'000 £'000 £'000 Revenue 8,195 7,917 16,436Segment result 1,177 1,358 2,746 Unallocated expenses (823) (876) (1,718) ------- -------- ------- Operating profit 354 482 1,028 Interest income 66 77 151 ------- -------- ------- 420 559 1,179 (118) (168) (328) ------- -------- -------Profit for the period attributable to themembers of Titon Holdings Plc 302 391 851 ------- -------- ------- Titon Holdings Plc 3 Corporation Taxes Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 £'000 £'000 £'000Current taxUK corporation tax 108 168 313Adjustment in respect of prior years - - (28) -------- -------- -------Total UK corporation tax 108 168 285 Foreign tax 10 - 34Deferred tax expense - - 9 -------- -------- -------Taxation expense 118 168 328 -------- -------- ------- Tax for the interim period is charged at 28.0% (Six months to 31 March 2005:30.0%) representing the best estimate of the average annual effective income taxrate for the full financial year. Titon Holdings Plc 4 Employee benefits Employee benefits include: Fair value of share option awardsIn accordance with IFRS 2, the fair value of outstanding equity settled sharebased option awards to employees, which have been granted after 7 November 2002,but not vested as at 1 January 2005, are recognised as an expense to the incomestatement. The Black Scholes option pricing model has been used for calculating the fairvalue of the Company's share options. The Directors believe that this model isthe most suitable for calculating the fair value of the equity based shareoptions offered to employees under the Company's share schemes. The calculatedfair values of the share option awards are adjusted to reflect actual andexpected vesting levels. The amount charged to the income statement in respect of share based payments isas follows: Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 £'000 £'000 £'000 Share based payment expense 1 - 1 -------- -------- -------- Two issues of share options have been granted since 7 November 2002 and arerecognised for valuation under IFRS 2. Share options granted Date Granted 21.05.2004 18.05.2005 Number of Shares 36,150 26,300Subscription price (exercise price per share -pence) 91.0p 99.0p Exercisable from 21.05.2007 18.05.2008Exercisable until 21.05.2014 18.05.2015 Expected dividend yield (%) 6.50 6.50Risk free rate of return (%) 5.10 4.75Share price volatility (%) 29.0 29.0 Fair value per share (pence) 15.3p 15.5p Assumptions used in the option pricing model. a) The vesting period for a share option is expected to be 6 years from thedate of grant of the share option. b) Each issue of share option awards is re-assessed, at each balance sheetdate, to calculate the total fair value of share options. The fair value ofshare options is charged to the income statement over the 6 year expected vesting period. c) Share price volatility is calculated by looking back six years from thedate of grant for each share option, as it is expected that the historicvolatility in the share price is the best measure of likely movement in theshare price in the future and therefore during the expected average vestingperiod of six years from the date of grant, until the date of exercise. d) Volatility has been calculated using the historic weekly movement,rather than daily movement, in the Company's share price as this is, in theopinion of the Directors, the most reasonable measure of the share price. e) Dividend yields are expected to be similar to those in recent years. f) A risk free rate of return has been used based on the Bank of Englandzero coupon rates. Titon Holdings Plc 5 Equity Called up Share Capital Trans- Share Retained Total share premium redemp- lation scheme earnings Equity capital reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 October2004 1,053 841 56 - - 9,086 11,036Profit for theperiod - - - - - 391 391 Dividends paid - - - - - (505) (505)--------------- -------- ------- ------ ------ ------ ------ -------At 31 March2005 1,053 841 56 - - 8,972 10,922Share-basedpaymentexpense - - - - 1 - 1 Translationdifferences onoverseasoperations - - - (3) - - (3) Profit forperiod - - - - - 460 460 Dividends paid - - - - - (242) (242) --------------- ------- ------ ------ ------ ------ ----- ------At 30September 2005 1,053 841 56 (3) 1 9,190 11,138 Share optionsexercised 2 22 - - - - 24 Share-basedpaymentexpense - - - - 1 - 1 Translationdifferences onoverseasoperations - - - 12 - - 12 Profit forperiod - - - - - 302 302Dividends paid - - - - - (506) (506)--------------- ------- ------ ------ ------ ------ ------ ------At 31 March2006 1,055 863 56 9 2 8,986 10,971--------------- ------- ------ ------ ------ ------ ------ ------- Titon Holdings Plc 6 Dividends and earnings per share DividendsAn interim dividend in respect of the six months ended 31 March 2006 of 2.3p pershare, amounting to a total dividend of £243,000, was approved by the Directorsof Titon Holdings Plc on 10 May 2006. These consolidated interim statements donot reflect the dividend payable. The interim dividend will be payable on 3 July 2006 to the shareholders on theregister on 9 June 2006. The ex dividend date is 7 June 2006. The following dividends have been recognised and paid by the Company: Six Six Months Six Months Year to to 31.3.06 to 31.3.05 30.9.05 Date Pence paid per share £'000 £'000 £'000 Final 18.2.05 4.8 - 505 505Interim 01.7.05 2.3 - - 242Final 24.2.06 4.8 506 - - -------- -------- ------- 506 505 747 -------- -------- ------- Dividends and earnings per share (continued) Earnings per shareBasic earnings per share has been calculated by dividing the Profit attributableto shareholders by the weighted average number of ordinary shares in issueduring the period, being 10,552,500 (Six months ended 31 March 2005: 10,528,800;Year ended 30 September 2005: 10,528,800). Diluted earnings per share has been calculated by dividing the Profitattributable to shareholders by the weighted average number of ordinary sharesand potential dilutive ordinary shares during the period, being 10,586,129 (Sixmonths ended 31 March 2005: 10,574,796; Year ended 30 September 2005:10,576,852). All dilutive ordinary shares relate to share options. Titon Holdings Plc 7 Reconciliation of Profit Six Months Year to to 31.3.05 30.9.05 Six Note UK GAAP Effect of IFRS UK GAAP Effect of IFRS Transition Transition to IFRS to IFRS £'000 £'000 £'000 £'000 £'000 £'000 Revenue 7,917 - 7,917 16,436 - 16,436Operatingprofit (a) 482 - 482 1,029 (1) 1,028 Interestincome 77 - 77 151 - 151 ------- ------- ------- ------- ------- ------- Profitbefore 559 - - 559 1,180 (1) 1,179taxationTaxationexpense (168) - (168) (328) - (328) ------- ------- ------- ------- ------- -------Profit fortheperiodattributableto themembers 391 - 391 852 (1) 851of Titon ------- ------- ------- ------- ------- -------Holdings Plc (a) Share based paymentsThe effect of accounting for equity settled share based payment transactions atfair values is to reduce operating profit by £1,000 for the year ended 30September 2005. 8 Property, plant and equipment Acquisition and disposalsDuring the six months ended 31 March 2006, the Group acquired assets with a costof £1,142,000 (six months to 31 March 2005: £151,000; Year ended 30 September2005: £569,000). Assets with a net book value of £11,000 were disposed of duringthe six months ended 31 March 2006 (six months ended 31 March 2005: £3,000; Yearended 30 September 2005: £13,000). Titon Holdings Plc 9 Reconciliation of Equity At 1.10.04 UK GAAP Effect of IFRS Note Transition To IFRS £'000 £'000 £'000AssetsIntangible assets (a) - 11 11Property, plant and (a) 4,291 (11) 4280equipment -------- -------- --------Total non-current assets 4,291 - 4,291 Stocks 2,580 - 2,580Trade and other receivables 3,201 - 3,201Cash at bank and in hand 4,017 - 4,017 -------- -------- --------Total current assets 9,798 - 9,798 -------- -------- --------Total Assets 14,089 - 14,089 -------- -------- -------- LiabilitiesDeferred taxation liability 95 - 95 -------- -------- --------Total non-current liabilities 95 - 95 Trade and other payables (d) 2,660 (505) 2,155Bank overdraft 706 - 706Corporation tax liability 97 - 97Employee benefits - - - -------- -------- --------Total current liabilities 3,463 (505) 2,958 -------- -------- --------Total Liabilities 3,558 (505) 3,053 -------- -------- --------Equity Called up share capital 1,053 - 1,053Share premium 841 - 841Capital redemption reserve 56 - 56Translation reserve - - -Share schemes reserve ( c) - - -Retained earnings 8,581 505 9,086 -------- -------- --------Total Equity 10,531 505 11,036 -------- -------- -------- -------- -------- --------Total Liabilities and Equity 14,089 - 14,089 -------- -------- -------- At 31.3.05 UK GAAP Effect of IFRS Note Transition To IFRS £'000 £'000 £'000AssetsIntangible assets (a) - 8 8Property, plant and (a) 4,142 (8) 4,134equipment ------- -------- --------Total non-current assets 4,142 - 4,142 Stocks 2,563 - 2,563Trade and other receivables 3,468 - 3,468Cash at bank and in hand 3,154 - 3,154 ------- -------- --------Total current assets 9,185 - 9,185 ------- -------- --------Total Assets 13,327 - 13,327 ------- -------- -------- LiabilitiesDeferred taxation liability 95 - 95 ------- -------- --------Total non-current liabilities 95 - 95 Trade and other payables (d) 2,355 (242) 2,113Bank overdraft - - -Corporation tax liability 182 - 182Employee benefits 15 - 15 ------- -------- --------Total current liabilities 2,552 (242) 2,310 ------- -------- --------Total Liabilities 2,647 (242) 2,405 ------- -------- --------Equity Called up share capital 1,053 - 1,053Share premium 841 - 841Capital redemption reserve 56 - 56Translation reserve - - -Share schemes reserve (c) - - -Retained earnings 8,730 242 8,972 ------- -------- --------Total Equity 10,680 242 10,922 ------- -------- -------- ------- -------- --------Total Liabilities and Equity 13,327 - 13,327 ------- -------- -------- At 30.9.05 UK GAAP Effect of IFRS Note Transition To IFRS £'000 £'000 £'000AssetsIntangible assets (a) - 6 6Property, plant and (a) 4,248 (6) 4,242equipment ------- -------- --------Total non-current assets 4,248 - 4,248 Stocks 2,511 - 2,511Trade and other receivables 3,695 - 3,695Cash at bank and in hand 3,380 - 3,380 ------- -------- --------Total current assets 9,586 - 9,586 ------- -------- --------Total Assets 13,834 - 13,834 ------- -------- -------- LiabilitiesDeferred taxation liability 104 - 104 ------- -------- --------Total non-current liabilities 104 104 Trade and other payables (d) 2,911 (505) 2,406Bank overdraft 21 - 21Corporation tax liability 144 - 144Employee benefits 21 - 21 ------- -------- --------Total current liabilities 3,097 (505) 2,592 ------- -------- --------Total Liabilities 3,201 (505) 2,696 ------- -------- -------- Equity Called up share capital 1,053 - 1,053Share premium 841 - 841Capital redemption reserve 56 - 56Translation reserve (b) - (3) (3)Share schemes reserve ( c) 1 1Retained earnings 8,683 507 9,190 ------- -------- --------Total Equity 10,633 505 11,138 ------- -------- -------- ------- -------- --------Total Liabilities and Equity 13,834 - 13,834 ------- -------- -------- Reconciliation of Equity (continued) Notes to the reconciliation of Equity (a) Intangible assetsComputer software previously included within Property Plant and Equipment underUK GAAP is reclassified under IFRS as intangible assets. On transition to IFRSat 1 October 2004 assets with a net book value of £11,000 have been reclassifiedas intangible assets. (b) Foreign exchange translation of overseas operationsThe effect at 30 September 2005 is to increase retained earnings and decreasethe translation reserve by £3,000. (c) Share based paymentsThe effect of IFRS accounting for equity settled share based paymenttransactions at fair values is to recognise a cost of £1,000 for share optionawards for the period ended 30 September 2005. Accordingly, the share schemereserve at 30 September 2005 is increased by £1,000 and retained earnings aredecreased by £1,000. (d) DividendsUnder UK GAAP dividends were provided for when proposed even if this was afterthe balance sheet date. Under IAS 10 Events after the Balance Sheet Date this isnot allowed. Accordingly, Trade and other payables at: • 30 September 2004 have been reduced by £505,000, for the proposed final dividend for the period ending 30 September 2004. The dividend was paid from reserves in the period ended 31 March 2005. • 31 March 2005 have been reduced by £242,000, for the proposed interim dividend for the period ending 31 March 2005. The dividend was paid from reserves in the period ended 30 September 2005. • 30 September 2005 have been reduced by £505,000, for the proposed final dividend for the period ending 30 September 2005. The dividend was paid from reserves in the period ended 31 March 2006. Titon Holdings Plc 10 Explanation of transition to IFRS As stated in note 1(a) these are the Group's first consolidated interimfinancial statements for part of the period covered by the first IFRS annualconsolidated financial statements prepared in accordance with IFRS. The accounting policies in note 1 have been applied in preparing theconsolidated interim financial statements for the six months ended 31 March2006, the comparative information for the six months ended 31 March 2005, thefinancial statements for the year ended 30 September 2005 and the preparation ofan opening IFRS balance sheet at 1 October 2004 (the Group's date oftransition). In preparing the opening balance sheet, comparative information for the sixmonths ended 31 March 2005 and financial statements for the year ended 30September 2005, the Group has adjusted amounts previously reported in financialstatements prepared in accordance with UK GAAP. IFRS 1 - First-time Adoption of International Financial Reporting Standardspermits or requires certain exemptions from the general principle ofretrospective application. Where permitted, the Group has utilised exemptionswhen retrospective application would result in little or no added usefulness interms of the information presented and where retrospective application wouldrequire the use of hindsight, which is specifically precluded by IFRS 1. The following summarises the Group's application of the IFRS 1 exemptions: Cumulative translation differencesIAS 21 - The Effects of Changes in Foreign Exchange Rates requires theclassification of translation differences arising in connection with foreignoperations to be classified as a separate component of equity. IFRS 1 exempts afirst-time adopter from the retrospective application of IAS 21. The Group hasapplied this exemption, with the effect that cumulative translation differencesfor all foreign operations as at the date of transition are deemed to be nil. Share based paymentsThe Group has applied IFRS 2 Share-based Payments to share option awards grantedafter 7 November 2002 not accounted for under UK GAAP. There is no material effect of accounting for equity settled share based paymenttransactions at fair values to retained earnings at 1 October 2004. This information is provided by RNS The company news service from the London Stock Exchange