2019 Annual Report
and Financial Statements
S:\Artwork\Literature\Titon Holdings\2019\Images Overleaf: Pear Tree House, London. Specifier: Edgley Design. Titon Products: HRV10 Q Plus Units, Trimbox NO2 Filter®
Annual Report and Financial Statements
for the year ended 30 September 2019
Contents
Chairman’s Statement ...................................................................................... 2
Strategic Report................................................................................................ 6
Strategic Report: Corporate and Social Responsibility Report ....................... 11
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 ........................................................................................ 70
Notice of Annual General Meeting ................................................................. 71
Directors and Advisors ................................................................................... 75
1
Titon Holdings Plc 2019 Annual Report Chairman’s Statement
As announced in early 2019, a slow-down in trading coupled with changing product preferences towards
mechanical ventilation units in South Korea has resulted in a reduction in the Group’s underlying profit before
tax of 22%. Our UK, European and US operations have, however, traded satisfactorily and the total dividend
for the year has been maintained. At the same time, our balance sheet has continued to strengthen as net cash
increased significantly to £4.6 million.
Profit and loss
As noted below, all 2018 amounts, where relevant,
have been restated. In the year ended 30 September
2019, the Group’s net revenue (which excludes inter-
segment activity) reduced by 9% to £27.2 million (2018:
£29.8 million). On a constant currency basis, there was
no material change to the 2019 net revenue (2018: an
increase of 8%).
The Group’s gross margin increased from 28.9% to 30.2%
as a result of changes in the geographical mix of sales.
Underlying operating profit1 fell 10.2% to £1.8 million
(2018: £2.0 million) and the Group realised an underlying
operating profit margin1 of 6.7% (2018: 6.8%).
Net interest contributed £12,000 (2018: £13,000) while the
share of profits from the Group’s South Korean associate
fell from £741,000 to £329,000 resulting in underlying
profit before tax1 of £2.15 million (2018: £2.77 million). On
a constant currency basis there was no material change
to the 2019 or the 2018 profit before tax.
Underlying EBITDA1 was 3.4% lower at £2.58 million
(2018: £2.67 million) and underlying earnings per share1
for the year was 14.5 pence (2018:18.2 pence). The
underlying effective rate of taxation1 of the Group fell to
10.2% (2018: 15.5%).
The Directors are proposing a final dividend of 3.0 pence
per share (2018: 3.0 pence). When added to the interim
dividend of 1.75 pence, paid on 21 June 2019 (2018: 1.75
pence), this represents a total dividend for the year of 4.75
pence (2018: 4.75 pence). If approved by shareholders at
the forthcoming Annual General Meeting on 18 February
2020, the dividend will be payable on 21 February 2020
to shareholders on the register at 17 January 2020. The
ex-dividend date is 16 January 2020.
Statements of financial position and cash flows
The Group benefits from a robust and liquid balance
sheet. Net assets, including non-controlling interests,
rose by £0.59 million to £17.7 million in the year to 30
September 2019, at which point net cash stood at £4.59
million (2018: £3.41 million), which is equivalent to 25.9%
of net assets (2018: 20.0%). Inventory levels at the year-
end fell by £783,000 on 2018 due to a reduction in stock
levels in South Korea. This, along with a reduction in the
level of other working capital required in South Korea, has
contributed to cash generated from operations increasing
to £3.28 million (2018: £1.94 million). Capital expenditure
increased slightly to £902,000 (2018: £893,000) and
the Group paid dividends to the shareholders of Titon
Holdings Plc of £526,000 (2018: £489,000). During the
course of the year Titon Korea paid a further dividend
to Titon Holdings Plc and non-controlling shareholders,
resulting in £480,000 of cash being paid to Titon Holdings
Plc and a cash outflow from the Group to Non-Controlling
Interests of Titon Korea of £488,000 (2018: £416,000).
The overall effect has been a net increase in the Group’s
cash reserves in the period of £1.17 million (2018:
£146,000). Net current assets at 30 September 2019
were £10.1 million (2018: £9.8 million) with a Quick Ratio2
of 2.1 (2018: 1.6). Underlying ROCE3 was 14.6% (2018:
15.5%).
Segment analysis
The Directors look initially at geographical areas to
evaluate the Group’s performance and then consider
product splits at the secondary level.
UK and Europe
Overall, revenue from the UK and Europe increased by
1% in fiscal 2019.
from
Revenue
the Hardware business, comprising
sales of our traditional trickle vents plus window and
door hardware, was slightly lower in the year as export
sales fell by 19% and sales into the PVCu, Timber and
Aluminium sectors of the UK market were flat as markets
weakened. Sales of Titon branded door and window
hardware products continued to show growth of 20% in
the fiscal year.
In our Ventilation Systems business, the revenues from
mechanical ventilation products increased by 4%, with
sales in the UK up 7% despite a slowdown in our key
2
Titon Holdings Plc 2019 Annual Report London and South East markets where delays in projects
are being experienced. Mechanical ventilation sales
in mainland Europe were slightly down on 2018 as a
number of the major European economies slowed and
the uncertainty caused by Brexit led to customers’ normal
purchasing patterns being disrupted.
2018 according to Experian’s most recent UK Construction
forecast, and by a further 2.3% in 2020. At the same
time, the expected value of repair, maintenance and
improvement (RMI) in the private and public residential
sectors is forecast to be down by 1% in 2019 against
2018, although it is then expected to rise by 2.3% in 2020.
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 continue in 2020. A focus on
the importance of air quality, both outdoors and indoors,
continues to sharpen as the impact of poor-quality air on
health is better understood by the medical profession,
governments and consumers. For our part, we continue
to work with our trade associations to promote ventilation
and specifically with 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. Beama also continues to sponsor the
Healthy Homes and Buildings All Party Parliamentary
Group and the Air Pollution All Party Parliamentary Group.
In October 2019 the Ministry of Housing, Communities
and Local Government (MHCLG) published “The Future
Homes Standard”, which includes a consultation on
changes to Part L (Conservation of fuel and power)
and Part F (Ventilation) of the Building Regulations for
new dwellings. Both of these Building Regulations are
important to the sale of our ventilation products in the
UK. We will be commenting on the proposed changes
to both sets of Building Regulations before the closing
date in January 2020. MHCLG have indicated that they
hope to bring into force the proposed changes by mid/
late 2020 although this date will, of course, be subject to
the usual parliamentary priorities. Our initial view is that
the proposals may alter the mix of ventilation products
supplied to the market. We await proposals from MHCLG
on the refurbishment sector, non-domestic buildings and
over-heating in due course.
The value of UK private and public housebuilding output
is forecast to increase in 2019 by 2.3% against calendar
South Korea
In South Korea, the Group’s subsidiary, Titon Korea
(51% owned), manufactures natural window ventilation
products and remains the national market leader with an
estimated market share in this core sub-sector in excess
of 75%. In February 2019 we issued a trading update
in respect of our South Korean business identifying a
slowdown in the domestic residential development market
and the presence of dust-based air pollution, largely from
China. The latter impact increased the relative demand for
mechanical ventilation products which, in turn, reduced
the demand for natural ventilation products. These factors
have resulted in a reduction in revenue to £8.3 million
(2018: £11.4 million) whilst the contribution to Group profit
before tax declined to £0.82 million (2018: £1.1 million).
The Group’s associate company
(49% owned),
Browntech Sales Co. Limited (‘BTS’), which principally
distributes Titon Korea’s natural ventilation products,
was accordingly impacted by the downturn experienced
by Titon Korea. The profit recognised in respect of
associates (which is all BTS) was 56% lower in 2019 at
£329,000 (2018: £741,000). In addition to distributing
ventilation products in South Korea, BTS invests in and
develops schemes in the domestic residential real estate
market. There have been no further changes to the status
of BTS’s investments in the South Korean residential real
estate market since the 2019 Interim Results. Despite
the reduction in profits from South Korea that we have
experienced this year and taking Titon Korea and BTS
together, South Korea remains the largest contributor
to the Group’s profit before tax at £1.15 million for the
year (2018: £1.84 million). We have continued to commit
resources to designing new products for the South
Korean market and a new natural ventilation product with
increased filtration has been designed by our Research &
3
Titon Holdings Plc 2019 Annual Report attributable to equity holders of Titon by £826,000 from the
figure shown in the 2018 Annual Report. In this Statement
the total equity and other comparative 2018 numbers have
been restated. For the fiscal year to 30 September 2018,
revenue has been reduced by £172,000 to £29.8 million
and profit before tax has been reduced by £209,000.
Investors
We have now been listed on the AIM market for one year
since our move from the Main Market of the London Stock
Exchange and I hope that shareholders have benefited
from this move.
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 four years. Shore Capital, our Nominated
Adviser and broker, has initiated research coverage on
Titon during the year by publishing a research note on
the Group in August 2019 entitled “Improving the air
that we breathe”, a sentiment we share. Finally, 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.
Outlook
Despite
the
the previously reported challenges
Korean market, the Group remained profitable and cash
generative. The dividend for the year was maintained at
the same level as 2018, whilst our net cash reserves also
increased significantly, further strengthening the Group’s
balance sheet.
in
The UK economy continues to grow, albeit at a slower
rate than forecast at this time last year. How much of
this slower growth is down to Brexit is difficult to say but
sentiment amongst many consumers and businesses
in the UK (and within the wider EU) is that uncertainty
about Brexit has hit confidence and impacts adversely
Chairman’s Statement (continued)
Segment analysis (continued)
Development team in the UK and it is now in the process
of being tooled up in Korea. The product will be on sale in
the second half of fiscal 2020.
United States
Finally, as I noted in the 2019 Interim Results Statement,
results from our US business have improved significantly
in the period. Sales for the twelve months increased by
51% to £983,000 (2018: £652,000) and, while Titon Inc.
made no statutory profits in the full year, it generates a
return for our UK manufacturing business and makes a
contribution to Group income.
Board
As noted in the Interim Report, we appointed Mr Bernd
Ratzke to the Titon Board as an independent Non-
executive Director and he has immediately made a
contribution to the Board’s discussions and to other legal
matters impacting the day-to-day activities of the Group.
There have been no other changes to the Board during
the fiscal year.
Employees
As ever, 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. Although the business has not grown
this year as we would have liked, this is not down to their
contribution which, as usual, has been substantial.
Restatement
As reported in the 2019 Interim Results Statement, we
announced in March 2019 that certain costs and revenues
associated with products sold by Titon Korea in earlier
accounting periods, up to and including 30 September
2018, had, in error, not been correctly accounted for in the
relevant periods. This related to the incorrect accounting
apportionment of costs and revenues between first and
second fix installations of products manufactured by
our 51% subsidiary, Titon Korea and sold by Browntech
Sales Co. Ltd., our 49% owned associate company. The
result of this error was a non-cash reduction of total equity
4
Titon Holdings Plc 2019 Annual Report on trading. At Titon, we increased the buying of stock in
advance of a possible Brexit date twice in 2019, to no
benefit. We urge our politicians, of whichever party wins
the General Election, to give certainty to the Country.
Without it, of course, it is difficult to plan and commit funds
to new investments. As a business and sector, too, we
are subject to amendments to the current UK regulatory
regime for ventilation and conservation of fuel and power,
which could change demand for our passive and powered
ventilation products.
In South Korea, the Group’s largest net profit contributor,
2019 saw modest growth in GDP throughout the year
of about 2.0%, which is below trend. The South Korean
economy should continue to grow in 2020 with Focus
Economics forecasting a rise in GDP in 2020 of 2.2%
and 2.3% in 2021 as the Government continues its
expansionary fiscal stance together with the impact of two
interest rate cuts by the Bank of Korea. As noted above,
we are in a transitionary period for our natural ventilation
products in South Korea as market requirements change.
Whilst we will be launching new products for this market in
the second half of 2020, we expect adoption over a period
of time. As a result, we anticipate that sales in Titon Korea
in fiscal 2020 will be lower than in 2019.
Our business model is robust but we continue to
face political and economic uncertainties which have
contributed to a challenging first two months of the fiscal
year. Titon builds and delivers popular products across a
unique geographical spread and a number of core market
positions. We have good people, a strong balance sheet
and continue to seek new growth opportunities in our
target markets.
On behalf of the Board.
KA Ritchie
Chairman
11 December 2019
Keith Ritchie Chairman
Notes:
1 Underlying Operating profit, Underlying Profit before tax,
Underlying EBITDA and Underlying EPS in the period
are non-IFRS measures which are calculated by adding
back an exceptional item of £181,000, which relates
to transaction related costs in respect of a potential
acquisition which did not proceed.
2 The Quick Ratio measures liquidity and is calculated as
follows: Current Assets-less-Stocks divided by Current
Liabilities.
3 Underlying ROCE is calculated by dividing Underlying
EBIT by capital employed (capital employed being the
sum of shareholders’ funds, non-controlling interests and
all debt less intangible assets and cash).
5
Titon Holdings Plc 2019 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 decline of 8.8%% to £27.2m and Group profit before tax down to £1.97m
EPS down 29.5% to 12.84 pence
Second dividend paid by Titon Korea
Net cash balances up by £1.18m to £4.59m
Total dividend for the year maintained at 4.75 pence per share
Overview
In evaluating the performance of the business the Directors initially review
geographical areas and then consider product group splits at the secondary level.
David Ruffell - Chief Executive
The Titon Group performance is monitored across three geographical segments. Within these segments, the principal
business 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;
● 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 has also been 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
2019
£’000
27,157
1,970
(186)
1,784
126
8.3
4,587
2018
restated
£’000
29,774
2,770
(315)
2,455
132
10.9
3,415
The Directors are disappointed with the 9% fall in Revenue and the 29% decrease in Group Profit before Tax during
the year, which is largely due to lower business levels in South Korea. A full review of the Group’s performance during
the year is given in the Chairman’s Statement.
6
Titon Holdings Plc 2019 Annual Report
Goals and strategy
The Titon Group’s goals are the following:
Markets
Employees
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
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 2019 Annual Report
Strategic Report (continued)
Business model
Within its main geographical classifications of the United Kingdom, South Korea, North America and All Other Countries,
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 including South Korea. This activity accounted for 74% of Group revenue in 2019 (2018: 77%); and
(ii) mechanical ventilation business, which the Group entered in 2007 and which accounted for 26% of revenue in 2019
(2018: 23%). See Business Segmentation information on page 52.
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 no further developments will be
made.
The Group also has a wholly owned subsidiary, Titon Inc, based in Indiana in the USA. Sales into this market accounted
for 4% of Group revenues during the year (2018: 2%).
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 48% (2018: 42%) of overall Group turnover and products manufactured in South Korea
account for 31% (2018: 39%). The remaining 21% (2018: 19%) 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. Sales by individual area sales managers reviewed weekly
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 2019 Annual Report Graphical representations of some of these KPI’s and other financial performance measures for the years ended 30
September are as follows:
Revenue
£27.2m
Operating profit
£1.63m
28.0
29.8
27.2
22.3
23.7
1.77
1.85
2.02
1.56
Profit before tax
£1.97m
2.77
2.49
1.63
1.87
2.14
1.97
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Dividend paid
4.75p
4.45
3.75
4.75
Earnings per share
12.84p
18.21
16.55
15.21
2.75
3.00
12.6
12.84
Net cash & cash equivalents
£4.59m
4.59
3.27
3.41
2.87
2.44
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Note: 2018 figures are restated
2018/19 performance
The financial results for the year are shown above and are discussed throughout the Annual Report. In respect of the
strategies identified, the significant outcomes are as follows:
UK, Europe and USA
●
sales of trickle vents and door and window hardware products fell by 1.4% in the UK and in Europe during the
year, but increased by over 50% in the US. Whilst we have experienced a fall in trickle vent sales in some of our
European markets it has been encouraging to see continued strong growth in sales of Titon branded hardware in
the UK. The rebound in US sales comes against the background of a significant fall in the previous financial year,
but is nonetheless welcome news;
●
sales of Ventilation System products in the UK rose by 7% in the period against the prior year, but sales to
continental Europe and the rest of the world were flat as some of our more important European markets slowed;
● we continued to invest in new products during the year and launched two further sizes of Mechanical Ventilation
with Heat Recovery (MVHR) units, both of which are already being received very positively in their target market
sectors;
● we have recently restructured our workforce in Haverhill in 2019 to reflect changes in our product mix and reductions
in demand on some product lines.
South Korea
●
sales of natural ventilation products through our subsidiary in South Korea fell by 27% as sales into the private
sector declined due to a slowdown in residential new build construction and the impact of air pollution coming
mainly from China. Despite this Titon retains a 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, increased
again to £504,000 (2018: £446,000), reflecting the strategy noted above to continually develop new products;
●
employee numbers fell during the period to 215 at September 2019 against 225 at September 2018. Salaries are
reviewed annually but due to the difficult operating environment the staff inflationary pay review for October 2019
has been deferred.
9
Titon Holdings Plc 2019 Annual Report Strategic Report (continued)
2019/20 activities
The Board anticipates that the Group’s business will continue on broadly the same approach as it did in 2018/19 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:
●
increasing our penetration into the residential MVHR market in the UK through an increase in sales force numbers
and sales activities;
● working with Regulatory and Governmental organisations to increase the awareness of the effects of inadequate
ventilation and poor indoor air quality (subject to the MHCLG Consultations on Building Regulations discussed in
the Chairman’s Statement);
●
●
●
●
●
●
●
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;
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 new natural ventilation products in South Korea following changes to the regulatory regime in
Korea that requires higher levels of filtration for all ventilation systems;
focus on improving factory operating efficiency along with continued control of overheads will be necessary;
in the UK, the consensus view on the UK economy is for GDP growth of around 1.2% in 2020 and 2021. UK
Government capital spending remains constrained although housebuilding remains 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). Experian is forecasting continued growth of 2.3% for 2020 in residential new build in both
the private and public sectors and 4.1% in 2021. For public and private sector residential RMI Experian forecast
2.3% increase in 2020 and 2% in 2021. 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 2.2% in 2020 and 2.3% in 2021. 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 continuing slowdown in our core business in
South Korea in fiscal 2020 as our new products are introduced to the market.
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
2019
Male
8
9
124
141
2019
Female
-
-
74
74
2019
Total
8
9
198
215
2018
Male
7
9
134
150
2018
Female
-
-
75
75
2018
Total
7
9
209
225
10
Titon Holdings Plc 2019 Annual Report 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; and
● 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.
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 recently updated our Health & Safety policy, which
is displayed on noticeboards throughout the business, and have 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
The accident statistics for our UK operations are as follows:
●
●
January to December 2018
January to December 2019
36 reported accidents, 1 RIDDOR reported
44 reported accidents, 0 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.
11
Titon Holdings Plc 2019 Annual Report
Strategic Report (continued)
Corporate and Social Responsibility Report (continued)
The Group follows ISO 14001:2015 for Environmental Management Systems within its UK manufacturing operation
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 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. Based on the
latest energy figures available we have reduced our UK electricity usage by 2.5% in 2019 against 2018 and gas usage
by 10% over the same periods.
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
Total tonnes of CO2 equivalent
CO2 emissions normalised per £ million of sales of manufactured products
2019
tCO2e
648
368
1,016
48
2018
tCO2e
698
428
1,126
47
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 2019.
Community and human rights
We continue to support a number of national charities throughout the year and have identified a specific local charity
each year as well for collections. We have arranged 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 2019 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.
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, the date of which is still
uncertain.
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.
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.
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.
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. Additional measures have
been taken to ensure the security of the
Group and customer data.
13
Titon Holdings Plc 2019 Annual Report Strategic Report (continued)
Report on Risk Management (continued)
Risk
Potential Impact
Mitigations
Reliance on key customers and
suppliers
Parts of the Group’s business are
dependent on key customers and key
suppliers.
Failure to manage relationships with key
customers and suppliers 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 and suppliers 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 Experian’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 2019 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 UK ventilation and heat and power
use regulations are currently subject to
consultation.
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 as well as professional indemnity
cover for areas of the business where
advice about products is provided as part
of the sales process.
15
Titon Holdings Plc 2019 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 minimise this risk and these
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.
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.
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.
16
Titon Holdings Plc 2019 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 18 December 2019 and signed on its behalf by:
D A Ruffell
Chief Executive
17
Titon Holdings Plc 2019 Annual Report Directors’ Report
The Directors present their report and the Group and Company financial statements for the year ended 30 September
2019.
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 8.
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 2019, 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
741,579
%
11.41
7.22
6.69
The Company has not been notified of any changes to substantial shareholdings between 30 September 2019 and 18
December 2019.
Share capital
The total issued ordinary share capital at 30 September 2019 consisted of 11,133,750 Titon Holdings Plc shares of 10p
each, of which 50,000 shares were held in treasury. There were no 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 2019 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 (2018: 3.0 pence) per ordinary share.
This, when taken with the interim dividend of 1.75 pence (2018: 1.75 pence) per ordinary share paid on 21 June 2019,
gives a total dividend of 4.75 pence (2018: 4.75 pence) per ordinary share for the year ended 30 September 2019.
Titon operates a dividend reinvestment programme for shareholders details of which are available from our registrars,
Link Market Services Ltd.
18
Titon Holdings Plc 2019 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 £504,000 during the year (2018: £446,000). Development
expenditure capitalised in 2019 amounted to an additional £123,000 (2018: £136,000). 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 their employment, the Group will consider providing the employee with such
means, including appropriate training, as will enable the employee to continue to carry out their 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, the 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 within 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. The Directors 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 2019 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 also required to prepare financial statements in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM.
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 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 18 December 2019 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 2019 and 18 December 2019
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.
20
Titon Holdings Plc 2019 Annual Report
Post balance sheet events
There have been no events since the balance sheet date that materially affect the position of the Group.
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 and Parent Company have adequate resources to continue in operational existence for a
period of at least twelve months from the date of approval of the Financial Statements. 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 18 February 2020 commencing
at 11.00 a.m. A Notice convening the Annual General Meeting of the Company for the year ended 30 September
2019 may be found on page 71 of this document.
Shareholders are being asked to vote on various items of ordinary business, being Resolutions 1 to 12 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 2019.
The Directors’ Report was approved by the Board on 18 December 2019 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 21 February 2020 to shareholders on the register on 17 January 2020.
Resolution 3 - to re-elect Mr Tyson 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 4 - to re-elect Mr Tony David Gearey as a Director
The Chairman confirms that following performance evaluation Mr Gearey 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-elect Mr Bernd Ratzke as a Director
The Chairman confirms that following performance evaluation Mr Ratzke continues to be effective and demonstrates
commitment in his role.
Resolution 9 - 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 10 – to approve the Directors’ Remuneration Report
Resolution 10 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.
21
Titon Holdings Plc 2019 Annual Report
Directors’ Report (continued)
Resolution 11 – 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
Meeting held on 20 February 2019, will expire at the forthcoming Annual General Meeting.
Resolution 11 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 18 December 2019 (excluding
treasury shares). The Company currently holds 50,000 shares in treasury.
The authority conferred by the resolution will expire on 17 May 2021 or, if sooner, at the 2021 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 12 - 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 Annual General Meeting
held on 20 February 2019 will expire at the forthcoming Annual General Meeting. Accordingly, Resolution 12 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 18 December 2019). The power conferred by this Resolution will expire
on 17 May 2021 or, if sooner, at the 2021 Annual General Meeting.
In addition, there is one item of special business, being Resolution 13, as listed below.
Resolution 13 - Company’s authority to purchase its own shares
Resolution 13 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 18 December 2019. 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 17 May 2021 or, if sooner, at the 2021 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 18 December 2019 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 13 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 18 December 2019 and signed on its behalf by:
D A Ruffell
Secretary
22
Titon Holdings Plc 2019 Annual Report Directors’ Remuneration Report
Statement from the Chairman of the Committee
I am pleased to present the Directors’ Remuneration Report for the year ended 30 September 2019.
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 18 February 2020, to receive and adopt
the Directors’ Remuneration Report. I can report that at the 2019 AGM there were 1,538,215 votes in favour, 0 votes
against and 473 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. As the
results did not exceed budget, no performance related elements have been paid this year.
Details of the Directors’ Remuneration Policy are shown on the Group’s website in the Corporate Governance section.
The Directors’ Remuneration Policy was approved in its entirety at the 2018 AGM and the Remuneration Committee is
not proposing any changes this year.
The Directors’ interests in the ordinary share capital of the Company at the year-end are reported below on page 26.
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.
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 AIM index.
t
n
e
c
r
e
P
700
600
500
400
300
200
100
0
-100
Total Shareholder Return Index
Titon Holdings Plc
FTSE AIM
Sep 09
Sep 10
Sep 11
Sep 12
Sep 13
Sep 14
Sep 15
Sep 16
Sep 17
Sep 18
Sep 19
This graph shows the percentage change in value of £1 invested in the Company on 30 September 2009 (assuming
dividends reinvested) compared with the percentage change in value of £1 (assuming dividends reinvested) in the
FTSE AIM. The Directors consider the FTSE AIM Index to be an appropriate choice as the Company was included in
it during the year to 30 September 2019.
23
Titon Holdings Plc 2019 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
%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
88
92
92
92
94
101
102
111
116
122
-
-
-
-
-
28
21
31
32
-
13
14
16
17
12
12
13
15
16
17
9
20
20
15
15
16
17
16
16
17
110
126
128
124
121
157
153
173
180
156
0.0
14.5
1.6
(3.1)
(2.4)
29.8
(2.5)
13.1
4.0
(13.3)
%
-
-
-
-
-
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
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
The Remuneration of the Chief Executive has reduced by 13.3% in the year (2018: an increase of 4.0%), compared to
average increase for all Group employees of between 2% and 3% (2018: an increase of 2.3%). 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:
Directors’ remuneration
Other employee remuneration
Dividend payments to shareholders
2019
£’000
664
6,141
526
2018
£’000
723
5,930
489
Percentage
change
%
(8.2)
3.6
7.6
24
Titon Holdings Plc 2019 Annual Report
Directors’ remuneration
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
K A Ritchie
D A Ruffell
Non-executive Directors:
J N Anderson
N C Howlett
K Sargeant (c)
B Ratzke – appointed as
Non-executive Director on
25 March 2019
Totals
£’000
£’000
(b)
£’000
£’000
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
96
89
58
39
130
127
122
116
37
37
54
23
37
37
25
-
559
468
7
6
7
7
18
16
17
16
-
-
-
-
-
-
-
-
49
45
-
22
-
20
-
30
-
32
-
-
-
5
-
-
-
-
-
109
7
6
28
45
-
-
17
16
-
-
4
34
-
-
-
-
56
101
£’000
110
123
93
111
148
173
156
180
37
37
58
62
37
37
25
-
664
723
(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, no performance related remuneration is payable to the
Executive Directors for this period. The Remuneration Committee will consider the impact of the restatement of
Titon Korea’s revenues in earlier accounting periods when determining future payments.
(c) Inclusive of £37,455 relating to consultancy fees for 2019 (2018: £36,720).
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 2019 were £nil (2018: £3,694).
25
Titon Holdings Plc 2019 Annual Report
Directors’ Remuneration Report (continued)
Directors and their interests in shares
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 2019
Ordinary shares of
10p each
30 September 2018
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
B Ratzke
Non-executive Director
981,381
118,500
1,737,802
693,750
20,500
38,500
10,000
14,924
978,212
118,500
1,737,802
693,750
20,500
38,500
-
-
There were no other changes
18 December 2019.
in Directors’ beneficial shareholdings between 30 September 2019 and
Share options
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
2018
Granted
during
the year
Exercised
during
the year
Lapsed
during the
year
At
30 September
2019
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
10,000
50,000
60,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
25,000
18,000
18,000
25,000
25,000
50,000
50,000
10,000
50,000
60,000
Mr J N Anderson, Mr K Sargeant and Mr B Ratzke 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 2019 and
18 December 2019.
26
Titon Holdings Plc 2019 Annual Report
Share options (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 2019 the market price of the Company’s shares was 130.0p. The range during the year was 112.5p
to 206.0p.
Approval
The Directors’ Remuneration Report was approved by the Remuneration Committee on 18 December 2019 and signed
on its behalf by:
J N Anderson
Remuneration Committee Chairman
27
Titon Holdings Plc 2019 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. As noted last year 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, where the
Company’s shares have been traded since 10 December 2018.
There have been no major changes to the UK Corporate Governance Code to report to shareholders during the
financial period. As noted last year the 2018 Code made 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 and to meet its liabilities as they fall due over the period of
their assessment. 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, including those that would threaten its business model, future
performance, solvency or liquidity, 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 four 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.
Mr B Ratzke is deemed to be independent for the purposes of the Code despite his previous service as Group Legal
Counsel, due to his independence of character and judgement.
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 2018/19 financial period comprises the Chairman, the Chief Executive
and Mr K Sargeant 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
28
Titon Holdings Plc 2019 Annual Report ●
●
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;
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 Nominations 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 2019 the Board consisted of the Executive Chairman, the Chief Executive, two other Executive
Directors and four 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.
Main
Board
Remuneration
Committee
Audit
Committee
Nominations
Committee
Total meetings held
K A Ritchie
D A Ruffell
T N Anderson
T D Gearey
N C Howlett
K Sargeant
J N Anderson
B Ratzke*
* B Ratzke joined the Board on 25 March 2019
7
7
7
7
7
6
7
7
3
1
-
-
-
-
-
1
1
-
2
2
2
-
-
-
2
-
-
1
-
-
-
-
-
1
1
-
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.
The Directors who retire by rotation are Mr Tyson Anderson, Mr Tony Gearey, Mr John Anderson, Mr Kevin Sargeant,
Mr Nicholas Howlett and Mr Bernd Ratzke. All six Directors, being eligible, offer themselves for re-election:
●
●
Tyson Anderson has been with the Company since 1993 and was elected to the board of Titon Hardware Limited in
1999. Tyson joined the Board on 1 January 2004 as Marketing Director, was appointed Sales & Marketing Director
on 1 February 2007 and has a service contract which has a notice period of six months;
Tony Gearey joined Titon in 1985 and has held a number of positions within the Group since then. He is currently
responsible for IT and for the operations of Titon Inc. and was appointed to the Board on 2 November 2016. He
has a service contract which has a notice period of six months;
29
Titon Holdings Plc 2019 Annual Report
Corporate Governance Report (continued)
●
●
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 terminates at the 2020 Annual General Meeting unless he is re-elected;
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 terminates at the 2020
Annual General Meeting unless he is re-elected;
● 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 1 October 2017. He has a
service contract which terminates at the 2020 Annual General Meeting unless he is re-elected;
●
Bernd Ratzke joined the Titon Board in March 2019 following a career as a corporate lawyer in the City of London.
He has a service contract which terminates at the 2020 Annual General Meeting unless he is re-elected.
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. 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 18 December 2019 and signed on its behalf by:
KA Ritchie
Chairman
30
Titon Holdings Plc 2019 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 and Mr K Sargeant ACMA, who has extensive
accounting experience from his time in industry and has joined the Audit Committee this year.
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 unaudited interim results are also reviewed by the Audit Committee prior to their
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 installation
of either the first fix or the second fix products into buildings rather than the delivery of such 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 manage this risk through senior management making regular
trips to South Korea combined with the receipt of detailed monthly management accounts from Korea.
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
31
Titon Holdings Plc 2019 Annual Report Audit Committee Report (continued)
that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group in
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 are not reviewed as part of the
Company’s formal review processes due to the local delegation of managerial responsibilities, but instead are reviewed
as part of regular 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 2018. The Auditor extended its work in relation to revenue recognition in the current period in
connection with both the transition to IFRS 15 and as a result of the identified prior year adjustment commented on in
the Chairman’s Statement.
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 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. BDO also provided
corporate finance services in respect of a potential acquisition that the Group wished to make but which was aborted.
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 £90,000. 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 2020 AGM.
The fees for audit services provided by BDO for 2019 were £76,000 (2018: £69,000). 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 2019 was £91,000 (2018: £26,000).
K A Ritchie
Audit Committee Chairman
18 December 2019
32
Titon Holdings Plc 2019 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 (together
“the Group”) for the year ended 30 September 2019 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 and the Group and Company Statements of Cash
Flows, and 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 2019
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 that describe the principal risks and explain how they are being managed or
mitigated;
the Directors’ confirmation 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 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; or
● whether the Directors’ statement relating to going concern made in accordance with the UK Corporate Governance
Code is materially inconsistent with our knowledge obtained in the audit; or
●
the Directors’ explanation 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, including 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.
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 gave rise to significant risk of material misstatement. We reached this conclusion
having considered the possible management bias in recording of revenues. We refer to the revenue recognition
accounting policy in note 1. We have considered the risk around revenue recognition to be enhanced in the year due
33
Titon Holdings Plc 2019 Annual Report Independent Auditor’s Report (continued)
to both the prior year adjustment pertaining to an error identified relating to revenue recognition in the Group’s Korean
subsidiary and associate, as described in note 25, and the first time adoption of IFRS 15 Revenue from Contracts with
Customers in the period given the complexity of this standard.
The Group revisited its accounting policy for revenue on implementation of IFRS 15. In the absence of long term customer
supply contracts or material elements of variable consideration, the group was able to make a clear determination of
the nature of its contracts with customers, the performance obligations under those contracts and the consideration to
be allocated. No material differences were identified in comparison to the previous accounting policies under IAS 18.
How we addressed the key audit matter in our audit
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 control of promised goods to customers in an amount
that reflects the consideration to which the Group expects to be entitled in exchange for those goods. We evaluated
whether the Group’s application of IFRS 15 was appropriate with regard to a range of matters, including whether the
Group’s performance obligations were satisfied at a point in time or over time. In the Korean operations, the pattern of
product delivery and entitlement to payment for performance of obligations indicates that recognition of revenue over
time is most appropriate.
We sample tested the existence and completeness of sales recorded, and the point of the transfer of control of inventory
though 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 whether revenues recorded in the UK subsidiary and Korean
associate were supported by appropriate delivery of inventory. Where unearned revenues related to future supply of
inventory in the South Korean subsidiary and associate, we verified that the deferral of that revenue and, in relation
to the associate, the related costs, was accurately recorded for both the prior year adjustment and the deferral at 30
September 2019.
Key observations
As a result of performing the above procedures, we did not identify any material misstatements.
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 management’s description of the accounting policies for inventory included in note 1, and the critical accounting
estimates in this area included within note 2.
How we addressed the key audit matter in our audit
As part of our audit inventory provisioning, we confirmed that the report used by management to quantify historical
usage of stock, used in calculating the slow-moving inventory provision, was accurate by agreeing a sample of aged
inventory items to the last recorded invoice or movement of the stock. We also reperformed the calculation of the
inventory that was slow moving and we discussions with management to understand and corroborate the assumptions
applied in estimating inventory provisions. Furthermore, we inspected the condition of inventory at our physical inventory
observations to ascertain whether additional provisions should be made.
Key observations
As a result of performing the above procedures, we did not identify any material misstatements.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. At the planning stage we set an overall level of materiality for the Financial Statements as a whole
based on our understanding of the elements of the Financial Statements that are likely to be of greatest significance to
users. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use
a lower materiality level, performance materiality, to determine the extent of testing needed. lmportantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the Financial
Statements as a whole.
We set materiality for the Financial Statements as a whole at £150,000 (2018: £210,000), being approximately 7% (2018:
7%) 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 £49,000 (2018: £70,000) at the Korean
components to £97,500 (2018: £142,500) at Titon Hardware Limited.
For the purposes of our audit of the Parent Company Financial Statements, we set materiality at £110,000 (2018:
£150,000) and performance materiality at £77,000 (2018: £105,000).
Our performance materiality levels were based on 70%-75% (2018: 70%-75%) of the respective materiality levels
on balance of a number of factors including the nature of our audit approach including the extent of sample testing
conducted, the degree of estimation inherent in the balances included in the Financial Statements and the expected
level of errors.
34
Titon Holdings Plc 2019 Annual Report We reported all misstatements we had identified which were greater than £3,000 (2018: £4,200) to the Audit Committee
as well as qualitative matters, such as disclosure misstatements for the Parent Company greater than £2,200 (2018:
£3,000).
An overview of the scope of our audit
The Group conducts its operations principally within two main geographical regions, being Europe, through its UK
subsidiary, Titon Hardware Ltd, and South East Asia, through its subsidiary Titon Korea Co. Ltd. Titon Korea Co. Ltd
sells only to the Group’s associate, Browntech Sales 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 by BDO LLP in relation
to Titon Hardware Ltd and by BDO Korea in relation to Titon Korea Co. Ltd and Browntech Sales Co. Ltd. BDO UK
conducted a full scope audit on the Parent Company.
In relation to the South Korean 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.
The Group’s North American subsidiary, Titon Inc., was evaluated as being a non-significant component on which
we performed analytical procedures at group level along with targeted procedures on material balances where we
considered it appropriate.
Our approach to the Group audit was set on the basis of our review of key financial metrics, which are shown below.
Other information
Profit before tax
2%
Revenue
2%
Gross assets
1%
38%
31%
35%
60%
67%
64%
Audit – BDO UK
Audit – other BDO member firms
BDO UK limited scope review
The Directors are responsible for the other information. The other information comprises the information included in
the Annual Report, other than the Financial Statements and our auditor’s report thereon. 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 this 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 – 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 – the section describing the work of the Audit Committee does not appropriately address
matters communicated by us to the audit committee; or
35
Titon Holdings Plc 2019 Annual Report
Independent Auditor’s Report (continued)
● Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the Directors’ statement
relating to the company’s compliance with the UK Corporate Governance Code containing provisions that would,
for a company subject to the Listing Rules of the Financial Conduct Authority, be 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, 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
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and 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 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, 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 Parent 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 Parent 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 Parent Company and the Parent
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Matthew Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
18 December 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
36
Titon Holdings Plc 2019 Annual Report
Consolidated Income Statement
for the year ended 30 September 2019
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Research and development expenses
Transaction related 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
* See note 25 for details regarding the restatement of prior year results
2019
£’000
2018
restated*
£’000
27,157
29,774
(18,959)
(21,170)
8,198
(1,489)
(4,415)
(504)
(181)
20
1,629
12
329
1,970
(186)
1,784
1,423
361
1,784
8,604
(1,454)
(4,707)
(446)
-
19
2,016
13
741
2,770
(315)
2,455
2,007
448
2,455
12.84p
12.68p
18.21p
17.94p
Note
3
5
13
6
7
9
9
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2019
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
* See note 25 for details regarding the restatement of prior year results
The notes on pages 43 to 69 form part of these financial statements
2019
£’000
1,784
(201)
1,583
1,323
260
1,583
2018
restated*
£’000
2,455
423
2,878
2,293
585
2,878
37
Titon Holdings Plc 2019 Annual Report Consolidated Statement of Financial Position
at 30 September 2019
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
30.9.19
£’000
3,799
718
2,894
281
7,692
4,884
5,446
-
4,587
30.9.18
restated*
£’000
01.10.17
restated*
£’000
3,655
737
2,586
348
7,326
5,667
7,799
12
3,415
3,548
638
1,713
375
6,274
4,670
6,644
79
3,269
14,917
16,893
14,662
22,609
24,219
20,936
83
83
4,793
12
4,805
4,888
1,113
1,049
56
(27)
402
13,669
16,262
37
37
6,901
154
7,055
7,092
1,113
1,049
56
(27)
502
12,728
15,421
39
39
5,802
63
5,865
5,904
1,098
985
56
(27)
216
11,167
13,495
1,459
1,706
1,537
17,721
17,127
15,032
22,609
24,219
20,936
The notes on pages 43 to 69 form part of these financial statements.
*See note 25 for details regarding the restatement of prior year results.
These financial statements were approved and authorised for issue by the Board on 18 December 2019 and signed
on its behalf by:
KA Ritchie
Chairman
38
Titon Holdings Plc 2019 Annual Report Company Statement of Financial Position
at 30 September 2019
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
30.9.19
£’000
30.9.18
£’000
10
12
13
15
19
16
17
18
1,987
554
225
2,766
3,122
1,494
4,616
7,382
134
134
85
85
219
1,113
1,049
56
(27)
4,972
7,163
7,382
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
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 2019 of £246,000 (2018: profit £354,000).The notes on pages 43 to 69 form
part of these financial statements.
These financial statements were approved and authorised for issue by the Board on 18 December 2019
and signed on its behalf by:
KA Ritchie
Chairman
39
Titon Holdings Plc 2019 Annual Report Consolidated Statement of Changes in Equity
at 30 September 2019
Share
capital
Share
premium
reserve
Capital
redemption
reserve
Foreign
exchange
reserve
Treasury
shares
Retained
earnings
Total
Non-
controlling
interest
Total
Equity
restated*
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 30 September 2017
(as previously stated)
Restatement of post-tax
profit for prior years *
30 September 2017 and
at 1 October 2017
(as restated)
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
1,098
985
-
-
1,098
985
-
-
-
-
-
-
-
-
-
-
-
-
Ordinary shares issued
15
64
At 30 September 2018
(as restated)
Accounting policy
change IFRS 9
1,113
1,049
-
-
At 1 October 2018
1,113
1,049
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
-
-
-
-
-
-
-
-
-
-
-
-
56
-
56
-
-
-
-
-
-
-
56
-
56
-
-
-
-
-
-
216
(27)
11,887
14,215
1,986
16,201
-
-
(720)
(720)
(449)
(1,169)
216
(27)
11,167
13,495
1,537
15,032
286
-
286
-
-
-
-
-
-
-
-
-
-
-
-
286
2,007
2,007
2,007
2,293
(489)
(489)
-
43
-
-
43
79
137
448
585
-
(416)
-
-
423
2,455
2,878
(489)
(416)
43
79
502
(27)
12,728
15,421
1,706
17,127
-
-
(19)
(19)
(19)
(38)
502
(27)
12,709
15,402
1,687
17,089
(100)
-
(100)
-
-
-
-
-
-
-
-
-
-
(100)
(101)
(201)
1,423
1,423
1,423
1,323
361
260
1,784
1,583
(526)
(526)
-
(526)
-
63
-
63
(488)
(488)
-
63
At 30 September 2019
1,113
1,049
56
402
(27)
13,669
16,262
1,459
17,721
* See note 25 for details regarding the restatement of prior year results. The notes on pages 43 to 69 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 2019 Annual Report
Company Statement of Changes in Equity
at 30 September 2019
Share
capital
Share
premium
reserve
Capital
redemption
reserve
Treasury
shares
Retained
earnings
Total
Equity
At 1 October 2017
1,098
985
56
(27)
5,281
£’000
£’000
£’000
£’000
£’000
Profit for the year
Total Comprehensive Income for the year
Dividends paid
Share-based payment expense
-
-
-
-
-
-
-
-
Ordinary shares issued
15
64
-
-
-
-
-
-
-
-
-
-
£’000
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
Profit for the year
Total Comprehensive Income for the year
Dividends paid
Share-based payment expense
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
246
246
246
246
(526)
(526)
63
63
At 30 September 2019
1,113
1,049
56
(27)
4,972
7,163
The notes on pages 43 to 69 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
Retained earnings
Premium on shares issued in excess of nominal value
Amounts transferred from share capital on redemption and cancellation of issued shares
Weighted average cost of own shares held in Treasury
All other net gains and losses and transactions with owners (e.g. dividends) not recognised
elsewhere
41
Titon Holdings Plc 2019 Annual Report
Group and Company Statement of Cash Flows
for the year ended 30 September 2019
Group
Company
2019
£’000
2018
restated*
£’000
2019
£’000
2018
£’000
1,970
2,770
(288)
(78)
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
Decrease / (increase) in inventories
Decrease / (increase) in receivables
(Decrease) / increase in payables and other current liabilities
Cash generated / (used) in operations
Income taxes paid
Net cash generated / (used) in 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
543
228
-
63
(12)
(329)
2,463
690
2,153
(2,033)
3,273
(203)
3,070
(694)
(209)
7
12
-
448
209
(16)
43
(13)
(741)
2,700
(836)
(890)
964
1,938
(132)
1,806
(578)
(315)
46
13
-
Net cash (used) / generated from investing activities
(884)
(834)
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 treasury deposit accounts
Net cash (used) / generated from financing activities
Net increase in cash (including movement on treasury
deposits)**
Cash at beginning of the year (excluding treasury deposits)
Cash at end of the year (excluding treasury deposits)
-
(526)
(488)
900
(114)
2,072
2,515
4,587
79
(489)
(416)
300
(526)
446
2,069
2,515
77
-
-
63
(7)
-
(155)
-
(316)
(122)
(593)
-
(593)
-
-
-
7
480
487
-
(526)
-
900
374
268
1,226
1,494
75
-
(7)
43
(9)
-
24
-
96
59
179
-
179
(25)
-
7
9
409
400
79
(489)
-
300
(110)
469
757
1,226
* See note 25 for details regarding the restatement of prior year results
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 £nil (2018: £900,000) and totals £4,587,000 at 30 September
2019 (2018: £3,415,000). See Note 19.
**The net increase in Group cash including the movements on treasury deposits for the year is £1,172,000 (2018:
£146,000).
The notes on pages 43 to 69 form part of these financial statements.
42
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
General information
The consolidated financial statements of the Group for the year ended 30 September 2019 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 18 December 2019.
1 - Summary of significant accounting policies
(a) Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies
have been consistently applied to all the years presented, unless otherwise stated. The Group and Parent Company
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.
The impact on the reported results of the Group following the adoption of IFRS 15 and 9 are noted in the section below.
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:
●
IFRS 15 Revenue from contracts with customers. IFRS 15 sets out a single and comprehensive framework for revenue
recognition. The guidance in IFRS 15 is considerably more detailed than previous IFRS’s for revenue recognition (IAS 11 Construction
Contracts and IAS 18 Revenue and associated Interpretations). An assessment of the impact of IFRS 15 has been completed,
including a comprehensive review of the contracts that exist across the Group’s revenue streams and the new standard applied.
The single performance obligation identified in all contracts with customers is the delivery of goods to customers. The performance
obligation is satisfied either at the point in time when the customer receives the goods, when control passes on delivery, or in
South Korea only, over time when initial and secondary activities are completed, that is, as first fix shipments receive customer
acceptance that the product has been satisfactorily installed; and second fix shipments when they are provided to the customer.
In carrying out the review, no differences were identified between the effects of using the risk and rewards approach to determining
when to recognise revenue under IAS 18 and the passing of control over goods and services for satisfied performance obligations
under IFRS 15. As a result no material changes have been identified.
●
IFRS 9 Financial instruments. IFRS 9 addresses the classification and measurement of financial assets and liabilities
and replaces IAS 39. Among other things, the standard introduces a forward-looking credit loss impairment model whereby
entities need to consider and take into account losses that may occur in the future (an “expected loss” model). The Board has
considered the impact of the introduction of IFRS9 and determined that a reduction in Group reserves of £38,000 as at 30
September 2018 is necessary. This amount relates to a provision against amounts due from the Group’s associate. No additional
provisions are considered necessary for the transition of the Group’s previous methodology to the expected credit loss approach.
The Group has implemented an expected credit loss impairment model with respect to trade receivables using the simplified
approach. Trade receivables have been grouped on the basis of their shared risk characteristics and a provision matrix has
been developed and applied to these balances to generate the loss allowance. The majority of the Group’s receivables are
companies supplying the UK and European window and door and mechanical ventilation markets and natural ventilation for the
new build residential market in South Korea. The historic incidence of credit loss is low. There has therefore been no material
adjustment as a result of transition from the previous bad debt provision under IAS 39 to the loss allowance under IFRS 9.
As regards the treatment of expected credit losses in the Parent Company, the Board considers that there is limited prospect of
a credit loss on balances due from group undertakings and therefore no credit loss provisions are currently necessary.
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.
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).
●
●
43
Titon Holdings Plc 2019 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2019
1 - Summary of significant accounting policies (continued)
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 is currently concluding its project to assess the impact of IFRS 16 (Leases), which the Group will adopt
in FY 2019-20. The principal impact of IFRS 16 will be to move the Group’s operating leases, primarily in respect of
property, onto the balance sheet, with a consequential increase in non-current assets and finance lease obligations.
Operating lease charges included in Administrative Expenses will be replaced by depreciation and interest costs. IFRS
16 introduces a new category of non-current assets for ‘right of use assets’ associated with leases. At the date of initial
application of IFRS 16 at 01/10/2019, the carrying value of the Group’s right of use assets is estimated to be in the
region of £710,000 with a corresponding lease liability being recognised at that date, with no net impact on total equity
at that date.
Other than as described for the new IFRSs 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.
●
●
●
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.
Effective date
(periods beginning)
1 January 2019
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. The impact of this standard is currently under review.
1 January 2019
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
(b) Basis of consolidation
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 2019. 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.
44
Titon Holdings Plc 2019 Annual Report Associates (continued)
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)).
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 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 90% (2018: 89%) 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
- 2% per annum straight line
Improvements to leasehold property
- 10% to 20% per annum straight line (or the lease term, if shorter)
Plant and equipment
- 10% to 33.3% per annum straight line
Motor vehicles
- 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.
45
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
1 - Summary of significant accounting policies (continued)
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.
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 and Bought In finished goods
Work in progress and manufactured finished goods
- cost of purchase
- 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.
46
Titon Holdings Plc 2019 Annual Report
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.
(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 recognised when
control of the goods supplied has 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, staged over time, as first and second fix components
are supplied and installed and at which point contractual entitlement to payment is established and the customer
obtains control of the goods.
Note 1 (a) (i) above provides further discussion of the impact on transition to IFRS 15.
(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.
47
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
1 - Summary of significant accounting policies (continued)
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.
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 business model that they are used in and the nature of the
cash flows they are expected to generate.
IFRS 9 replaced IAS 39 ‘Financial Instruments: Recognition and Measurement’. All financial instruments classified
as loans and receivables under IAS 39 have been classified and measured at amortised cost under IFRS 9. IFRS 9
requires the Group to recognise expected credit losses (‘ECL’) whereby expected losses as well as incurred losses
are provided for. The Group applies the simplified approach when determining ECL provisions for trade receivables.
In making the assessment of credit risk and estimating ECL provisions, the Group uses reasonable and supportable
information about past events, current conditions and forecasts of future events and economic conditions.
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.
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).
48
Titon Holdings Plc 2019 Annual Report 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).
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. Administration Expenses are currently allocated to operating segments in the Group’s reporting to the
CODM and include 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 Group recognises revenue at a single point in time in its UK and US subsidiary. The nature of business practice at
its South Korean subsidiary means that the Group recognises revenue there over time, this being at first fix and second
fix stages. As invoicing for both first fix and second fix components usually takes place at the first fix stage, the revenue
on the second fix products is deferred in the Financial Statements until the point that those second fix products are
accepted by the customer.
Details of the deferred revenue movements during the year is as follows:
Deferred Revenue at beginning of year
Released in the year
Provided for in the year
Deferred Revenue at end of year
2019
£’000
1,347
(1,327)
667
687
2018
£’000
1,175
(1,165)
1,337
1,347
The deferred revenue noted above is the Group’s only contract liability and is shown within Other Payables.
The Group has no material contract assets.
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 in the remainder of
this note 3.
49
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
3 - Revenue and segmental information (continued)
Operating segment
The Directors’ primary review of performance is by geographical regions.
For the year ended
30 September 2019
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
15,567
(496)
15,071
878
706
14,459
2,669
867
£’000
8,329
-
8,329
1,186
65
7,846
-
36
£’000
983
-
983
-
-
304
-
-
£’000
2,774
-
2,774
(94)
-
-
-
-
£’000
27,653
(496)
27,157
1,970
(186)
1,784
771
22,609
2,669
903
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 £329,000.
Sales to BTS of £8.33m represented 31% of Group Revenue (2018: £11.39m – 38%). 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 2019
Revenues
By entities’ country of domicile
By country from which derived
Non-current assets
United
Kingdom
Europe
USA and
Canada
South
Korea
All other
regions
£’000
17,845
15,073
£’000
£’000
-
2,742
983
983
£’000
8,329
8,329
Total
£’000
27,157
27,157
7,692
£’000
-
30
-
By entities’ country of domicile
4,642
-
30
3,020
50
Titon Holdings Plc 2019 Annual Report 3 - Revenue and segmental information (continued)
Operating segment
For the year ended
30 September 2018 (restated)*
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
2,586
889
£’000
11,389
-
11,389
1,875
49
9,894
-
4
£’000
652
-
652
(109)
1
238
-
-
£’000
2,941
-
£’000
30,203
(429)
2,941
29,774
(1)
-
-
-
-
2,770
(315)
2,455
657
24,219
2,586
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 £11.39m represented 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 (restated*)
Revenues
By entities’ country of domicile
By country from which derived
Non-current assets
United
Kingdom
Europe
USA and
Canada
South
Korea
All other
regions
£’000
17,733
14,792
£’000
£’000
-
2,804
652
652
£’000
11,389
11,389
£’000
-
137
Total
£’000
29,744
29,744
By entities’ country of domicile
4,439
-
23
2,864
-
7,326
* See note 25 for details regarding the restatement of prior year results
51
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
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
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
2019
£’000
20,134
7,023
27,157
2018
£’000
23,022
6,752
29,774
Group
Company
2019
£’000
6,281
598
525
63
2018
£’000
6,224
712
429
43
7,467
7,408
2019
£’000
317
39
16
6
378
2018
£’000
352
57
6
4
419
Group
Company
2019
2018
2019
2018
Number
Number
Number
Number
144
73
217
149
77
226
-
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
2019
£’000
12
2018
£’000
13
52
Titon Holdings Plc 2019 Annual Report 6 - Profit before tax
2,019
£’000
2,018
£’000
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 (gains) / losses
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% (2018: 19%)
Additional deduction for R&D expenditure
Effect of Associate’s results reported net of tax
Expenses deductible / (not deductible) for tax purposes
Difference in overseas tax rates
Adjustments in respect of prior periods
Income tax expense
543
228
504
214
138
(39)
63
-
13
63
13
90
1
2019
£’000
(73)
-
(73)
(113)
(186)
448
209
446
196
122
12
43
(16)
13
56
13
25
1
2018
restated*
£’000
(307)
17
(290)
(25)
(315)
1,970
2,770
(374)
148
63
25
(48)
-
(186)
(526)
148
144
(31)
(67)
17
(315)
* See note 25 for details regarding the restatement of prior year results
The tax rate in the United Kingdom, being the primary economic environment in which the Group conducts its business
is 19% from 1 April 2017. In 2015 the UK government announced legislation setting the Corporation Tax main rate at
19% for 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%.
53
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
8 - Dividends
Final 2018 dividend of 3.00 pence (2017: 2.70 pence) per ordinary share proposed and paid during
the year relating to the previous year’s results
Interim dividend of 1.75 pence (2018: 1.75 pence) per ordinary share paid during the year
2019
£’000
332
194
526
2018
£’000
295
194
489
The Directors are proposing a final dividend of 3.0 pence (2018: 3.0 pence) per share. This will result in a final dividend
totalling £332,512 (2018: £332,512), 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
2019
£’000
1,423
2018
restated*
£’000
2,007
Number
Number
Weighted average number of ordinary shares for the purposes of basic earnings per share
11,083,750
11,024,243
Effect of dilutive potential ordinary shares: share options
142,560
165,212
Weighted average number of ordinary shares for the purposes of diluted earnings per share
11,226,310
11,189,455
Earnings per share (pence)
Basic
Diluted
* See note 25 for details regarding the restatement of prior year results
The total number of options in issue is also disclosed in note 23.
12.84p
12.68p
18.21p
17.94p
54
Titon Holdings Plc 2019 Annual Report 10 - Property, plant and equipment
Group
Cost
At 1 October 2017
Additions
Disposals
At 1 October 2018
Additions
Disposals
At 30 September 2019
Depreciation
At 1 October 2017
Charge for the year
Disposals
At 1 October 2018
Charge for the year
Disposals
At 30 September 2019
Net book value at 30 September 2019
At 30 September 2018
At 1 October 2017
Freehold
land and
buildings
Improvements
to leasehold
property
Plant and
equipment
Motor
vehicles
Total
£’000
3,455
-
-
3,455
-
-
3,455
1,362
64
-
1,426
64
-
1,490
1,965
2,029
2,093
£’000
1
63
-
64
110
-
174
-
-
-
-
10
-
10
164
64
1
£’000
7,667
443
(678)
7,432
546
(6)
7,972
6,417
308
(676)
6,049
390
(6)
6,433
1,539
1,383
1,250
£’000
372
72
(101)
343
38
(32)
349
168
76
(80)
164
79
(25)
218
131
179
204
£’000
11,495
578
(779)
11,294
694
(38)
11,950
7,947
448
(756)
7,639
543
(31)
8,151
3,799
3,655
3,548
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 2019, the Group had entered into contractual commitments for the acquisition of plant and equipment
amounting to £36,000 (2018: £178,000).
55
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
10 - Property, plant and equipment (continued)
Company
Cost
At 1 October 2017
Additions
Disposals
At 1 October 2018
Additions
Disposals
At 30 September 2019
Depreciation
At 1 October 2017
Charge for the year
Disposals
At 1 October 2018
Charge for the year
Disposals
At 30 September 2019
Net book value at 30 September 2019
At 30 September 2018
At 1 October 2017
Freehold
land and
buildings
Motor
vehicles
Total
£’000
£’000
£’000
3,455
-
-
3,455
-
-
3,455
1,362
64
-
1,426
64
-
1,490
1,965
2,029
2,093
55
25
(28)
52
-
-
52
34
11
(28)
17
13
-
30
22
35
21
3,510
25
(28)
3,507
-
-
3,507
1,396
75
(28)
1,443
77
-
1,520
1,987
2,064
2,114
56
Titon Holdings Plc 2019 Annual Report 11 - Intangible assets
Group
Cost
At 1 October 2017
Additions
Disposals
At 1 October 2018
Additions
Disposals
At 30 September 2019
Amortisation
At 1 October 2017
Charge for the year
Disposals
At 1 October 2018
Charge for the year
Disposals
At 30 September 2019
Net book value at 30 September 2019
At 30 September 2018
At 1 October 2017
Computer
software
Development
costs
(internally
generated)
Goodwill
Patents
Total
£’000
£’000
£’000
706
178
(61)
823
86
(5)
904
435
69
(54)
450
77
(5)
522
382
373
271
813
136
(171)
778
123
-
901
526
139
(171)
494
150
-
644
257
284
287
78
-
-
78
-
-
78
-
-
-
-
-
-
-
78
78
78
£’000
248
1
-
£’000
1,845
315
(232)
249
1,928
-
-
249
246
1
-
247
1
-
248
1
2
2
209
(5)
2,132
1,207
209
(225)
1,191
228
(5)
1,414
718
737
638
All assets have an average useful economic life of 3.1 years (2018: 3.3 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 £274,000 at 30 September 2019 (2018: £298,000) and a remaining amortisation period of 4 years (2018: 4
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 (2018: £nil)
57
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
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
2018 and 2019
Titon Hardware Ltd
Design, manufacture
and marketing of
window fittings and
ventilators
England
894 The Crescent,
Colchester Business
Park, Colchester,
CO4 9YQ
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
As above
As above
As above
As above
PO Box 241,
Granger, Indiana
46530
257-4 Ra-dong,
Munwon-gil, Jori-eup,
Paju-si, Gyeonggi-do
402 Jardine House,
1 Connaught Place
Central
100%
100%
100%
100%
100%
100%
51%
100%
For the subsidiaries listed above, the country of operation is the same as the country of incorporation.
Company Investment
At 30 September
2019
£’000
554
2018
£’000
554
13 - Investments in associates
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
2018 and 2019
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
2019
£’000
225
2018
£’000
225
58
Titon Holdings Plc 2019 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
2019
£’000
11,943
138
12,081
6,577
-
6,577
2018
restated*
£’000
13,876
233
14,109
9,234
-
9,234
5,504
4,875
2,697
197
2,894
2019
£’000
12,960
672
2,389
197
2,586
2018
£’000
17,860
1,548
* See note 25 for details regarding the restatement of prior year results
BTS did not record any other comprehensive income for the years ended 30 September 2019 or 30 September
2018 in its own accounts, although the Consolidated Statement of Comprehensive Income includes £21,000 of other
comprehensive expense for 2019 (2018: income £132,000). BTS has been included based on audited financial
statements drawn up for the year to 30 September 2019. Transactions between it and the Group are set out in note 24.
The Group’s investment in BTS at 30 September 2019 includes £197,000 (2018: £197,000) of goodwill.
14 - Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2019
£’000
2,144
581
2,159
4,884
2018
£’000
1,476
493
3,698
5,667
No inventories (2018: £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 £48,000 (2018: net debit of £169,000) 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 £18,959,000 (2018: £21,170,000).
Company
The Company had no inventories at 30 September 2019 (2018: £nil).
59
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
15 - Trade and other receivables
Trade receivables
Less: provision for impairment
Trade receivables - net
Related parties receivables
Less: provision for impairment
Related parties receivables (See Note 24)
Other receivables
Prepayments and accrued income
Total trade and other receivables
Group
Company
2019
£’000
2,951
(48)
2,903
2,010
(35)
1,975
300
268
2018
£’000
3,043
(53)
2,990
4,059
-
4,059
382
368
2019
£’000
2018
£’000
-
-
-
3,117
-
3,117
1
4
-
-
-
2,794
-
2,794
12
-
5,446
7,799
3,122
2,806
Other than the amounts due from related parties there were no significant concentrations of credit risk at either 30
September 2019 or 30 September 2018.
The average credit period taken on sale of goods by the Group’s trade debtors is 64 days (2018: 77 days).
Trade debtors included in the balance sheet are stated net of expected credit loss (ECL) provisions which have been
calculated using a provision matrix grouping trade receivables on the basis of their shared credit risk characteristics.
An analysis of the provision held against trade debtors is set out below:
Current – not overdue
Up to 30 days past due
Up to 60 days past due
Up to 90 days past due
Over 90 days past due
Group
Group
2019
£’000
2019
£’000
2018
£’000
2018
£’000
Gross
trade and
related party
receivables
Loss
provision
(ECL)
Gross
trade and
related party
receivables
Loss
provision
(ECL)
3,916
913
77
52
3
4,961
(47)
(13)
(8)
(12)
(3)
(83)
5,637
1,106
254
75
30
7,102
(11)
(12)
(3)
(2)
(25)
(53)
Of the £83,000 ECL provision, £35,000 (2018: £nil) relates to amounts due from the Group’s associate. See note 13.
There has been no assessed significant increase in credit risk over the period.
The main factors considered in determining the level of the loss provisions set are external customer credit ratings
information, prevailing market and economic conditions and the historic levels of losses experienced by the Group.
There are no indications as at 30 September 2019 that the debtors will not meet their payment obligations in respect
of the amount of trade and related party receivables recognised in the balance sheet that are overdue and unprovided.
The proportion of trade debtors at 30 September 2019 that are overdue for payment is 21% (2018: 21%).
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.
60
Titon Holdings Plc 2019 Annual Report 15 - Trade and other receivables (continued)
Group
Movements on the provision for impairment of trade and related
party 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
16 - Deferred tax
2019
£’000
53
105
(23)
(52)
83
2018
£’000
81
31
(18)
(41)
53
Group
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 17.0% (2018:
17.0%). The movement on the deferred tax account is as shown below:
Total
deferred tax
at 1 October
2018
restated*
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
Total
deferred
tax at 30
September
2019
Liability
2019
UK
Asset
2019
Non-UK
£’000
(247)
89
235
210
24
311
£’000
£’000
-
-
-
-
-
-
(48)
13
23
(100)
(1)
(113)
£’000
(295)
102
258
110
23
198
£’000
(295)
102
-
110
-
(83)
£’000
-
-
258
-
23
281
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
Total
deferred
tax at 1
October
2017
restated*
Total
deferred
tax at 30
September
2018
restated*
Asset
2018
UK
Liability
2018
Non-UK
£’000
£’000
£’000
£’000
£’000
£’000
(283)
106
220
293
-
336
36
(15)
(1)
(37)
-
(17)
-
(2)
16
(46)
24
(8)
(247)
(247)
89
235
210
24
311
89
-
210
-
52
-
-
235
-
24
259
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
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
* See note 25 for details regarding the restatement of prior year results
There are no unrecognised deferred tax assets at 30 September 2018 or 30 September 2019.
61
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
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% (2018: 17.0%).
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
2018
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
£’000
(240)
43
9
(188)
£’000
£’000
-
-
-
-
12
(17)
59
54
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
2019
£’000
(228)
26
68
Liability
2019
UK
£’000
(228)
26
68
(134)
(134)
Total
deferred
tax at 30
September
2018
£’000
(240)
43
9
Liability
2018
UK
£’000
(240)
43
9
(188)
(188)
Group
Company
2019
£’000
2,433
364
576
1,420
4,793
2018
restated*
£’000
3,438
487
516
2,460
6,901
2019
2018
£’000
£’000
-
-
-
85
85
-
-
-
207
207
* See note 25 for details regarding the restatement of prior year results
Group trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
Year-end Group trade creditors represent 48 days (2018: 55 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.
62
Titon Holdings Plc 2019 Annual Report 18 - Share capital
Authorised
13,600,000 ordinary shares of 10p each
2019
£’000
1,360
2018
£’000
1,360
The Company’s issued and fully paid ordinary shares of 10p during the year is:
At the beginning of the year
11,133,750
1,113
10,983,750
1,098
Share options exercised during the year
-
-
150,000
15
At the end of the year
11,133,750
1,113
11,133,750
1,113
2019
Number
2019
£’000
2018
Number
2018
£’000
Treasury shares held by the Group
At the beginning of the year
Treasury shares purchased
At the end of the year
2019
Number
50,000
-
50,000
2019
£’000
27
-
27
2018
Number
50,000
-
50,000
2018
£’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 2019
At 30 September 2018
Number of
shares
10,000
200,000
205,000
415,000
415,000
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 2019 and 18 December 2019.
63
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
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 48 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:
Currency
Sterling
US Dollar
Euro
South Korean Won
Group
Company
2019
£’000
2,893
518
138
1,038
4,587
2018
£’000
2,622
422
331
40
2019
£’000
1,494
-
-
-
2018
£’000
2,126
-
-
-
3,415
1,494
2,126
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
2019
£’000
4,587
-
4,587
2018
£’000
2,515
900
3,415
2019
£’000
1,494
-
1,494
2018
£’000
1,226
900
2,126
The floating term deposits with banks had a weighted average interest rate of 0.55% (2018: 0.43%).
Financial liabilities
The Group had no floating rate financial liabilities at 30 September 2019 (2018: £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).
64
Titon Holdings Plc 2019 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 long term “A” rating.
Quantitative disclosures of the credit risk exposure in relation to Trade and other receivables are provided 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.
65
Titon Holdings Plc 2019 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2019
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
2019
£’000
(178)
624
446
2018
£’000
28
335
363
The effect of a 10% weakening of the Euro and the US Dollar against Sterling at the reporting date of 30 September
2019 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 £40,000 (2018: decrease of £33,000). A 10% strengthening in the exchange rate would, on the same
basis, have increased pre-tax profit and increased net assets by £44,000 (2018: increase of £36,000).
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
Later than five years and not later than ten years
22 - Pensions
2019
£’000
89
196
446
731
2018
£’000
16
529
-
545
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 £36,000 (2018: £30,000).
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.
66
Titon Holdings Plc 2019 Annual Report
23 - Share-based payments (continued)
In the year to 30 September 2019 no share options were granted (2018: 205,000). 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
Number
of share
options
Exercise price (pence)
Number of share options
granted initially
Number of share options
outstanding at 01/10/18
48.0
24.5
58.0
67.0
156.5
259,950
203,000
320,000
25,000
205,000
90,000
5,000
240,000
25,000
-
360,000
Share options exercised
-
-
-
-
205,000
205,000
Share options lapsed
(80,000)
(5,000)
(40,000)
(25,000)
-
(150,000)
200,000
-
205,000
415,000
Number of share options
outstanding at 30/09/18
Share options granted
Share options exercised
Number of share options
outstanding at 30/09/19
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
-
-
-
-
-
-
-
10,000
-
200,000
111
6
2.50
5
114
6
1.08
5
116
6
2.18
5
-
-
-
102
6
1.28
5
-
-
-
-
205,000
415,000
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 (2018: 360,000).
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 (2018: 210,000 at 57.5p). The 415,000 share options outstanding at 30 September 2019 had a
weighted average price of 106.4p (2018: 415,000 at 106.4p) and a weighted average remaining contractual life of 6.2
years (2018: 7.2 years).
The share price at 30 September 2019 was 130p. The average market price during the year was 162p.
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 £63,000 was recognised in respect of share options in the year (2018: £43,000) of which
£6,000 (2018: £4,000) was the charge made in respect of key management personnel.
67
Titon Holdings Plc 2019 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2019
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 £734,000 (2018: £685,000). See Note 15 for the related party balances at 30 September 2019.
Titon Korea Co. Ltd., the Company’s 51% owned subsidiary, paid a dividend during the year to its shareholders
amounting to £996,000 (2018: £849,000). Of this amount, £508,000 (2018: £433,000), before withholding tax, was paid
to the Company with the other £488,000 (2018: £416,000) being paid to the non-controlling interests.
Transactions for the year between the Group companies and the associate company, which is a related party, were as
follows:
Sales of goods
Amount owed by
related party
2019
£’000
8,329
2018
restated*
£’000
11,389
2019
2018
£’000
1,975
£’000
4,059
Browntech Sales Co. Ltd
* See note 25 for details regarding the restatement of prior year results
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
2019
£’000
676
56
6
738
2018
£’000
650
101
4
755
The Non-executive Directors received fees for their services to the Titon Holdings Plc Board as disclosed in the
Directors’ Remuneration Report.
25 - Restatement of prior year results
In March 2019 the Company discovered that certain costs and revenues associated with products sold by Titon Korea
in earlier accounting periods, up to and including 30 September 2018, had, in error, not been correctly accounted for
in the relevant periods. This related to the incorrect accounting apportionment of revenues between first and second
fix installations of products manufactured by our 51% subsidiary, Titon Korea and the related costs and revenues on
those products sold by Browntech Sales Co. Ltd., our 49% owned associate company. The required restatements have
been included within these results.
68
Titon Holdings Plc 2019 Annual Report 25 - Restatement of prior year results (continued)
The effect of the restatement on the relevant lines within the Consolidated Statement of Financial Position as at 30
September 2017 and 30 September 2018 is as follows:
Originally
stated
as at
30/09/2017
Adjust-
ment
Restated
as at
30/09/2017
Originally
stated
as at
30/09/2018
Adjust-
ment
Restated
as at
30/09/2018
£’000
£’000
£’000
£’000
£’000
£’000
1,966
116
(253)
259
1,713
375
2,876
52
(290)
296
2,586
348
Assets
Investments in Associates
Deferred tax assets
Liabilities
Trade and other payables
4,627
1,175
5,802
5,554
1,347
6,901
Equity
Total Equity attributable to the
equity holders of the parent
Non-controlling interest
Total Equity
14,215
1,986
(720)
(449)
16,201
(1,169)
13,495
16,247
1,537
15,032
2,221
18,468
(1,341)
(826)
(515)
15,421
1,706
17,127
The effect on the relevant lines of the Income Statement for the 12 months to September 2018 is as follows:
Revenue
Profit before tax
Income tax (expense)/credit
Profit after income tax
Attributable to:
Equity holders of the parent
Non-controlling interest
Earnings per share attributable to equity holders of the parent
Basic
Diluted
12 months to September 2018
Originally
stated
Adjustment
Restated
£’000
29,946
2,979
(352)
2,627
2,113
514
2,627
19.17p
18.88p
£’000
(172)
(209)
37
(172)
(106)
(66)
(172)
£’000
29,774
2,770
(315)
2,455
2,007
448
2,455
18.21p
17.94p
Additionally, during the period, the Directors have determined that it is a more normal classification within the Income
Statement to show carriage outwards as a Distribution Cost rather than being included within Cost of Sales.
As a result of this, Distribution Costs for the 12 month period to 30 September 2018 have been increased by £750,000
to £1,454,000 (previously reported as £704,000). Cost of Sales for 12 month period to 30 September 2018 have been
reduced by £750,000 to £21,170,000 (previously reported as £21,920,000). There has been no overall impact on profit
before tax or any Statement of Financial Position line item in any period as a result of this reclassification.
69
Titon Holdings Plc 2019 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
2019
2018
2017
2016
2015
Restated
£’000
£’000
£’000
£’000
£’000
27,157
29,774
28,011
23,721
22,258
8,198
1,629
12
329
1,970
(186)
1,784
526
8,604
2,016
13
741
7,265
1,850
10
633
7,048
1,772
8
356
5,978
1,562
9
298
2,770
2,493
2,136
1,869
(315)
(269)
(184)
(160)
2,455
2,224
1,952
1,709
489
410
324
289
Basic earnings per share
12.84p
18.21p
16.55p
15.21p
12.60p
Assets Employed
Property, plant & equipment
Net cash and cash equivalents
Net current assets
Financed by
3,799
4,587
10,112
3,655
3,415
9,838
3,548
3,269
9,972
3,511
2,438
9,039
3,218
2,870
7,392
Shareholders’ funds: all equity
16,262
15,421
14,215
13,060
11,050
The five year summary does not form part of the audited financial statements.
70
Titon Holdings Plc 2019 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 18 February 2020
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 11 will be proposed as
Ordinary Resolutions and of which Resolutions 12 and 13 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 2020 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.
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 2019.
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 17 January 2020 payable on 21 February 2020.
To re-elect Mr Tyson Neil Anderson who retires from the Board in accordance with Article 104, as a Director
of the Company.
To re-elect Mr Tony David Gearey 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.
8.
To re-elect Mr Bernd Ratzke, who retires from the Board in accordance with Article 104, as a Director of the
Company.
9.
10.
11.
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 2019, 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 18 December 2019) for a period expiring (unless
previously revoked, varied or renewed) on 17 May 2021 or, if sooner, at the end of the 2021 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.
71
Titon Holdings Plc 2019 Annual Report
12.
That subject to the passing of Resolution 11 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 17 May 2021 or, if sooner, the end of the 2021 Annual General Meeting of the
Company. This power shall be limited to the allotment of equity securities:
12.1
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
12.2
otherwise than pursuant to paragraph 12.1 up to an aggregate nominal amount of £150,000 (representing
approximately 14.6% of the nominal value of the ordinary shares in issue on 18 December 2019);
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 11” were omitted.
13.
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:
13.1
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 18 December 2019);
13.2
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 Aim Appendix to
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);
13.3
the minimum price which may be paid for each ordinary share shall be 10p; and
13.4 this authority (unless previously revoked, varied or renewed) shall expire on 17 May 2021 or, if sooner,
the end of the 2021 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
22 January 2020
72
Registered Office:
894 The Crescent
Colchester Business Park
Colchester
Essex
CO4 9YQ
Titon Holdings Plc 2019 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
Sunday 16 February 2020. 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.
73
Titon Holdings Plc 2019 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 14 February 2020, 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 21 January 2020, 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.
74
Titon Holdings Plc 2019 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
B Ratzke (appointed 25 March 2019)
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
Cassini House
57-58 St. James’s Street
London
SW1A 1LD
BROKER
Shore Capital Stockbrokers Ltd
Cassini House
57-58 St. James’s Street
London
SW1A 1LD
REGISTRARS AND TRANSFER OFFICE
Link Market Services Ltd
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
75
Titon Holdings Plc 2019 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