Last checked at 6 Dec 2012 07:00
Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Chairman's Statement
Financial Performance
The result for the year to 30 September 2012 is a net Loss before Taxation of £984,000 (2011: Profit of £34,000), on Revenues 9% lower at £14.5 million (2011: £16.0 million). The loss after Taxation is £737,000 (2011: £189,000 Profit) resulting in a Loss per Share of 6.83p (2011: Earnings per share of 1.62p).
Net cash balances at the year end were £1.81 million (2011: £2.85 million). Total capital expenditure during the year was £632,000 (2011: £735,000). £207,000 of this expenditure relates to investment in software for the new computer system which was implemented during the year. This is in addition to the £202,000 spent on the same project last year.
The Directors are proposing a final dividend of 0.5p per share (2011: 1.0p). This, when added to the interim dividend paid on 25 June 2012 gives a total for the year of 1.5p (2011: 2.0p). If approved by shareholders at the forthcoming Annual General Meeting, the dividend will be payable on 22 February 2013 to shareholders on the register on 25 January 2013. The ex dividend date is 23 January 2013. We are always reluctant to cut our dividend but given the financial performance this year we have to reflect this in the final dividend.
Trading Commentary
The Directors are obviously very disappointed with the result for the year. The large trading loss reflects the continued deterioration in almost all of the markets in which we operate. Construction and particularly house building and refurbishment activity has borne the brunt of the economic slowdown resulting in contracting sales and fierce competition for component suppliers such as Titon. In the United Kingdom output from the construction sector over the twelve months from 1st October 2011 has fallen by approximately 11% and was still declining even when the most recent Gross Domestic Products Index increased by 1% for the quarter ended 30th September 2012. By the mid point of the financial year it was evident that this decline was continuing and that we would need to make significant reductions in our cost base. This has been a major focus for me since joining Titon on the 30th April 2012.
UK Revenues have fallen by 8.5% to £11.21 million (2011: £12.25 million) and now represent 77.1% of Group turnover (2011: 76.6%). There has been a 3.8% fall in UK private house building and, more notably, a 29.2% fall in public sector house building for the 12 month period ending in June 2012 against the comparable period ending in June 2011 for which data is available. This illustrates clearly the effect of the slowdown and has had a major impact on our sales volumes. Reduced Local Authority spending and the lack of consumer confidence to invest in new windows, doors and conservatories has impacted on our traditional hardware business, where sales have fallen by 7.1% over the year. We have reviewed our sales and product offerings in this sector and expect to introduce some new products early in 2013.
Page 1
Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Chairman's Statement (continued)
For ventilation systems we have seen that the trend towards the use of heat recovery ventilation systems experienced over the past few years has slowed. The house builders have looked to make savings in building costs, wherever possible and this has been combined with the fall in public sector house building already noted above. We are committed to increasing and improving our mechanical ventilation range and will be announcing new products and new features during the coming year. One of the strengths of Titon is the quality of the Design and Research & Development team and an ability to develop innovative new products. I expect that to continue in 2013.
We reported in last year's statement that we had commenced litigation in the High Court against a UK competitor, Nuaire Limited, in respect of alleged patent and design right infringements of one of our mechanical ventilation product range. This action has been ongoing during the year with resultant additional legal costs of £127,000.
Revenues outside of the UK have fallen by 11% to £3.34 million (2011: £3.75 million). The major part of this reduction emanates from our joint venture in South Korea where revenues were 16.1% lower at £1.92 million (2011: £2.28 million). This reversal in volumes has resulted in a £74,000 loss at our Korean subsidiary, Titon Korea during the year. This, when added to our £39,000 share of losses in our associate Company, Browntech Sales Co. Ltd., makes a total loss of £113,000 in that country compared to the £29,000 profit last year. The South Korean construction market stalled badly over the early part of the year as economic growth slowed and the funding of social housing programmes were delayed. I am pleased to report that this market has returned to strong growth in recent months.
The majority of our other export sales are in Western Europe where demand has been curtailed by the well documented problems within the Euro zone. Sales in Scandinavia of our trickle vents have been lower when compared to earlier periods and the markets for heat recovery ventilation systems in the major European economies have been weak.
Employees
Employee numbers within the Group have fallen from 182 at the beginning of the year to 163 at 30 September 2012. The reduction in staffing levels has occurred during the second half of the year as the need to reduce costs became apparent. As part of this process we have had to make 13 people redundant across our UK business, resulting in severance costs of £136,000 (2011: £62,000). Redundancy is always a very traumatic process for those involved and we express our gratitude and best wishes to our former employees and their families.
My Chairmanship of the Titon Group has come about due to the retirement from Office of John Anderson, the former Chairman and founder of the Company. John handed over to me in July this year after 40 years with Titon and has now become Deputy Chairman and Non-executive Director. On behalf of everyone involved with Titon I would like to thank John for his strong vision and leadership over the years and to wish him well in his retirement.
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Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Chairman's Statement (continued)
Mr Christopher Martin left Titon in August after 29 years service, the last 13 as a Director. We also wish Chris well in the future.
It has been another difficult year for all of our employees. We have recently agreed with our remaining UK employees to make reductions in their employment benefits packages and we thank them sincerely for the supportive attitude that they have demonstrated as we make the necessary adjustments to our costs.
Prospects
The overriding objective of the Directors this year is to return the business to profitability. The overhead reduction programme that commenced during the year is now well underway and will lead to approximately £600,000 of savings in a full Financial Year. I do want to emphasise that Titon retains a strong balance sheet with £1.81m of cash at the year end and has net assets of £9.2 million. This strength will provide us with the opportunity to invest in new products and markets in 2013. The 2013 forecast for UK house building is that there will be a small increase in private sector housing starts but the decline in public sector housing will continue. Against this backdrop we envisage that prospects for expanding our ventilation system sales will be limited. However, as noted above, we do have some new products in the pipeline and anticipate that these will strengthen our overall market position. In our window hardware market we will also be launching some new product ranges which we expect will gain us sales in markets where we have traditionally not competed.
We anticipate that our overseas sales will grow during the coming year with improvements expected from our South Korean and the USA businesses in particular. We are optimistic that our Korean activities will return to profit in comparison to the loss recorded this year.
In conclusion, we believe that the strength of Titon and the actions we have taken will result in a return to profitability in the year ahead.
On behalf of the Board.
K A Ritchie
Chairman
5 December 2012
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Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Unaudited Consolidated Income Statement
for the year ended 30 September 2012
Unaudited 2012 |
2011 | |
£'000 | £'000 | |
Revenue | 14,548 | 15,995 |
Cost of sales | (11,668) | (12,376) |
Gross profit | 2,880 | 3,619 |
Distribution costs | (665) | (622) |
Administrative expenses | (3,186) | (2,992) |
Operating (loss) / profit | (971) | 5 |
Finance income | 26 | 36 |
Share of losses from associate | (39) | (7) |
(Loss) / profit before tax | (984) | 34 |
Income tax credit | 247 | 155 |
(Loss) / profit after income tax | (737) | 189 |
Attributable to: | ||
Equity holders of the parent | (721) | 171 |
Non-controlling interest | (16) | 18 |
(Loss) / profit for the year | (737) | 189 |
(Loss) / earnings per share - basic | (6.83p) | 1.62p |
- diluted | (6.83p) | 1.62p |
Unaudited Consolidated Statement of Comprehensive Income
for the year ended 30 September 2012
| Unaudited 2012 |
2011 |
£'000 | £'000 | |
(Loss) / profit for the year | (737) | 189 |
Exchange difference on retranslation | ||
of overseas operations | 6 | (11) |
Total comprehensive (loss) / income for the year | (731) | 178 |
Attributable to: |
| |
Equity holders of the parent | (715) | 160 |
Non-controlling interest | (16) | 18 |
(731) | 178 |
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Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Unaudited Consolidated Statement of Financial Position
at 30 September 2012
| Unaudited 2012 |
2011 | |
£'000 | £'000 | ||
Assets | |||
Property, plant and equipment | 3,484 | 3,682 | |
Intangible assets | 774 | 586 | |
Investments in associates | 48 | 87 | |
Total non-current assets | 4,306 | 4,355 | |
Inventories | 2,578 | 2,593 | |
Trade and other receivables | 3,133 | 3,283 | |
Corporation tax | 75 | 71 | |
Cash and cash equivalents | 1,840 | 2,864 | |
Total current assets | 7,626 | 8,811 | |
Total Assets | 11,932 | 13,166 | |
Liabilities | |||
Deferred tax | 210 | 392 | |
Total non-current liabilities | 210
| 392 | |
Trade and other payables | 2,478 | 2,623 | |
Bank overdraft | 27 | 17 | |
Corporation tax | 20 | 6 | |
Total current liabilities | 2,525 | 2,646 | |
Total Liabilities | 2,735 | 3,038 | |
Equity | |||
Share capital | 1,056 | 1,056 | |
Share premium reserve | 865 | 865 | |
Capital redemption reserve | 56 | 56 | |
Translation reserve | (7) | (13) | |
Retained earnings | 7,096 | 8,017 | |
Total Equity attributable to equity holders of the parent | 9,066 | 9,981 | |
Non-controlling Interest | 131 | 147 | |
Total Equity | 9,197 | 10,128 | |
Total Liabilities and Equity | 11,932 | 13,166 |
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Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Unaudited Consolidated Statement of Changes in Equity
at 30 September 2012
Share Capital | Share premium reserve | Capital redemption reserve | Trans- lation reserve | Retained earnings | Total | Non- controlling interest | Total equity | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 1 October 2010 | 1,056 | 865 | 56 | (2) | 8,038 | 10,013 | - | 10,013 |
Translation differences on overseas operations | - | - | - | (11) | - | (11) | - | (11) |
Profit for the year | - | - | - | - | 171 | 171 | 18 | 189 |
Total Comprehensive Income for the year | - | - | - | (11) | 171 | 160 | 18 | 178 |
Dividends paid | - | - | - | - | (237) | (237) | - | (237) |
Share-based payment expense | - | - | - | - | 3 | 3 |
- | 3 |
Dilution of ownership of subsidiary |
- |
- |
- |
- |
42 |
42 |
129 |
171 |
At 30 September 2011 | 1,056 | 865 | 56 | (13) | 8,017 | 9,981 | 147 | 10,128 |
Translation differences on overseas operations | - | - | - | 6 | - | 6 | - | 6 |
Loss for the year | - | - | - | - | (721) | (721) | (16) | (737) |
Total Comprehensive income for the year | - | - | - | 6 | (721) | (715) | (16) | (731) |
Dividends paid | - | - | - | - | (211) | (211) | - | (211) |
Share-based payment expense | - | - | - | - | 11 | 11 |
- | 11 |
At 30 September 2012 | 1,056 | 865 | 56 | (7) | 7,096 | 9,066 | 131 | 9,197 |
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Titon Holdings Plc
Preliminary Announcement for the year ended 30 September 2012
Unaudited Consolidated Statement of Cash Flows
for the year ended 30 September 2012
| Unaudited 2012 |
2011 | |
£'000 | £'000 | ||
Cash generated from operating activities | |||
(Loss) / profit before tax | (984) | 34 | |
Depreciation of property, plant & equipment | 496 | 530 | |
Amortisation on intangible assets | 117 | 105 | |
Decrease / (increase) in inventories | 21 | (79) | |
Decrease in receivables | 151 | 127 | |
(Decrease) / increase in payables and other current liabilities | (145) | 99 | |
Profit on sale of plant & equipment | (11) | (31) | |
Share based payment - equity settled | 11 | 3 | |
Interest received | (26) | (36) | |
Share of associate's loss | 39 | 7 | |
Cash (used in) / generated from operations | (331) | 759 | |
Income taxes refunded / (paid) | 74 | (119) | |
Net cash (used in) / generated from operating activities | (257) | 640 | |
Cash flows from investing activities | |||
Purchase of plant & equipment | (327) | (470) | |
Purchase of intangible assets | (305) | (265) | |
Proceeds from sale of plant & equipment | 40 | 33 | |
Interest received | 26 | 36 | |
Net cash used in investing activities | (566) | (666) | |
Cash flows from financing activities | |||
Dividends paid to equity shareholders | (211) | (237) | |
Net cash used in financing activities | (211) | (237) | |
Net decrease in cash & cash equivalents | (1,034) | (263) | |
Cash & cash equivalents at beginning of the year | 2,847 | 3,110 | |
Cash & cash equivalents at end of the year | 1,813 | 2,847 | |
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Titon Holdings Plc
Notes to the Preliminary Announcement for the year ended 30 September 2012
1 Earnings per ordinary share
The calculation of the basic and diluted earnings per share is based on the following data:
2012 | 2011 | |||
£'000 | £'000 | |||
Numerator |
| |||
(Loss) / profit for the purposes of basic earnings per share being |
| |||
(Losses) / profit after tax attributable to members of Titon Holdings Plc | (721) | 171 |
| |
Denominator | Number | Number |
| |
Weighted average number of ordinary shares for the purposes of basic |
| |||
(losses) / earnings per share - at the beginning and end of the year | 10,555,650 | 10,555,650 |
| |
Losses / earnings per share (pence) |
| |||
Basic | (6.83p) | 1.62p |
| |
Diluted | (6.83p) | 1.62p |
| |
2 Dividends
2012 | 2011 | |
£'000 | £'000 | |
Final 2011 dividend of 1.00 pence (2010: 1.25 pence) per ordinary share paid and proposed during the year relating to the previous year's results
| 106 | 132 |
Interim dividend of 1.0 pence (2011: 1.0 pence) per ordinary share paid during the year | 105 | 105 |
211 | 237 |
The Directors are proposing a final dividend of 0.50 pence (2011: 1.00 pence) per share. This will result in a final dividend totalling £52,800 (2011: £105,000), subject to approval by the shareholders at the Annual General Meeting. This dividend has not been accrued at the balance sheet date.
Page 8
Titon Holdings Plc
Notes to the Preliminary Announcement for the year ended 30 September 2012
3 Notes supporting the statement of cash flows
The table below provides an analysis of net cash and cash equivalents during the year ended 30 September:
2012 | 2011 | |
| £'000 | £'000 |
Cash available on demand | 1,580 | 273 |
Short-term deposits | 260 | 2,591 |
Cash at bank | 1,840 | 2,864 |
Overdraft | (27) | (17) |
1,813 | 2,847 | |
Net decrease in cash equivalents | (1,034) | (263) |
Cash and cash equivalents at beginning of year | 2,847 | 3,110 |
Cash and cash equivalents at end of year | 1,813 | 2,847 |
4 Revenue and segmental information
In identifying its operating segments, management generally follows the Group's reporting lines, which represent the main geographic markets in which the Group operates. The segment reporting below is shown in a manner consistent with the internal reporting provided to the Board, which is the Chief Operating Decision Maker (CODM). These operating segments are monitored and strategic decisions are made on the basis of segment operating results. The Group operates three main business segments which are :
Segment | Activities undertaken include:
|
United Kingdom | Sales of passive and powered ventilation products to house builders, electrical contractors and window manufacturers. In addition to this, it is a leading supplier of window hardware to its window-manufacturing customers. |
South Korea | Sales of passive ventilation products to construction companies. |
All other countries | Sales of passive and powered ventilation products to distributors, window manufacturers and construction companies |
Inter-segment revenue is transacted on an arm's length basis and charged at prevailing market prices for a specific product and market or cost plus where no direct comparative market price is available. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Research and development entity-wide financial expenses are not allocated to the business activities for which R&D is specifically performed and it is not therefore reported as a separate operating segment. Research and development expenses are included within the total un-allocated expenses figures set out below.
The measurement policies the Group uses for segment reporting under IFRS 8 are the same as those used in its financial statements.
The total assets for the segments represent the consolidated total assets attributable to these reporting segments. Parent company results and consolidation adjustments reconciling the segmental results and total assets to the consolidated financial statements, are included within the United Kingdom segment figures stated over page.
Page 9
Titon Holdings Plc
Notes to the Preliminary Announcement for the year ended 30 September 2012
4 Revenue and segmental information (continued)
Business segment
For the year ended 30 September 2012 | United Kingdom | South Korea | All other countries | Consolidated |
£'000 | £'000 | £'000 | £'000 | |
Segment revenue | 11,213 | 1,916 | 1,419 | 14,548 |
Inter-segment revenue | - | - | 213 | 213 |
Total Revenue | 11,213 | 1,916 | 1,632 | 14,761 |
Depreciation and amortisation | 538 | 87 | 4 | 629 |
Operating profit / (loss) - segment result | 1,473 | (74) | 75 | 1,474 |
Unallocated expenses | (2,445) | |||
Losses from associates | (39) | |||
Finance income | 26 | |||
Loss before tax | (984) | |||
Tax credit | 247 | |||
Loss for the year | (737) | |||
Total assets | 10,113 | 1,606 | 213 | 11,932 |
Total assets include: Investments in associates | 48 | - | - | 48 |
Additions to non-current assets (other than financial instruments and deferred tax assets) | 583 | 49 | - | 632 |
IFRS 8 requires entity wide disclosures to be made about the regions in which it earns its revenues and holds its non-current assets which are shown below.
For the year ended 30 September 2012 | United Kingdom | Europe | USA | South East Asia | All other regions | Total |
Revenues | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
By entities' country of domicile | 12,066 | - | 566 | 1,916 | - | 14,548 |
By country from which derived | 11,212 | 786 | 566 | 1,916 | 68 | 14,548 |
Non-current assets | ||||||
By entities' country of domicile | 4,023 | - | 1 | 282 | - | 4,306 |
Business segments
The Group's operations are separated between Group manufactured products and bought in products. The following table provides an analysis of the Group's external revenue by source of products, irrespective of the geographical region of sale.
2012 | 2011 | |
£'000 | £'000 | |
Group manufactured products | 10,018 | 10,774 |
Bought in products | 4,530 | 5,211 |
Revenue | 14,548 | 15,995 |
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Titon Holdings Plc
Notes to the Preliminary Announcement for the year ended 30 September 2012
4 Revenue and segmental information (continued)
For the year ended 30 September 2011 | United Kingdom | South Korea | All other countries | Consolidated |
£'000 | £'000 | £'000 | £'000 | |
Segment revenue | 12,245 | 2,282 | 1,468 | 15,995 |
Inter-segment revenue | - | - | 160 | 160 |
Total Revenue | 12,245 | 2,282 | 1,628 | 16,155 |
Depreciation and amortisation | 538 | 87 | 4 | 629 |
Operating profit - segment result | 2,121 | 36 | 91 | 2,248 |
Unallocated expenses | (2,243) | |||
Losses from associates | (7) | |||
Finance income | 36 | |||
Profit before tax | 34 | |||
Tax credit | 155 | |||
Profit for the year | 189 | |||
Total assets | 11,330 | 1,706 | 130 | 13,166 |
Total assets include: Investments in associates | 87 | - | - | 87 |
Additions to non-current assets (other than financial instruments and deferred tax assets) | 718 | 222 | 1 | 941 |
IFRS 8 requires entity wide disclosures to be made about the regions in which it earns its revenues and holds its non-current assets which are shown below.
For the year ended 30 September 2011 | United Kingdom | Europe | USA | South East Asia | All other regions | Total |
Revenues | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
By entities' country of domicile | 13,277 | - | 436 | 2,282 | - | 15,995 |
By country from which derived | 12,245 | 980 | 436 | 2,330 | 4 | 15,995 |
Non-current assets | ||||||
By entities' country of domicile | 4,182 | - | 5 | 277 | - | 4,464 |
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Titon Holdings Plc
Notes to the Preliminary Announcement for the year ended 30 September 2012
5 Tax (credit) / expense
| 2012 | 2011 |
£'000 | £'000 | |
Corporation tax credit | (56) | (65) |
Adjustment in respect of (over) / under provision in prior years | (9) | 2 |
Total corporation tax | (65) | (63) |
Deferred tax - origination and reversal of temporary differences | (182) | (92) |
Total tax credit | (247) | (155) |
The charge for the year can be reconciled to the profit | ||
per the income statement as follows: |
| |
(Loss) / profit before tax Effect of: | (984) | 34 |
Expected tax charge based on the standard rate of | ||
corporation tax in the UK of 25% (2011: 27%) | (246) | 9 |
Additional deduction for R&D expenditure | (85) | (70) |
Expenses not deductible for tax purposes | 13 | 26 |
Difference in deferred tax rates | (4) | (33) |
Other short term timing differences | (1) | (80) |
Unrelieved tax losses | - | (9) |
Surrender of losses for R&D tax credit | 85 | - |
Adjustments in respect of prior periods | (9) | 2 |
Total tax credit for the year | (247) | (155) |
6 Basis of preparation
The financial information for the year ended 30 September 2012 together with the comparative year has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union.
The accounting polices of the Group under International Financial Reporting Standards (IFRSs) are set out in detail in the 2011 Financial Statements which is available from the Group's website at www.titonholdings.com.
Except for the implementation of the amendments to IAS 1 and IAS 12 there have been no changes to the accounting policies during the year.
·; Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income |
·; Amendments to IAS 12 - Deferred Tax: Recovery of Underlying Assets |
The information in this preliminary announcement does not constitute the statutory accounts of the Group within the meaning of Section 435 of the Companies Act 2006 for the year ended 30 September 2012 or 2011.
Page 12
Titon Holdings Plc
Notes to the Preliminary Announcement for the year ended 30 September 2012
The financial information for the year ended 30 September 2011 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The statutory accounts for 2012, on which the auditors have not yet reported, will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held on 19 February 2013.
For further information please contact :
Keith Ritchie, Chairman
Phone: +44 (0)1206 713800
Page 13
Titon Holdings Plc
Registered Office: International House, Peartree Road, Stanway, Colchester, Essex CO3 0JL. Registered in England and Wales (registered no. 1604952).