Titon : Interim Statement (6 months to 31st March 2021)

Titon Holdings Plc

2021 Interim Statement

Overleaf:

Titon's new Amada Punch Press for the sheet metal production area at its state-of-the-art manufacturing site in Haverhill, Suffolk.

2021 Interim Statement

Contents
Business Review.............................................................................................	2
Consolidated Interim Income Statement......................................................	6
Consolidated Interim Statement of Comprehensive Income......................	6
Consolidated Interim Statement of Financial Position................................	7
Consolidated Interim Statement of Changes in Equity...............................	8
Consolidated Interim Statement of Cash Flows...........................................	9
Notes to the Condensed Consolidated Interim Statements......................	10
Directors and Advisers.................................................................................	16

Titon Holdings Plc Interim Statement 2021	1

Business Review

Chairman's Statement

I am pleased to report that we are in a much better position both as a business and a country this year than we were at this time last year. In the UK, the data on the impact of the Covid-19 pandemic has improved significantly since the start of 2021. This is due to the vaccination programme, which is proving very successful in protecting so many people and the gradual lifting of restrictions from the third national lockdown imposed in January 2021. From Titon's perspective we have remained open throughout the period, along with the construction sector, and we have seen a sustained recovery in demand since the middle of 2020. As a result, I can report a return to profitability in H1 2021 as trading since our 30 September 2020 financial year end has been slightly ahead of budget. We have continued to follow the Government's guidelines for safe working in our factory in Haverhill and our office based staff have continued to work from home where they can. We are now turning our attention to introducing on-going flexible working for our office-based employees so that they can both spend time in the office and also work from home, which we will commence gradually over the next few months.

Income Statement

In the six months to 31 March 2021, Titon's net revenue (which excludes inter-segment activity) increased by 4.1% to £11.7 million (2020: £11.2 million). We have been pleased with the levels of activity in the construction sector both here in the UK and in Europe and we have also weathered the impact of the UK leaving the EU's single market and customs union on 31 December 2020. We can report an increase in UK and European sales of 16.6% against the six months to 31 March 2020.

Gross margin rose to 31.9% (2020: 27.3%) due to the higher contributions from all of our operations in the UK and Europe. EBITDA was 259% higher at £1.13 million (2020: £0.32 million), whilst we made an operating profit of £0.62 million (2020 loss: £0.23 million). The results from the Group's associate, Browntech Sales Co. Ltd (BTS) in South Korea, amounted to a loss of £59,000 (2020 loss: £39,000) as a result of the continuing weak housing market in Korea and the Korean market shift towards mechanical ventilation. In aggregate, the Group made a profit before tax of £0.55 million (2020 loss: £0.27 million).

The earnings per share was 4.29 pence (2020 loss:

2.73 pence) with the total statutory profits of £0.48m

(2020 loss: £0.30m) and an apportionment to minority

shareholders lower at £2,000 (2020: £49,000) which reflected the weaker trading incurred by the Group's

51% owned subsidiary, Titon Korea.

As a result of the continued recovery in trading the Board has approved the payment of an interim dividend in respect of the 6 months ending 31 March 2021 of 1.5 pence per share (2020: nil pence per share). The interim dividend is payable on 25 June 2021 to shareholders on the register at 21 May 2021. The ex-dividend date is 20 May 2021.

Balance sheet and cash flow

Net assets including non-controlling interests rose by

1.2% or £0.2 million to £16.5 million (31 March 2020: £16.3 million) with net cash of £4.63 million (31 March 2020: £3.69 million) which is equivalent to 28.0% of net assets (31 March 2020: 22.7%). The Group had no financial indebtedness at 31 March 2021.

During the period a further dividend of £0.4 million was paid by Titon Korea to the Company in respect of our 51% shareholding, with £0.4 million also being paid to our Korean partners who are the 49% minority shareholders. The cash held by Titon Korea has remained consistent at £0.3 million at 31 March 2021 (31 March 2020: £0.3 million).

The half year saw cash used in operations of £0.13 million (2020: generated £0.54 million), primarily due to working capital components rising in line with the increased levels of activity. Capital expenditure in the period was £0.19 million (2020: £0.19 million) as we continued to carefully manage expenditure on major items of capital equipment. Capital expenditure will be higher in the second half as we have recently purchased a new Amada punch press to increase capacity in our factory, at a total cost of £0.3m. Net current assets were £9.2 million at 31 March 2021 (2020: £8.8 million) with a Quick Ratio1 of 2.19 (2020:1.97). Asset Turn was 2.11 (2020: 1.87).

Segmental and operational review

The contrast with last year is stark with the recovery in activity continuing throughout the period under review. With our total revenue increasing 4.1% on 2020, we have recorded strong growth in revenue for every part of our UK and European businesses but saw reductions in revenue in both the USA and South Korea.

2 Titon Holdings Plc Interim Statement 2021

This revenue growth, when combined with a 4.6% increase in Group gross margin, lower operating costs due to a reduction in business activities such as travel and marketing and a lower bad debt provision has resulted in a significant improvement in Group operating profits.

UK and Continental Europe

Sales in our UK Window and Door Hardware business were 9% up on the same period last year as the new build and replacement window markets both grew due to the improved market conditions in 2021 against the uncertainty caused by the 2019 General Election and Brexit in the prior period. The increase in home DIY activity in 2020 and 2021 has been well documented and our UK business has been a beneficiary of this recovery and growth trend. The new build market has also contributed to a good performance from Ventilation Systems in the UK, which saw sales of mechanical ventilation products rise by 15% over the same period last year. One particular feature was increased sales of the Titon FireSafe® Air Brick, which was designed as a response to the Hackitt review of building safety following the Grenfell fire. Total UK revenues increased 8.6% on 2020.

Sales to Europe performed strongly in the six months to 31 March 2021, up 52.1% on the same period in 2020. Export sales of Ventilation Systems products rose by 67.4% in the period under review as our network of European customers increased and we introduced new products. Despite the well-publicised logistics difficulties that arose in January 2021 after the UK finally left the EU single market and customs union, sales have continued at a very similar rate in our Q2 against our Q1 numbers. This reflects the continuing construction activity in the EU despite the Covid-19 pandemic. We have continued to invest time and money in developing new products for our customers in Europe and are hopeful that sales will continue to grow in the second half. Export sales of Window and Door Hardware products also improved in the period and were up by 19% against the same period in 2020.

I can report that our UK and European segments both returned to segmental profitability in the six months to 31 March 2021, after generating losses in 2020.

South Korea

We noted in the Group's 2020 Annual Report that sales in South Korea had been badly impacted by the

reduction in house building and the delay of a number of building projects. This has continued to be the situation in South Korea for the period under review. We have also been affected by the trend towards mechanical ventilation in domestic buildings. This has resulted in the contribution from Titon Korea falling significantly in this period compared to last year. Our partners in South Korea are working hard to introduce new natural and mechanical ventilation products to address the market trends. The contribution from Browntech Sales Co. Limited (BTS), the Group's associate company, which primarily distributes ventilation products in South Korea, was also affected by lower sales in the half year and this resulted in BTS making a small loss for the period. BTS has, subsequent to the end of this half year, sold another of its investment properties.

In terms of the segmental contribution from South Korea, the two businesses, Titon Korea and BTS are added together. The revenue, which is solely that from Titon Korea (the Group's share of BTS's profits/ losses are accounted for as an associate) was 27% lower at £2.1 million (2020: £2.8 million). The segment contribution, which includes the pre-tax profit of Titon Korea plus 49% of the post-tax loss of BTS, was a loss of £54,000 (2020 profit: £42,000).

United States

Sales in our US business remain a very small portion of the Group's overall sales and fell 26% from the same period last year at £294,000 (2020: £397,000). This is largely due to a fall in the construction of multi-occupancy housing requiring trickle vents, in favour of single houses not requiring trickle vents in our key market areas. This is again disappointing and we have seen few signs of the situation changing rapidly. Although Titon Inc. made a small pre-tax loss in the period, when we include the inter-segmental profits made at our Haverhill factory on products sold in the US, the contribution to Group profit before tax was positive.

Board

Since the end of the period under review David Ruffell, Chief Executive Officer, has left Titon. David worked for Titon for over 33 years and I thank him for the contribution he has made to the Group. As we have already announced we have recruited a new Chief Executive, Matthew Norris, who is due to start in July 2021.

Titon Holdings Plc Interim Statement 2021	3