2018 Annual Report
and Financial Statements
Annual Report and Financial Statements
for the year ended 30 September 2018
Contents
Chairman’s Statement ...................................................................................... 2
Strategic Report................................................................................................ 6
Strategic Report: Corporate and Social Responsibility Report ....................... 10
Strategic Report: Report on Risk Management .............................................. 13
Directors’ Report............................................................................................. 18
Directors’ Remuneration Report ..................................................................... 23
Corporate Governance Report ....................................................................... 28
Audit Committee Report ................................................................................ 31
Independent Auditor’s Report ......................................................................... 33
Consolidated Income Statement .................................................................... 37
Consolidated Statement of Comprehensive Income ...................................... 37
Consolidated Statement of Financial Position ................................................ 38
Company Statement of Financial Position...................................................... 39
Consolidated Statement of Changes in Equity ............................................... 40
Company Statement of Changes in Equity..................................................... 41
Group and Company Statement of Cash Flows ............................................. 42
Notes to the Consolidated Financial Statements............................................ 43
Five Year Summary ........................................................................................ 71
Notice of Annual General Meeting ................................................................. 72
Directors and Advisors ................................................................................... 76
1
Titon Holdings Plc 2018 Annual Report Chairman’s Statement
It was another record year for Titon, generating revenue of £30 million and delivering a 20% increase in profit
before tax to £3.0 million. The total declared dividend for the year was also increased by 13%.
Profit and loss
In the year ended 30 September 2018, the Group’s net
revenue (which excludes inter-segment activity) rose
7% to £29.9 million (2017: £28.1 million). On a constant
currency basis, however, the increase is 8%.
The gross margin increased from 25.9% to 26.8% and
EBITDA was 16% higher at £2.85 million (2017: £2.46
million). Earnings before interest and tax (EBIT) or
operating profit rose 18% to £2.19 million (2017: £1.85
million) with the operating margin higher at 7.3% (2017:
6.6%).
Net interest contributed £13,000 (2017: £10,000) while
the share of profits from the Group’s associate (in South
Korea) rose 23% to £778,000 (2017: £633,000) resulting
in profit before tax of £2.98 million, which was an increase
of 20% (2017: £2.49 million). On a constant currency
basis there was no material change to the 2018 profit
before tax.
Earnings per share for the year increased 16% to 19.2
pence (2017: 16.5 pence). The effective rate of taxation
increased to 12% (2017: 11%).
The Directors are proposing a final dividend of 3.0 pence
per share (2017: 2.7 pence). When added to the interim
dividend of 1.75 pence, paid on 21 June 2018 (2017:
1.5 pence), this represents a total dividend for the year
of 4.75 pence (2017: 4.20 pence) a 13% rise on 2017.
If approved by shareholders at the forthcoming Annual
General Meeting on 20 February 2019, the dividend is
payable on 26 February 2019 to shareholders on the
register at 18 January 2019. The ex-dividend date is 17
January 2019.
Statements of financial position and cash flows
Net assets including non-controlling interests rose £2.3
million to £18.5 million with net cash at £3.42 million
(2017: £3.27 million) which is equivalent to 18.5% of
net assets (2017: 20.2%). Inventory levels at the year-
end increased by £997,000 on 2017 due to strong
business growth in South Korea and the introduction
of new products into the UK and European markets. In
turn, this meant that cash generated from operations in
the year was £1.94 million (2017: £2.24 million). Capital
expenditure increased to £893,000 (2017: £706,000) and
dividends paid to the shareholders of Titon Holdings Plc
increased by 19% to £489,000 (2017: £410,000). Titon
Korea also paid a maiden dividend in the year and this led
to a cash outflow from the Group to the Non-Controlling
Interests of £416,000 (2017: £0), whilst simultaneously
repatriating a similar amount to the UK as a dividend to
Titon Holdings Plc. The result of the above is an overall
net increase in the Group’s cash reserves in the period
of £146,000 (2017: £831,000). Net current assets were
£11.2 million (2017: £9.9 million) with a Quick Ratio1 of
1.97 (2017: 2.13).
ROCE2 was 15.3% (2017: 15.1%) with Capital Turn at 2.1
(2017: 2.3).
Segment analysis
The directors look initially at geographical areas to evaluate
the Group’s performance and then consider product group
splits at the secondary level.
UK and Europe
Revenue from the UK and Europe increased by 7% in
fiscal 2018. This increase was derived chiefly from a strong
performance in the Hardware business comprising sales of
our traditional trickle vents, and window and door hardware.
Here, sales into the aluminium window and door sector
continued to perform strongly, up 12%. I am also pleased
to report that sales of Titon branded door and window
hardware products had a strong year with a 34% annualised
revenue increase in the year, which reflects a lot of hard
work put into this product area.
Results from the Ventilation System’s sales of mechanical
ventilation products saw an increase of 7.5% in revenue, with
2
Titon Holdings Plc 2018 Annual Report Segment analysis (continued)
pleasing demand for exports again as new customers have
been introduced. The latter reflects a continued targeting of
and investment in new geographical markets, particularly
Eastern Europe. Within the UK, sales were up marginally on
2017 as we restructured our sales areas outside of London
and the South East.
Titon continues to invest in research and development
which, in turn, yields a continuing number of new products for
both the Ventilation Systems and Hardware businesses and
this will also be true in 2019. The importance of air quality,
both outdoors and indoors, continues to expand as the
impact of poor quality air becomes more understood by the
medical profession, governments and consumers. Titon has
worked with one of our trade associations, Beama (British
Electrotechnical & Allied Manufacturers Association), which
represents manufacturers of electro technical products,
such as ventilation products, to promote the benefits of good
indoor air quality. In October 2018, the Healthy Homes and
Buildings All Party Parliamentary Group published a White
Paper entitled Building our Future, Laying the Foundations
for Healthy Homes and Buildings. I am very pleased to say
that Titon was a significant contributor to this paper, which
we hope will lead to healthier homes and higher sales of
ventilation products.
The value of UK private and public housebuilding output is
forecast to increase in 2018 by 4.5% against calendar 2017
according to the Construction Products Association. At the
same time, the expected value of repair, maintenance and
improvement (RMI) in the private and public residential
sectors is forecast to be flat in 2018 against 2017.
South Korea
In South Korea, the Group’s subsidiary, Titon Korea (51%
owned), manufactures natural window ventilation products
and is the national market leader with an estimated market
share in this core sub-sector in excess of 75%. In fiscal
2018, it also had another very good year with revenue
increasing by 21% to £11.6 million, due to higher private
sector demand, and its contribution to Group profit after tax
was up by 24% to £1.0 million.
The Group’s associate company, Browntech Sales Co.
Limited (‘BTS’) also operates exclusively in South Korea and
it generated another higher contribution in the year, with the
Group recognising a share of profits from BTS of £778,000
(2017: £633,000) up 23% on 2017. In terms of activity, BTS
distributes ventilation products in South Korea and both
invests in and develops schemes in the domestic residential
real estate market. There are three such schemes active
at this time: the first in the form of a secured loan, which
is expected to be repaid in 2019; the second, a residential
refurbishment in Seoul, which is tenanted; and the third,
the development of a residential property in Seoul, which
has now been completed and is currently being marketed.
Taking Titon Korea and BTS together, South Korea is the
largest contributor to the Group’s profit after tax at £1.8
million for the year. (2017: £1.5 million).
United States
Finally, as I noted in the interim results, revenue in the US
was substantially lower and this continued in the second half,
although the US represents only a small proportion of Group
sales (2% in 2018 and 6% in 2017). In fact, sales for the
year were down by almost two-thirds against 2017, which
was very disappointing and due largely to the ending of a
subsidised window replacement programme in New York
and a general market slowdown in one of our core markets
in Washington State. It is important to add, however, that
we benefit from very low fixed costs in our US business and
the region has made a positive contribution overall to the
Group’s results.
Board
We have not made any changes to the Board in the last
twelve months. However, we have agreed, in connection
3
Titon Holdings Plc 2018 Annual Report Chairman’s Statement (continued)
Board (continued)
Outlook
with our move to AIM, that we will appoint another
independent Non-executive Director to the Board in 2019.
The process of selecting an appropriate person for this
role is underway and an announcement will be made in
due course.
Employees
Once again, I offer my sincere thanks to all of the
employees of Titon as the success of the Group is down
to their hard work and talents. We continue to grow and
develop as a business and it would not be possible without
their contribution. As with last year, we have continued
to make increases in the wages of our UK weekly paid
employees in line with the National Minimum Wage.
Investors
We have now completed our move from the Main Market
of the London Stock Exchange to the AIM market, which
was effective from 10 December 2018. We are very
pleased that shareholders voted in favour of this change
as the Board believes it offers significant benefits to
existing shareholders and new investors in Titon.
We have continued to engage the corporate research
house Hardman & Co. which regularly writes and
distributes investment research on Titon and which
we believe has both widened interest in the Group and
continues to have a positive impact in the share price over
the past three years. We have engaged Shore Capital as
our Nominated Advisor and Broker for the purposes of the
move to AIM and they will initiate research coverage on
Titon in early 2019. Finally, here, I would like to mention
again the Group’s dividend reinvestment programme
(DRIP) which has operated for a number of years. This
represents a straight-forward and cost effective way for
shareholders to increase their holdings in Titon should
they wish to do so.
It was another record year for Titon with revenue of £30
million and profit before tax ahead by a fifth to £2.98
million. The dividend for the year was also increased by
13% which is the 6th consecutive year of rising dividends.
The UK economy continues to grow at a modest rate in
both historic and relative terms with consensus forecasts
for GDP growth clustered around 1.5% per annum in both
2019 and 2020. These forecasts, too, are made assuming
that the UK reaches an agreement with the EU about
withdrawing in an orderly manner and any continuing
uncertainty is unwelcome to our business. By way of a
failsafe, though, we have already placed orders for certain
extra components with our EU suppliers. That said, in
the first two months of the new fiscal year, we are very
pleased with UK and continental European trading, which
is in line with the same period in 2017 when October and
November were particularly good months.
In South Korea, the World’s 12th largest economy3 and
the Group’s largest net profit contributor, Q3 of calendar
2018 saw slightly slower GDP growth in relative terms at
2.0% compared with 2.8% in Q2 due largely to weaker
construction and business investment. We anticipate
that rising levels of air pollution may raise demand for
mechanical ventilation units over natural ventilation
products in fiscal 2019, resulting in a slowdown in our
core natural ventilation business. We are, however, in
the process of developing new solutions for the South
Korean ventilation market. Most importantly, the trajectory
of the South Korean economy remains enviably positive
with FocusEconomics forecasting GDP growth of 2.6% in
both 2019 and 2020 as Government spending increases
and monetary policy remains accommodative. We are
therefore positive on the medium-term outlook for our
South Korean business.
4
Titon Holdings Plc 2018 Annual Report Outlook (continued)
Titon builds and delivers popular products and has a
unique geographical spread. It has good people and a
perennially strong balance sheet. We also continue to
look for new opportunities for growth within our target
markets. 2019 will be a more testing year in the UK and
in South Korea as noted above. However, provided that
Brexit doesn’t negatively impact the UK economy we
expect another year of growth in revenue and profits for
Titon in line with market expectations.
On behalf of the Board
KA Ritchie
Chairman
12 December 2018
Notes:
Keith Ritchie Chairman
1 The Quick Ratio measures liquidity and is calculated as follows Current Assets-less-Stocks divided by Current
Liabilities
2 ROCE is calculated by dividing EBIT by capital employed (capital employed being the sum of shareholders’ funds,
non-controlling interests and all debt less intangible assets and cash); with Capital Turn calculated by dividing revenue
by capital employed
3 International Monetary Fund data at May 2018
5
Titon Holdings Plc 2018 Annual Report
Strategic Report
The Strategic Report has been prepared in accordance with Section
414C of the Companies Act 2006 (the “Act”). Its purpose is to inform
shareholders of Titon Holdings PLC (“Titon” or “the Company” or “the
Group”) and help them to assess how the Directors have performed their
legal duty under Section 172 of the Act to promote the success of the Group.
Highlights
Revenue growth of 7% to £29.9m and Group profit before tax up to £2.98m
EPS up 17% to 19.2 pence
First dividend paid by Titon Korea
Total dividend for the year up 13% to 4.75 pence per share
Overview
The Directors look initially at geographical areas to evaluate the Group’s
performance and then consider product group splits at the secondary level.
The Titon Group performance is monitored across three geographical
segments. Within these segments, the principal businesses activities are
design, manufacture, marketing and sales, along with our associate’s activity
in real estate development:
●
trickle vents and hardware products for the window and door fabricator
markets in the UK, Europe and the USA;
David Ruffell Chief Executive
● mechanical ventilation products for the new build residential markets in the UK and Europe; and
●
natural ventilation products for the new build residential market in South Korea.
The first two activities above are carried out by Titon Hardware Limited and Titon Inc. (in the US), both wholly owned
subsidiaries. Titon is one of the leaders in the window trickle vent market in the UK, trickle vents being used extensively
in the new build and refurbishment sectors. The third activity is carried out by Titon Korea Co. Ltd (“Titon Korea”), a 51%
owned subsidiary, which designs and manufactures products and Browntech Sales Co. Limited (“BTS”), a 49% owned
associate company, which markets and sells these products to customers. BTS is also active in domestic residential
real estate development.
Titon’s strategy is to grow the businesses organically on a continuing basis and to develop new products. In South
Korea the Group seeks to maintain its position as a market leader in natural ventilation in the residential market. More
details of the Group’s strategy are discussed below.
Chief Executive’s Review
The principal activities of the Group have not changed during the year and consist of the design, manufacture and
marketing of ventilation products and door and window fittings.
The Consolidated Income Statement is set out on page 37. A summary of the results along with other selected Key
Performance Indicators (“KPIs”) is as follows:
Revenue
Profit before tax
Taxation
Profit after tax
Revenue per employee
Profit after tax per employee
Net cash and cash equivalents
2018
£’000
29,946
2,979
2017
£’000
28,011
2,493
(352)
(269)
2,627
133
11.6
3,415
2,224
115
9.1
3,269
The Directors are pleased with the 7% improvement in Revenue and the 20% increase in Group Profit before Tax
during the year. A review of the Group’s performance during the year is given in the Chairman’s Statement. The
Group Profit before Tax for the year exceeded 2017 due to a significantly higher contribution from South Korea and an
increased contribution from the UK.
6
Titon Holdings Plc 2018 Annual Report
Goals and strategy
The Titon Group’s goals are the following:
Markets
Grow market share of natural and mechanical ventilation products and window and door hardware in
the residential housing markets of the UK, Europe, US and South Korea.
Employees
Provide a challenging but rewarding and supportive environment for our employees which offers
them long term careers.
Products
Offer products which are of high quality and that the “as built” performance is as expected.
Shareholders
Interact with shareholders and generate rising returns through a rising share price and a progressive
dividend policy on a consistent basis.
Management
Set and maintain a high standard of management and business behaviour, which will ensure that
employees, customers and suppliers are treated fairly.
Our strategy to meet each of these goals is identified separately and then transferred into incremental steps and actions
which each department within Titon can achieve and against which they can be measured. Each year these strategies
are reviewed at the start of the financial period by the Board of Directors and changes are made, where necessary, if
the results achieved have been less than the target.
The strategy to achieve each of these goals is as follows:
Grow market share in the UK, Europe, US and South Korea
Increase sales of our existing products.
Find new customers for our products.
Develop new products.
Improve existing products.
Working environment
Pay our employees fairly for their services.
Retain a long term view and not a “hire and fire” mentality.
Provide employees with the necessary support and training to do their jobs.
Ensure that the diversity of every employee is recognised and that everybody is treated equally.
Conduct regular and transparent appraisals with all employees.
Product offering
Invest in research and development resources to bring innovative new products to market.
Set high standards for product design.
Continuously improve production performance.
Take customer complaints seriously and improve products as required.
Interaction with shareholders
Pay dividends commensurate with the results of the business.
Communicate openly and honestly with an absence of jargon.
Be accessible to all shareholders at all times.
Management behaviour
Set high standards for management and all employees.
Be accountable and take responsibility for decision taking.
Communicate effectively with all stakeholders.
Ensure all dealings are open and cannot be misconstrued.
7
Titon Holdings Plc 2018 Annual Report
Strategic Report (continued)
Business model
Within distinct geographical markets, the Group operates in two business streams:
(i) trickle ventilation and window and door hardware business, in which Titon has operated since its formation in 1972,
and now including South Korea. This activity accounted for 77% of Group revenue in 2018 (2017: 78%); and
(ii) mechanical ventilation business, which the Group entered in 2007 and which accounted for 23% of revenue in 2018
(2017: 22%). See Business Segmentation information on page 54.
The Group generally organises its sales and marketing activities into these business streams with manufacturing and
other services supporting them both on a shared basis. The management of these two business streams also follows
this split with regular meetings of the senior managers alongside the Directors.
In the UK, the Group has a direct sales force for both business streams and aims to win specifications for its products
through its dealings with developers/housebuilders, architects, building services engineers and local authorities. Where
specifications are not possible, Titon aims to sell directly to its wide customer base of electrical contractors, installers
and window fabricators.
Titon operates in a wide range of export markets and has made sales to a significant number of countries from the
UK during this year. Our policy for exporting, in respect of both window and door hardware and mechanical ventilation
products, is to appoint local distributors and to support them in building the Titon brand. Within the mechanical ventilation
business the Group also manufactures OEM products for its customers and, near term, has targeted a significant
increase in its activities in continental Europe.
In South Korea, Titon Korea, makes almost all of its sales to BTS, which sells products onward to its customers in the
new residential construction sector. Titon entered the South Korean market in 2008. As noted elsewhere, BTS has
entered into a number of property development activities in the last three years but this activity is expected to diminish
in future years.
The Group also has a wholly owned subsidiary based in Indiana in the USA. Sales into this market accounted for 2%
of Group revenues during the year (2017: 6%).
The Group manufactures products in the UK and in South Korea. Production in South Korea is entirely for the South
Korean market, whilst products manufactured in the UK are sold domestically and exported. Products manufactured
in the UK factory account for 42% (2017: 46%) of overall Group turnover and products manufactured in South Korea
account for 39% (2017: 34%). The remaining 19% (2017: 20%) of revenue is obtained by the sale of products bought-
in from third party manufacturers. These bought-in products tend to be complementary to and are generally sold
alongside our own manufactured lines.
Key Performance Indicators (KPIs)
The Board looks at a range of KPIs to monitor the performance of the Group throughout the financial year and within
the individual business departments further KPIs are reviewed. The financial KPIs monitored by the Board regularly
include:
KPI
Group Revenue
Timing
Measured against budget and prior year on monthly basis
Group Profit Before Tax
Measured against budget and prior year on monthly basis
Individual legal entities’ and
business sector performance
Measured against budget and prior year on monthly basis
Revenue and Profit per employee Measured annually within the Strategic Report
Sales, margins and prices of core
products
Sales to customers
Top 25 products reviewed monthly and at Divisional Management levels
Top 25 customers and 12 month rolling sales reviewed monthly and at Divisional
Management levels
Purchases
Net cash
Top 25 suppliers and delivery performance reviewed monthly
Reviewed quarterly by Board and monthly by senior management
The Board of Directors also reviews quarterly performance figures at the quarterly board meetings and any significant
variances are discussed together with any necessary remedial actions.
8
Titon Holdings Plc 2018 Annual Report 2017/18 performance
The financial results for the year are discussed above and throughout the Annual Report. In respect of the strategies
identified above the significant KPIs are as follows:
UK, Europe and USA
●
sales of trickle vents and window hardware products increased in the year by 8.8% in the UK and in Europe, but
fell in the US by nearly two-thirds. This was due to higher vent and hardware sales against the prior financial
period in the UK, but sales to the US fell significantly due to the ending of a window replacement programme in the
eastern US and a fall in construction of homes for multiple occupancy in western US, which impacted the overall
sales increase. Sales of bought in hardware also increased due mainly to higher sales of products for Aluminium
windows and doors in the UK and sales of own range Titon bought in products, which increased by 34%;
●
sales of Ventilation System products in the UK rose marginally in the period against the prior year, but sales to
continental Europe and the rest of the World were up 13% as the continued investment in products and marketing
for European markets generated good returns;
● we continued to invest in new products during the year and sales of the SF Xtra trickle vent, which was introduced
in 2015/16 grew strongly as did the range of acoustic products. Similarly, in the Ventilation System division sales
of our newly introduced products performed well in the year, justifying the ongoing investment in R&D.
South Korea
●
sales of natural ventilation products through our subsidiary in South Korea rose by 21% as sales into the private
sector continued to grow. Titon has a very strong position in South Korea with an estimated market share in its
chosen products in excess of 75%.
Other
●
research and development expenditure in the year, excluding capitalised development expenditure, remained high
at £446,000 (2017: £468,000), reflecting the strategy noted above to continually develop new products;
●
●
●
during the year we have transitioned both our ISO 9001 Quality Management Systems and ISO 14001 Environmental
Management Systems from the old versions to the current 2015 versions. This has taken a considerable amount
of senior management time and demonstrates our commitment as a company to the highest standards of both
production and environmental management;
employee numbers remained largely the same at the end of the period at 225 against 229 at September 2017.
Salaries are reviewed annually and all staff received an increase. Our weekly paid staff also benefited from the
increase in the National Minimum Wage in April 2018; and
the Total Return to Shareholders for the period under review was an increase of 43.1%, which is a combination of
share price increase and dividend yield.
2018/19 activities
The Board anticipates that the Group’s business will continue on broadly the same approach as it did in 2017/18 and
our strategy remains the same. We have set budgets for all parts of our business which reflect agreed growth ambitions
and these will be monitored on a monthly basis. Specific initiatives for the current fiscal year include:
●
●
●
●
●
●
continuing efforts to sell more Titon branded bought-in hardware, particularly cylinders and friction hinges;
increased sales of acoustic trickle vents particularly in the major conurbations where external noise can be an
important issue for house occupiers or where new infrastructure, such as roads, railways or airports is being
developed;
development of additional Mechanical Ventilation with Heat Recovery (“MVHR”) products for the UK market,
including a new product for mid-sized apartments and a product for larger properties, which is also in demand
in Europe. As we have previously noted, large scale growth is only likely, however, if the Government drives up
energy efficiency standards in new homes through regulation, since UK developers and housebuilders tend not to
build to these higher standards on a voluntary basis due to the increased cost of doing so;
increased sales in Eastern Europe of MVHR systems as these markets become aware of the availability of
this technology along with their need to reduce energy consumption. We have recently signed new distribution
agreements with distributors in Poland and Lithuania;
development of new products for the South Korean ventilation market as the requirement for different ventilation in
residential buildings increases. This will be a key initiative for the Group given how important sales in South Korea
have been to the Group in recent years;
control of overheads will continue in the period. We have restructured our workforce in Haverhill during November
2018 to reflect changes in our product mix;
9
Titon Holdings Plc 2018 Annual Report Strategic Report (continued)
2017/18 activities (continued)
●
in the UK, the consensus view on the UK economy is for GDP growth of around 1.5% in 2019 and 2020. UK
Government capital spending remains constrained although housebuilding has been made a political priority with a
commitment to build 300,000 units per annum through the middle of the next decade. At the same time, the largely
independently funded Housing Associations continue to grow and spend on new build and repair, maintenance
and improvement (RMI). The Construction Products Association is forecasting continued growth in residential new
build in both the private and public sectors over the next three years. The same is true for private sector residential
RMI. However, the much smaller public sector residential RMI segment is forecast to experience relatively flat
volumes. We anticipate that demand should increase for both our hardware and mechanical ventilation product
sales over and above any gains in market share; and
●
in South Korea GDP growth is forecast by FocusEconomics to grow by 2.6% in 2019 and 2020. However, the
construction industry will rise at a slower pace. At the same time, it is anticipated that increasing levels of air
pollution may raise demand for mechanical ventilation units over natural ventilation products. This means that we
anticipate a comparative slowdown in our core business in South Korea in fiscal 2019.
Employee Gender Breakdown
As at the end of the financial year the analysis by gender of employees, was as follows:
Directors
Senior Managers
Other
Total
2018
Male
7
9
134
150
2018
Female
-
-
75
75
2018
Total
7
9
209
225
2017
Male
7
10
135
152
2017
Female
-
-
77
77
2017
Total
7
10
212
229
Corporate and Social Responsibility Report
Business ethics, anti-corruption and compliance
The Group is committed to conducting its business in an ethical, socially responsible and environmentally sustainable
manner. The Directors lead by example in encouraging and promoting the highest standards of integrity throughout all
of their business dealings.
As far as it is possible to determine, the Group complies with all human rights, anti-corruption and environmental
legislation, regulation and best practice in each of the countries where it conducts business.
The following formal policies are in place within the Group to promote and monitor business ethics and anti-corruption:
●
Anti-corruption policy to protect the Group in respect of employees offering payments or inducements to gain
favour with customers or potential customers;
● Whistleblowing policy to enable any employee who has concerns as to the Group being involved in any unlawful
or improper activities can raise issues in confidence and with reassurance that they will be protected from reprisals
or victimisation.
Employees who become aware of any breaches of these policies would raise them with their immediate line manager
or if this isn’t appropriate with a Director. Such instances would also be immediately discussed by Senior Management
and would then be raised with the Board at the next scheduled Board meeting. Urgent matters will be referred to the
Chief Executive for appropriate action. Concerns can also be raised directly with any of the Non-executive Directors
if the allegation involved any of the Senior Management. Third parties can raise any issues or breaches of policy with
any of the Directors.
10
Titon Holdings Plc 2018 Annual Report Corporate and Social Responsibility Report (continued)
Health and safety
It is critical as a manufacturing business that our employees operate in a safe environment and that our health and
safety policies and practices are as good as they can be. We have a written Health & Safety policy, which is displayed
on noticeboards throughout the factory and a full time Health & Safety officer.
The Health and Safety management system is as follows:
Board of Directors
Overall responsibility for setting policy and performance
Health & Safety Management Committee
Meets quarterly to review statistics and every reported incident. Both the
Chairman and CEO attend
Local Management
Health & Safety Officer
Responsible for oversight of Health & Safety Officer and any local
incidents
Responsible for all day to day issues, implementation of changes to
policy and reaction to incidents
Two examples of action that has been taken this year are:
● we have reviewed and updated our health and safety policy during 2018 and have appointed an external consultant
from EEF, the manufacturers’ association, to advise on health and safety matters; and
● we have adopted a much greater scrutiny of all accidents in our UK factory, so that the health and safety culture is
embedded in the business. This has resulted in an increase in the number of accidents reported during the year.
We believe that this is in the best interests of our employees and therefore, also of the Company.
The accident statistics for our UK operations are as follows:
●
●
January to December 2017
15 reported accidents, 0 RIDDOR reported
January to December 2018
36 reported accidents, 1 RIDDOR reported
RIDDOR is the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013. These Regulations
require employers, the self-employed and those in control of premises to report specified workplace incidents.
Environmental matters
The Board recognises its responsibility as a manufacturing business to minimise the impact of the Group’s activities
on the environment.
The Group seeks to reduce its environmental impact in a way that benefits a broad group of stakeholders, including
customers, shareholders, employees, and in particular, the local community. As noted above the Group has now
transitioned to ISO 14001:2015 from ISO 14001:2004 for Environmental Management Systems within its UK
manufacturing operation in 2018 and places great emphasis on ensuring that it conducts its operations such that:
●
●
●
●
●
emissions to air, releases to water and land filling of waste do not cause unacceptable environmental impacts and
do not offend the community;
significant plant and process changes are assessed and positively pursued to prevent adverse environmental
impacts;
energy is used efficiently and consumption is monitored;
natural resources are used efficiently;
raw material waste is minimised;
● waste is reduced, reused or recycled where practicable; and
●
the amount of packaging used for our products is minimised.
As part of its processes, the Group’s environmental performance is reviewed monthly by senior management and
a programme of continuous improvement for the benefit of customers, employees and the environment has been
adopted. We have continued the replacement of old halogen lamps on our Haverhill site during the year and this
programme has now largely been completed. We remain focussed on reducing our energy usage and maintain detailed
records of each area’s gas and electricity consumption with the aim of taking prompt action if any unexplained increase
is observed.
11
Titon Holdings Plc 2018 Annual Report
Strategic Report (continued)
Corporate and Social Responsibility Report (continued)
In accordance with Statutory Instrument 2008/410 the Group presents the following information in respect of its CO2
emissions during the period.
Global Greenhouse Gas (GHG) emissions data for the period are:
Source:
Combustion of fuel and operation of facilities
Electricity, heat, steam and cooling purchased for
own use
2018
tCO2e
698
428
2017
tCO2e
619
527
Total tonnes of CO2 equivalent
1,126
1,146
CO2 emissions normalised per £ million of sales of
manufactured products
47
51
These sources fall within our consolidated financial reporting. We do not have responsibility for any emission sources
outside of our consolidated financial reporting, including those of our Associate Company.
We have used the GHG Protocol Corporate Accounting and Reporting Standard (revised edition), data gathered to
fulfil our requirements under the CRC Energy Efficiency scheme, and emission factors from UK Government’s GHG
Conversion Factors for Company Reporting 2018.
Community and human rights
We supported a number of national charities throughout the year and have identified a specific local charity each year
as well for collections. We will be arranging a collection before Christmas of clothing and foodstuffs for the Colchester
Night Shelter, which exists for the benefit of rough sleepers in Colchester. Our colleagues in Haverhill also carry out a
number of charity collections during the year.
We are committed to respecting human rights across our business operations and aim to comply with all local and
international legislation and standards.
Employee diversity and equal opportunities policy
We are committed to encouraging equality and diversity among our employees. Our objective is to create a working
environment in which there is no unlawful discrimination and where all employee decisions are based on merit. The
policy applies to all employees, workers, agency workers, contractors and job applicants and covers all of the “protected
characteristics” as defined by the Equality Act 2010.
This policy has been issued to all employees within the UK Group and provides a framework for ensuring that no
employee is discriminated against. We recognise that equality and diversity is paramount within our employees and
provide training to our staff, where necessary, to ensure that they understand the policy and avoid discrimination.
12
Titon Holdings Plc 2018 Annual Report Report on Risk Management
Risks and uncertainties
The Group has established procedures for monitoring and controlling operational and financial risks and these are
detailed below.
The Board is responsible for ensuring that the Group maintains an effective risk management system. It determines the
Group’s approach to risk, its policies and the procedures that are implemented to mitigate exposure to risk.
Process for managing risk
The Board continually assesses and monitors the key risks in the business and has developed a risk management
matrix to identify, report and manage its principal risks and uncertainties. This includes the recording of all principal
risks and uncertainties, which are reviewed annually. Risks are fully analysed, their potential impact on the business
assessed and relevant mitigations established. The risk matrix is reviewed quarterly at Board Meetings along with the
appropriateness and effectiveness of the key mitigating controls.
The table below highlights the principal risks and uncertainties which could have a material impact on the Group’s
performance and prospects and the mitigating activities which are aimed at reducing the impact or likelihood of a major
risk materialising. The Board does recognise, however, that it will not always be possible to eliminate these risks
entirely.
Risk Matrix
Risk
Associate companies
The Group is exposed to the risks related
to working with associate companies
over which it does not have full operating
control through its equity holding.
Potential Impact
Mitigations
Failure to maintain good working
relationships and to exert sufficient control
and influence in respect of our South
Korean Associate Company, Browntech
Sales Co. Ltd could affect the Group’s
ability to deliver on its objectives in this
market.
The Group’s senior management has a
regular schedule of visits to meet with the
Associate Company’s management in
South Korea.
A formal Distribution Agreement exists
between Titon Korea Co. Ltd and
Browntech Sales Co. Ltd which aligns
those companies for trading purposes.
Brexit
The decision to leave the European Union
could have a significant impact on the
Group’s business in the UK and Europe.
There is still great uncertainty about the
nature of the relationship with the EU after
we leave, which is currently expected to
be on 29th March 2019.
Business disruption
The Group’s manufacturing and
distribution operations could be subjected
to disruption due to factors including
incidents such as a major fire, a failure of
essential IT equipment or a major cyber-
attack on the Group.
Imports and exports of goods and raw
materials to and from the EU could be
subject to tariffs or other charges, which
could increase costs and make the
Group’s products uncompetitive.
Delays in the movement of goods across
borders after the UK leaves the European
Customs Union may affect the Group’s
ability to supply its customers.
The Group will monitor the UK and EU
negotiations and political ramifications
and through its membership of trade
associations will lobby that tariff free
trading along with the frictionless physical
movement of goods is highly desirable.
The Group has developed relationships
with alternative component suppliers
should the re-sourcing of those items
currently sourced from the EU be
necessary.
Incidents such as a fire at the Group’s
premises or the failure of IT systems
could result in the temporary cessation
in activity or disruption of the Group’s
production facilities impeding the Group’s
ability to deliver its products to its
customers. A cyber-attack could leave
the Group open to a ransom demand or
compromise data security both for the
Group and customers.
The Group has developed business
continuity and disaster recovery plans.
The Group maintains a significant
amount of insurance to cover business
interruption and damage to property from
such events. A cyber insurance policy
has been taken out in the UK to protect
against ransom demands and additional
measures have been taken to ensure the
security of the Group and customer data.
13
Titon Holdings Plc 2018 Annual Report Strategic Report (continued)
Report on Risk Management (continued)
Risk
Potential Impact
Mitigations
Reliance on key customers
Parts of the Group’s business are
dependent on key customers.
Failure to manage relationships with
key customers could lead to a loss of
business affecting the financial results of
the Group.
The Group’s strategic objective is to
broaden its customer base wherever
possible.
The Group focuses on delivering high
levels of customer service and maintains
strong relationships with major customers
through direct engagement at all levels.
The Group maintains customer service
KPIs which are monitored monthly
through the Group’s ISO 9001 procedures
and intervention made where required.
The Group closely manages its pricing,
rebates and commercial terms with its
customers to ensure that they remain
competitive.
New product development
The Group operates in very competitive
markets where the continual development
of new products is necessary.
Failure to provide customers with market
leading products could lead to a loss of
business affecting the financial results of
the Group.
The Group continually seeks to innovate
and develop its product lines to ensure its
products are appropriate for the markets
in which it operates.
The Group maintains comprehensive
patent, design and trademark coverage.
Recruitment and retention of key
personnel
The Group is dependent on the continued
employment and performance of its senior
management and other skilled personnel.
Loss of any key personnel without
adequate and timely replacement could
disrupt business operations and the
Group’s ability to implement and deliver
its growth strategies.
The Group has a formal succession plan
in place which is reviewed periodically.
The Group aims to provide competitive
remuneration packages and bonus
schemes to retain and motivate key
personnel.
Economic conditions
The Group is dependent on the level of
activity in the construction industry in the
countries in which it markets its products
and is therefore susceptible to any
changes in economic conditions.
Lower levels of construction industry
activity within any of the key markets in
which the Group operates could reduce
sales and production volumes adversely,
thus affecting the Group’s financial
results.
The Group closely monitors trends in the
industry using a wide range of external
data including the Construction Products
Association’s reports and forecasts for
the UK and other reports in the rest of the
World.
The Group monitors product demand on
a weekly basis and is able to respond
quickly in re-allocating or varying
resources.
The Group continually seeks to expand
the geographical markets into which it
sells its products.
14
Titon Holdings Plc 2018 Annual Report
Risk
Potential Impact
Mitigations
Government action and policy
The Group’s business is significantly
affected by Building Regulations in its
core markets as well as by government
action and policies relating to public and
private investment.
Many of the Group’s products are
provided to customers in order to help
them to comply with Building Regulations
in respect of ventilation. Changes to
Regulations could adversely impact on
sales volumes affecting the Group’s
financial results.
Additionally, significant downward trends
in government spending could have
an adverse impact on the construction
industry which could impact on sales and
production volumes affecting the Group’s
financial results.
The Group closely monitors and attempts
to influence Building Regulations through
its work with industry working groups.
The Group structures its operations so
that it has a balanced exposure to the
residential and commercial construction
sectors and the refurbishment sector so
as to reduce the impact of any adverse
government action or policy on any one of
these sectors.
Government regulations and standards
The Group is subject to the requirements
of occupational health and safety laws,
employment law and environmental
regulations, within the markets in which it
operates.
Failure of the Group to comply with Health
and Safety law, employment law and
environmental regulations could result in
the Group being liable for fines. It could
also require modification to operations,
increase manufacturing and delivery
costs, and could result in the suspension
or termination of operations, thereby
impacting the Group’s financial results.
Product liability
The Group manufactures electrical
products that could cause injury to people
or property. The Group’s products are
also often incorporated into the fabric of
a building or dwelling, which could be
difficult to access, repair, recall or replace
in the event of product failure.
A product safety issue or a failure or
recall could result in a liability claim for
personal injury or other damage leading
to substantial money settlements,
damage to the Group’s brand reputation,
costs and expenses and diversion of
key management’s attention from the
operation of the Group, which could all
affect the Group’s financial results.
The Group has a strong Health and
Safety ethos combined with robust
policies and procedures for the
management of employee and visitor
safety across its sites.
The Group uses the services of EEF Ltd
and lawyers in formulating employment
practices and policies and when dealing
with employee disputes and grievances.
Within the UK, the Group operates an
ISO 14001 Environmental policy, and
procedures are in place to monitor
compliance with the policy which is
subject to external environmental audits
on a periodic basis.
The Group operates comprehensive
quality assurance systems and
procedures within its UK manufacturing
processes and is subject to regular
external audit as part of its ISO 9001
accreditation.
Comprehensive end of line testing is
carried out on all in-house manufactured
electrical products.
Wherever required, the Group obtains
certifications over its products to the
relevant standards of the countries in
which it markets its products. These
certifications incorporate electrical safety
testing.
The Group endeavours to ensure that its
products are in compliance with relevant
fire safety regulations.
The Group maintains product liability
insurance to cover personal injury and
property damage claims from product
failures.
15
Titon Holdings Plc 2018 Annual Report Strategic Report (continued)
Report on Risk Management (continued)
Financial risk management
The Group’s operations expose it to a
variety of financial risks which include the
effects of:
The Group has financial risk management
procedures in place that seek to limit the
adverse effects of the financial risks as
follows:
Risk
Fraud
Potential Impact
Mitigations
The risk that an employee or a group of
employees could embezzle the Group’s
funds either directly or through co-
operation with external accomplices.
A significant financial fraud could deplete
the Group’s assets and adversely affect
the Group’s financial results.
The Group has a series of Financial
Control Procedures in place which are
designed to eliminate this risk and which
are reviewed regularly. Segregation of
duties is a critical component within these
controls.
Foreign exchange risk
The risk that the fair value of a financial
instrument or future cash flows will
fluctuate because of changes in foreign
exchange rates. The Group’s risk relates
primarily to its trading activities in South
Korea denominated in South Korean Won.
The Group is also exposed to foreign
exchange risk in respect of cash flows
denominated in Euros and US Dollars.
Exchange rate fluctuations may adversely
affect the Group’s results.
It is not possible for the Group to
mitigate exchange rate differences which
impact the translation of its overseas
subsidiaries’ results and net assets.
The Group undertakes some activities
in the Eurozone where purchases of
materials denominated in Euros provide
an element of natural hedging for sales of
finished products denominated in Euros.
The Group sells products into the US
where prices are denominated in US
Dollars. The income from this activity
provides a natural hedge for components
sourced from East Asia, which are also
denominated in US Dollars.
Customer credit risk is subject to the
Group’s established policy, procedures
and control relating to customer credit
risk management. Credit quality of
the customer is assessed based on
referencing and on third party scoring
and individual credit limits are defined
in accordance with this assessment.
Outstanding customer receivables are
regularly monitored and deliveries are
suspended when customers exceed their
payment terms.
Credit risk arising from cash deposits
with banks are managed by the Group’s
finance department. Investments of
surplus funds are made only with banks
that have, as a minimum, a single A credit
rating.
Credit risk
The Group is exposed to credit risk from
its trading activities (primarily from trade
receivables) and from its deposits with
banks.
The failure of a counterparty to meet
their financial obligations could lead to a
financial loss for the Group.
16
Titon Holdings Plc 2018 Annual Report Risk
Liquidity risk
Potential Impact
Mitigations
The risk that the Group will not be able
to meets its financial obligations as they
fall due.
Insufficient funds could result in the Group
not being able to fund its operations.
The Group’s approach to managing
liquidity is to ensure that it will always
have sufficient liquidity to meet its
liabilities when due, under both normal
and stressed conditions, without incurring
unacceptable losses or risking damage to
the Group’s reputation.
The Group maintains close relationships
with a number of UK banks in order to
support liquidity requirements.
Interest rate risk
The risk that interest rates could change
impacting on the Group’s results.
Increases to interest rates could
result in significant additional interest
rate payments being required on any
borrowings. Decreases to interest rates
could result in lower interest income on
bank deposits.
Owing to the Group’s size and degree of
exposure to interest rate risks, no hedging
activity is currently undertaken.
This Strategic Report was approved by the Board on 19 December 2018 and signed on its behalf by:
D A Ruffell
Chief Executive
17
Titon Holdings Plc 2018 Annual Report Directors’ Report
The Directors present their report and the Group and Company financial statements for the year ended 30
September 2018.
The Directors of Titon Holdings Plc throughout the financial year or subsequent to the year-end are listed on page 26.
A detailed commentary on the results for the year and discussion of future developments is given in the Chairman’s
Statement on pages 2 to 5 and an explanation of the Group’s business strategy is included within the Strategic Report
on page 7.
The Group’s compliance with the UK Corporate Governance Code is set out in the report on pages 28 and 29.
Substantial shareholders
As at 30 September 2018, the Company had been notified of the following voting interests in its ordinary share capital
(excluding ordinary shares held in treasury), other than Directors’ holdings of 3 per cent or more in the ordinary share
capital of the Company:
Name
Rights & issues Investment Trust PLC
MI Discretionary Unit Fund Managers Ltd
Mrs A J Clipsham
Shares
1,265,000
800,000
750,579
%
11.41
7.22
6.77
The Company has not been notified of any changes to substantial shareholdings between 30 September 2018 and 19
December 2018.
Share capital
The total issued ordinary share capital at 30 September 2018 consisted of 11,133,750 Titon Holdings Plc shares of 10p
each, of which 50,000 shares were held in treasury. 150,000 ordinary shares were issued during the year as a result
of employees exercising share options. There were no other changes to the Company’s ordinary share capital during
the year.
Details of the authorised and issued share capital of the Company as at 30 September 2018 are set out in note 18 of
the Notes to the Financial Statements.
All of the Company’s shares are ranked equally and the rights and obligations attaching to the Company’s shares are
set out in the Company’s Articles of Association, copies of which can be obtained from Companies House in England
and Wales and on the Company’s website at www.titonholdings.com.
There are no restrictions on the voting rights of shares and there are no restrictions on their transfer other than:
●
●
certain restrictions as may from time to time be imposed by laws and regulations (for example insider trading laws);
and
pursuant to Article 19(11) of the Market Abuse Regulation whereby Directors of the Company require approval
to deal in the Company’s shares (Market Abuse Directive available from https://www.esma.europa.eu/regulation/
trading/market-abuse).
Additionally, the Company is not aware of any agreements between shareholders of the Company that may result in
restrictions on the transfer of ordinary shares or voting rights.
Proposed dividends
The Directors recommend the payment of a final ordinary dividend of 3.0 pence (2017: 2.7 pence) per ordinary share.
This, when taken with the interim dividend of 1.75 pence (2017: 1.5 pence) per ordinary share paid on 21 June 2018,
gives a total dividend of 4.75 pence (2017: 4.2 pence) per ordinary share for the year ended 30 September 2018. Titon
operates a dividend reinvestment programme for shareholders details of which are available from our registrars, Link
Asset Services.
18
Titon Holdings Plc 2018 Annual Report Research and development
The Directors consider that research and development continues to play an important role in the Group’s success as
the need to provide increasingly energy efficient ventilation products will be a feature of our market over the coming
years.
Investment in research and development amounted to £446,000 during the year (2017: £468,000). Development
expenditure capitalised in 2018 amounted to an additional £136,000 (2017: £177,000). See note 11 of the Financial
Statements.
Financial risk management
The Directors assess the financial risks facing the business and spend appropriate time considering them. The Group
has a system of risk management, which identifies these items and seeks ways of mitigating such risks as far as is
possible. The Report on Risk Management set out on pages 13 to 17 includes information on financial risk and also see
note 20 to the Financial Statements.
Employees
The Group recognises the importance of its employees in achieving its objectives and has contractual arrangements in
place to encourage and reward loyalty and to safeguard the interests of the Group.
Employees are provided with information about the Group’s activities via the Employee Consultative Committee, other
staff meetings and staff notice boards. The Group aims to foster an environment in which employees and management
can enjoy a free flow of information and ideas.
The Group is an equal opportunities employer and its policies for recruitment, training, career development and
promotion are based on the aptitude and abilities of the individual. See the Strategic Report for more details.
Disabled employees
The Group gives full consideration to the career development and promotion of disabled persons, and to applications
for employment from disabled persons, where the requirements of the job can be adequately fulfilled by a handicapped
or disabled person.
The Group considers the training requirements of each disabled person on an individual basis. Where an employee
becomes disabled during the course of his or her employment, the Group will consider providing this employee with
such means, including appropriate training, as will enable the employee to continue to carry out his or her job, where it
reasonably can, or will attempt to provide an alternative suitable position.
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so
that it can continue to provide returns for its shareholders and benefits for its other stakeholders.
The Group considers its capital to comprise ordinary share capital, share premium, capital redemption reserve and
accumulated retained earnings (see ‘Consolidated Statement of Changes in Equity’ on page 40). The translation
reserve is not considered as capital. In order to maintain or adjust its working capital at an acceptable level and to
meet strategic investment needs, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders or sell assets.
The Group does not seek to maintain any particular debt to capital ratio, but will consider investment opportunities on
their merits and fund them in the most effective manner.
Environmental issues
An explanation of how the Group deals with its environmental responsibilities is included in the Strategic Report.
Directors’ responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements and have elected to prepare the Company financial statements
in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under
company law the Directors must not approve the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and of the profit or loss for the Group for that period.
19
Titon Holdings Plc 2018 Annual Report Directors’ Report (continued)
Directors’ responsibilities (continued)
In preparing these financial statements, the Directors are required to:
●
select suitable accounting policies and then apply them consistently;
● make judgements and accounting estimates that are reasonable and prudent;
●
●
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to
any material departures disclosed and explained in the financial statements; and
prepare a Directors’ Report, a Strategic Report and Directors’ Remuneration Report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable
them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
Website publication
The Directors are responsible for ensuring that the annual report and the financial statements are made available on
a website. Financial statements are published on the Company’s website, which can be found at www.titonholdings.
com in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. Following the move to AIM the Directors are also responsible for disclosing
additional information under Rule 26 of the AIM Rules, which is also available at www.titonholdings.com. The Directors’
responsibility also extends to the ongoing integrity of the financial statements contained therein.
Directors’ responsibilities
The Directors confirm to the best of their knowledge:
●
●
the Group financial statements have been prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position
and profit and loss of the Group; and
the Annual Report includes a fair review of the development and performance of the business and the financial
position of the Group and the parent company, together with a description of the principal risks and uncertainties
that they face.
Directors’ statement as to disclosure of information to auditors
●
The Directors at the time of approving the Directors’ Report are listed on page 26. Having made enquiries of fellow
Directors and of the Officers of the Company, each of the Directors confirms that:
●
●
to the best of each Director’s knowledge and belief, there is no relevant audit information of which the Company’s
auditors are unaware; and
each Director has taken all steps a Director ought to have taken to make themselves aware of any information
needed by the Company’s auditors for the purpose of their audit and to establish that the Company’s auditors are
aware of that information.
Directors’ liability insurance and indemnity
The Company has purchased liability insurance cover, which remained in force at the date of the report, for the benefit
of the Directors of the Company which gives appropriate cover for legal action brought against them. The Company
also provides an indemnity for its Directors (to the extent permitted by law) in respect of liabilities which could occur as
a result of their office. This indemnity does not provide cover should a Director be proved to have acted fraudulently or
dishonestly.
Purchase of own shares
The Company has authority from shareholders to purchase up to 10% of its own ordinary shares in the market. This
authority was not used during the year nor in the period to 19 December 2018 and the Board intends to seek shareholder
approval to renew the authority at the forthcoming Annual General Meeting.
In accordance with the Companies (Acquisition of Own Shares) (Treasury Shares) Regulations 2003, companies are
permitted to hold purchased shares rather than cancelling them and as at 30 September 2018 and 19 December 2018
the Company held 50,000 such shares in treasury. The Company may use this power again in the future depending on
market conditions and the financial position of the Company.
Post balance sheet events
Since the end of the financial year the Company has moved its share listing from the main market of the London Stock
Exchange to the AIM market. There have been no events since the balance sheet date that materially affect the position
of the Group.
20
Titon Holdings Plc 2018 Annual Report Going concern
The Group’s business activities, its financial position, together with the factors likely to affect the Group’s performance,
are set out in the Strategic Report. In addition, note 20 to the financial statements includes the Group’s risk management
objectives and policies; managing its financial risk and its exposures to credit risk, foreign exchange risk and liquidity
risk.
The Group has considerable financial resources together with a diverse range of customers and suppliers, across
different geographic areas and markets. As a consequence the Directors believe that the Group is well placed to
manage business risks successfully.
The Directors have reviewed the budgets, projected cash flows, principal risks and other relevant information for
a period of three years from the balance sheet date. On the basis of this review the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.
For this reason they believe it is appropriate to continue to adopt the going concern basis in preparing the financial
statements.
Annual General Meeting
The Annual General Meeting of Titon Holdings Plc (“the Company”) will be held at the Company’s Head Office
at 894 The Crescent, Colchester Business Park, Colchester, Essex, CO4 9YQ on 20 February 2019 commencing
at 11.00 a.m. A Notice convening the Annual General Meeting of the Company for the year ended 30 September
2018 may be found on page 72 of this document.
Shareholders are being asked to vote on various items of ordinary business, being Resolutions 1 to 10 inclusive, as
listed below:
Resolution 1 – to receive and adopt the audited accounts
The Directors recommend that shareholders adopt the reports of the Directors and the Auditors and the audited
accounts of the Company for the year ended 30 September 2018.
The Directors’ Report was approved by the Board on 19 December 2018 and signed by order of the Board.
Resolution 2 - to declare a final dividend
The Directors recommend a final dividend of 3.0 pence per ordinary share. Subject to approval by shareholders, the
final dividend will be paid on 26 February 2019 to shareholders on the register on 18 January 2019.
Resolution 3 - to re-elect Mr Keith Archibald Ritchie as a Director
The Deputy Chairman confirms that following performance evaluation Mr Ritchie continues to be effective and
demonstrates commitment in his role.
Resolution 4 - to re-elect Mr David Alan Ruffell as a Director
The Chairman confirms that following performance evaluation Mr Ruffell continues to be effective and demonstrates
commitment in his role.
Resolution 5 - to re-elect Mr John Neil Anderson as a Director
The Chairman confirms that following performance evaluation Mr Anderson continues to be effective and demonstrates
commitment in his role.
Resolution 6 - to re-elect Mr Kevin Sargeant as a Director
The Chairman confirms that following performance evaluation Mr Sargeant continues to be effective and demonstrates
commitment in his role.
Resolution 7 - to re-elect Mr Nicholas Charles Howlett as a Director
The Chairman confirms that following performance evaluation Mr Howlett continues to be effective and demonstrates
commitment in his role.
Resolution 8 - to re-appoint BDO LLP as auditors
This resolution proposes that BDO LLP should be re-appointed as the Company’s Auditors and authorises the Directors
to determine their remuneration.
Resolution 9 – to approve the Directors’ Remuneration Report
Resolution 9 in the Notice of Annual General Meeting, which will be proposed as an Ordinary Resolution, is to receive
and approve the Directors’ Remuneration Report as set out on pages 23 to 27.
Resolution 10 – authority to allot shares
The Companies Act 2006 prevents directors of a public company from allotting unissued shares, other than pursuant
to an employee share scheme, without the authority of shareholders in general meeting. In certain circumstances this
could be unduly restrictive. The Directors’ existing authority to allot shares, which was granted at the Annual General
21
Titon Holdings Plc 2018 Annual Report Directors’ Report (continued)
Annual General Meeting (continued)
Meeting held on 21 February 2018, will expire at the forthcoming Annual General Meeting. Resolution 10 in the notice
of Annual General Meeting will be proposed, as an Ordinary Resolution, to authorise the Directors to allot ordinary
shares in the capital of the Company up to a maximum nominal amount of £260,000, representing approximately 24%
of the nominal value of the ordinary shares in issue on 19 December 2018 (excluding treasury shares). The Company
currently holds 50,000 shares in treasury.
The authority conferred by the resolution will expire on 20 May 2020 or, if sooner, at the 2020 Annual General Meeting.
The Directors have no present plans to allot unissued shares other than on the exercise of share options under
the Company’s employee share option schemes. However, the Directors believe it to be in the best interests of the
Company that they should continue to have this authority so that such allotments can take place to finance appropriate
business opportunities that may arise.
Resolution 11 - to disapply pre-emption rights
Unless they are given an appropriate authority by shareholders, if the Directors wish to allot any of the unissued shares
for cash or grant rights over shares or sell treasury shares for cash (other than pursuant to an employee share scheme)
they must first offer them to existing shareholders in proportion to their existing holdings. These are known as pre-
emption rights.
The existing disapplication of these statutory pre-emption rights, which was granted at the General Meeting held on
9 November 2018 will expire at the forthcoming Annual General Meeting. Accordingly, Resolution 11 in the Notice of
Annual General Meeting will be proposed, as a Special Resolution, to give the Directors power to allot shares or sell
treasury shares without the application of these statutory pre-emption rights: first, in relation to offers of equity securities
by way of rights issue, open offer or similar arrangements; and second, in relation to the allotment of equity securities
for cash up to a maximum aggregate nominal amount of £150,000 (representing approximately 14.6% of the nominal
value of the ordinary shares in issue on 19 December 2018). The power conferred by this Resolution will expire on 20
May 2020 or, if sooner, at the 2020 Annual General Meeting.
In addition, there is one item of special business, being Resolution 12, as listed below.
Resolution 12 - Company’s authority to purchase its own shares
Resolution 12 in the Notice of Annual General Meeting, which will be proposed as a Special Resolution, will authorise
the Company to make market purchases of up to 1,090,000 ordinary shares. This represents approximately 10% of the
Company’s ordinary shares in issue on 19 December 2018. The maximum price per share that may be paid shall be
the higher of: (i) 5% above the average of the middle market quotations for an ordinary share for the five business days
immediately before the day on which the purchase is made (exclusive of expenses); and (ii) the higher of the price of
the last independent trade and the highest current independent bid on the trading venue where the purchase is carried
out (exclusive of expenses). The minimum price shall not be less than 10p per share. The authority conferred by this
resolution will expire on 20 May 2020 or, if sooner, at the 2020 Annual General Meeting.
Your Directors are committed to managing the Company’s capital effectively and although they have no plans to make
such purchases, buying back the Company’s ordinary shares is one of the options they keep under review. Purchases
would only be made after considering the effect on earnings per share and the benefits for shareholders generally.
The Company may hold in treasury any of its own shares that it purchases in accordance with the Companies Act 2006
and the authority conferred by this resolution. This would give the Company the ability to re-issue treasury shares
quickly and cost effectively and would provide the Company with greater flexibility in the management of its capital
base. As noted above the Company currently holds 50,000 shares in treasury.
As at 19 December 2018 there were options outstanding over 415,000 ordinary shares which, if exercised at that
date, would have represented 3.7% of the Company’s issued ordinary share capital (including treasury shares). If the
authority given by Resolution 12 were to be fully used, these would then represent 4.1% of the Company’s issued
ordinary share capital.
Recommendation
The Directors believe that the resolutions which are to be proposed at the Annual General Meeting are in the best
interests of the Company and its shareholders as a whole and recommend that all shareholders vote in favour of them,
as each of the Directors intends to do, in respect of his or her beneficial holding.
The Directors’ Report was approved by the Board on 19 December 2018 and signed on its behalf by:
D A Ruffell
Secretary
22
Titon Holdings Plc 2018 Annual Report
Directors’ Remuneration Report
The Remuneration Committee submits this report in accordance with the requirements of SI 2008/410.
The law requires the Group’s Auditors to audit certain disclosures provided. Where disclosures have been audited, they
are indicated as such. The Auditors’ opinion is disclosed in their report on pages 33 to 36.
Remuneration Committee
The Committee presently consists of Mr J N Anderson, a Non-executive Director and the Deputy Chairman, and Mr K
Sargeant, a Non-executive Director. The Committee has been established by the Board to set Remuneration Policy
and to deal with all matters relating to Directors’ Remuneration and reporting thereon. It has clear Terms of Reference
established by the Board.
Statement from the Chairman
I am pleased to present the Directors’ Remuneration Report for the year ended 30 September 2018.
The vote on the Directors’ Remuneration Report is, as previously, an advisory vote. An Ordinary Resolution will be put
to shareholders at the forthcoming Annual General Meeting to be held on 20 February 2019, to receive and adopt the
Directors’ Remuneration Report. I can report that at the 2018 AGM there were 3,592,841 votes in favour, 7,145 votes
against and 170 votes withheld for the Resolution to receive and adopt the Directors’ Remuneration Report.
There has been no change to the Directors’ Remuneration Policy during the period and there have been no significant
changes in individual Director’s levels of remuneration during the year, except as a result of the performance related
elements, which are directly linked to the amount by which the Group’s profit before taxation exceeds budget.
Details of the Directors’ Remuneration Policy are shown on the Group’s website in the Corporate Governance section.
The Remuneration Committee is not proposing any change to the Directors’ Remuneration Policy this year which was
last approved at the 2018 AGM.
The Directors’ interests in the ordinary share capital of the Company at the year-end are reported below on page 26.
Performance graph
The following graph shows the Company’s 10 year performance, measured by total shareholder return, compared with
the equivalent performance of the FTSE Fledgling Index.
Total Shareholder Return Index
Titon Holdings Plc
FTSE Fledgling
Sep 08
Sep 09
Sep 10
Sep 11
Sep 12
Sep 13
Sep 14
Sep 15
Sep 16
Sep 17
Sep 18
t
n
e
c
r
e
P
1100
900
700
200
300
100
-100
This graph shows the percentage change in value of £1 invested in the Company on 30 September 2008 (assuming
dividends reinvested) compared with the percentage change in value of £1 (assuming dividends reinvested) in the
FTSE Fledgling Index. The Directors consider the FTSE Fledgling Index to be an appropriate choice as the Company
was included in it during the year to 30 September 2018.
23
Titon Holdings Plc 2018 Annual Report
Directors’ Remuneration Report (continued)
Chief Executive’s Remuneration
The elements of, and the movement in, the remuneration of the Chief Executive over the past ten years is as follows:
Salary
Short term
performance
related
remuneration
Benefits
in kind
Pension
benefits
Total
Percentage
change
in year
Percentage of
short term
performance related
remuneration
entitlement
received in year
Year ended
30 September
£’000
£’000
£’000
£’000
£’000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
88
88
92
92
92
94
101
102
111
116
-
-
-
-
-
-
28
21
31
32
13
13
14
16
17
12
12
13
15
16
9
9
20
20
15
15
16
17
16
16
110
110
126
128
124
121
157
153
173
180
%
0.9
0.0
14.5
1.6
(3.1)
(2.4)
29.8
(2.5)
13.1
4.0
%
-
-
-
-
-
-
100
81
100
100
Recommended practice is to exclude pension benefits from the above table. However, because the Chief Executive
sacrifices part of his salary for a payment into his pension fund, to exclude this element could be misleading.
The short term performance related remuneration element was only introduced in 2015. Since then the maximum
amount that could be earned in each year was 25% of the Chief Executive’s salary.
The remuneration for the Chief Executive over this ten year period is as follows:
Chief Executive’s Remuneration
£190,000
£180,000
£170,000
£160,000
£150,000
£140,000
£130,000
£120,000
£110,000
£100,000
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
The Remuneration of the Chief Executive has increased by 4.0% in the year (2017: an increase of 13.1%), compared
to an average increase for all Group employees of 2.3% (2017: an increase of 2.1%). The level of base pay increase to
other staff was taken into account by the Remuneration Committee when setting Directors’ base salaries.
Directors’ remuneration compared to certain other distributions are as follows:
2018
£’000
723
5,930
489
2017
£’000
807
5,798
410
Percentage
change
%
(10.4)
2.3
19.3
Directors’ remuneration
Other employee remuneration
Dividend payments to shareholders
24
Titon Holdings Plc 2018 Annual Report
Directors’ remuneration (audited)
The remuneration paid to the Directors during the year, together with a comparison of the previous year, is as follows:
Year
ended
30 September
Salary
and
fees
(a)
Benefits
in
kind
Short term
performance
related
remuneration
Pension
benefits
Total
Executive Directors:
T N Anderson
T D Gearey - appointed
2 November 2016
K A Ritchie
D A Ruffell
Non-executive Directors:
J N Anderson
N C Howlett – appointed as
Non-executive Director on
1 October 2017
K Sargeant (c)
Totals
£’000
£’000
(b)
£’000
£’000
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
89
87
39
55
127
147
116
111
37
36
23
59
37
36
468
531
6
4
7
6
16
16
16
15
-
-
-
13
-
-
45
54
22
22
20
19
30
36
32
31
-
-
5
26
-
-
6
6
45
17
-
-
16
16
-
-
34
48
-
-
109
134
101
87
£’000
123
119
111
97
173
199
180
173
37
36
62
146
37
36
723
807
(a) A ‘salary sacrifice’ system is in operation, where the Company makes a pension contribution on behalf of each
Director, where applicable, and their salary is reduced by a corresponding amount.
(b) In accordance with the proposals adopted by shareholders, performance related remuneration is due for this period
to Executive Directors. The maximum performance was achieved in the period and a bonus of approximately 25%
of salary is payable.
(c) Inclusive of £37,000 relating to consultancy fees for 2018 (2017: £36,000).
The remuneration package of each Executive Director includes non-cash benefits comprising the provision of a company
car. The aggregate gains made by Directors on the exercise of share options during 2018 were £3,694 (2017: £29,241).
25
Titon Holdings Plc 2018 Annual Report
Directors’ Remuneration Report (continued)
Directors and their interests in shares (audited)
The Directors of the Company during the year and at the year end and their beneficial interests in the ordinary share
capital were as follows:
30 September 2018
Ordinary shares of
10p each
30 September 2017
Ordinary shares of
10p each
(or date of
appointment if later)
K A Ritchie
Executive Director and Chairman
D A Ruffell
Chief Executive
J N Anderson
Non-executive Director and Deputy Chairman
T N Anderson
Sales & Marketing Director
T D Gearey
I.T. Director
N C Howlett
Non-executive Director
K Sargeant
Non-executive Director
978,212
118,500
1,737,802
693,750
20,500
38,500
-
977,280
101,000
1,737,802
693,750
20,500
48,750
-
There were no other changes in Directors’ beneficial shareholdings between 30 September 2018 and 19 December
2018.
Share options (audited)
Details of the interests of Directors, who served during the year, in options over ordinary shares are as follows:-
Exercise
price
per share
At 1
October
2017
Granted
during
the year
Exercised
during
the year
Lapsed
during the
year
At
30 September
2018
Number
Number
Number
Number
Number
T N Anderson
(b)
58.0p
T D Gearey
(c)
156.5p
N C Howlett
(b)
58.0p
K A Ritchie
(b)
58.0p
D A Ruffell
(a)
(b)
48.0p
58.0p
25,000
25,000
-
-
-
-
18,000
18,000
25,000
25,000
50,000
50,000
45,000
50,000
95,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,000)
-
(35,000)
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
18,000
18,000
25,000
25,000
50,000
50,000
10,000
50,000
60,000
On 30 January 2018 Mr T D Gearey was granted options over 18,000 ordinary shares. The face value and exercise
price of the share options and the market price of Company shares on the date of grant was 156.5 pence.
Mr J N Anderson and Mr K Sargeant had no interests in options over shares during the year.
There have been no changes to the number of share options held by Directors between 30 September 2018 and
19 December 2018.
26
Titon Holdings Plc 2018 Annual Report
Share options (audited) (continued)
Share options are exercisable between the following dates:
(a) 9 June 2014 and 9 June 2021
(b) 15 January 2017 and 15 January 2024
(c) 30 January 2021 and 30 January 2028
The Directors may only exercise share options if the growth in the earnings per share of the Company over any period
of three consecutive financial years of the Company following the date of grant, exceeds the growth in the retail price
index over the same period by at least 9 per cent.
At 30 September 2018 the market price of the Company’s shares was 195.0p. The range during the year was 132.5
to 221.0p.
Approval
The Directors’ Remuneration Report was approved by the Remuneration Committee on 19 December 2018 and signed
on its behalf by:
J N Anderson
Remuneration Committee Chairman
27
Titon Holdings Plc 2018 Annual Report Corporate Governance Report
Chairman’s Introductory Statement
I am pleased to present the Corporate Governance Report for the last financial year. As I have noted in the past, we
take our corporate governance responsibilities very seriously. I can report to shareholders that we have applied the
main principles of the Code throughout the financial period. Since the year-end we have moved our share listing from
the Main Market of the London Stock Exchange to the AIM market with effect from 10 December 2018. Whilst the Listing
Rules of the London Stock Exchange ceased to apply to the Company from 10 December 2018 as the Company’s
shares ceased trading on that market from that date, we have indicated that we currently intend to continue to apply
the relevant version of the UK Corporate Governance Code now we are on AIM. We are reporting our compliance with
the Code in this annual report in light of the very recent delisting from the main market of the London Stock Exchange,
and the Company’s shares having been traded on that market for the year under review.
There have not been any major changes to the UK Corporate Governance Code to report to shareholders during
the financial period, I am pleased to say. The Financial Reporting Council has published an updated version of
its UK Corporate Governance Code (the 2018 Code), which will replace the 2016 Code. The 2018 Code makes
some significant changes to the 2016 Code concerning, inter alia, relations with a company’s workforce and other
stakeholders, the culture of the company, succession and diversity and remuneration policies. The 2018 Code is
applicable to financial periods starting on or after 1 January 2019 so it will not have any application to Titon until the
2019/20 accounting period. Finally, I confirm that the Titon Audit Committee continues to have competence relevant to
the sector in which the Company operates.
KA Ritchie
Chairman
Compliance with UK Corporate Governance Code
The Board is accountable to the Company’s shareholders for good corporate governance and the statements set out
in this report describe how the principles identified in the Code are applied by the Company. Titon’s business approach
is based on openness and high levels of accountability and there is a commitment to high standards of corporate
governance throughout the Group. With an international presence, the Group acts in accordance with the national laws
of the various countries in which it operates and encourages the highest standards of business practice and procedure.
As part of this commitment to maintaining high standards of corporate governance, the Board applies, where they are
deemed appropriate, the principles of corporate governance set out in the Code as issued by the Financial Reporting
Council (“FRC”) in June 2016. The 2016 Code can be found on the FRC’s website (www.frc.org.uk). Further explanation
of how both the main provisions and the supporting provisions have been applied is set out below.
Please see the Audit Committee Report for a description of the main features of the internal control process and the risk
management system in relation to the financial reporting process adopted by the Group. The disclosure of information
on significant shareholdings in the Company is shown in the Directors’ Report.
Under the 2016 Code the Directors are required to assess the viability of the Group. The Directors have reviewed the
budgets, projected cash flows, principal risks and other relevant information for a period of 3 years from the balance
sheet date. On the basis of this review the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future and to meet its liabilities as they fall due.
The Directors consider that a period of 3 years is appropriate as the assumptions made in the review about market
conditions are expected to remain valid over this period. The Directors have also carried out a robust assessment of
the principal risks facing the Group as documented in the Report on Risk Management on pages 13 to 17, which has
informed the assessment of viability including in relation to matters such as Brexit.
The Directors consider that the Annual Report and Financial Statements taken as a whole are fair, balanced and
understandable and provide the information necessary for shareholders to assess the Group’s performance, business
model and strategy.
The Group consolidated accounts are prepared by the Group Financial Controller and are reviewed by the Chief
Executive. The review includes a detailed inspection of the accounts of all the constituent companies that comprise the
Group along with the relevant consolidation adjustments and journals.
At the year-end the Group had four Executive Directors and three Non-executive Directors. Mr K Sargeant is deemed
to be independent for the purposes of the Code. He has no other relationships or prior service for the Company or its
shareholders. Mr N Howlett is also deemed to be independent for the purposes of the Code despite his previous service
and role as an executive director of the Company due to his independence of character and judgment. Mr JN Anderson
is not deemed to be independent as he is a significant shareholder and was a previous chairman of the Company.
28
Titon Holdings Plc 2018 Annual Report
The Directors confirm that the Group was compliant with all relevant provisions of Sections A to E of the Code throughout
the accounting period and up to the date of the Directors’ Report except in the following areas:
●
●
●
the Company’s Audit Committee during the 2017/18 financial period comprises the Chairman and the Chief
Executive and therefore the Company did not comply with paragraph C.3.1. The Directors considered that this
structure was appropriate for a company of this size and complexity. The Directors consider that failure to comply
with the Code in this respect poses no significant additional risk for shareholders and has no plans to comply with
the provision in the short term. As noted above the Audit Committee has competence relevant to the sector in
which the Company operates. Since the year-end Mr Kevin Sargeant has joined the Audit Committee;
the Company’s Remuneration Committee did not consist exclusively of independent Non-executive Directors
throughout the financial period and therefore did not comply with paragraph D.2.1. The Directors consider that
failure to comply with the Code in this respect posed no significant additional risk for shareholders; and
the Company’s Nomination Committee did not comprise a majority of independent Non-executive Directors
throughout the financial period and therefore did not comply with paragraph B.2.1. The Directors do not consider
that failure to comply with the Code in this respect posed any significant additional risk for shareholders.
Composition and operation of the Board of Directors
As at 30 September 2018 the Board consisted of the Executive Chairman, the Chief Executive, two other Executive
Directors and three Non-executive Directors.
The Board has a schedule of matters specifically reserved to it for decision including major capital expenditure decisions,
business acquisitions and disposals and the setting of treasury policy. This also includes matters such as material
financial commitments, commencing or settling major litigation and appointments to main and subsidiary company
boards.
Scheduled Board meetings take place on a quarterly basis with further ad hoc meetings arranged as necessary. To
enable the Board to function effectively and Directors to discharge their responsibilities, full and timely access is given
to all relevant information. In the case of Board meetings, this consists of comprehensive management reporting
information and discussion documents regarding specific matters.
The individual attendance by Executive Directors and Non-executive Directors at the Board and principal Board
Committee Meetings held during the financial year is shown in the table below.
Total meetings held
K A Ritchie
D A Ruffell
T N Anderson
T D Gearey
N C Howlett
K Sargeant
J N Anderson
Main
Board
Remuneration
Committee
Audit
Committee
Nominations
Committee
6
6
6
5
6
6
4
5
2
-
-
-
-
-
2
2
2
2
2
-
-
-
-
-
0
-
-
-
-
-
0
0
There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company’s
expense. This is in addition to the access which every Director has to the Company Secretary. The Secretary is
charged by the Board with ensuring that Board procedures are followed.
When new members are appointed to the Board, they are provided with advice from the Company Secretary in respect
of their role and duties as a public company director. Furthermore, all Directors have ongoing access to the Company
Secretary for advice during the course of their appointment.
Appointments to the Board of both Executive and Non-executive Directors are considered by the Nominations
Committee for endorsement by the Board as a whole.
Any Director appointed during the year is required, under the provisions of the Code, to retire and seek election by the
shareholders at the next Annual General Meeting. The Articles of Association also require that one third of the Directors
retire by rotation each year and seek re-election at the Annual General Meeting. The Directors required to retire are
those in office longest since their previous re-election and in practice this means that each Director retires at least every
three years, in accordance with the requirements of the Code. The Non-executive Directors will seek re-election at each
Annual General Meeting.
29
Titon Holdings Plc 2018 Annual Report
Corporate Governance Report (continued)
The Directors who retire by rotation are Mr Keith Ritchie, Mr David Ruffell, Mr John Anderson, Mr Kevin Sargeant and
Mr Nicholas Howlett. All five Directors, being eligible, offer themselves for re-election:
●
Keith Ritchie joined Titon in April 2012 and became Executive Chairman as of 1st July 2012. Prior to that he
was a Non-executive Director of Titon between February 2005 and June 2009. Keith is a member of the Institute
of Chartered Accountants in England and Wales and has had a long career in the City of London working for a
number of financial institutions including Bank of America Merrill Lynch and Deutsche Bank;
● David Ruffell joined Titon in 1988 at the time of its flotation on the Unlisted Securities Market. He was appointed
Finance Director of Titon Hardware Limited in 1993 and joined the Titon Holdings Board in 1997 as Group Finance
Director. He was appointed Group Chief Executive in 2002;
●
●
John Anderson founded the Company in 1972 and was its Chairman until 2012 when he became a Non-executive
Director. He holds the Chair of the Remuneration Committee and the Nominations Committee. He has a service
contract which expires on 30 June 2019;
Kevin Sargeant joined the Board on 1 September 2016. He worked at Vent-Axia, a subsidiary of Smith Industries
PLC, from 1990 until 2002 when Volution Holdings (comprising Vent-Axia) was created. Mr Sargeant led the
buyout of Volution Holdings in the same year and was CEO of the newly named Volution Group until its sale to
Towerbrook Private Equity and the management in 2012. Since then, he has held a number of senior strategic
development roles with major companies in the ventilation sector and was Non-executive Chairman of Nuaire Ltd
from November 2013 until its sale to Polypipe PLC in August 2015. Mr Sargeant qualified as a member of the
Chartered Institute of Management Accountants in 1980. He has a service contract which expires on 30 June
2019, and
● Nicholas Howlett joined Titon in 1991 and has held a number of positions within the Group since then. He was
appointed to the Board in 2002 and became a Non-executive Director with effect from 1st October 2017. He has a
service contract which expires on 30 June 2019.
A statement of Directors’ interests and copies of their service contracts are available for inspection during usual business
hours at the registered office of the Company, on any weekday (excluding public holidays), and will be available at the
place of the Annual General Meeting for at least fifteen minutes prior to and during the meeting. All Executive Directors
are subject to annual appraisals of their performance and membership of relevant board committees, as appropriate,
during the financial year.
The Remuneration Committee
The Remuneration Committee Report is set out on pages 23 to 27. The Remuneration Committee’s terms of reference,
established by the Board, are to:
●
●
●
●
determine and to keep under review the Group’s policy on remuneration;
determine the basic salaries and non-cash emoluments payable to all Executive Directors, including Executive
Directors of subsidiary Group companies, giving due consideration to individual responsibility and performance
and to salaries paid to Executive Directors of similar companies in comparable business sectors;
select the performance targets for the Executive Directors’ bonus arrangements;
select the performance conditions relating to the Group’s Share Option Schemes. Such performance conditions to
be aimed to align Directors’ interests to shareholder value;
● make recommendations to the Board of Directors on other matters relating to remuneration in the Group; and
●
prepare an annual report on remuneration to the Company’s shareholders for approval by the Board for submission
to a vote of shareholders at the Company’s Annual General Meeting and to advise the Board if it believes that, in
any year, there are particular matters relating to remuneration which should be put to the Company’s shareholders.
Communications with shareholders
The Board recognises the importance of communications with shareholders. The Strategic Report on pages 6 to 17
gives a detailed review of the business, and there is regular dialogue with institutional shareholders at the time of the
Group’s preliminary announcement of the year end results and at the half year.
The Group’s results and other announcements are published on the London Stock Exchange RNS service and on the
Company’s website.
The Board uses the Annual General Meeting to communicate with private and institutional investors and welcomes
their participation.
Nominations Committee
The Nominations Committee comprises the Deputy Chairman and Mr Sargeant. It is responsible for proposing
candidates as Directors of Titon Holdings Plc for endorsement by the Board. As noted above the Board intends to
appoint another Non-executive director to the Board in the next six months. The selection of suitable candidates will be
based on the suitability of the person for the position regardless of age, ethnicity or gender. Candidates may be either
internal or external and executive search consultants may be used in the process. The Nominations Committee has not
met in the financial period under review.
The Corporate Governance Report was approved by the Board on 19 December 2018 and signed on its behalf by:
KA Ritchie
Chairman
30
Titon Holdings Plc 2018 Annual Report Audit Committee Report
The Audit Committee reports to the Board on matters concerning the Group’s internal financial controls,
financial reporting and risk management systems, identifying any matters in respect of which it considers that
action or improvement is needed and making recommendations as to the steps to be taken.
Composition of the Audit Committee
The Audit Committee is appointed by the Board for a period of three years and comprises Mr K A Ritchie ACA and
Mr D A Ruffell ACMA both of whom have financial reporting experience. Mr K Sargeant ACMA has joined the Audit
Committee since the year-end.
Role of the Audit Committee
The Audit Committee operates within defined terms of reference and its main functions are:
●
●
●
●
●
●
●
to monitor the internal financial control and risk management systems on which the Group is reliant;
to consider whether there is a need for the Group to have its own internal audit function;
to monitor the integrity of the Group’s financial statements and formal announcements relating to the Group’s
financial performance, reviewing significant financial reporting judgements contained in them;
to review arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters
of financial reporting or any other matter;
to meet the independent Auditor of the Group to review their proposed audit programme of work and the subsequent
Audit Report and to assess the effectiveness of the audit process and the levels of fees paid in respect of both
audit and non-audit work;
to make recommendations to the Board in relation to the appointment, re-appointment or removal of the Auditor,
and to negotiate their remuneration and terms of engagement on audit and non-audit work; and
to monitor and review annually the external Auditor’s independence, objectivity, effectiveness, resources and
qualification.
Review of financial statements and risks identified
Financial statements issued by the Company need to be fair, balanced and understandable. The Audit Committee
reviews the Annual Report as a whole and makes recommendations to the Board. The Audit Committee has advised
the Board that, in its opinion, the Annual Report and Financial Statements are fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company’s position and performance, business
model and strategy.
The Company’s half-yearly report is reviewed by the Audit Committee prior to publication. The Audit Committee
assesses annually whether it is appropriate to prepare the Group’s financial statements on a going concern basis, and
makes its recommendation to the Board. The Board’s conclusions are set out in the Directors’ Report.
In planning its own work, and reviewing the audit plan of the Auditors, the Audit Committee takes account of the most
significant issues and risks, both operational and financial, likely to impact on the Group’s financial statements.
The Committee considers that the timing of revenue recognition is a significant area of risk to accurate financial
reporting and ensures that necessary credit note provisions and warranty provisions are made. In relation to activities
in South Korea, revenues are only recognised once the third party customer has accepted the successful inclusion of
our products into buildings rather than the delivery of product from our factory.
The carrying value of the Group’s assets is an area where the Committee places great emphasis. In particular,
calculating the carrying value for the Group’s inventory is a vital factor as the Group has a wide range of product lines
that may fluctuate regularly in terms of their sales volumes. Consequently, every product line is assessed at the year-
end to ensure that accurate provisions for obsolescence are made.
A significant risk considered by the Committee is the Group’s investment in its South Korean business and in particular the
accuracy of accounting information. The Committee considers that regular trips to South Korea by senior management
combined with the detailed monthly reporting that is in place are sufficient to manage and monitor this risk.
Internal audit
The Board believes that due to the size of the business there is currently no requirement for an internal audit function.
This matter is reviewed annually.
Internal control
The respective responsibilities of the Directors in connection with the financial statements are set out on pages 19 and
20, and those of the Auditors are detailed in the Independent Auditors’ Report on pages 33 to 36.
The Audit Committee is responsible for ensuring that suitable internal controls systems to prevent and detect fraud
and error are designed and is also responsible for reviewing the effectiveness of such controls. The Board confirms
that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group in
31
Titon Holdings Plc 2018 Annual Report Audit Committee Report (continued)
line with the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting,
published in September 2014 and the FRC’s Guidance on Audit Committees published in April 2016. This process has
been in place for the year under review and up to the date of approval of this report, and accords with the guidance.
In particular, the Committee has reviewed and updated the process for identifying and evaluating the significant risks
affecting the Group and policies by which these risks are managed. The risks of any failure of such controls are
identified in a Risk Matrix (set out in the Risk Management Report on pages 13 to 17) which is regularly reviewed by
the Board and which identifies the likelihood and severity of the impact of such risks and the controls in place to mitigate
the probability of such risks occurring.
Internal control systems are designed to meet the Group’s particular needs and the risks to which it is exposed. They do
not eliminate the risk of failure to achieve business objectives. The following are the key components which the Group
has in place to provide effective internal control:
●
●
●
●
an appropriate control environment through the definition of the organisation structure and authority levels;
the identification of the major business risks facing the Group and the development of appropriate procedures and
controls to manage these risks;
a comprehensive budgeting and reporting system with monthly results compared with budgets and with previous
years; and
the principal aspects of the Group’s internal control processes used in preparing the Group’s consolidated accounts
include second reviews of consolidation workings and Board review of the composition of the Group’s financial
information.
The Directors acknowledge that they are responsible for establishing and maintaining the Group’s system of internal
control and risk management and reviewing their effectiveness, which they have done during the year. Internal control
systems are designed to meet the particular needs of the Group and the risks to which it is exposed and by their
nature can provide reasonable but not absolute assurance against material misstatement or loss. Appropriate risk
monitoring systems have been in place throughout the year and up to the date of approval of the Annual Report and
have been regularly reviewed by the Board. The Report on Risk Management sets out the principal risks identified by
the Directors, the potential impact and the mitigation measures which apply. No significant weaknesses have been
identified in this report by the Directors during the year.
The Company has a shareholding in an associate company. Controls within this entity may not be reviewed as part of
the Company’s formal processes due to the local delegation of managerial responsibilities, but instead are reviewed as
part of the normal management process.
External audit process
The Audit Committee meets at least twice a year with the Auditor, who provides a planning report in advance of the
annual audit and a report on the annual audit. The Committee has an opportunity to question and challenge the Auditor
in respect of each of these reports. No significant deficiencies were noted by the Auditor in respect of the period ended
30th September 2017 so no new specific areas were subject to greater scrutiny in this year’s audit.
After each audit, the Audit Committee reviews the audit process and considers its effectiveness.
Auditor assessment and independence
The Group’s external auditor is BDO LLP, which has been the Group’s auditor since 2006.
The Audit Committee also reviewed BDO’s independence policies and procedures including quality assurance
procedures and it was confirmed that those policies and procedures remained fit for purpose. During the period ended
30th September 2018 and extending into the current financial period, BDO provided corporate finance services to the
Group in relation to the move to AIM. The team that carried out this work was not involved in any management decision
making, did not give financial advice and has not been involved in any of the audit arrangements. The fee charged for
this work amounted to £25,000. The Audit Committee does not consider that this work affected BDO’s independence as
auditor to the Group. Accordingly, the Audit Committee recommends that BDO should be reappointed as the Group’s
auditor for the next financial year and a resolution to that effect will be proposed at the 2019 AGM.
The fees for audit services provided by BDO for 2018 were £69,000 (2017: £66,000). The Audit Committee discussed
the non-audit services provided by BDO during the year. The cost of non-audit services provided by the Auditor for the
financial year ended 30 September 2018 was £26,000 (2017: £1,000).
K A Ritchie
Audit Committee Chairman
19 December 2018
32
Titon Holdings Plc 2018 Annual Report
Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TITON HOLDINGS PLC
Opinion
We have audited the financial statements of Titon Holdings Plc (the ‘parent company’) and its subsidiaries (the ‘Group’)
for the year ended 30 September 2018 which comprise the Consolidated Income Statement, the Consolidated Statement
of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and
Company Statements of Changes in Equity, the Consolidated and Company Statements of Cash Flows and the notes
to the financial statements, including a summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
In our opinion the financial statements:
●
●
●
●
give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30 September 2018
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by
the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the Group and the parent company in accordance
with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK)
require us to report to you whether we have anything material to add or draw attention to:
●
●
●
the disclosures in the Annual Report set out on pages 13 to 17 and 28 that describe the principal risks and explain
how they are being managed or mitigated;
the Directors’ confirmation set out on page 28 in the Annual Report that they have carried out a robust assessment
of the principal risks facing the Group, including those that would threaten its business model, future performance,
solvency or liquidity;
the Directors’ statement set out on page 21 in the financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting in preparing the financial statements and the Directors’
identification of any material uncertainties to the Group and the parent company’s ability to continue to do so over
a period of at least twelve months from the date of approval of the financial statements;
● whether the Directors’ statement relating to going concern is materially inconsistent with our knowledge obtained
in the audit; or
●
the Directors’ explanation set out on page 28 in the Annual Report as to how they have assessed the prospects
of the Group, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on the
overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
33
Titon Holdings Plc 2018 Annual Report Independent Auditor’s Report (continued)
Revenue recognition
In our assessment of audit risk we determined that the timing of revenue recognition during the period immediately prior
to and subsequent to the year-end, and the existence of revenue in particular approaching the year end, gave rise to
significant risk of material misstatement. We reached this conclusion having considered the possible bias in recording
of revenues which may result from a linkage to management compensation arrangements. We refer to the revenue
recognition accounting policy within note 1.
As a starting point, we examined the Group’s terms of business with its customers to ensure that the accounting
policy applied properly takes account of the point of transfer of risk, reward and beneficial ownership of the goods
supplied. We tested the existence of sales recorded and the point of transfer of the risks and rewards of inventory
through identification of the timing of delivery, invoicing and revenue recognition by sampling a number of transactions
in the days prior to and subsequent to the year end as well as throughout the year in the Korean subsidiary. We also
performed sample testing to determine whether revenues recorded in the UK subsidiary in the latter part of the year
were supported by appropriate delivery documentation.
Inventory: valuation
We identified the valuation of the Group’s inventory balance as carrying a heightened risk of material misstatement due
to the use of significant management judgements in respect of provisions for slow-moving and obsolete inventory. We
refer to the revenue recognition accounting policy within note 1 and management’s description of the critical accounting
estimates in this area included within note 2.
As part of our audit of inventory provisioning, we performed detailed testing on the prior year slow-moving and
obsolete inventory report and tested the inventory movements recorded during the year ended 30 September 2018 by
ensuring receipts and deliveries of inventory had been properly recorded to obtain assurance over the suitability of the
provisioning method management has selected, using the benefit of hindsight. We selected samples from both the year
ended 30 September 2018 and the post year end period to enable us to evaluate the accuracy of the 30 September
2018 slow-moving and obsolete inventory report. This enabled us to evaluate the appropriateness of the provision as a
whole. We also reviewed sales invoices subsequent to the year end to ensure that inventory was appropriately valued
at the lower of cost and net realisable value. Furthermore, we inspected the condition of inventory at our physical
inventory observations to ascertain whether additional provisions should be made.
Our application of materiality
We set certain thresholds for materiality to enable us to identify those balances and amounts in the financial statements
which may have a greater impact on decision-making by the users of the accounts. A materiality threshold also enables
us to assess the significance of identified misstatements both individually and in aggregate.
During the planning of our audit, we set our materiality threshold at £210,000 (2017: £200,000), being approximately
7% (2017: 9%) of the Group’s profit before tax. We applied both a measure of performance materiality and component
materiality to our Group audit, to ensure that our audit appropriately guarded against the risk that errors, when
aggregated both within a component and across different components, may be material to the financial statements. The
component performance materiality thresholds applied in the component audits ranged from £70,000 at the Korean
components to £142,500 at Titon Hardware Limited.
We reported all misstatements we had identified which were greater than £4,200 to the Audit Committee as well as
qualitative matters, such as disclosure misstatements.
An overview of the scope of our audit
The Group conducts its operations principally within two main geographical regions, being Europe, through its
subsidiary, Titon Hardware Limited, and South East Asia, through its subsidiary Titon Korea Co. Ltd. Titon Korea
Co. Ltd sells only to the Group’s associate, Browntech Co. Ltd, which distributes the Group’s product to third parties,
predominantly in South Korea. Full scope audits were performed on each of these entities in addition to the full scope
audit BDO UK conducted on the parent company.
In relation to the overseas components, we were involved in the scoping, risk assessment and design of the audit plan
and, with full access to the component auditor’s working papers, we undertook a review of the results of the audit and
conclusions formed both remotely from the UK and during a visit to South Korea to meet with the component auditor
and component management.
34
Titon Holdings Plc 2018 Annual Report Our approach to the Group audit was set on the basis of our review of key financial metrics, which are shown below.
Profit before tax
0%
29%
71%
Revenue
2%
39%
59%
Gross assets
1%
30%
69%
Audit – BDO UK
Audit – other BDO member firms
BDO UK limited scope review
Other information
The other information comprises the information included in the Annual Report other than the financial statements
and our auditor’s report thereon. The Directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements,
our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in
the other information and to report as uncorrected material misstatements of the other information where we conclude
that those items meet the following conditions:
●
Fair, balanced and understandable set out on page 28 – the statement given by the Directors that they consider
the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Group’s performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the audit; or
●
Audit Committee reporting set out on pages 31 and 32 – the section describing the work of the Audit Committee
does not appropriately address matters communicated by us to the Audit Committee; or
● Directors’ statement of compliance with the UK Corporate Governance Code set out on page 28 – the parts of the
Directors’ statement relating to the Company’s compliance with the UK Corporate Governance Code containing
provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose
a departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration Report described as having been audited has been properly
prepared as if the provisions of the Companies Act 2006 relating to preparation of a Directors’ Remuneration Report
had applied.
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report
and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the
financial statements and those reports have been prepared in accordance with applicable legal requirements.
35
Titon Holdings Plc 2018 Annual Report Independent Auditor’s Report (continued)
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
●
●
●
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
● we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on pages 19 and 20, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and
for such internal control as the Directors determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
Anthony Perkins (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
20 December 2018
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
36
Titon Holdings Plc 2018 Annual Report Consolidated Income Statement
for the year ended 30 September 2018
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Research and development expenses
Other income
Operating profit
Finance income
Share of post-tax profits from associate
Profit before tax
Income tax expense
Profit after income tax
Attributable to:
Equity holders of the parent
Non-controlling interest
Profit for the year
Earnings per share attributed to equity holders of the parent:
Basic
Diluted
Note
3
5
13
6
7
9
9
2018
£’000
2017
£’000
29,946
28,011
(21,920)
(20,746)
8,026
(704)
(4,707)
(446)
19
2,188
13
778
2,979
(352)
2,627
2,113
514
2,627
7,265
(717)
(4,249)
(467)
18
1,850
10
633
2,493
(269)
2,224
1,804
420
2,224
19.17p
18.88p
16.55p
16.24p
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2018
Profit for the year
Other comprehensive income - items which may be reclassified to profit or loss in
subsequent periods:
Exchange difference on retranslation of net assets of overseas operations
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
The notes on pages 43 to 70 form part of these financial statements.
2018
£’000
2,627
423
3,050
2,399
651
3,050
2017
£’000
2,224
(443)
1,781
1,509
272
1,781
37
Titon Holdings Plc 2018 Annual Report Consolidated Statement of Financial Position
at 30 September 2018
Assets
Property, plant and equipment
Intangible assets
Investments in associates
Deferred tax assets
Total non-current assets
Inventories
Trade and other receivables
Income tax receivable
Cash and cash equivalents
Total current assets
Total Assets
Liabilities
Deferred tax liability
Total non-current liabilities
Trade and other payables
Income tax payable
Total current liabilities
Total Liabilities
Equity
Share capital
Share premium reserve
Capital redemption reserve
Treasury shares
Foreign exchange reserve
Retained earnings
Total Equity attributable to equity holders of the parent
Non-controlling Interest
Total Equity
Total Liabilities and Equity
Note
10
11
13
16
14
15
19
16
17
18
2018
£’000
3,655
737
2,876
52
7,320
5,667
7,799
12
3,415
16,893
24,213
37
37
5,554
154
5,708
5,745
1,113
1,049
56
(27)
502
13,554
16,247
2017
£’000
3,548
638
1,966
116
6,268
4,670
6,644
79
3,269
14,662
20,930
39
39
4,627
63
4,690
4,729
1,098
985
56
(27)
216
11,887
14,215
2,221
1,986
18,468
16,201
24,213
20,930
The notes on pages 43 to 70 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board on 19 December 2018
and signed on its behalf by:
KA Ritchie
Chairman
38
Titon Holdings Plc 2018 Annual Report Company Statement of Financial Position
at 30 September 2018
Company No. 01604952
Assets
Property and motor vehicles
Investments in subsidiaries
Investments in associates
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total Assets
Liabilities
Deferred tax
Total non-current assets
Trade and other payables
Total current liabilities
Total Liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Treasury shares
Retained earnings
Total Equity
Total Liabilities and Equity
Note
10
12
13
15
19
16
17
18
2018
£’000
2,064
554
225
2,843
2,806
2,126
4,932
7,775
188
188
207
207
395
1,113
1,049
56
(27)
5,189
7,380
7,775
2017
£’000
2,114
554
225
2,893
2,902
1,957
4,859
7,752
211
211
148
148
359
1,098
985
56
(27)
5,281
7,393
7,752
As permitted by section 408(3) of the Companies Act 2006 the Company has elected not to present its
own profit and loss account for the year. Titon Holdings Plc reported a profit after tax for the financial
year ended 30 September 2018 of £354,000 (2017: profit £130,000).The notes on pages 43 to 70 form
part of these financial statements.
These financial statements were approved and authorised for issue by the Board on 19 December 2018
and signed on its behalf by:
KA Ritchie
Chairman
39
Titon Holdings Plc 2018 Annual Report Consolidated Statement of Changes in Equity
at 30 September 2018
Share
capital
Share
premium
reserve
Capital
redemption
reserve
Foreign
exchange
reserve
Treasury
shares
Retained
earnings
Total
Non-
controlling
interest
Total
Equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 1 October 2016
1,091
950
56
511
(27)
10,479
13,060
1,714
14,774
Translation differences on
overseas operations
Profit for the year
Total Comprehensive
Income for the year
Dividends paid
Share-based payment
expense
-
-
-
-
-
-
-
-
-
-
Ordinary shares issued
7
35
-
-
-
-
-
-
(295)
-
(295)
-
-
-
-
-
-
-
-
-
-
(295)
(148)
(443)
1,804
1,804
420
2,224
1,804
1,509
272
1,781
(410)
(410)
14
-
14
42
-
-
-
(410)
14
42
At 30 September 2017
1,098
985
56
216
(27)
11,887
14,215
1,986
16,201
Translation differences on
overseas operations
Profit for the year
Total Comprehensive
income for the year
Dividends paid
Dividends paid to NCI in
subsidiary
Share-based payment
expense
-
-
-
-
-
-
-
-
-
-
-
-
Ordinary shares issued
15
64
-
-
-
-
-
-
286
-
-
286
-
-
-
-
-
-
-
-
-
-
-
-
286
137
423
2,113
2,113
514
2,627
2,113
2,399
651
3,050
(489)
(489)
-
(489)
-
43
-
-
(416)
(416)
43
79
-
-
43
79
At 30 September 2018
1,113
1,049
56
502
(27)
13,554
16,247
2,221
18,468
The notes on pages 43 to 70 form part of these financial statements.
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share premium
Capital redemption
Treasury shares
Foreign exchange reserve
Retained earnings
Premium on shares issued in excess of nominal value
Amounts transferred from share capital on redemption of issued shares
Weighted average cost of own shares held in Treasury
Cumulative gains/losses arising on retranslating the net assets of overseas operations
into Sterling
All other net gains and losses and transactions with owners (e.g. dividends) not
recognised elsewhere
40
Titon Holdings Plc 2018 Annual Report
Company Statement of Changes in Equity
at 30 September 2018
Share
capital
Share
premium
reserve
Capital
redemption
reserve
Treasury
shares
Retained
earnings
Total
Equity
At 1 October 2016
1,091
950
56
(27)
5,547
£’000
£’000
£’000
£’000
£’000
Profit for the year
Total Comprehensive Income for the year
Dividends paid
Share-based payment expense
Ordinary shares issued
-
-
-
-
7
At 30 September 2017
1,098
Profit for the year
Total Comprehensive income for the year
Dividends paid
Share-based payment expense
-
-
-
-
-
-
-
-
35
985
-
-
-
-
Ordinary shares issued
15
64
£’000
7,617
130
130
130
130
(410)
(410)
14
-
14
42
-
-
-
-
-
-
-
-
-
-
56
(27)
5,281
7,393
-
-
-
-
-
-
-
-
-
-
354
354
354
354
(489)
(489)
43
-
43
79
At 30 September 2018
1,113
1,049
56
(27)
5,189
7,380
The notes on pages 43 to 70 form part of these financial statements.
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share premium
Capital redemption
Treasury shares
Translation reserve
Retained earnings
Premium on shares issued in excess of nominal value
Amounts transferred from share capital on redemption of issued shares
Weighted average cost of own shares held in Treasury
Cumulative gains/losses arising on retranslating the net assets of overseas operations
into Sterling
All other net gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere
41
Titon Holdings Plc 2018 Annual Report
Group and Company Statement of Cash Flows
for the year ended 30 September 2018
Group
Company
2018
£’000
2017
£’000
2018
£’000
2017
£’000
Cash generated from operating activities
Profit / (loss) before tax
Depreciation of property, plant & equipment
Amortisation of intangible assets
Profit on sale of plant & equipment
Share based payment expense – equity settled
Finance income
Share of associate’s post-tax profit
Increase in inventories
(Increase) / decrease in receivables
Increase in payables and other current liabilities
Cash generated from operations
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of plant & equipment
Purchase of intangible assets
Proceeds from sale of plant & equipment
Finance income
Dividends received from subsidiary companies
2,979
2,493
448
209
(16)
43
(13)
(778)
2,872
(836)
(890)
792
1,938
(132)
1,806
(578)
(315)
46
13
-
438
175
-
14
(10)
(633)
2,477
(133)
(161)
57
2,240
(390)
1,850
(520)
(186)
45
10
-
Net cash (used)/ generated in investing activities
(834)
(651)
Cash flows from financing activities
Exercise of share options
Dividends paid to equity shareholders of the parent
Dividends paid to Non-controlling shareholders of a subsidiary
Cash withdrawn from / (transferred to) treasury deposit accounts
Net cash used in financing activities
Net increase in cash (excluding movement on treasury
deposits)*
Cash at beginning of the year (excluding treasury deposits)
Cash at end of the year (excluding treasury deposits)
79
(489)
(416)
300
(526)
446
2,069
2,515
42
(410)
-
(100)
(468)
731
1,338
2,069
(78)
75
-
(7)
43
(9)
-
24
-
96
59
179
-
179
(25)
-
7
9
409
400
79
(489)
-
300
8
74
-
(6)
14
(10)
-
80
-
788
3
871
-
871
(27)
-
6
10
76
65
42
(410)
-
(100)
(110)
(468)
469
757
1,226
468
289
757
The Group cash and cash equivalents figure on the Consolidated Statement of Financial Position includes both the
cash at the year end and the cash on treasury deposit of £900,000 (2017: £1,200,000) and totals £3,415,000 at 30
September 2018 (2017: £3,269,000). See Note 19.
*The net increase in Group cash including the movements on treasury deposits for the year is £146,000 (2017:
£831,000).
In respect of this change in presentation of the Consolidated Statement of Cash Flows, the comparative figures have
been amended. The notes on pages 43 to 70 form part of these financial statements.
42
Titon Holdings Plc 2018 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2018
General information
The consolidated financial statements of the Group for the year ended 30 September 2018 incorporates Titon
Holdings Plc (“the Company”) and its subsidiaries (together referred to as “the Group”).
Titon Holdings Plc shares are publicly traded on the AIM market of the London Stock Exchange. The nature of the
Group’s operations and its principal activities are set out in the Strategic Report on page 6. The consolidated financial
statements were authorised for release on 19 December 2018.
1 - Summary of significant accounting policies
(a) Basis of preparation
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out
below. The policies have been consistently applied to all the years presented, unless otherwise stated. These financial
statements have been prepared in accordance with International Financial Reporting Standards as adopted by the
European Union (IFRSs and IFRIC interpretations) and issued by the International Accounting Standards Board (IASB)
and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRS.
During the period, the following new standards, amendments and interpretations to existing standards were published.
None had an impact on the reported result of the Group.
i New IFRS standards applied by the Group
Standards, interpretations and amendments to existing standards published and effective in the current financial year
relevant to the Group:
●
●
Recognition of deferred tax assets for unrealised losses (Amendments to IAS 12). The amendments to IAS 12 are intended to
clarify the requirements on recognition of deferred tax assets for unrealised losses on debt instrument financial assets measured
at fair value.
Disclosure Initiative: Amendments to IAS 7. The amendments to IAS 7 are intended to improve information provided to users of
financial statements about changes in financial liabilities, and financial assets if they meet the same definition, arising from an
entity’s financing activities. Entities will be required to disclose the cash flow and non-cash changes arising from these financing
activities.
ii New IFRS standards not applied by the Group
Standards, interpretations and amendments to existing standards that have been published as mandatory for later
accounting periods, but are not yet effective and have not been adopted early by the Group:
The Group has progressed its evaluation of the impact of IFRS 15 and currently expects the impact on the UK business
to be limited. It has also worked with its Korean operations and has determined the effect on the timing of revenue
recognition in both Titon Korea and the Group’s associate, BTS, and expects that the impact of IFRS 15 on Titon Korea
and BTS will be limited with regard to the timing of recognition of revenues as a result of new commercial terms being
put in place. There is a possible impact on transition but this has not been quantified at present.
Whilst the Company and Group do not have any financial assets other than those falling within the “hold-to-collect”
business model, it is still evaluating IFRS 9’s requirements relating to the expected credit losses in particular but does
not expect that there will be a material impact on the Group’s financial statements.
In respect of IFRS 16, property and vehicle leases are currently being treated as operating leases and the Group
believes that there will be a material impact on the Group’s financial statements when they are accounted for differently
under IFRS 16.
Other than as described for the new IFRS’s noted above, the Group does not believe that the adoption of these new
standards or interpretations will have a material impact on the consolidated results or financial position of the Group.
43
Titon Holdings Plc 2018 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2018
1 - Summary of significant accounting policies (continued)
ii New IFRS standards not applied by the Group (continued)
●
●
●
●
●
IFRS 9 Financial Instruments. This IFRS replaces IAS 39 Financial Instruments: Recognition and
Measurement in its entirety and uses a single approach to determine whether a financial asset is
measured at amortised cost or fair value.
IFRS 15 Revenue from Contracts with Customers. IFRS 15 is intended to clarify the principles of
revenue recognition and establish a single framework for revenue recognition. IFRS 15 supersedes:
IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC
15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers
and SIC-31 Revenue-Barter Transactions Involving Advertising Services. The core principle is that
an entity should recognise revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services.
IFRS 16 Leases. This IFRS sets out the principles for the recognition, measurement, presentation
and disclosure of leases for both parties to a contract, i.e. the customer (‘lessee’) and the supplier
(‘lessor’). IFRS 16 eliminates and replaces the classification of leases as either operating leases or
finance leases as is required by IAS 17 and, instead, introduces a single lessee accounting model.
The amendments are now endorsed for use in the EU and effective for periods beginning on or after
1 January 2019.
Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2).
The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based
payments – guidance now requires the same approach used for equity settled share based payments
to be followed for cash settled share based payments. Share-based payment transactions with a net
settlement feature for withholding tax obligations – An exception has now been added to IFRS 2
so that a share-based payment where the entity settles the share-based payment arrangement net
is classified as equity-settled in its entirety provided the share-based payment would have been
classified as equity-settled had it not included the net settlement feature.
Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (Amendments to IFRS 4).
The objective of the amendments is to address the temporary accounting consequences of the
different effective dates of IFRS 9 Financial Instruments and the forthcoming insurance contracts
Standard (expected to be IFRS 17).
Effective date
(periods beginning)
1 January 2018
1 January 2018
1 January 2019
1 January 2018
1 January 2018
●
Annual Improvements to IFRSs (2014-2016 Cycle)
1 January 2018
IFRS 1 First–time Adoption of International Financial Reporting Standards - IFRS 1 has been
amended to remove short-term exemptions dealing with IFRS 7 Financial Instruments: Disclosures,
IAS 19 Employee Benefits and IFRS 10 Consolidated Financial Statements. The reliefs provided are
no longer applicable and had been available to entities for reporting periods that have now passed.
IFRS 12 Disclosure of Interests in Other Entities - Amendments have been made to clarify the scope
of IFRS 12 in respect of interests in entities within the scope of IFRS 5 Non-current Assets Held for
Sale and Discontinued Operations. Specifically it clarifies that entities are not exempt from all of the
disclosure requirements in IFRS 12 when entities have been classified as held for sale or as discontinued
operations. The standard as amended therefore makes it clear that it is only the disclosure requirements
set out in paragraphs B10 – 16 that do not need to be provided for entities within the scope of IFRS 5.
IAS 28 Investments in Associates and Joint Ventures - Amended to clarify that a venture capital
organisation, or a mutual fund, unit trust and similar entities (including investment-linked insurance
funds) may choose, on an investment by investment basis, to account for its investments in joint
ventures and associates at fair value or using the equity method. The amendment also makes it
clear that method chosen for each investment is to be made on initial recognition.
●
IFRIC 22 Foreign Currency Transactions and Advance Consideration. IFRIC 22 addresses how
to determine the date of the transaction for the purpose of determining the exchange rate to use
on initial recognition of the related asset, expense or income (or part of it) on the de-recognition
of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance
consideration in a foreign currency (e.g. a prepayment or deferred income).
1 January 2018
44
Titon Holdings Plc 2018 Annual Report
Effective date
(periods beginning)
1 January 2019
1 January 2019
It specifies that the date of a transaction for the purpose of determining the exchange rate to use
on initial recognition of the related asset, expense or income (or part of it) is the date on which
that non-monetary asset or liability was initially recognised on the payment or receipt of advance
consideration.
In other words, the related income, expense or asset should not be re-measured for
changes in exchange rates occurring between the date of initial recognition of the advance
consideration and the date of recognition of the transaction to which that consideration relates.
●
Amendments to IAS 40: Transfers of Investment Property. IAS 40 requires a property to be transferred
to, or from, investment property only when there is a change in use. The amendment clarifies that a
change in management’s intentions for the use of a property does not in isolation provide evidence
of a change in use. This is because management’s intentions, alone, do not provide evidence of a
change in use.
An entity must, therefore, have taken observable actions to support such a change. IAS 40.57 gives
the following examples of appropriate sources of evidence (this is not intended to be an exhaustive
list):
commencement of owner-occupation, or of development with a view to owner-occupation, for a
transfer from investment property to owner-occupied property;
commencement of development with a view to sale, for a transfer from investment property to
inventories;
end of owner-occupation, for a transfer from owner-occupied property to investment property; and
inception of an operating lease to another party, for a transfer from inventories to investment property.
●
IFRIC 23 Uncertainty over Income Tax Treatments. It may be unclear how tax law applies to a
particular transaction or circumstance, or whether a taxation authority will accept a company’s tax
treatment. IAS 12 Income Taxes specifies how to account for current and deferred tax, but not how
to reflect the effects of uncertainty. IFRIC 23 provides requirements that add to the requirements in
IAS 12 by addressing the following issues when there is uncertainty over income tax treatments:
whether an entity considers uncertain tax treatments separately or together with one or more other
uncertain tax treatments;
the assumptions an entity makes about the examination of tax treatments by taxation authorities.
IFRIC 23 requires an entity to assume that the taxation authorities will examine amounts it has a right
to examine and have full knowledge of all related information when making those examinations;
how an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits
and tax rates. IFRIC 32 require an entity to consider the probability that the tax authorities will accept
or reject an uncertain tax treatment, with the accounting treatment being driven by the conclusion of
that assessment; and
how an entity considers changes in facts and circumstances. IFRIC 23 requires an entity to reassess
judgements or estimates required if the facts and circumstances on which the judgement or estimate
was based change or as a result of new information that affects the judgement or estimate.
An entity may apply IFRIC 23 on a fully retrospective basis, or retrospectively with the cumulative
effect of initially applying the Interpretation recognised at the date of initial application rather than
through the restatement of comparatives.
●
Amendments to IFRS 9: Prepayment Features with Negative Compensation. The International
Accounting Standard Board (IASB) has issued these amendments to IFRS 9 Financial Instruments
to aid implementation. The amendment allows companies to measure particular prepayable financial
assets with so-called negative compensation at amortised cost or at fair value through other
comprehensive income if a specified condition is met—instead of at fair value through profit or loss.
1 January 2019
45
Titon Holdings Plc 2018 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2018
1 - Summary of significant accounting policies (continued)
ii New IFRS standards not applied by the Group (continued)
●
Amendments to IAS 28: Long-term interests in Associates and Joint Ventures. The IASB has issued
amendments to IAS 28 Investments in Associates and Joint Ventures to aid implementation. The
amendments clarify that companies account for long-term interests in an associate or joint venture -
to which the equity method is not applied - using IFRS 9. The Board has also published an example
that illustrates how companies apply the requirements in IFRS 9 and IAS 28 to long-term interests in
an associate or joint venture.
Effective date
(periods beginning)
1 January 2019
●
Annual Improvements to IFRSs (2015-2017 Cycle) The following narrow scope amendments have
been made:
1 January 2019
IFRS 3 Business combinations. The amendments clarify that a company must remeasure its
previously held interest in a joint operation when it obtains control of the business.
IFRS 11 Joint Arrangements. The amendments clarify that a company does not remeasure its
previously held interest in a joint operation when it obtains joint control of the business.
IAS 12 Income Taxes. Clarification that a company accounts for all income tax consequences of
dividend payments in the same way (i.e. in the profit and loss, regardless of how the tax arose).
IAS 23 Borrowing costs. Clarification that a company treats any borrowings originally made to
develop an asset when the asset is ready for its intended use or sale, as part of general borrowings.
●
Amendments to IAS 19: Plan Amendment, Curtailment or Settlement. The IASB has amended IAS
19 Employee Benefits to specify how companies determine pension expenses when changes to a
defined benefit plan occur. When a plan amendment, curtailment or settlement takes place, IAS 19
requires a company to re-measure its net defined benefit liability or asset.
(b) Basis of consolidation
1 January 2019
Subsidiaries
The Group’s consolidated financial statements incorporate the financial statements of the Company (Titon Holdings
Plc) and the entities controlled by the Company (its subsidiaries) made up to 30 September 2018. Control exists when
the Company is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability
to affect those returns through its power over the subsidiary.
Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions,
are eliminated in preparing the financial statements.
Non-controlling interests
A non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling
interests at the end of reporting period represent the non-controlling shareholders’ portion of the fair values of the
identifiable assets and liabilities of the subsidiary at the acquisition date and the non-controlling interests’ portion of
movements in equity since the date of the combination. Non-controlling interest is presented within equity, separately
from the parent’s shareholders’ equity.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in deficit balance.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially recognised in the consolidated balance sheet at cost.
The Group’s share of post-acquisition profits and losses is recognised in the consolidated income statement, except
that losses in excess of the Group’s investment in the associate are not recognised unless there is an obligation to make
good those losses. Profits and losses arising on transactions between the Group and its associates are recognised
only to the extent of unrelated investors’ interests in the associate. The investors’ share in the associate’s profits and
losses resulting from these transactions is eliminated against the carrying value of the associate. Any premium paid
for an associate above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities
acquired is capitalised and included in the carrying amount of the associate. The carrying amount of the investment in
associates is subject to impairment in the same way as goodwill arising on a business combination (see accounting
policy (h)).
46
Titon Holdings Plc 2018 Annual Report
Business combinations
The consolidated financial statements incorporate the results of business using the purchase method. In the consolidated
balance sheet, the Group’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair
values at the acquisition date. The Group’s share of the results of acquired operations are included in the consolidated
income statement from the date on which control is obtained.
(c) Foreign currency
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment
in which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur.
Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange
differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the
consolidated income statement.
On consolidation, the results of overseas operations are translated into Sterling, which is the functional and presentational
currency of the Company and Group, at rates approximating those ruling when the transactions took place. All assets
and liabilities of overseas operations are translated at the rate ruling at the balance sheet date. Exchange differences
arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are
recognised directly in other comprehensive income.
Upon disposal of all overseas operations, exchange differences arising from the translation of the financial statements
of foreign operations are recycled and taken to the consolidated income statement as part of the profit or loss on
disposal. The Company has elected, 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. Any gain or loss on the subsequent disposal of those
foreign operations would exclude translation differences that arose before the date of transition to IFRS and include
only subsequent translation differences.
More than 89% (2017: 90%) of sales from the Group’s UK business are invoiced in Sterling.
(d) Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation.
The Group recognises in the carrying amount of an item of property, plant and equipment 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 item
will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income
statement as incurred.
Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and equipment to write
off the carrying value of items over their expected useful economic lives. It is applied at the following rates:
Freehold buildings
Improvements to leasehold property
Plant and equipment
Motor vehicles
- 2% per annum straight line
- 20% per annum straight line (or the lease term, if shorter)
- 10% to 33.3% per annum straight line
- 25% per annum straight line
The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable (see accounting policy (h)).
(e) Intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation
and impairment losses (see accounting policy (h)). Amortisation is charged to Administrative Expenses within the
Consolidated Income Statement.
i Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary or associate at the date of acquisition and subject to annual impairment testing.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill associated with the acquisition of
associates is included within the investment in associates.
Goodwill is not subject to amortisation, but is tested for impairment annually. On disposal of a subsidiary the attributable
amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal.
47
Titon Holdings Plc 2018 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2018
1 - Summary of significant accounting policies (continued)
ii Internally generated intangible assets (development costs)
Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products
developed.
Expenditure on internally developed products is capitalised if all of the following can be demonstrated:
●
●
●
●
●
●
it is technically feasible to complete the intangible asset so that it will be available for use or sale;
there is an intention to complete the intangible asset and use or sell it;
an ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Development costs are amortised using the straight line method over their remaining estimated useful lives from the
date that the products are available for sale to customers, which is normally between 3 and 5 years. The remaining
useful lives of such development assets are assessed by the Directors annually.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects
is recognised in the consolidated income statement as incurred.
iii Computer software
Costs incurred on the acquisition of computer software are capitalised if they meet the recognition criteria of IAS 38 as
described above. Computer software costs recognised as assets are written off over their estimated useful lives, which
is normally between 3 and 10 years.
iv Other intangible assets
Other intangible assets arising on business combinations, including patents, are recorded at fair value at the date of
acquisition. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives,
which is normally 5 years. The remaining useful lives of such assets are assessed by the Directors annually.
v Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
(f) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated 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, together with attributable overheads based
on the normal level of activity.
Net realisable value is based on estimated selling price less further costs to completion and disposal. A charge is made
to the income statement for slow moving inventories. The charge is reviewed at each balance sheet date.
(g) Cash and cash equivalents
Cash and cash equivalents comprise cash balances, bank overdrafts and treasury deposits for cash flow purposes.
The Group has no long term borrowings and any available cash surpluses are placed on deposit.
(h) Impairment
The carrying amount of the Group’s assets, other than deferred tax assets, are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount
is estimated. Impairment losses are recognised in the income statement.
Reversals of impairment
Other than in respect of goodwill, an impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount
does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
48
Titon Holdings Plc 2018 Annual Report (i) Employee benefits
Share-based payment transactions
The Company provides share option schemes for Directors and for other members of staff.
In accordance with IFRS 2 – Share-based Payments, the fair value of the employee services received in exchange for
the grant of options is recognised as an expense to the income statement over the vesting period of the option and the
corresponding credit recognised to the Retained Earnings within equity. The Black-Scholes option pricing model has
been used for calculating the fair value of the Group’s share options. The Directors believe that this model is the most
suitable for calculating the fair value of the equity based share options.
The fair value of the options is determined excluding the impact of any non-market vesting conditions. Non-market
vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance
sheet date the Group revises its estimates of the number of option awards that are expected to vest. The impact of the
revision of original estimates, if any, is recognised in the income statement, with a corresponding adjustment to equity.
No adjustment is made for failure to achieve market vesting conditions providing all other vesting conditions are met.
Pension costs
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those
of the Group in independently administered funds. Contributions to the pension scheme are charged to the income
statement in the year in which they become payable.
Accrued holiday pay
Provision is made at each balance sheet date for holidays accrued but not taken at the salary of the relevant employee
at that date.
(j) Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. They
are discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to
the liability.
(k) Revenue
Revenue is derived principally from the sale of goods and is measured at the fair value of consideration received or
receivable, after deducting discounts, settlement discounts, rebates and value added tax. A sale is usually recognised
when the significant risks and rewards of ownership have passed to the customer, which is upon the transport of the
goods from the company’s premises or in South Korea, upon customer acceptance of goods.
(l) Finance income
Finance income comprises interest receivable on funds invested.
(m) Corporation and deferred taxes
Tax on the profit or loss for the periods presented comprises current and deferred tax.
Current tax
Current tax is the expected corporation tax payable on the taxable income for the year, using rates and laws enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is provided using the balance sheet liability method, using rates and laws enacted or substantively enacted
at the balance sheet date, providing for temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Temporary differences are not provided on goodwill that is not deductible for tax purposes or on the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit, to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
49
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
1 - Summary of significant accounting policies (continued)
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets
and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
●
●
the same taxable group company; or
different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax
assets or liabilities are expected to be settled or recovered.
(n) Leased assets
Operating leases represent leasing agreements that do not give rights approximating to ownership. Annual rentals are
charged to the income statement on a straight-line basis over the lease term. Lease incentives are recognised as an
integral part of the total lease expense.
(o) Dividends
Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders,
this is when paid. In the case of final dividends, this is when approved by the shareholders at the AGM.
(p) Financial assets
The Group classifies its financial assets depending on the purpose for which the asset was acquired. The Group holds
only two classes of financial assets, namely loans and receivables which comprise trade and other receivables and
cash and cash equivalents in the balance sheet.
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They arise principally through the provision of goods and services to customers (trade receivables), but also
incorporate other types of contractual monetary asset. They are initially recognised at fair value and subsequently
carried at amortised cost.
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the
part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the
amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying
amount and the present value of the future expected cash flows associated with the impaired receivable. For trade
receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being
recognised within distribution expenses in the income statement. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the associated provision.
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it
has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather
than changes to the amounts owed, and if the revised present value of cash flows is not significantly different from the
carrying amount, no impairment is recorded.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid
investments with original maturities of twelve months or less, such as short term fixed deposits with banks, and bank
overdrafts. Bank overdrafts are shown on the face of the balance sheet.
(q) Financial liabilities
The Group holds only one class of financial liabilities, namely trade payables. Trade payables and other short-term
monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost.
(r) Treasury shares
Consideration paid or received for the purchase or sale of treasury shares is recognised directly in Equity - see page
40. The cost of treasury shares held is presented as a separate item (“Treasury shares”). Any excess of the
consideration received on the sale of treasury shares over the weighted average cost of the shares sold is reflected in
share premium.
2 - Critical accounting estimates and judgements
The Group makes estimates and judgements regarding the future. Estimates and judgements are continually evaluated
based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.
The estimates that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
50
Titon Holdings Plc 2018 Annual Report Valuation of inventory
The Group reviews its inventory on a regular basis and, where appropriate, makes provision for slow moving and
obsolete stock based on estimates of future sales activity. The estimate of the future sales activity will be based on both
historical experience and expected outcomes based on knowledge of the markets in which the Group operates (see
note 14 of the Consolidated Financial Statements).
Depreciation of property, plant and equipment
Depreciation is provided so as to write down the assets to their residual values over their estimated useful lives as set
out in note 1 (d). The selection of these estimated lives requires the exercise of management judgement.
Useful lives of intangible assets
Intangible assets are amortised over their useful lives. Useful lives are based on the management’s estimates of the
period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes
to estimates can result in significant variations in the carrying value and amounts charged to the consolidated income
statement in specific periods (see notes 1 (e) and 11 of the Consolidated Financial Statements).
Significant areas in which judgement is exercised comprise:
Share-based payments
The charge for share-based payment is calculated in accordance with certain assumptions. The option valuation model
used requires highly subjective assumptions to be made including the future volatility of the Company’s share price,
expected dividend yields, risk-free rate of return and expected staff turnover. The Directors draw upon a variety of
external sources to aid in the determination of the appropriate data to use in such calculations.
Credit notes and warranty provisions
The amounts provided for credit notes against customer receivables and product warranty provisions also require
management judgement given their unknown nature at year-end cut off.
Impairment of assets
Investments, property, plant and equipment and intangible assets are reviewed for impairment if events or changes in
circumstances indicate that the carrying amount may not be recoverable. When a review for impairment is conducted,
the recoverable amount of an asset or a cash-generating unit is determined based on value in-use calculations prepared
on the basis of management’s assumptions and estimates (see notes 1 (h), 10 and 11 of the Consolidated Financial
Statements).
3 - 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 in four main business segments which are:
Segment
United Kingdom
Activities undertaken include:
Sales of passive and powered ventilation products to housebuilders, electrical contractors
and window and door manufacturers. In addition to this, it is a leading supplier of window and
door hardware.
South Korea
Sales of passive ventilation products to construction companies.
North America
Sales of passive ventilation products to window and door manufacturers.
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 allocated to the business activities for which R&D is specifically
performed. Sales Administration and Other Expenses are currently allocated to operating segments in the Group’s
reporting to the CODM. Other Expenses include mainly central and parent company overheads relating to Group
management, the finance function and regulatory requirements.
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 the page.
51
Titon Holdings Plc 2018 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2018
3 - Revenue and segmental information (continued)
Operating segment
The Directors’ primary review of performance is by geographical regions.
For the year ended
30 September 2018
Segment revenue
Inter-segment revenue
Total Revenue
Segment profit
Tax expense
Profit for the year
Depreciation and amortisation
Total assets
Total assets include:
Investments in associates
Additions to non-current assets (other than financial
instruments and deferred tax assets)
United
Kingdom
South
Korea
North
America
All other
countries
Consolidated
£’000
15,221
(429)
14,792
1,005
607
14,087
2,651
889
£’000
11,561
-
11,561
2,084
49
9,888
-
4
£’000
652
-
652
(109)
1
238
-
-
£’000
2,941
-
£’000
30,375
(429)
2,941
29,946
(1)
-
-
-
-
2,979
(352)
2,627
657
24,213
2,651
893
The South Korea Segment profit includes the Group’s share of the profits from Browntech Sales Co. Ltd., (BTS), the
Group’s associate undertaking in South Korea, of £778,000.
Sales to BTS of £11.56m represent 38% of Group Revenue (2017: £9.53m – 34%). There are no other concentrations
of revenue above 10% during the year (see Note 24 - Related party transactions).
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 2018
United
Kingdom
Europe
USA and
Canada
South
Korea
All other
regions
Revenues
By entities’ country of domicile
By country from which derived
Non-current assets
£’000
17,733
14,792
£’000
£’000
-
2,804
652
652
£’000
11,561
11,561
£’000
-
137
Total
£’000
29,946
29,946
By entities’ country of domicile
4,439
-
23
2,858
-
7,320
52
Titon Holdings Plc 2018 Annual Report 3 - Revenue and segmental information (continued)
Operating segment
For the year ended
30 September 2017
Segment revenue
Inter-segment revenue
Total Revenue
Segment profit
Tax expense
Profit for the year
Depreciation and amortisation
Total assets
Total assets include:
Investments in associates
Additions to non-current assets (other than financial
instruments and deferred tax assets)
United
Kingdom
South
Korea
North
America
All other
countries
Consolidated
£’000
14,823
(858)
13,965
706
563
12,916
1,741
672
£’000
9,530
-
9,530
1,638
49
7,704
-
34
£’000
1,781
-
1,781
166
1
310
-
-
£’000
2,735
-
2,735
(17)
-
-
-
-
£’000
28,869
(858)
28,011
2,493
(269)
2,224
613
20,930
1,741
706
The South Korea Segment profit includes the Group’s share of the profits from Browntech Sales Co. Ltd., (BTS), the
Group’s associate undertaking in South Korea, of £633,000.
Sales to BTS of £9.53m represent 34% of Group Revenue (2016: £7.11m – 30%). There are no other concentrations
of revenue above 10% during the year (see Note 24 - Related party transactions).
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 2017
United
Kingdom
Europe
USA and
Canada
South
Korea
All other
regions
Revenues
By entities’ country of domicile
By country from which derived
Non-current assets
£’000
16,700
13,965
£’000
-
2,565
£’000
1,781
1,781
£’000
9,530
9,530
£’000
-
170
Total
£’000
28,011
28,011
By entities’ country of domicile
4,295
-
1
1,972
-
6,268
53
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
3 - Revenue and segmental information (continued)
Information about the Group’s products
Within geographical segments the Directors also monitor the revenue performance of the Group within its two identified
business streams. The Group’s operations are separated between trickle ventilation and window and door hardware
products and mechanical ventilation products. The following table provides an analysis of the Group’s external revenue,
irrespective of the geographical region of sale.
Trickle ventilation and window and door hardware products
Mechanical ventilation products
Revenue
2018
£’000
23,194
6,752
29,946
2017
£’000
21,734
6,277
28,011
4 - Directors and employees
Staff costs, including Directors, were as follows:
Wages and salaries
Employer’s social security costs and similar taxes
Defined contribution pension cost
Share based payment expense – equity settled
The average monthly number of employees
during the year was as follows:
Manufacturing
Sales, marketing and administration
Group
Company
2018
£’000
6,224
712
429
43
2017
£’000
6,250
672
354
14
7,408
7,290
2018
£’000
352
57
6
4
419
2017
£’000
370
53
6
5
434
Group
Company
2018
2017
2018
2017
Number
Number
Number
Number
149
77
226
173
71
244
-
5
5
-
5
5
Details of Directors’ emoluments, pension contributions and interests in share options are given in the Directors’
Remuneration Report set out on pages 23 to 27.
5 - Finance income
Group
Bank interest receivable on short term deposits
2018
£’000
13
2017
£’000
10
54
Titon Holdings Plc 2018 Annual Report 6 - Profit before tax
This is arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Amortisation of intangible assets
Research and development expenditure written off
Operating lease rentals - land and buildings
Operating lease rentals - vehicles and plant & equipment
Foreign exchange loss / (gains)
Share-based payment expense
Profit on disposal of fixed assets
Auditors’ remuneration:
- for the audit of these accounts
- for the audit of those accounts of the Company’s subsidiaries
- for the audit of the accounts of the Group’s associate
- non-audit services - comprising corporate finance services; see
page 32
- non-audit services - comprising other assurance services
7 - Tax expense
Current income tax:
Corporation tax expense
Adjustment in respect of prior years
Deferred tax:
Origination and reversal of temporary differences Note 16
Income tax expense
The charge for the year can be reconciled to the profit
per the income statement as follows:
Profit before tax
Effect of:
Expected tax charge based on the standard rate of Corporation tax
in the UK of 19.0% (2017: 19.5%)
Additional deduction for R&D expenditure
Effect of Associate’s results reported net of tax
Expenses not deductible for tax purposes
Difference in overseas tax rates
Withholding taxes paid on dividend from overseas subsidiary
Adjustments in respect of prior periods
Income tax expense
2018
£’000
2017
£’000
448
209
446
196
122
12
43
(16)
13
56
13
25
1
2018
£’000
(307)
17
(290)
(62)
(352)
438
175
468
135
134
(141)
14
-
12
54
9
-
1
2017
£’000
(249)
(43)
(292)
23
(269)
2,979
2,493
(566)
148
151
(31)
(47)
(24)
17
(352)
(486)
171
127
(11)
(27)
-
(43)
(269)
The tax rate in the United Kingdom, being the primary economic environment in which the Group conducts its business,
reduced from 20% to 19% on 1 April 2017. The UK government announced legislation setting the Corporation Tax main
rate at 19% for the years starting 1 April 2017, 2018 and 2019 and at 18% for the year starting 1 April 2020. In 2016,
the UK government announced a further reduction to the Corporation Tax main rate for the year starting 1 April 2020,
setting the rate at 17%.
55
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
8 - Dividends
Final 2017 dividend of 2.70 pence (2016: 2.25 pence) per ordinary share proposed and paid during
the year relating to the previous year’s results
Interim dividend of 1.75 pence (2017: 1.50 pence) per ordinary share paid during the year
2018
£’000
295
194
489
2017
£’000
245
165
410
The Directors are proposing a final dividend of 3.0 pence (2017: 2.70 pence) per share. This will result in a final
dividend totalling £334,013 (2017: £296,561), subject to approval by the shareholders at the Annual General Meeting.
This dividend has not been accrued at the balance sheet date.
9 - Earnings per ordinary share
The calculation of the basic and diluted earnings per share is based on the following data:
Numerator
Earnings for the purposes of basic earnings per share being earnings after tax attributable to
members of Titon Holdings Plc
Denominator
2018
£’000
2,113
2017
£’000
1,804
Number
Number
Weighted average number of ordinary shares for the purposes of basic earnings per share
11,024,243
10,903,394
Effect of dilutive potential ordinary shares: share options
165,212
207,855
Weighted average number of ordinary shares for the purposes of diluted earnings per share
11,189,455
11,111,249
Earnings per share (pence)
Basic
Diluted
The total number of options in issue is also disclosed in note 23.
19.17p
18.88p
16.55p
16.24p
56
Titon Holdings Plc 2018 Annual Report 10 - Property, plant and equipment
Group
Cost
At 1 October 2016
Additions
Disposals
At 1 October 2017
Additions
Disposals
At 30 September 2018
Depreciation
At 1 October 2016
Charge for the year
Disposals
At 1 October 2017
Charge for the year
Disposals
At 30 September 2018
Net book value at 30 September 2018
At 30 September 2017
At 1 October 2016
Freehold
land and
buildings
Improvements
to leasehold
property
Plant and
equipment
Motor
vehicles
Total
£’000
3,455
-
-
3,455
-
-
3,455
1,298
64
-
1,362
64
-
1,426
2,029
2,093
2,157
£’000
1
-
-
1
63
-
64
-
-
-
-
-
-
-
64
1
1
£’000
7,322
417
(72)
7,667
443
(678)
7,432
6,149
295
(27)
6,417
308
(676)
6,049
1,383
1,250
1,173
£’000
335
103
(66)
372
72
(101)
343
155
79
(66)
168
76
(80)
164
179
204
180
£’000
11,113
520
(138)
11,495
578
(779)
11,294
7,602
438
(93)
7,947
448
(756)
7,639
3,655
3,548
3,511
The Directors are not aware of any events or changes in circumstances during the year which would have a significant
impact on the carrying value of the Group’s property, plant and equipment at the balance sheet date.
At 30 September 2018, the Group had entered into contractual commitments for the acquisition of plant and equipment
amounting to £178,000 (2017: £41,000).
57
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
10 - Property, plant and equipment (continued)
Company
Cost
At 1 October 2016
Additions
Disposals
At 1 October 2017
Additions
Disposals
At 30 September 2018
Depreciation
At 1 October 2016
Additions
Disposals
At 1 October 2017
Charge for Year
Disposals
At 30 September 2018
Net book value at 30 September 2018
At 30 September 2017
At 1 October 2016
Freehold
land and
buildings
Motor
vehicles
Total
£’000
£’000
£’000
3,455
-
-
3,455
-
-
3,455
1,298
64
-
1,362
64
-
1,426
2,029
2,093
2,157
59
27
(31)
55
25
(28)
52
55
10
(31)
34
11
(28)
17
35
21
4
3,514
27
(31)
3,510
25
(28)
3,507
1,353
74
(31)
1,396
75
(28)
1,443
2,064
2,114
2,161
58
Titon Holdings Plc 2018 Annual Report 11 - Intangible assets
Group
Cost
At 1 October 2016
Additions
Disposals
At 1 October 2017
Additions
Disposals
At 30 September 2018
Amortisation
At 1 October 2016
Charge for the year
Disposals
At 1 October 2017
Charge for the year
Disposals
At 30 September 2018
Net book value at 30 September 2018
At 30 September 2017
At 1 October 2016
Computer
software
Development
costs
(internally
generated)
Goodwill
Patents
Total
£’000
698
8
-
706
178
(61)
823
352
83
-
435
69
(54)
450
373
271
346
£’000
£’000
636
177
-
813
136
(171)
778
434
92
-
526
139
(171)
494
284
287
202
78
-
-
78
-
-
78
-
-
-
-
-
-
-
78
78
78
£’000
247
1
-
248
1
-
249
246
-
-
246
1
-
247
2
2
1
£’000
1,659
186
-
1,845
315
(232)
1,928
1,032
175
-
1,207
209
(225)
1,191
737
638
627
All assets have an average useful economic life of 3.3 years (2017: 3.5 years) except for Goodwill which has an
indefinite useful economic life.
Included within Computer Software is the Group’s Enterprise Resource Planning software system which has a carrying
value of £298,000 at 30 September 2018 (2017: £243,000) and a remaining amortisation period of 4 years (2017: 5
years).
The Directors are not aware of any events or changes in circumstances during the year which would have a significant
impact on the carrying value of the Group’s intangible assets at the balance sheet date.
Company
The Company has no intangible assets (2017: £nil)
59
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
12 - Investments in subsidiaries
Investments comprise direct shareholdings of the ordinary share capital in the following subsidiaries, all of which are
included in the Consolidated Financial Statements. A list of the investments in subsidiaries, including the name, country
of incorporation and proportion of ownership is as follows:
Name of subsidiary
Principal activity
Country of
incorporation
Address
Proportion of
voting rights held
at 30 September
2017 and 2018
Titon Hardware Ltd
Design, manufacture
and marketing of
window fittings and
ventilators
England
Titon Automation Ltd
Dormant company
England
Titon Components Ltd
Dormant company
England
Titon Developments Ltd
Dormant company
England
Titon Investments Ltd
Dormant company
England
Titon Inc.
Distribution of Group
products
USA
Titon Korea Co. Ltd
Manufacture of
window ventilators
Republic of Korea
Titon HK Holdings Ltd
Dormant company
Hong Kong, China
894 The Crescent,
Colchester Business
Park, Colchester,
CO4 9YQ
As above
As above
As above
As above
PO Box 241,
Granger, Indiana
46530
100%
100%
100%
100%
100%
100%
257-4 Ra-dong,
Munwon-gil, Jori-eup,
Paju-si, Gyeonggi-do
51%
402 Jardine House,
1 Connaught Place
Central
100%
For the subsidiaries listed above, the country of operation is the same as the country of incorporation.
Company Investment
At 1 October
At 30 September
13 - Investments in associates
2018
£’000
554
554
2017
£’000
554
554
The following entity meets the definition of an associate, the Group considers it has power to exercise significant
influence, and has been equity accounted in these consolidated financial statements:
Name of associate
Principal activity
Country of
incorporation
Address
Proportion of
voting rights held
at 30 September
2017 and 2018
Browntech Sales Co. Ltd
Sales of window
ventilators
Republic of Korea
257-4 Ra-dong,
Munwon-gil, Jori-eup,
Paju-si, Gyeonggi-do
49%
The remaining 51% shareholding of Browntech Sales Co. Ltd (“BTS”) is held by South Korean investors who, through
their voting shares, have operational control of the company.
Company Investment
At 30 September
2018
£’000
225
2017
£’000
225
60
Titon Holdings Plc 2018 Annual Report 13 - Investments in associates (continued)
The aggregated amounts relating to BTS are as follows:
As at 30 September
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total Liabilities
Net Assets
Group 49% share of Net Assets
Group investment in Goodwill
Group share of investment
For the year ended 30 September
Revenue
Profit after tax
2018
£’000
14,634
67
14,701
9,234
-
9,234
2017
£’000
10,674
104
10,778
7,167
-
7,167
5,467
3,611
2,679
197
2,876
2018
£’000
18,129
1,624
1,769
197
1,966
2017
£’000
14,979
1,329
BTS did not record any other comprehensive income for the years ended 30 September 2018 or 30 September
2017 in its own accounts, although the Consolidated Statement of Comprehensive Income includes £132,000 of
other comprehensive expense for 2018 (2017: income £131,000). BTS has been included based on audited financial
statements drawn up for the year to 30 September 2018. Transactions between it and the Group are set out in note 24.
The Group’s investment in BTS at 30 September 2018 includes £197,000 (2017: £197,000) of goodwill.
14 - Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2018
£’000
1,476
493
3,698
5,667
2017
£’000
1,355
539
2,776
4,670
No inventories (2017: £nil) are carried at fair value less costs to sell.
The carrying value of inventory represents cost less appropriate provisions. During the year there was a net debit
of £169,000 (2017: net debit of £124,000) to the Consolidated Income in relation to the inventory provisions. The
movements in the inventory provisions are included within cost of sales in the Consolidated Income Statement. The
value of inventory that has been recognised in cost of sales over the year is £21,169,000 (2017: £19,996,000).
Company
The Company had no inventories at 30 September 2018 (2017: £nil).
61
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
15 - Trade and other receivables
Trade receivables
Related parties receivables (See Note 24)
Other receivables
Prepayments and accrued income
Total trade and other receivables
Group
Company
2018
£’000
2,990
4,059
382
368
7,799
2017
£’000
3,249
2,798
276
321
6,644
2018
£’000
-
2,794
12
-
2017
£’000
-
2,891
11
-
2,806
2,902
Other than the amounts due from related parties there were no significant concentrations of credit risk at either 30
September 2018 or 30 September 2017.
The average credit period taken on sale of goods by the Group’s trade debtors is 77 days (2017: 68 days).
The carrying amount of a financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of a provision account. When
a trade receivable is considered uncollectible, based on its age and likely recoverability, it is written off against the
provision account. Subsequent recoveries of amounts previously written off are credited against the provision account.
Changes in the carrying amount of the provision account are recognised in the income statement.
Movements on the provision for impairment of trade receivables are
as follows:
At the beginning of the year
Provision for receivables impairment
Receivables written off during the year as uncollectible
Unused amounts reversed
At the end of the year
2018
£’000
81
31
(18)
(41)
53
2017
£’000
114
27
(26)
(34)
81
As at 30 September 2018 trade receivables of £1,426,000 (2017: £1,390,000) were past due but not impaired. These
relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of
these receivables is as follows
Up to 3 months
3 up to 6 months
2018
£’000
1,421
5
1,426
2017
£’000
1,382
8
1,390
As at 30 September 2018 trade receivables of £53,000 (2017: £81,000) were past due and impaired. These relate to a
number of customers. The ageing analysis of these receivables is as follows:
2018
£’000
28
1
24
53
2017
£’000
66
15
-
81
Up to 3 months
3 up to 6 months
6 up to 12 months
62
Titon Holdings Plc 2018 Annual Report 16 - Deferred tax
Group
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17.0%
(2017: 19.5%). The movement on the deferred tax account is as shown below:
Total
deferred tax
at 1 October
2017
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
Total
deferred
tax at 30
September
2018
Asset
2018
UK
Liability
2018
Non-UK
UK Accelerated capital allowances
UK other temporary and deductible differences
Non-UK other temporary and deductible differences
UK available losses
Non-UK available losses
Total deferred tax
£’000
(283)
106
(39)
293
-
77
£’000
£’000
36
(15)
(1)
(37)
-
(17)
-
(2)
(21)
(46)
24
(45)
£’000
(247)
89
(61)
210
24
15
£’000
(247)
89
-
210
-
52
£’000
-
-
(61)
-
24
(37)
Total
deferred tax
at 1 October
2016
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
Total
deferred
tax at 30
September
2017
Asset
2017
UK
Liability
2017
Non-UK
£’000
£’000
£’000
£’000
£’000
£’000
(230)
51
(25)
337
133
6
(2)
-
(8)
(4)
(59)
57
(14)
(36)
(52)
(283)
106
(39)
293
77
(283)
106
-
293
116
-
-
(39)
-
(39)
UK Accelerated capital allowances
UK other temporary and deductible differences
Non-UK other temporary and deductible differences
UK available losses
Total deferred tax
There are no unrecognised deferred tax assets at 30 September 2017 or 30 September 2018.
63
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
16 - Deferred tax (continued)
Company
Deferred tax is calculated in full on timing differences under the liability method using a tax rate of 17.0% (2017:
19.50%). The movement on the deferred tax account is as shown below:
UK Accelerated capital allowances
UK other temporary and deductible differences
UK available losses
Total deferred tax
UK Accelerated capital allowances
UK other temporary and deductible differences
UK available losses
Total deferred tax
17 - Trade and other payables - current
Trade payables
Other payables
Other tax and social security taxes
Accruals
Total
deferred tax
at 1 October
2017
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
£’000
(276)
55
10
(211)
£’000
£’000
35
(7)
(1)
27
1
(5)
-
(4)
Total
deferred
tax at 30
September
2018
£’000
(240)
43
9
Liability
2018
UK
£’000
(240)
43
9
(188)
(188)
Total
deferred tax
at 1 October
2016
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
Total
deferred
tax at 30
September
2017
Liability
2017
UK
£’000
£’000
£’000
£’000
£’000
(300)
30
13
(257)
7
-
-
7
17
25
(3)
39
(276)
(276)
55
10
55
10
(211)
(211)
Group
Company
2018
£’000
3,438
487
516
1,113
5,554
2017
£’000
2,686
439
504
998
4,627
2018
£’000
-
-
-
207
207
2017
£’000
-
-
-
148
148
Group trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
Year-end Group trade creditors represent 55 days (2017: 45 days) average purchases. The contractual maturities of
these liabilities are from 30 days up to approximately 100 days.
The Directors consider that the carrying amount of trade payables is approximate to their fair value.
64
Titon Holdings Plc 2018 Annual Report 18 - Share capital
Authorised
13,600,000 ordinary shares of 10p each
2018
£’000
1,360
2017
£’000
1,360
The Company’s issued and fully paid ordinary shares of 10p during the year is:
2018
Number
2018
£’000
2017
Number
At the beginning of the year
10,983,750
1,098
10,908,750
Share options exercised during the year
150,000
15
75,000
At the end of the year
11,133,750
1,113
10,983,750
Treasury shares held by the Group
At the beginning of the year
Treasury shares purchased
At the beginning and end of the year
2018
Number
50,000
-
50,000
2018
£’000
27
-
27
2017
Number
50,000
-
50,000
2017
£’000
1,091
7
1,098
2017
£’000
27
-
27
Treasury shares held by the Group were acquired in July 2014. The Group has no current plans to dispose of these.
Share options
Options have been granted over the following number of ordinary shares which were outstanding:
Date granted
Exercise price
09.06.11
15.01.14
30.01.18
48.0p
58.0p
156.5p
At 30 September 2018
At 30 September 2017
Number of
shares
10,000
200,000
205,000
415,000
360,000
Exercisable between
09.06.14
15.01.17
30.01.21
and
and
and
09.06.21
15.01.24
30.01.28
No share options were exercised between 30 September 2018 and 19 December 2018.
65
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
19 - Cash and cash equivalents
Financial assets
The Group has floating rate financial assets which comprise treasury deposits, cash to finance its operations together
with the retained profits generated by operating companies (refer to the ‘Financial Assets’ note 1(p) on page 50 for
further details).
The Group has no long term borrowings and any available cash surpluses are placed on deposit. The Group uses cash
on deposit to manage short term liquidity risks which may arise.
The Group’s floating rate financial assets (see below) at 30 September were:
Group
Company
Currency
Sterling
US Dollar
Euro
South Korean Won
2018
£’000
2,622
422
331
40
2017
£’000
2,497
359
136
277
2018
£’000
2,126
-
-
-
2017
£’000
1,957
-
-
-
3,415
3,269
2,126
1,957
The Sterling financial assets comprises cash held on current account as well as fixed term deposits with banks.
The Group’s cash and floating rate financial assets at 30 September comprise:
Bank current accounts
Fixed term treasury deposits
Group
Company
2018
£’000
2,125
900
3,415
2017
£’000
2,069
1,200
3,269
2018
£’000
1,226
900
2,126
2017
£’000
757
1,200
1,957
The floating term deposits with banks had a weighted average interest rate of 0.43% (2017: 0.55%).
Financial liabilities
The Group had no floating rate financial liabilities at 30 September 2018 (2017: £nil). Any liability is offset against bank
deposits for the purposes of interest payment calculation. The Board considers the fair value of the Group’s financial
assets and liabilities to be the same as their book value.
20 - Financial instruments – risk management
The Group is exposed through its operations to credit risk, foreign exchange risk and liquidity risk.
In common with other businesses, the Group is exposed to risks that arise from its use of financial instruments. This
note, read in conjunction with the ‘Capital Management’ section of the Directors’ Report on page 19, and the Report on
Risk Management on pages 13 to 17 describe the Group’s objectives, policies and processes for managing those risks.
Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies
and processes for managing those risks from previous periods unless otherwise stated in this note.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Audit
Committee reviews and reports to the Board on the effectiveness of policies and processes put in place. The overall
objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out on pages 31 and 32.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risks arise are trade receivables,
cash at bank, bank overdrafts, trade and other payables and loans to related parties (see Notes 15, 17 and 19).
66
Titon Holdings Plc 2018 Annual Report
20 - Financial instruments – risk management (continued)
Credit risk
Credit risk is the risk of financial loss to the Group if a customer, associate company or counterparty to a financial
instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is
Group policy, implemented locally, to assess the credit risk of new customers before entering contracts along with local
business practices.
The Group’s finance function has established a credit policy under which each new customer is analysed individually
for credit-worthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s
review includes external ratings, when available, and trade references. Purchase limits are established for each
customer, which represents the maximum open amount without requiring senior management’s approval. These limits
are reviewed on an on-going basis. Customers that fail to meet the Group’s benchmark credit-worthiness may transact
with the Group on a prepayment basis.
Credit risk also arises from cash and cash equivalents and deposits with banks. The Group has cash and cash
equivalents with banks with a minimum “A” rating.
Quantitative disclosures of the credit risk exposure in relation to Trade and other receivables, which are neither past
due nor impaired, are disclosed in note 15
Liquidity risk
Liquidity risk arises from the Group’s management of working capital in that the Group may encounter difficulty in
meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash
to allow it to meet its liabilities when they become due (see Note 17). To achieve this aim, it seeks to maintain cash
balances to meet expected requirements for a period of 90 days or longer. The Board receives cash flow projections
as well as information regarding cash balances. At the balance sheet date, these projections indicated that the Group
expected to have sufficient liquid resources to meet its obligations under all reasonably expected circumstances.
The liquidity risk of each Group entity is managed locally. Each operation has a facility with the Group, the amount
of the facility being based on budgets. The budgets are set locally and agreed by the Board in advance, enabling the
Group’s cash requirements to be anticipated. Where facilities of Group entities need to be increased, approval must be
sought from the Board
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional
currency is not the same as the functional currency in which the Group companies are operating. Although its global
market penetration reduces the Group’s operational risk in that it has diversified into several markets, the Group’s net
assets arising from such overseas operations are exposed to currency risk resulting in gains or losses on retranslation
into Sterling. Only in exceptional circumstances would the Group consider hedging its net investments in overseas
operations as generally it does not consider that the reduction in foreign currency exposure warrants the cash flow risk
created from such hedging techniques.
Foreign exchange risk also arises when individual Group entities enter into transactions denominated in a currency
other than their functional currency.
The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional
currency (primarily Sterling, US Dollar or South Korean Won) with the cash generated from their own operations in that
currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have
insufficient reserves of that currency to settle them) cash already denominated in that currency will, where possible, be
transferred from elsewhere within the Group.
The Group has two overseas subsidiaries in the USA and South Korea. Their revenues and expenses, other than those
incurred with the UK business, are primarily denominated in their functional currency. The Board does not believe
that there are any significant risks arising from the movements in exchange rates with these companies due to the
insignificance to the Group of Titon Inc.’s net assets and the long term nature of the Group’s investment in Titon Korea.
The UK businesses make purchases from approximately twenty overseas suppliers who invoice in the local currency
of that supplier. This, in addition to the Euro and US Dollar cash balances held in the UK and the 10% of sales from
the UK businesses not invoiced in Sterling, gives rise to foreign currency exposure which is detailed in the table below.
67
Titon Holdings Plc 2018 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2018
20 - Financial instruments – risk management (continued)
As of 30 September the Group’s UK net exposure to foreign exchange risk was as follows:
Net foreign currency financial assets / (liabilities)
Euro
US Dollar
Total net exposure
2018
£’000
28
335
363
2017
£’000
(8)
286
278
The effect of a 10% weakening of the Euro and the US Dollar against Sterling at the reporting date of 30 September
2018 on these denominated trade and other receivables, trade and other payables and cash balances carried at that
date would, had all other variables held constant, have resulted in a decrease in pre-tax profit for the year and decrease
of net assets of £33,000 (2017: decrease of £25,000). A 10% strengthening in the exchange rate would, on the same
basis, have increased pre-tax profit and increased net assets by £36,000 (2017: increase of £28,000).
21 - Leases
Operating leases
The Group leases its headquarters offices in Colchester Business Park, Colchester, Essex on a tenant repairing lease
basis. The Group has the option to terminate the lease in August 2021 or to continue in occupation until August 2026.
The Group has tenancy of three factory unit leases in South Korea which expire in February 2020. The Group also
leases cars as lessee under non-cancellable operating leases with various terms, escalation clauses and renewal
rights.
At the year end the Group had total commitments under non-cancellable operating leases, principally in respect of
properties, as set out below:
Operating lease rentals payable within:
Not later than one year
Later than one year and not later than five years
22 - Pensions
2018
£’000
16
529
545
2017
£’000
61
448
509
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those
of the Group in independently administered funds. The pension cost charge represents contributions payable by the
Group to these funds during the year (see note 4). The unpaid contributions outstanding at the year end, included in
accruals (note 17) are £30,000 (2017: £23,000).
23 - Share-based payments
Equity settled share option schemes
The Group provides share option schemes for Directors and for other members of staff.
There are presently two equity settled share option schemes; one HMRC approved and the other unapproved in
which employees may be invited to participate. Both of these schemes were introduced in March 2010. The exercise
of options granted under these schemes is dependent upon the growth in the earnings per share of the Group, over
any three consecutive financial years following the date of grant, exceeding the growth in the retail price index over the
same period by at least 9 per cent.
The vesting period of all share option schemes is three years. If the options remain unexercised after a period of ten
years from the date of grant, or on an employee leaving the Group, the options expire.
68
Titon Holdings Plc 2018 Annual Report
23 - Share-based payments (continued)
In the year to 30 September 2018, 205,000 share options were granted on 30 January 2018 (2017: nil). Details of the
share options granted and exercised during the year and the assumptions used in the Black-Scholes model for each
share-based payment are as follows:
Date of share option grant
09/06/11
03/01/13
15/01/14
05/01/15
30/01/18
Exercise price (pence)
48.0
24.5
58.0
67.0
156.5
Number
of share
options
259,950
203,000
320,000
25,000
205,000
Number of shares options granted
initially
Number of shares options
outstanding at 01/10/16
105,000
25,000
320,000
25,000
Share options exercised
(15,000)
-
Share options lapsed
-
(20,000)
(60,000)
(20,000)
-
-
-
-
-
-
475,000
(75,000)
(40,000)
360,000
Number of shares options
outstanding at 30/09/17
Share options granted
90,000
5,000
240,000
25,000
-
-
-
-
205,000
205,000
Share options exercised
(80,000)
(5,000)
(40,000)
(25,000)
-
(150,000)
Number of shares options
outstanding at 30/09/18
The inputs to the Black-Scholes
pricing model are:
Expected volatility %
Expected option life (years)
Risk free rate %
Expected dividend yield %
Weighted fair value of options at
initial grant
10,000
-
200,000
-
205,000
415,000
111
6
2.50
5
114
6
1.08
5
116
6
2.18
5
102
6
1.28
5
88
6
1.13
3
£75,000
£37,000
£114,000
£9,000
£188,000
During the year 360,000 share options, included in the table above, met the conditions of exercise (2017: 450,000).
At the end of the financial year 210,000 share options met the conditions of exercise and have a weighted average
exercise price of 57.5p (2017: 335,000 at 54.8p). The 415,000 share options outstanding at 30 September 2018 had a
weighted average price of 106.4p (2017: 55.6p) and a weighted average remaining contractual life of 7.2 years (2017:
5.7 years).
The share price at 30 September 2018 was 195p. The average price during the year was 176p.
The Group uses a Black-Scholes pricing model to determine the annual fair value charge for its share-based payments.
Expected volatility is based on historical volatility over the last six years’ data of the Company. The calculated fair
values of the share option awards are adjusted to reflect actual and expected vesting levels.
In accordance with IFRS 2, the fair value of equity-settled share-based payments to employees is determined at the
date of grant and is expensed on a straight-line basis over the vesting period on the Group’s estimate of shares that will
eventually vest. A charge of £43,000 was recognised in respect of share options in the year (2017: £14,000) of which
£4,000 was the charge made in respect of key management personnel (2017: £5,000).
69
Titon Holdings Plc 2018 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2018
24 - Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
During the year the Company recharged management service fees and rent to other wholly-owned Group members
totalling £384,000 (2017: £351,000). See Note 15 for the related party balances at 30 September 2018.
Titon Korea Co. Ltd., the 51% owned subsidiary, paid a dividend during the year to its shareholders amounting to
£849,000 (2017: £nil). Of this amount, £433,000, before withholding tax, was paid to the Company with the other
£416,000 being paid to the non-controlling interests.
Transactions for the year between the subsidiary companies and the associate company, which is a related party, were
as follows:
Browntech Sales Co. Ltd
Sales of goods
Amount owed by
related party
2018
£’000
11,561
2017
£’000
9,530
2018
£’000
4,059
2017
£’000
2,798
Trading debts between subsidiaries and BTS are created only when the ultimate customer has accepted the successful
inclusion of our products into buildings.
There have been no transactions between the Company and BTS during the year.
Key management who hold the authority and responsibility for planning, directing and controlling activities of the Group
are comprised solely of the Directors. Aside from compensation arrangements, there were no transactions, agreements
or other arrangements, direct or indirect, during the year in which the Directors had any interest. Their remuneration is
disclosed in the Remuneration Report on page 25 of this document.
Remuneration paid to key management personnel during the year was as follows:
Short term benefits
Post-employment benefits
Share based payments
2018
£’000
650
101
4
755
2017
£’000
761
88
5
854
The Non-executive Directors received fees for their services to the Titon Holdings Plc Board as disclosed in the
Directors’ Remuneration Report.
70
Titon Holdings Plc 2018 Annual Report Five Year Summary
Summarised consolidated results
Results
Revenue
Gross profit
Operating profit
Finance income
Share of profit from associate
Profit before tax
Income tax expense
Profit after tax
Dividends
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
29,946
28,011
23,721
22,258
19,256
8,026
2,188
13
778
2,979
(352)
2,627
489
7,265
1,850
10
633
7,048
1,772
8
356
5,978
1,562
9
298
5,330
1,140
5
188
2,493
2,136
1,869
1,333
(269)
(184)
(160)
(56)
2,224
1,952
1,709
1,277
410
324
289
211
Basic earnings per share
19.17p
16.55p
15.21p
12.60p
8.52p
Assets Employed
Property, plant & equipment
Net cash and cash equivalents
Net current assets
Financed by
3,655
3,415
11,185
3,548
3,269
9,972
3,511
2,438
9,039
3,218
2,870
7,392
3,169
2,149
6,323
Shareholders’ funds: all equity
16,247
14,215
13,060
11,050
9,996
The five year summary does not form part of the audited financial statements.
71
Titon Holdings Plc 2018 Annual Report Notice of Annual General Meeting
THIS INFORMATION IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt as to what action to take, you should consult your stockbroker, solicitor, accountant or
other appropriate independent professional adviser authorised under the Financial Services and Markets Act
2000. If you have sold or otherwise transferred all of your shares in Titon Holdings Plc, please forward this
document and the accompanying documents to the person through whom the sale or transfer was effected,
for transmission to the purchaser or transferee.
Notice is hereby given that the Annual General Meeting of Titon Holdings Plc (“the Company”) will be held at the
Company’s Head Office at 894 The Crescent, Colchester Business Park, Colchester, CO4 9YQ on 20 February 2019
at 11.00 a.m. for the following purposes:
To consider and, if thought fit, to pass the following resolutions, of which Resolutions 1 to 10 will be proposed as
Ordinary Resolutions and of which Resolutions 11 and 12 will be proposed as Special Resolutions.
Explanatory notes in respect of the resolutions are set out on pages 21 to 22 of the Directors’ Report which accompanies
this Notice.
Please note you will not receive a form of proxy for the 2019 AGM in the post. Instead, you can vote online at www.
signalshares.com. To register you will need your Investor Code, which can be found on your share certificate. You may
also request a hard copy proxy form directly from our Registrars, Link Asset Services, on 0871 664 0300. For full details
on proxy voting please see the notes below, which accompany this Notice of Annual General Meeting.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
To receive and adopt the reports of the Directors and the Auditors and the audited accounts of the Company
for the year ended 30 September 2018.
To declare a final dividend of 3.0p per ordinary share payable to shareholders on the Company’s register of
members at close of business on 18 January 2019 payable on 26 February 2019.
To re-elect Mr Keith Archibald Ritchie who retires from the Board in accordance with Article 104, as a Director
of the Company.
To re-elect Mr David Alan Ruffell who retires from the Board in accordance with Article 104, as a Director of
the Company.
To re-elect Mr John Neil Anderson who retires from the Board in accordance with Article 104, as a Director of
the Company.
To re-elect Mr Kevin Sargeant, who retires from the Board in accordance with Article 104, as a Director of the
Company.
To re-elect Mr Nicholas Charles Howlett, who retires from the Board in accordance with Article 104, as a
Director of the Company.
To re-appoint BDO LLP as Auditors of the Company and to authorise the Directors to determine their
remuneration.
That the Directors’ Remuneration Report set out on pages 23 to 27 of the Annual Report and Financial
Statements for the year ended 30 September 2018, be approved.
That in place of all existing authorities, the Directors be generally and unconditionally authorised pursuant
to section 551 of the Companies Act 2006 to exercise all the powers of the Company to allot shares in
the Company and to grant rights to subscribe for, or to convert any security into, shares in the Company
(“Relevant Securities”), up to a maximum aggregate nominal amount of £260,000 (representing approximately
24% of the nominal value of the ordinary shares in issue on 19 December 2018) for a period expiring (unless
previously revoked, varied or renewed) on 19 May 2020 or, if sooner, at the end of the 2020 Annual General
Meeting of the Company, but in each case the Company may, before such expiry, make an offer or agreement
which would or might require Relevant Securities to be allotted after this authority expires and the Directors
may allot Relevant Securities in pursuance of such offer or agreement as if this authority had not expired.
11.
That subject to the passing of Resolution 10 above and in place of all existing powers, the Directors be
generally empowered pursuant to section 570 and 573 of the Companies Act 2006 to allot equity securities
(within the meaning of section 560 of the Companies Act 2006) for cash, pursuant to the authority conferred
by Resolution 10 as if section 561(1) of the Companies Act 2006 did not apply to such allotment, provided
that this power shall expire on 19 May 2020 or, if sooner, the end of the 2020 Annual General Meeting of the
Company. This power shall be limited to the allotment of equity securities:
72
Titon Holdings Plc 2018 Annual Report
11.1
in connection with an offer of equity securities (including, without limitation, under a rights issue, open
offer or similar arrangement) in favour of holders of ordinary shares in the capital of the Company in
proportion (as nearly as may be practicable) to their existing holdings of ordinary shares but subject
to such exclusions or other arrangements as the Directors deem necessary or expedient in relation
to fractional entitlements or any legal, regulatory or practical problems under the laws of any territory,
or the requirements of any regulatory body or stock exchange; and
11.2
otherwise than pursuant to paragraph 11.1 up to an aggregate nominal amount of £150,000
(representing approximately 14.6% of the nominal value of the ordinary shares in issue on 19
December 2018);
but the Company may, before such expiry, make an offer or agreement which would or might require
equity securities to be allotted after this power expires and the Directors may allot equity securities in
pursuance of such offer or agreement as if this power had not expired.
This power applies in relation to a sale of shares which is an allotment of equity securities by virtue
of section 560(3) of the Companies Act 2006 as if in the first paragraph of this resolution the words
“pursuant to the authority conferred by Resolution 10” were omitted.
12.
That the Company be generally authorised pursuant to section 701 of the Companies Act 2006 to make
market purchases (within the meaning of section 693(4) of the Companies Act 2006) of its ordinary shares of
10p each on such terms and in such manner as the Directors shall determine, provided that:
12.1
12.2
the maximum number of ordinary shares hereby authorised to be purchased is 1,090,000 (representing
approximately 10% of the nominal value of the ordinary shares in issue on 19 December 2018);
the maximum price which may be paid for each ordinary share shall be the higher of (i) 5% above the
average of the middle market quotations for an ordinary share (as derived from The Stock Exchange
Daily Official List) for the five business days immediately before the day on which the purchase is
made (in each case exclusive of expenses); and (ii) the higher of the price of the last independent
trade and the highest current independent bid on the trading venue where the purchase is carried out
(exclusive of expenses);
12.3
the minimum price which may be paid for each ordinary share shall be 10p; and
12.4
this authority (unless previously revoked, varied or renewed) shall expire on 19 May 2020 or, if
sooner, the end of the 2020 Annual General Meeting of the Company except in relation to the
purchase of ordinary shares the contract for which was concluded before such date and which will or
may be executed wholly or partly after such date.
By order of the Board
D A Ruffell
Secretary
24 January 2019
Registered Office:
894 The Crescent
Colchester Business Park
Colchester
Essex
CO4 9YQ
73
Titon Holdings Plc 2018 Annual Report
Notice of Annual General Meeting (continued)
Notes:
Rights to appoint a proxy
1.
Shareholders can vote online by logging on to www.signalshares.com and following the instructions given.
Alternatively shareholders can request a hard copy proxy form by contacting our Registrars, Link Asset Services,
on 0871 664 0300 from the UK (Calls cost 12p per minute plus network extras) or +44 371 664 0300 from outside
the UK (calls chargeable at the applicable international rate) and returning it to the address shown on the form. The
appointment of a proxy will not prevent a member from subsequently attending and voting at the meeting in person.
2.
Members of the Company are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak
and vote at a meeting of the Company. A proxy does not need to be a member of the Company. A member may
appoint more than one proxy in relation to a meeting provided that each proxy is appointed to exercise the rights
attached to a different share or shares held by that member. To appoint more than one proxy you may photocopy
the proxy form.
Procedure for appointing a proxy
3.
To be valid, the proxy instruction must be received by one of the below methods no later than 11.00 a.m. on
Monday 18 February 2019. It should be accompanied by the power of attorney or other authority (if any) under
which it is signed or a notarially certified copy of such power or authority:
●
●
●
via www.signalshares.com by logging in and selecting the ‘Proxy Voting’ link. If you have not previously
registered, you will first be asked to register as a new user, for which you will require your investor code (which
can be found on your share certificate and dividend confirmation), family name and postcode (if resident in
the UK);
if your shares are held electronically via CREST, the proxy appointment may be lodged using the CREST
Proxy Voting Service in accordance with note 7 below; and
in hard copy form by post, by courier or by hand to the Company’s registrars, Link Asset Services, PXS, 34
Beckenham Road, Beckenham, Kent BR3 4TU.
Nominated persons
4.
Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006
to enjoy information rights (a “Nominated Person”) may, under an agreement between him or her and the member
by whom he or she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy
for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to
exercise it, he or she may, under any such agreement, have a right to give instructions to the member as to the
exercise of voting rights.
5.
The statement of the rights of members in relation to the appointment of proxies in notes 1, 2 and 3 above does
not apply to Nominated Persons. The rights described in those notes can only be exercised by members of the
Company.
CREST
6.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service
may do so by using the procedures described in the CREST Manual. CREST personal members or other CREST
sponsored members and those CREST members who have appointed a voting service provider(s), should refer to
their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
7.
8.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST
message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications and must contain the information required for such instructions, as described in the CREST
Manual. The message must be transmitted so as to be received by the Company’s agent, Link Asset Services
(CREST Participant ID: RA10), no later than 48 hours before the time appointed for the meeting. For this purpose,
the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the
CREST Application Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST
in the manner prescribed by CREST.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that
Euroclear does not make available special procedures in CREST for any particular messages. Normal system
timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility
of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored
member or has appointed a voting service provider(s) to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the
CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST
sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning
practical limitations of the CREST system and timings.
74
Titon Holdings Plc 2018 Annual Report Notes: (continued)
9.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a)
of the Uncertificated Securities Regulations 2001 (as amended).
Entitlement to Attend
10. Entitlement to attend and vote at the meeting (and the number of votes which may be cast at the meeting), will
be determined by reference to the Company’s register of members at close of business on Monday 18 February
2019, or, if the meeting is adjourned, 48 hours before the time fixed for the adjourned meeting (ignoring for these
purposes non-working days). In each case, changes to the register after such time will be disregarded.
Corporate representatives
11. Any corporation which is a member can appoint one or more corporate representatives, who may exercise on its
behalf all of its powers as a member provided that they do not do so in relation to the same shares.
Total voting rights
12. Holders of ordinary shares are entitled to attend and vote at general meetings of the Company. The total number
of issued ordinary shares in the Company on 23 January 2019, which is the latest practicable date before the
publication of this document, is 11,133,750. The Company holds 50,000 ordinary shares in treasury. On a vote by
show of hands, every member who is present has one vote and every proxy present who has been duly appointed
by a member entitled to vote has one vote. On a poll vote, every member who is present in person or by proxy has
one vote for every ordinary share of which they are the holder.
Publication on website
13. Under section 527 of the Companies Act 2006, members meeting the threshold requirements set out in that
section have the right to require the Company to publish on a website a statement setting out any matter relating
to: (i) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to
be laid before the Annual General Meeting; or (ii) any circumstance connected with an auditor of the Company
ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance
with section 437 of the Companies Act 2006. The Company may not require the members requesting any such
website publication to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where
the Company is required to place a statement on a website under section 527 of the Companies Act 2006, it must
forward the statement to the Company’s auditor not later than the time when it makes the statement available on
the website. The business which may be dealt with at the Annual General Meeting includes any statement that the
Company has been required under section 527 of the Companies Act 2006 to publish on a website.
14. A copy of this notice, and other information required by section 311A of the Companies Act 2006, can be found on
the website at www.titonholdings.com.
15. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any
such question relating to the business being dealt with at the meeting but no such answer need be given if (a) to do
so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information,
(b) the answer has already been given on a website in the form of an answer to a question, or (c) it is undesirable
in the interests of the Company or the good order of the meeting that the question be answered.
Documents available for inspection
16. Copies of the service contract of each Executive Director and the letter of appointment of each Non-executive
Director will be available for inspection at the registered office of the Company during normal business hours
on any weekday (excluding Saturdays and public holidays) and at Titon’s Head Office at 894 The Crescent,
Colchester Business Park, Colchester, CO4 9YQ, for at least 15 minutes prior to and during the Annual General
Meeting.
Communications
17. Members who have general enquiries about the meeting should use the following means of communication. No
other means of communication will be accepted. You may:
●
call the Link shareholders’ helpline on 0871 664 0300 (calls cost 12p per minute plus your phone company’s
access charge. If you are outside the United Kingdom, please call +44 371 664 0300. Calls outside the United
Kingdom will be charged at the applicable international rate. Lines are open 9:00am - 5.30pm Monday to
Friday excluding public holidays in England and Wales); or
●
write to Link Asset Services, Shareholder Services, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
18. You may not use any electronic address provided in this notice of Annual General Meeting for communicating with
the Company for any purposes other than those expressly stated.
75
Titon Holdings Plc 2018 Annual Report Directors and Advisors
DIRECTORS
Executive
K A Ritchie (Group Chairman)
D A Ruffell (Chief Executive)
T N Anderson
T D Gearey
Non-executive
J N Anderson (Deputy Chairman)
K Sargeant
N C Howlett
SECRETARY AND REGISTERED OFFICE
D A Ruffell
894 The Crescent
Colchester Business Park
Colchester
Essex
CO4 9YQ
COMPANY REGISTRATION NUMBER
1604952 (Registered in England & Wales)
WEBSITE
www.titonholdings.com
AUDITORS
BDO LLP
55 Baker Street
London
W1U 7EU
NOMINATED ADVISOR
Shore Capital and Corporate Ltd
Bond Street House
14 Clifford Street
London
W1S 4JU
BROKER
Shore Capital Stockbrokers Ltd
Bond Street House
14 Clifford Street
London
W1S 4JU
REGISTRARS AND TRANSFER OFFICE
Link Market Services Ltd
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
76
Titon Holdings Plc 2018 Annual Report
TITON HOLDINGS PLC
894 The Crescent, Colchester Business Park, Colchester, Essex, CO4 9YQ
Tel: +44 (0)1206 713800
Email: enquiries@titon.co.uk
Web: www.titonholdings.com