2020 Annual Report
and Financial Statements
S:\Artwork\Literature\Titon Holdings\2019\Images Overleaf: Titon’s new range of products; Stainless steel range of handles and letterplates, Titon FireSafe® Air Brick and the Titon Ultimate® dMEV.
Annual Report and Financial Statements
for the year ended 30 September 2020
Contents
Chairman’s Statement ...................................................................................... 2
Strategic Report................................................................................................ 6
Strategic Report: Corporate and Social Responsibility Report ....................... 12
Strategic Report: Director’s Section 172 Statement ....................................... 14
Report on Risk Management .......................................................................... 16
Directors’ Report............................................................................................. 19
Directors’ Remuneration Report ..................................................................... 25
Corporate Governance Report ....................................................................... 29
Audit Committee Report ................................................................................ 33
Independent Auditor’s Report ......................................................................... 35
Consolidated Income Statement .................................................................... 40
Consolidated Statement of Comprehensive Income ...................................... 40
Consolidated Statement of Financial Position ................................................ 41
Company Statement of Financial Position...................................................... 42
Consolidated Statement of Changes in Equity ............................................... 43
Company Statement of Changes in Equity..................................................... 44
Group and Company Statement of Cash Flows ............................................. 45
Notes to the Consolidated Financial Statements............................................ 46
Five Year Summary ........................................................................................ 74
Notice of Annual General Meeting ................................................................. 75
Appendix: The Titon EMI Share Option Plan 2021......................................... 79
Directors and Advisers ................................................................................... 81
1
Titon Holdings Plc 2020 Annual Report Chairman’s Statement
As with many businesses across the world, this year has been all about the impact of the COVID-19 pandemic on the
business, both here in the UK and Europe, and also in South Korea. Consistent with companies across the building
materials sector in the UK, our UK factory operations were suspended for over four weeks in March and April during
the first UK lockdown. Trading resumed in April and has continued uninterrupted since, with the second half of the
financial period seeing a steady recovery in trading in the UK and Europe back to levels similar to 2019 as we exited
the year. The Group took careful actions to mitigate the impact of the pandemic and we finished the period with a
very healthy balance sheet and cash of over £5m. Following a robust analysis of the Group’s finances we continue to
adopt a going concern basis for the preparation of this Annual Report.
All of our lives, livelihoods and businesses have been
impacted by the COVID-19 pandemic this year and this will
continue to impact us in the next few years as Government
finances have to be restored and individuals, who have lost
their jobs, and those that might lose their jobs in future, as
businesses close, seek new ones. We have been affected by
the pandemic as every business has been. We thank all of our
staff for the efforts they have made during the pandemic and
recognise the strains this has placed on them. As I write this
statement our office based employees remain working from
home and our factory based employees have been working,
subject to the Government guidelines under the latest national
lockdown provisions. I am also very pleased with the return
of our business in the UK to levels similar to 2019 after the
ending of the first national lockdown and that our export sales
to Europe in the year to 30 September 2020 were maintained
at similar amounts to the prior year, both very welcome results
given the circumstances.
Profit and loss
In the year ended 30 September 2020, the Group’s net
revenue (which excludes inter-segment activity) reduced by
24% to £20.7 million (2019: £27.2 million).
The Group’s gross margin reduced from 30.2% in 2019 to
27.4% in 2020 as a result of lower margins across all lines
of business. As a result, and exacerbated by the production
suspension in the year triggered by the first UK lockdown
which impacted our UK business, we realised an operating
loss in the period of £39,000 (2019: operating profit of £1.6
million). EBITDA was 58% lower at £1.0 million (2019: £2.4
million).
Net finance interest cost amounted to £26,000 (2019 income:
£12,000) due to the inclusion of £36,000 of interest expense
arising from the adoption of IFRS16. The share of profits from
the Group’s South Korean associate fell from £329,000 to
£83,000 as it too was affected by public health restrictions
triggered by the global coronavirus pandemic, as well as
South Korean government intervention in the new homes
sector and difficult weather conditions, resulting in Group
profit before tax of £18,000 (2019 profit: £1.97 million).
Basic statutory earnings per share for the year was 0.5 pence
(2019: 12.8 pence).
No interim dividend was paid in the year to 30 September
2020 due to the uncertainty caused by the first national
lockdown (2019: 1.75 pence). However, recognising the
importance of dividends to shareholders and having carefully
considered the Group’s current balance sheet position, the
receipt of dividends from our subsidiary in South Korea and
our overall projected future working capital requirements,
the Directors are proposing a final dividend of 2.0 pence
per share (2019: 3.0 pence). The total dividend for the year
will therefore be 2.0 pence per share (2019: 4.75 pence). If
approved by shareholders at the forthcoming Annual General
Meeting on 10 March 2021, the dividend will be payable on
12 March 2021 to shareholders on the register at 5 February
2021. The ex-dividend date is 4 February 2021.
Statements of financial position and cash flows
The Group benefits from a robust and liquid balance sheet
with no financial debt. Net assets, including non-controlling
interests, fell by 5% to £16.8 million in the year to 30
September 2020, at which point net cash stood at £5.57
million (2019: £4.59 million), which is equivalent to 33.1% of
net assets (2019: 25.9%).
Inventory levels at the year-end fell by £517,000 on 2019
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 of £2.79 million (2019: £3.28 million).
Capital expenditure was reduced
to £778,000 (2019:
£902,000) and the Group paid dividends in respect of 2019
to the shareholders of Titon Holdings Plc of £332,000 (2019:
£526,000). During the course of the year, Titon Korea paid
a further dividend to Titon Holdings Plc and non-controlling
shareholders, resulting in £658,000 (2019: £480,000) of cash
being received by Titon Holdings Plc and a cash outflow from
the Group to non-controlling shareholders of Titon Korea of
£668,000 (2019: £488,000).
The overall effect has been a net increase in the Group’s
cash reserves in the period of £0.98 million (2019: £1.17
million). Net current assets at 30 September 2020 were
£9.1 million (2019: £10.1 million) with a Quick Ratio1 of 2.0
(2019: 2.1). ROCE2 was 1.2%, impacted by reduced sales
on account of the temporary shutdown of production caused
by the coronavirus pandemic public health restrictions (2019:
13.1%).
2
Titon Holdings Plc 2020 Annual Report 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 fell by 16% in
fiscal 2020 due to the pandemic and the national lockdown
measures taken by Governments across the UK and Europe.
Revenue from the Hardware business, comprising sales of
our traditional trickle vents plus window and door hardware,
was lower in the year by 22% as sales into the PVCu, Timber
and Aluminium sectors of the UK market were significantly
impacted by the national lockdown and customers deferred
expenditure on replacement doors and windows. Sales of
Titon branded door and window hardware products fell by
9.8% but, relative to the rest of the Hardware business and
in spite of the curtailed despatch in the period, this was a
positive performance.
In our Ventilation Systems business, revenues
from
mechanical ventilation products fell by only 7%, as sales to
the new build market initially recovered more quickly than the
Repair, Maintenance and Improvements market. Ventilation
Systems sales in the UK were down 10% and sales in
mainland Europe were only a fraction down on 2019 as the
economic impact of the pandemic was felt less in the major
European economies than the UK.
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; this will
continue in 2021. We introduced a metal airbrick with high
resistance to fire earlier in the year, which is designed for
high rise buildings in response to the Grenfell fire and we
have seen good sales of this. We also expect to launch a
new small fan early in 2021, which will be the first that we
have designed and manufactured ourselves. We continue
to promote good indoor air quality and welcomed the
Government’s video released in November 2020 about
ventilation, in response to the threat of coronavirus particles
in the home. We continue to work with our trade association,
Beama Ltd, which sponsors the Healthy Homes and Buildings
All Party Parliamentary Group and the Air Pollution All Party
Parliamentary Group.
We noted in October 2019 that the Ministry of Housing,
Communities and Local Government
(MHCLG) had
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 commented on these proposals but, to date, MHCLG
has not published the draft regulations and we still await
proposals from MHCLG on the refurbishment sector, non-
domestic buildings and over-heating. Our initial view was
that the proposals may alter the mix of ventilation products
supplied to the market but we have no new evidence yet to
support this.
Of course, the value of UK private and public housebuilding
output in 2020 has been significantly impacted by the
pandemic. Experian do not expect the level of housing output
in the UK to reach 2019 levels until 2022. Their most recent
UK Construction forecast published in December 2020
shows a fall in total housing expenditure of 22% against
2019, although this is forecast to improve by 15% in 2021
and by a further 8% in 2022. At the same time, the expected
value of repair, maintenance and improvement in the private
and public residential sectors is forecast to be down by
20% in 2020 against 2019, although it is then expected to
rise by 12% in 2021 and 7% in 2022. As is clear from these
numbers, like many sectors, our industry has been hit hard
by the pandemic and we have felt the impact, but the forecast
recovery in 2021 is welcome.
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 2020, we announced that activity levels in the
South Korean new build market had continued to fall as the
South Korean Government had intervened to slow house
price growth by restricting lending. The market was further
impacted by the pandemic, which resulted in the cessation of
manufacturing operations at certain times in the year. On top
of this, the summer months, which are usually very busy in
the construction trade, were badly affected by the monsoon
season, which was significantly worse than in previous
years and this led to a number of building projects being
delayed. These factors have resulted in a material reduction
in revenue to £4.9 million (2019: £8.3 million) whilst the
contribution to Group profit before tax declined to £139,000
(2019: £819,000).
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 in respect of
BTS) was 75% lower in 2020 at £83,000 (2019: £329,000).
In addition to distributing ventilation products in South Korea,
BTS invested in and developed properties in the domestic
residential real estate market. One of these properties was
3
Titon Holdings Plc 2020 Annual Report of them, as the success of the Group is down to their hard
work and talents. They have adapted to combinations of
working from home, being on the furlough scheme and then
returning to work under the new rules and practices laid down
by the authorities to minimise the possibilities of catching
COVID-19. Without their willingness to adapt to the “new
normal” we would not have been able to function as well as
we have done in the face of the pandemic. My colleagues
on the Board also recognise the contribution that they have
made and thank them for their efforts and dedication.
Investors
As part of the cost reduction exercise we carried out in early
2020 we took the decision to end the research contract with
Hardman & Co. who had written investment research on
Titon for a number of years. I would like to thank Hardman for
their work and the good relationship we had with them. Shore
Capital, our Nominated Adviser and Broker, has continued to
write research coverage on Titon during the year although we
did remove guidance from the market in March when the first
national lockdown took place. Their last published report on
Titon in October 2020 was entitled “Deep value proposition”,
a view I share.
As usual, I would like to mention 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.
Current trading and outlook
Despite all the difficulties which the Group has faced during
the year, we made a small Group profit before tax. The
dividend for the year is reduced from the amount paid in
2019, and when combined with the careful actions we took
to manage the business and our financial resources, our net
cash reserves increased, further strengthening the Group’s
balance sheet and leaving the Group in a very healthy
financial position as we move into 2021.
Trading in the new fiscal period in the UK and Europe has
been positive with revenues for the quarter exceeding the like-
for-like sales in 2019 by 12%. Sales in Korea in October and
November 2020 continue to be impacted by the slowdown in
residential construction.
Of course, the great uncertainty is the course and length of the
COVID-19 pandemic and this colours all of our prospects for
2021. We have had good news recently on vaccines and this
does seem to be the best way of mitigating the impact of the
pandemic on people and the UK economy. However, given
the continued rolling public health restrictions and the latest
national lockdown, the impact of the pandemic is far from
behind us. The economic damage that has been caused by
Chairman’s Statement (continued)
sold during the period and a post-tax profit was realised. As
noted in the Group’s Interim Report, we took the decision
to make a provision against a secured loan investment that
BTS made in 2016. This has now been fully written-off in
the Group consolidated results resulting in an impairment
charge of £226,000 in the fiscal year. Our partners in BTS
will continue their efforts to realise the investment so there is
a possibility that a return to shareholders may be realised at
some stage if the properties underlying the secured loan are
eventually disposed of. Despite the reduction in profits from
South Korea that we have experienced this year, and taking
Titon Korea and BTS together, South Korea made a positive
contribution of £0.22 million to the Group’s profit before tax for
the year (2019: £1.15 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 will be on sale in 2021.
United States
Our US operations represent the smallest geographical
segment and results from this business reduced in the period.
Sales for the year fell by 21% to £777,000 (2019: £983,000)
as the market was impacted by the pandemic and, while Titon
Inc. made no statutory profits in the full year, it did generate
a return for our UK manufacturing business and made a
contribution to Group income.
Board
We announced on 30 October 2020 that after 33 years,
David Ruffell, Group CEO, has agreed with the Board that
he will step down from his role as CEO and leave Titon on 30
April 2021. David will remain as CEO and carry out his usual
responsibilities until this date to ensure a smooth transition for
the Group. I thank David for his commitment to Titon over 33
years and for his contribution to the Group and wish him well
for the future. The search for a new CEO has commenced
and David’s successor will be announced in due course.
As noted in the 2020 Interim Report, all of the Titon Holdings
directors agreed to take a 10% salary reduction from 1 May
2020 as part of the response to the COVID-19 pandemic.
This has been regularly reviewed and as a result of the
improvement in trading that we have seen over recent
months, salaries have been restored to their contractual
levels with effect from 1 September 2020.
I would like to thank again all of my fellow Board directors for
their efforts during the year: it has been very challenging at
times but we have ended the period with the business in good
shape and ready for the future.
Employees
After the last year with all of the challenges that our
employees have had to face, I offer my sincere thanks to all
4
Titon Holdings Plc 2020 Annual Report the measures that governments were forced to take has not
been mitigated. The Office for Budget Responsibility (“OBR”)
has forecast that UK Gross Domestic Product will fall by 11%
in 2020 but will then rebound quickly in 2021 if a vaccine can
be rolled out effectively but will not reach 2019 levels until
the end of 2022. Even by 2025 the UK economy will be lower
than the OBR forecast made in March 2020. Alongside the hit
to economic activity has been an increase in public spending
to counter the pandemic of over £250bn (as per the Spending
Review 2020), an unprecedented amount in peacetime
and this has led to a significant increase in Government
borrowing and debt. The OBR forecast that public sector debt
will exceed 90% of UK GDP by March 2021. I conclude this
very brief economic analysis by agreeing that the Chancellor
of the Exchequer was correct in saying that the “economic
emergency has only just begun”.
The UK economy is also subject to the impact of the UK
leaving the EU Single Market and Customs Union, which has
been forecast by many commentators to be detrimental to the
UK. We are pleased that a free trade agreement with the EU
was agreed before the deadline, which will allow us to trade
with our EU customers and suppliers on a zero tariff and zero
quotas basis. At this time it is impossible to forecast what
effect, positive or negative, the additional customs checks
and compliance requirements will have on our business with
the EU.
In South Korea, the economy is set to contract this year
as the pandemic hit both domestic and external demand.
Going into 2021, an accommodative monetary policy and an
expansionary fiscal stance are forecast to bolster domestic
activity, boding well for the recovery. However, further
outbreaks of COVID-19 are threatening to delay the rebound
in global trade and cloud the outlook. Bank of Korea forecast
GDP growth of 3.0% in 2021 and 2.5% in 2022. As previously
noted, we are in a transitionary period for our natural
ventilation products in South Korea as market requirements
change.
As I noted in the trading update we published in early October,
it is impossible at this stage to predict what the next twelve
months will throw at us. We continue to adopt a cautious short-
term view given the very significant economic issues that all
European economies face due to the pandemic. However,
Notes:
we have a very strong balance sheet, talented employees
and a good range of products that give us confidence in our
future despite the political and economic uncertainties which
face us.
On behalf of the Board.
KA Ritchie
Chairman
14 January 2021
1 The Quick Ratio measures liquidity and is calculated as follows: Current Assets-less-Stocks divided by Current
Liabilities.
2 ROCE is calculated by dividing EBIT by capital employed (capital employed being the sum of shareholders’ funds,
non-controlling interests and all debt less intangible assets and cash).
5
Titon Holdings Plc 2020 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.
Summary
Revenue decline of 24% to £20.7 million
Group profit before tax of £18,000
EPS down 96% to 0.5 pence
Net cash balances up by £0.98m to £5.6m
Total dividend for the year of 2.0 pence per share out of dividends received from
Titon Korea
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 40. 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
2020
£’000
20,652
18
104
122
105
0.6
Net cash and cash equivalents
5,572
2019
£’000
27,157
1,970
(186)
1,784
126
8.3
4,587
The trading results have been significantly affected by the COVID-19 pandemic and lower business levels in South
Korea. Revenues fell by 24% and the resulting decrease in profits meant the business generated a small Group Profit
before Tax for the year. A full review of the Group’s performance during the year is given in the Chairman’s Statement.
6
Titon Holdings Plc 2020 Annual Report COVID-19 response
As referred to in the Chairman’s Statement the key event in the fiscal year has been the Group’s response to the
COVID-19 pandemic. At the start of 2020 the risk of a global pandemic seemed remote but the situation escalated very
quickly and we asked all of our office based employees to work from home in mid-March. Following the Prime Minister’s
speech announcing the national lockdown, as with many businesses in our sector, we took the decision to close our
Haverhill manufacturing site and to cease despatch to our customers. This was a key moment and the directors and
managers came together to brief customers and employees about the situation. Within 7 days of the lockdown being
called we had determined which members of staff could be furloughed and which needed to stay working to keep the
business going; accordingly we furloughed 125 of our 160 UK based staff.
We then took steps to assess the position for the Group. We held daily management meetings and weekly board
meetings to consider the business operations, the response from our customers and the finance implications of the
lockdown. The key step was to re-open the factory as soon as possible, which we did at the end of April having carried
out the vital risk assessments, and put in place health and safety procedures, to ensure that our employees could work
safely in accordance with the Government guidelines. A huge amount of work has taken place to keep the Haverhill site
and the Colchester office safe. At Haverhill a one-way system was set up for employees moving around the site and
safe handling processes were established for the assembly of components and the movement of products around the
site. Credit goes to the Health & Safety team for achieving this and for maintaining standards since then.
Following the re-opening of the factory we started to bring back to work our factory employees as their sections
opened and also the office staff needed to process customer orders as they picked up. This resulted in a gradual
movement back to work over the summer with all employees resuming their positions by the end of September as our
business returned. We worked closely with our customers and suppliers during this period as their own businesses
returned to work. We have continued to trade during the latest national lockdowns and regional restrictions that the UK
Government has imposed.
We were fortunate that we entered the pandemic with a strong balance sheet and stringent measures were taken by
the Finance Team to protect it. Working capital was a key task; debtors and creditors were monitored daily to ensure
that the cash position of the Group was maximised and forecasts of the trading position, Group Balance Sheets and
cash flows were prepared to take into account the different trading scenarios. We worked closely with our customers
and agreed payment plans to help those customers more greatly affected than us and continued to pay our suppliers.
Credit must be given to all of the Finance Team for the work they performed. At no stage were we forced to consider
taking any of the Government’s support packages, other than the Coronavirus Job Retention Scheme. We did delay
the payment of our March quarter VAT payment, as permitted by HMRC, but as trading had returned to a reasonable
level in August we repaid the outstanding amount early in September 2020.
Of course, there has been a financial cost to the business from the shortfall in trading that has impacted our Q3
particularly. Sales in Q3 were only 54% of the 2019 actual sales, but we were very pleased to return to monthly
profitability again in July and this was maintained until the end of the fiscal year as our customers returned to work.
We estimate that the lost revenue in our UK and European business in 2020 compared to 2019 levels amounted to
approximately £3m with a loss of profit of £1m. When the amount claimed under the CJRS is taken into account the
net loss is approximately £0.5m. We also focussed on cost savings from the start of the pandemic and deferred all but
necessary capital expenditure. We took the decision not to pay an interim dividend, which was appropriate at the time.
The steps we have taken and the return to more usual levels of sales in the UK and Europe by the end of September
2020 have left us in a strong financial position and with a more efficient business. However, the pandemic is not over
yet and we will maintain our focus on managing our cash, working with our customers and suppliers and ensuring that
our employees and other stakeholders are all able to work and deal safely with us until the health crisis is over. We
know that the economic effects of the pandemic will be felt for many years.
The above analysis only covers the UK and European businesses; our business in South Korea was also impacted by
the steps imposed by the South Korean government there to close businesses, when and where necessary, but there
has not been anything like the same national lockdowns in South Korea that we have seen in the UK and Europe.
However, there has been an impact on the business and we know that our partners in South Korea have focussed on
cost savings and preserving cash, where possible. The sale of one of the investment properties owned by BTS during
the period for a sum of approximately £5.5m ensured that it finished the year with a cash balance of £2.6m, which is not
included in our Group cash balance. Our US trading business in Titon Inc. has also been impacted as revenues have
fallen significantly during the year.
7
Titon Holdings Plc 2020 Annual Report Strategic Report (continued)
As the Chairman has already mentioned above I would like to thank all of our employees across the Group for the
efforts they have made and their response to the disruption to their usual working environment that they had to suffer.
Goals and strategy
The Titon Group’s goals are the following:
Markets
Grow market share of natural and mechanical ventilation products and window and door hardware in
the residential housing markets of the UK, Europe, US and South Korea
Employees
Provide a challenging but rewarding and supportive environment for our employees which offers
them long term careers
Products
Offer products which are of high quality and that the “as built” performance is as expected
Shareholders
Interact with shareholders and generate rising returns through a rising share price and a progressive
dividend policy on a consistent basis
Management
Set and maintain a high standard of management and business behaviour, which will ensure that
employees, customers and suppliers are treated fairly
Our strategy to meet each of these goals is identified separately and then transferred into incremental steps and actions
which each department within Titon can achieve and against which they can be measured. Each year these strategies
are reviewed at the start of the financial period by the Board of Directors and changes are made, where necessary, if
the results achieved have been less than the target.
The strategy to achieve each of these goals is as follows:
Grow market share in the UK, Europe, US and South Korea
Increase sales of our existing products
Find new customers for our products
Develop new products
Improve existing products
Working environment
Pay our employees fairly for their services
Retain a long term view and not a “hire and fire” mentality
Provide employees with the necessary support and training to do their jobs
Ensure that the diversity of every employee is recognised and that everybody is treated equally
Conduct regular and transparent appraisals with all employees
Product offering
Invest in research and development resources to bring innovative new products to market
Set high standards for product design
Continuously improve production performance
Take customer complaints seriously and improve products as required
Interaction with shareholders
Pay dividends commensurate with the results of the business
Communicate openly and honestly with an absence of jargon
Be accessible to all shareholders at all times
Management behaviour
Set high standards for management and all employees
Be accountable and take responsibility for decision taking
Communicate effectively with all stakeholders
Ensure all dealings are open and cannot be misconstrued
8
Titon Holdings Plc 2020 Annual Report
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 71% of Group revenue in 2020 (2019: 74%); and
(ii) mechanical ventilation business, which the Group entered in 2007 and which accounted for 29% of revenue in 2020
(2019: 26%). See Business Segmentation information on page 54.
The Group generally organises its sales and marketing activities into these business streams with manufacturing and
other services supporting them both on a shared basis. The management of these two business streams also follows
this split with regular meetings of the senior managers alongside the Directors.
In the UK, the Group has a direct sales force for both business streams and aims to win specifications for its products
through its dealings with developers/housebuilders, architects, building services engineers and local authorities. Where
specifications are not possible, Titon aims to sell directly to its wide customer base of electrical contractors, installers
and window fabricators.
Titon operates in a wide range of export markets and has made sales to a significant number of countries from the
UK during this year. Our policy for exporting, in respect of both window and door hardware and mechanical ventilation
products, is to appoint local distributors and to support them in building the Titon brand. Within the mechanical ventilation
business the Group also manufactures OEM products for its customers and, near term, continues to target 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. BTS had previously entered into a
number of property developments but is now in the process of disposing of these.
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 (2019: 4%).
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 52% (2019: 48%) of overall Group turnover and products manufactured in South Korea
account for 24% (2019: 31%). The remaining 24% (2019: 21%) 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.
The COVID-19 pandemic has led to the Board spending considerable time in reviewing the activities of the Group and
succession planning, given the need to focus the business on faster growing sectors. It has also increased its focus on
working capital management, which will be maintained in the future.
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 monthly by Board and by senior management
9
Titon Holdings Plc 2020 Annual Report Strategic Report (continued)
During the COVID-19 pandemic the Board has met more frequently than in previous financial periods and has focussed
specifically on the trading results and working capital. A weekly review of all cash flows was performed by senior
management and all debtor balances were subject to scrutiny and early discussions with customers if any slowdown in
payment was observed. All material capital expenditure was deferred and no interim dividend was paid.
Graphical representations of some of these KPIs and other financial performance measures for the years ended 30
September are as follows:
Revenue
£20.7m
28.0
29.8
27.2
23.7
Operating loss
£0.04m
1.77
1.85
2.02
1.63
20.7
Profit before tax
£0.02m
2.77
2.49
2.14
1.97
2016
2017
2018
2019
2020
2016
2017
2018
2019
0.04
-
2020
2016
2017
2018
2019
2020
0.02
Dividend paid
3.00p
4.75
4.45
3.75
3.00
3.00
Earnings per share
0.52p
Net cash & cash equivalents
£5.57m
18.21
16.55
15.21
12.84
5.57
4.59
3.27
3.41
2.44
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
0.52
Note: 2018 figures are restated
2019/20 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 22% in the UK and in Europe during the
year, and decreased by over 20% in the US. The pandemic resulted in many of our customers closing their
businesses during the national lockdown and business was slow to return when the lockdown ended, however, it
is encouraging to see continued interest in sales of Titon branded hardware in the UK;
●
sales of Ventilation System products in the UK fell by 10% in the period against the prior year, but sales to
continental Europe and the rest of the world were down marginally as our important European customers continued
to purchase from us;
● we continued to invest in new products during the year and launched the metal airbrick in the period, which has
shown good sales to date;
● we restructured our workforce in Haverhill again in 2020 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 41% as sales into the private
sector declined due to a slowdown in residential new build construction, the impact of the pandemic in South Korea
and poor weather conditions during the main building season. Despite this Titon retains a strong position in South
Korea with an estimated market share in its chosen products in excess of 75%.
10
Titon Holdings Plc 2020 Annual Report Other
●
research and development expenditure in the year reduced to £446,000 (2019: £504,000), but the amount of
capitalised development expenditure increased from £123,000 in 2019 to £186,000 in 2020 reflecting the strategy
noted above to continually develop new products;
●
employee numbers fell during the period to 189 at September 2020 against 215 at September 2019. Salaries are
reviewed annually but due to the difficult operating environment no inflationary increase was made.
2020/21 activities
The Board anticipates that the Group’s business will continue on broadly the same approach as it did in 2019/20. 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:
●
●
recruiting a new CEO and updating the growth strategy of the Group;
increasing our penetration into the residential mechanical ventilation market in the UK through an increase in sales
force numbers and sales activities;
launching the new small domestic fan that has been developed in-house for the UK residential market;
●
● working with Regulatory and Governmental organisations to increase the awareness of the effects of inadequate
ventilation and poor indoor air quality. We expect the Government’s response to the Future Homes Standard to
be released imminently;
●
●
developing more products for eastern European markets as they 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 and
development of more distributor relationships for hardware in the UK;
● working with our colleagues in South Korea to develop new products for their market;
●
●
focusing on improving factory operating efficiency along with continued control of overheads;
introducing a new ERP system for the UK, European and US operations that will allow more automation of the
production and sales processes and better management information. This is scheduled to take place in 2021;
●
●
as noted above, the UK economy is forecast to recover from the 11% slump in GDP in 2020 caused by the
pandemic with growth of 5.8% in 2021 and 6.6% in 2022 forecast by Experian. Experian also forecast a recovery
in total housing expenditure of 15% in 2021 compared with 2020 and a further 8% in 2022; and
in South Korea GDP growth is forecast by Bank of Korea to grow by 3.0% in 2021 and 2.5% in 2022. We anticipate
an increase in the new residential building market in fiscal 2021 and also anticipate our new ventilation products
will achieve market recognition.
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
2020
Male
8
8
92
108
2020
Female
-
1
80
81
2020
Total
8
9
172
189
2019
Male
8
9
124
141
2019
Female
-
-
74
74
2019
Total
8
9
198
215
11
Titon Holdings Plc 2020 Annual Report
Strategic Report (continued)
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 is not 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 continually review our Health & Safety policies and have
a full time Health & Safety officer. During the pandemic we have worked very hard to ensure that all of our employees
and stakeholders are safe in their dealings with Titon and have followed the Government guidelines for safe working
throughout our UK operations and this will continue as long as necessary.
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
reaction to incidents
The accident statistics for our UK operations are as follows:
●
●
January to December 2019
44 reported accidents, 0 RIDDOR reported
January to December 2020
24 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.
12
Titon Holdings Plc 2020 Annual Report
Corporate and Social Responsibility Report (continued)
Environmental matters (continues)
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;
natural resources are used efficiently;
energy is used efficiently and consumption is monitored;
●
●
●
● waste is reduced, reused or recycled where practicable; and
the amount of packaging used for our products is minimised.
●
raw material waste 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 21% in 2020 against 2019 whilst gas usage
was unchanged. Of course, these figures have been impacted by the closure of the Haverhill site during March and
April 2020 and the significantly lower levels of business caused by the COVID-19 pandemic in 2020.
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. 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.
13
Titon Holdings Plc 2020 Annual Report
Strategic Report (continued)
Statement by the Directors in relation to their statutory duty in accordance with
section 172(1) of the Companies Act 2006
In compliance with the Companies Act 2006, the Board of Directors are required to act in accordance with a set of
general duties. During the year to 30 September 2020, the Board of Directors consider that they have, individually
and collectively, acted in a way they consider, in good faith, would be most likely to promote the success of the
Company for the benefit of its shareholders as a whole, having regard to a number of broader matters including the
likely consequence of decisions for the long term and the Company’s wider relationships. In doing so, the Board has
had regard to the matters contained in section 172(1) (a)-(f) of the Companies Act 2006.
The Directors fulfil their duties by ensuring that there is a strong governance structure in place across the Group’s
operations, backed up by robust processes.
The strategy for the Group is regularly monitored by the Board during the year. In respect of major matters discussed
at board level, the likely impact on all stakeholders are carefully considered and where possible, decisions are carefully
explained and discussed with affected stakeholders before actions are implemented to engender the necessary support.
The Group’s key stakeholders and why and how we engage with them are set out below:
Stakeholder Group
Why do we engage with them?
How does the Board engage with them?
Shareholders
The Board needs to know investors’ views so they
can be considered when making strategic and
governance decisions.
We have regular dialogue with institutional
Investors and individual shareholders in order to
develop an understanding of their views.
We aim to provide fair, balanced and
understandable information about the business to
enable informed investment decisions to be made.
Employees
Employee engagement is critical to our success.
We aim to create a diverse and inclusive
workplace where employees can reach their full
potential. This ensures we can retain and develop
talented people.
We have great regard for the health, safety and
welfare of our employees.
Customers
Our strategy of attaining sustainable growth in
profit and building goodwill in our brands will
only be achieved through an understanding of
the needs of our customers and the markets we
serve.
We listen to the views of our Nominated Adviser in
this respect.
Our AGM is an important forum for private
shareholders to meet the board and ask any
questions they may have.
Our website has an investors section which gives
investors direct access to reports, press releases
and other information. There is also a contact
mailbox facility.
We engage with our employees through site
communications, consultation with the Employee
Consultative Committee, briefings, performance
reviews, newsletters and notice boards.
Employees are also written to individually on
matters which are deemed important.
During the COVID-19 pandemic additional
communication was required for staff,
particularly for those working from home. It was
also particularly important to maintain good
communications with furloughed employees.
We have recently consulted with employees on
the quality of our communications and are acting
upon the feedback received.
Every effort has been made throughout the
COVID-19 pandemic to protect our employees.
We engage with our customers through:
Regular visits and meetings including virtual
meetings
Industry exhibitions
Customer site tours and presentations
Our website
Supplying samples and supporting literature
Delivering a high standard of technical support
Providing design services and support
14
Titon Holdings Plc 2020 Annual Report Suppliers
Community/
Environment
Our suppliers make an important contribution
to our business success. Engaging with our
supply chain means that we can ensure security
of supply and speed to market. Carefully
selected high-quality suppliers ensure we deliver
market leading innovative products to meet our
customers’ expectations.
The Board has a full understanding of the
importance of good community relations. We aim
to contribute positively to the communities and
environment in which we operate.
Government and
Regulatory Bodies
Government set the regulatory framework within
which we operate. We engage to ensure we
can help in shaping new policies, regulations
and standards, which assist in improving indoor
air quality, and ensure compliance with existing
legislation.
We engage with our suppliers by holding regular
meetings with them and via a feedback process
through monitoring their performance.
We provide products that are beneficial to health
and that are better for the environment.
Many of our capital expenditure projects focus
on improving energy efficiency and reducing
environmental emissions from our factories.
We have ISO 14001 Accreditation in the UK.
We participate in National Clean Air Day.
We support local charities through fundraising and
donations.
We participate in industry bodies and working
groups.
We attend All-Party Parliamentary Groups and
plenary sessions.
We participate in and respond to industry and
government consultations.
Application of s.172 during the year
During the year the Board has, amongst other things, considered the re-structure of the Korean businesses, discussed
possible acquisition targets and agreed plans for re-structuring within Titon Hardware Ltd.
We have continued to comply with the requirements under s.172 in the period of the COVID-19 pandemic. The Board
initially conducted weekly calls to consider all matters, with the primary focus being the health & safety of all employees,
customers and suppliers. The Board also focused on what was necessary for the long-term success of the business.
Key decisions made included:
●
●
●
●
●
●
enabling office based staff and sales executives to work from home;
temporarily closing our UK manufacturing site for four weeks;
conserving cash and monitoring the Group’s liquidity;
furloughing some staff;
not paying the interim dividend; and
implementing COVID-19 Health & Safety procedures in line with Government guidelines.
15
Titon Holdings Plc 2020 Annual Report Strategic Report (continued)
Report on Risk Management
Principal risks and uncertainties
The Group has established procedures for monitoring and controlling principal operational 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
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. During the pandemic visits
have been prevented but regular video
calls with local management have taken
place.
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 additional checks and
increased documentation which may
increase costs and make the Group’s
products less competitive.
Delays in the movement of goods across
borders after 31 December 2020 may
affect the Group’s ability to supply its
customers.
The Group will ensure that stocks of
raw materials and components from
EU suppliers are adequate to allow
for disruptions to supply chains. The
Group will also work very closely with
its customers and carriers to ensure
that exports are received on time by our
customers.
COVID-19
The Group is exposed to the impact
on the markets in which it trades of the
COVID-19 pandemic and particularly if
governments impose lockdowns on their
populations in response.
Falls in sales due to governments
imposing lockdowns is considered to be
a high risk to the Group. It is possible
that the Group could use up a significant
amount of its financial assets to remain in
business.
The Group has strong cash balances
and can reduce costs through staff
redundancies and cutting other
expenditure. It is also likely that
governments will provide support for
affected businesses. In extremis, the
Group could look to shareholders for new
equity or debt, if third party lenders are
unwilling to lend to the Group or could
sell other assets e.g. inventory or fixed
assets.
16
Titon Holdings Plc 2020 Annual Report 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.
We also maintain close links with
suppliers to ensure products are up-to-
date and service levels are maintained.
The Group maintains customer service
KPIs which are monitored monthly
through the Group’s ISO 9001 procedures
and intervention is made where required.
The Group closely manages its pricing,
rebates and commercial terms with its
customers and suppliers to ensure that
they remain competitive.
Recruitment and retention of key
personnel
The Group is dependent on the continued
employment and performance of its senior
management and other skilled 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.
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.
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. This is considered to be a high
risk to the Group given the current impact
of COVID-19.
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. Current forecasts
for economic activity in the UK and South
Korea for 2021 both show increases,
which would mitigate the risk.
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.
17
Titon Holdings Plc 2020 Annual Report Strategic Report (continued)
Report on Risk Management (continued)
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.
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 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.
Financial risk management
The Group’s operations expose it to a
variety of financial risks including fraud,
credit and foreign exchange risk
Losses from any of these financial risks
could impact the Group’s financial results
The Group has financial risk management
procedures and controls in place that
seek to limit the adverse effects of the
financial risks
This Strategic Report was approved by the Board on 14 January 2021 and signed on its behalf by:
D A Ruffell
Chief Executive
18
Titon Holdings Plc 2020 Annual Report Directors’ Report
The Directors present their report and the Group and Company financial statements for the year ended 30
September 2020.
The Directors of Titon Holdings Plc throughout the financial year or subsequent to the year-end are listed on page 27.
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 pages 8 and 9.
The Group’s compliance with the QCA Code is set out in the report on page 29.
Substantial shareholders
As at 30 September 2020, 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
728,079
%
11.41
7.22
6.57
The Company was notified on 14 October 2020 that David Jeremiah Barry holds 338,000 ordinary shares representing
3.05% of the ordinary share capital of the Company. The Company was notified on 25 November 2020 that Mrs
AJ Clipsham holds 718,079 ordinary shares representing 6.48% of the ordinary share capital of the Company. The
Company has not been notified of any other changes to substantial shareholdings between 30 September 2020 and
14 January 2021.
Share capital
The total issued ordinary share capital at 30 September 2020 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 2020 are set out in note 19 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.titon.com/uk/investors/.
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 ‘UK MAR’ (the EU Market Abuse Regulation as amended by the Market Abuse Exit
Regulations 2019) whereby Directors of the Company require approval to deal in the Company’s shares (see
https://www.fca.org.uk/markets/market-abuse/regulation).
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 2.0 pence (2019: 3.0 pence) per ordinary share.
No interim dividend was paid during the year (2019: 1.75 pence) so the total dividend for the year ended 30 September
2020 is 2.0 pence per share (2019: 4.75 pence). Titon operates a dividend reinvestment programme for shareholders
details of which are available from our registrars, Link Group.
19
Titon Holdings Plc 2020 Annual Report Directors’ Report (continued)
Research and development
The Directors consider that research and development continues to play an important role in the Group’s success as
the need to provide increasingly energy efficient ventilation products will be a feature of our market over the coming
years.
Investment in research and development amounted to £446,000 during the year (2019: £504,000). Development
expenditure capitalised in 2020 amounted to an additional £186,000 (2019: £123,000). 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 16 to 18 includes information on financial risk and also see
note 21 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 43). 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.
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;
20
Titon Holdings Plc 2020 Annual Report Directors’ responsibilities (continued)
●
●
●
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;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group
and parent company will continue in business; 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.titon.com/uk/
investors/ 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. The Directors are also responsible for disclosing additional information
under Rule 26 of the AIM Rules, which is available at www.titon.com/uk/investors/. 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 27. 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 14 January 2021 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 2020 and 14 January 2021
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.
21
Titon Holdings Plc 2020 Annual Report Directors’ Report (continued)
Post balance sheet events
Subsequent to the balance sheet date, a dividend of £391,000 was approved to be paid from Titon Korea to Titon
Holdings Plc. This also results in a cash outflow from the Group to the minority shareholders of £396,000. This is due
for payment by the end of January 2021.There have been no other 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 21 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 financial statements have been prepared on a going concern basis. In adopting the going concern basis the
Directors have considered all of the above factors, including potential scenarios arising from the COVID-19 pandemic,
the risks associated with the UK leaving the EU, and from its other principal risks set out on pages 16 to 18. Under
the worst case scenario considered, which is severe and considered highly unlikely, the Group remains liquid for a
period of 12 months from the date of reporting and the Directors therefore believe, at the time of approving the financial
statements that the Group is well placed to manage its business risks successfully and remains a going concern. The
key facts and assumptions in reaching this determination are summarised below.
The financial position remains robust with cash of £5.6m available to the Group and no debt and therefore no bank
covenants in place. Our base case scenario has been prepared using forecasts from each of our operating companies,
with each considering both the challenges and opportunities they are facing as a consequence of COVID-19 as well
as other market forecasts. Due to the strength of the Group’s balance sheet and market outlook, the Directors believe
there is no material uncertainty around going concern. To this end a reverse stress test scenario has also been
modelled, with the most extreme conditions being considered. All revenue was removed for all operating companies
within the Group from 1 April 2021 to 31 January 2022 but with all overheads remaining constant. All discretionary
expenditure was removed such as capital expenditure and dividends. The result of this scenario is that we still remain
cash positive within 12 months of the reporting date. This extreme scenario excludes all other resources we would have
at our disposal as means of raising further cash, such as:
●
●
●
●
●
●
The Group owns the freehold interest in our Haverhill site which had a fair value of £3.4 million in September 2019.
This could be used as collateral to borrow funds from our bank in the form of a mortgage;
The Group has significant fixed assets that would have a second hand market value that could be realised;
A rights issue could be made;
The Group has a large stock balance that could be sold on if there was no production;
Salary costs could be reduced by virtue of either restructuring or through pay reductions;
BTS, our associate Company, has £2.6m of cash which could be paid to shareholders in the form of a dividend.
BTS also has a residential property that could be sold to raise further funds.
The UK operation which represents 74% of the Group’s turnover has already survived two lockdowns and has shown
resilience throughout this pandemic year. The Group proved it could adapt under adversity and ensured that working
capital was monitored closely and carefully managed and actually managed to increase its cash balance through that
period.
The Directors consider that the impact of any frictional costs arising from the trade agreement with the EU would be
immaterial on the base case forecast.
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 10 March 2021 commencing at
11.00 a.m. A Notice convening the Annual General Meeting of the Company for the year ended 30 September
2020 may be found on page 75 of this document.
Shareholders are being asked to vote on various items of ordinary business, being Resolutions 1 to 10 inclusive, as
listed below. Given the COVID-19 pandemic and the likely restrictions in force, shareholders are urged not to
attend the meeting in person and to vote either via a proxy form or electronically via Link Group. More details
are contained in the Notice on page 77.
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 2020.
The Directors’ Report was approved by the Board on 14 January 2021 and signed by order of the Board.
22
Titon Holdings Plc 2020 Annual Report Resolution 2 - to declare a final dividend
The Directors recommend a final dividend of 2.0 pence per ordinary share. Subject to approval by shareholders, the
final dividend will be paid on 12 March 2021 to shareholders on the register on 5 February 2021.
Resolution 3 - 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 4 - 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 5 - 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 6 – 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 7 - 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 8 – to approve the Directors’ Remuneration Report
Resolution 8 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 25 to 28.
Resolution 9 – 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 18 February 2020, will expire at the forthcoming Annual General Meeting.
Resolution 9 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 14 January 2021 (excluding
treasury shares). The Company currently holds 50,000 shares in treasury.
The authority conferred by the resolution will expire on 9 June 2022 or, if sooner, at the 2022 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 10 - 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 18 February 2020 will expire at the forthcoming Annual General Meeting. Accordingly, Resolution 10 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 14 January 2021). The power conferred by this Resolution will expire
on 9 June 2022 or, if sooner, at the 2022 Annual General Meeting.
In addition, there are three items of special business, being Resolutions 11 to 13, as listed below.
Resolution 11 - Company’s authority to purchase its own shares
Resolution 11 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 14 January 2021. The maximum price per share that may be paid shall be the
23
Titon Holdings Plc 2020 Annual Report Directors’ Report (continued)
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 9 June 2022 or, if sooner, at the 2022 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 14 January 2021 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 11 were to be fully used, these would then represent 4.1% of the Company’s issued
ordinary share capital.
Resolution 12 – Approval of the TESOP 2021
The Company has operated executive share option schemes since 1988. The latest schemes expired in February 2020
meaning no options may now be granted under them. The Directors have considered what arrangements should be
established for the future and believe that executive share option schemes are an appropriate means of incentivising
key management and staff of the Group. The Directors have therefore decided to introduce a new executive share
option scheme, The Titon EMI Share Option Plan 2021 (“TESOP 2021”) to replace those that have expired. The Inland
Revenue imposes a limit of £250,000 on the value of approved executive options which can be held by an individual
at any one time and an overall limit of £3m on the total market value of ordinary shares granted under the scheme.
Provided the TESOP 2021 remains approved at the time of exercise, holders of options granted under the TESOP
2021 (who are UK income tax payers) will be entitled to income tax relief when they exercise their options. The benefits
under the TESOP 2021 will not be pensionable. The exercise of options granted will be subject to the satisfaction of
a performance condition imposed by the Remuneration Committee. It is proposed that the exercise of initial options
granted under the TESOP 2021 will be subject to a requirement that 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 must exceed
the growth in the consumer prices index over the same period by at least 9%. Further details of the TESOP 2021 are
contained in the Appendix on pages 79 and 80.
Resolution 12 in the Notice of Annual General Meeting, which will be proposed as an Ordinary resolution is to adopt the
TESOP 2021 and approve the Rules in such draft form subject to such amendments as are approved by a committee
of the Directors as are necessary to carry the Rules into effect and obtain HMRC or other regulatory approval, as
necessary. The principal terms of the TESOP 2021 are summarised in the Appendix to the Annual Report and the
Rules will be produced in draft form to the Annual General Meeting.
Resolution 13 - Approval for the Directors to vote in any meeting regarding the TESOP 2021
Resolution 13 in the Notice of Annual General Meeting will give the Directors power to vote and be counted in a quorum
at any meeting of the Directors at which any matter connected with the TESOP 2021 is considered regardless of any
interest they may have in the TESOP 2021 under consideration. This is subject to the provision that no Director may
vote when the Directors are considering his own individual rights of participation in the TESOP 2021.
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 14 January 2021 and signed on its behalf by:
C Isom
Company Secretary
24
Titon Holdings Plc 2020 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 2020.
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 10 March 2021, to receive and adopt
the Directors’ Remuneration Report. I can report that at the 2020 AGM there were 2,341,441 votes in favour, 0 votes
against and 0 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 27.
Remuneration Committee
The Committee presently consists of Mr K Sargeant and Mr B Ratzke, both Non-executive Directors. 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.
Directors’ remuneration compared to certain other distributions are as follows:
Directors’ remuneration
Other employee remuneration
Dividend payments to shareholders
2020
2019
£’000
662
5,557
332
£’000
664
6,141
526
Percentage
change
%
(0.3)
(9.5)
(36.9)
Other employee remuneration includes grant income relating to the Coronavirus Job Retention Scheme of £0.5m.
When this is included the percentage change in other employee remuneration falls to 1.1%.
25
Titon Holdings Plc 2020 Annual Report
Directors’ Remuneration Report (continued)
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) (e)
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 (c)
Non-executive Directors:
J N Anderson (d)
N C Howlett
K Sargeant
B Ratzke
Totals
£’000
£’000
(b)
£’000
£’000
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
96
96
55
58
128
130
119
122
35
37
52
54
36
37
36
25
556
559
-
7
9
7
20
18
19
17
-
-
-
-
-
-
-
-
49
49
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8
7
28
28
-
-
17
17
-
-
4
4
-
-
-
-
57
56
£’000
104
110
92
93
148
148
155
156
35
37
56
58
36
37
36
25
662
664
(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.
(c) Mr D Ruffell is a beneficiary of an agreement with the Company relating to his departure from the Company in April
2021.
(d) J N Anderson was furloughed from March to September during the year. During this period he received 100% of
contractual remuneration until the end of April and then 80% from May to September 2020.
(e) All Directors (except for J N Anderson as he was furloughed see note d) agreed to a 10% pay reduction in light of the
uncertainty surrounding COVID-19, which took effect from 1 May 2020 and was reinstated from 1 September 2020.
The remuneration package of each Executive Director includes non-cash benefits, which for K Ritchie, D Ruffell and T
Gearey also includes the provision of a company car. The aggregate gains made by Directors on the exercise of share
options during 2020 were £nil (2019: £nil).
26
Titon Holdings Plc 2020 Annual Report
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 2020
Ordinary shares of
10p each
30 September 2019
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
981,381
118,500
1,737,802
693,750
20,500
38,500
10,000
14,924
There were no other changes in Directors’ beneficial shareholdings between 30 September 2020 and 14 January 2021.
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
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
At 1
October
2019
Number
25,000
25,000
18,000
18,000
25,000
25,000
50,000
50,000
10,000
50,000
60,000
Granted
during
the year
Exercised
during
the year
Lapsed
during the
year
At
30 September
2020
Number
Number
Number
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Number
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 2020 and 14
January 2021.
27
Titon Holdings Plc 2020 Annual Report
Directors’ Remuneration Report (continued)
Share options
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 2020 the market price of the Company’s shares was 81.5p. The range during the year was 65p to
135p.
Approval
The Directors’ Remuneration Report was approved by the Remuneration Committee on 14 January 2021 and signed
on its behalf by:
K Sargeant
Remuneration Committee Chairman
28
Titon Holdings Plc 2020 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 now adopted
the Quoted Companies Alliance Corporate Governance Code (“QCA Code”), rather than the UK Corporate Governance
Code, as this fits more naturally with our listing on the AIM Market. The QCA Code is available from the QCA and it
involves us following ten general principles and ensuring that a number of minimum disclosure requirements are
made in the Annual Report or on the Company’s website, www.titon.com/uk/investors/. The website also contains
more details of the governance disclosures. It is then up to us to determine how the ten principles will be applied. This
contrasts with the UK Corporate Governance Code which applies a set of rules that followers have to meet and where
the rules are not met this has to be explained to stakeholders. This change in governance code hasn’t led to any major
differences in the way that we manage the governance of the Titon Group.
KA Ritchie
Chairman
Compliance with QCA Code
The Board is accountable to the Company’s shareholders for good corporate governance and the Company’s website
sets out how the 10 principles identified in the QCA 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.
I am confident that the goals and strategy that we have set for our business have been followed during the year
under review. Although the response to COVID-19 has required difficult decisions to be taken we have continued to
treat our employees fairly, to invest in research and development and to communicate openly and honestly with our
shareholders, to highlight three of our specific goals.
The Board seeks to instil a healthy corporate culture in all of its dealings with its stakeholders and believes that Titon
is regarded by those stakeholders in a positive light and will meet its obligations in a fair and transparent way. During
the year we undertook an employee survey to hear their views about working from home due to COVID-19. We
acknowledge that we can improve in some of our communications with employees and steps have been taken to
identify the actions necessary to do so. The Board believes that the corporate culture is in a good state and that the
reputation of Titon amongst our stakeholders is high.
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.
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 Finance
Director of Titon Hardware Ltd and 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.
Composition and operation of the Board of Directors
As at 30 September 2020 the Board consisted of the Executive Chairman, the Chief Executive, two other Executive
Directors and four Non-executive Directors.
The Board as a whole comprises a wealth of skills and experience from the wide range of activities undertaken by its
individual members, as follows:
Keith Ritchie joined the Company in 2012, having had a 25 year career in the City of London. He is a member of
the Institute of Chartered Accountant in England and Wales and has extensive experience of finance, legal, tax and
commercial matters. He is also a non-executive director of Beama Ltd, the trade association for the electro-technical
manufacturers association and is chairman of the Ventilation Group, within Beama Ltd. As a result of these different
activities he continues to utilise the skills gained over his working career;
David Ruffell has been with Titon since 1988 and qualified as a member of the Association of Cost and Management
Accountants. He has been chief executive of Titon since 2002 and offers a wide range of financial and commercial skills
to the Group, alongside deep knowledge of the ventilation and hardware industry. He has extensive knowledge of the
finance function within Titon and remains up-to-date with the relevant accounting practice that impact Titon and also
29
Titon Holdings Plc 2020 Annual Report Corporate Governance Report (continued)
has ongoing contacts with customers and their product needs. As noted above David will leave the Group in April 2021;
Tyson Anderson has been with the Company since 1993, when he joined the Marketing team 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. He has wide experience of the ventilation and hardware industry and
continues to develop his skills through being closely involved with new product development and procurement and also
with the latest marketing approaches, which led to the introduction of Titon’s latest website in 2018;
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
extensive technical skills and experience from a number of roles within Titon. Tony led the introduction of Microsoft’s
ERP system in 2012 and is currently leading the upgrade of that system to the latest Microsoft package, which means
that he remains closely involved with all aspects of production, purchasing, sales and the finance outputs to enable the
business to function;
John Anderson founded the Company in 1972 and was its Chairman until 2012 when he became a Non-executive
Director. As the Company’s founder he knows more about the Company and many of its products than most other
employees and has always been involved in product development and marketing, skills which he continues to offer to
the business. He has a service contract which terminates at the 2021 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 2021 Annual General Meeting
unless he is re-elected. Kevin is Non-executive chairman of a bathroom equipment supplier so continues to use his
skills regularly in a business environment;
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 2021 Annual General Meeting unless he is re-elected. Nick has carried out many roles for Titon,
including Production Manager at the Haverhill factory, head of Research & Development and then Managing Director
of Ventilation Systems in the UK and Europe. Nick works closely with UK trade associations involved in the ventilation
industry and on the impact of building regulations and other Government laws both for Titon and the wider industry;
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 2021 Annual General Meeting unless he is re-elected. He has extensive
legal and commercial skills from many years of practising law for a wide range of corporate clients. Bernd continues to
hold a practising certificate from the SRA and is a senior adviser to a UK legal practice. He is Group Legal Director and
in this role advises the Company on any relevant legal matters which arise during the course of business.
All Executive Directors are subject to annual appraisals of their performance and membership of relevant board
committees, as appropriate, during the financial year. This takes the form of a review of the targets and objectives for
the period, a meeting with the appraiser and the setting of targets and objectives for the current year. It also includes
a process whereby a failure to meet the targets is discussed and changes are agreed to improve performance. A
continuing failure to meet targets or performance could lead ultimately to dismissal. The Non-executive Directors also
provide feedback and appraisal of the Executive Directors on an ad hoc basis and this is included in the appraisals of
the relevant individuals. This has also resulted in changes to the Board, announced after the year end.
The Executive Chairman has a range of responsibilities to perform including, inter alia, the proper functioning of the
Board of Directors and setting the strategic development of the Company and Group. The Chief Executive also has a
specific range of responsibilities including the day-to-day management of the Group and implementing the strategy set
out by the Board. The four Non-executive Directors provide a diverse range of skills and wide experience to the Group
alongside the necessary independence, as required under principle 5, as follows:
1.
2.
3.
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.
4. 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.
30
Titon Holdings Plc 2020 Annual Report 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. The Executive Directors are involved with day-to-day matters arising and the size of the Group allows
the Board to have rapid access to any issues which arise in dealings with stakeholders.
Scheduled Board meetings take place on a quarterly basis with further ad hoc meetings arranged as necessary.
During 2020 the Board met informally on many occasions to discuss the response to the COVID-19 pandemic. In
2021 the Board will meet monthly as well as also meeting on an ad hoc basis, 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. All directors commit sufficient time to the Group to discharge their
responsibilities: the executive directors on a full-time basis, the Non-executive Directors, as required by the needs of
the business.
The individual attendance by Executive Directors and Non-executive Directors at the Board and principal Board
Committee Meetings held during the financial year is shown in the table below.
Total meetings held
K A Ritchie
D A Ruffell
T N Anderson
T D Gearey
N C Howlett
K Sargeant
J N Anderson
B Ratzke
Main
Board
Remuneration
Committee
Audit
Committee
Nominations
Committee
21
21
20
21
21
20
19
21
21
1
1
-
-
-
-
1
1
-
2
2
2
-
-
-
2
-
-
-
-
-
-
-
-
-
-
-
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 Company 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 Company’s Articles of Association,
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. It is the Company’s
practice that all of the Non-executive Directors will seek re-election at each Annual General Meeting.
The Directors who retire at the next AGM are Mr John Anderson, Mr Kevin Sargeant, Mr Nicholas Howlett and Mr Bernd
Ratzke. All four Directors, being eligible, offer themselves for re-election.
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.
31
Titon Holdings Plc 2020 Annual Report Corporate Governance Report (continued)
The Remuneration Committee
The Remuneration Committee Report is set out on pages 25 to 28. 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.
Nominations Committee
The Nominations Committee comprises Mr Sargeant and Mr Ratzke. 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. However, the members of the Nomination Committee have been involved in the
process of Mr Ruffell’s departure from the Company and the agreement that was reached with him. This also involved
the appointment of external employment law advisers for the Company. Executive search consultants have been
appointed to recruit the new CEO.
Communications with shareholders
The Board recognises the importance of communications with shareholders. The Strategic Report on pages 6 to 18
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 main contact with shareholders is
through the Chairman or Chief Executive.
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. However, this year COVID-19 restrictions make attendance inappropriate.
The Corporate Governance Report was approved by the Board on 14 January 2021 and signed on its behalf by:
KA Ritchie
Chairman
32
Titon Holdings Plc 2020 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. I confirm that the Titon Audit Committee continues to have competence
relevant to the sector in which the Company operates.
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. As noted in the Strategic Report and the Directors’ Report a considerable amount of work has been carried out
to assess the Group’s financial position as a result of the pandemic. The Audit Committee members have been fully
involved in all of the financial forecasting that has been performed and the cash management steps which have been
taken and has made a recommendation to the Board that the Group should continue to prepare the financial statements
on a going concern basis.
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 South Korea. During
2020 it was not possible to travel to South Korea but regular video calls with senior managers were held instead.
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.
33
Titon Holdings Plc 2020 Annual Report
Audit Committee Report (continued)
Internal control
The respective responsibilities of the Directors in connection with the financial statements are set out on pages 20-21,
and those of the Auditors are detailed in the Independent Auditor’s Report on pages 35 to 39.
The Audit Committee is responsible for ensuring that suitable internal controls systems to prevent and detect fraud
and error are designed and is also responsible for reviewing the effectiveness of such controls. The Board confirms
that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group in
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 16 to 18) 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 2019. The Committee also discussed the preparation of the going concern opinion and the key audit
matters with the Auditor, specifically in the context this year of the pandemic.
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. 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 2021 AGM.
The fees for audit services provided by BDO for 2020 were £91,000 (2019: £76,000). 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 2020 was £1,000 (2019: £91,000).
K A Ritchie
Audit Committee Chairman
14 January 2021
34
Titon Holdings Plc 2020 Annual Report Independent Auditor’s Report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TITON HOLDINGS PLC
Opinion
We have audited the financial statements of Titon Holdings Plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 30 September 2020 which comprise the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity,
Group and the Company Statement 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 the preparation of the financial statements is applicable law
and international accounting standards in conformity with the requirements of the Companies Act 2006 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 2020 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006;
the Parent Company financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements 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 going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to
you where:
●
●
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s or the Parent Company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised
for issue.
Key audit matters
Key audit matters are those matters that, in our professional judgement, 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) 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
The Group’s performance obligations are 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 determined that the timing of revenue recognition during the period immediately prior to
and subsequent to the year end carries a heightened 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.
How the scope of our audit addressed the key audit matter
We examined the Group’s terms of business with its customers to check that the accounting policy applied appropriately
takes account of the point of transfer of control of promised goods to customers for an amount that reflects the
consideration to which the Group expects to be entitled in exchange for those goods. We evaluated whether the
35
Titon Holdings Plc 2020 Annual Report
Independent Auditor’s Report (continued)
Group’s application of applicable accounting standards was appropriate.
We sample tested the existence of sales recorded, and the point of the transfer of control of inventory through
identification of the timing of delivery, invoicing and revenue recognition. We sampled the completeness of sales
recorded by obtaining the delivery note listing, ensuring the listing was complete and selecting a sample to corresponding
delivery note, invoice and the general ledger.
We sampled a number of transactions in the days prior to and subsequent to the year end as to whether revenues
recorded in the UK subsidiary and Korean associate were supported by appropriate delivery of inventory. For unearned
revenue in the Korean subsidiary and associate we agreed a sample to delivery notes subsequent to year to end
to confirm the stock quantity and agreed the margin applied in arriving at the deferred revenue amount to historical
margins.
Key observations:
Based on the work performed we consider that revenue has been recognised appropriately and is in accordance with
the group’s revenue recognition accounting policy.
Inventory: Provision for slow moving and obsolete stock
We identified the valuation of the Group’s inventory balance as carrying a risk of material misstatement due to the use
of key management judgements in respect of provisions for slow moving and obsolete inventory and the condition of
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 the scope of our audit addressed the key audit matter:
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 from the report to the last
recorded invoice or movement of the stock. We also reperformed the calculation of the inventory that was slow moving
and we corroborated the assumptions applied by Management in estimating inventory provisions by considering and
inspecting recent receipt of stock and the future sales activity by agreeing to purchase orders and reviewing post year
end stock movements. Furthermore, we inspected the condition of inventory at our physical inventory observations
to ascertain whether additional provisions should be made. We assessed the accuracy of prior year provisions by
comparing to actual results and year on year assessment.
Key Observations:
As a result of performing the above procedures, we did not identify any matters which indicate that management’s
judgements relating to the provision for slow moving and obsolete stock were not reasonable.
Inventory: Standard costing
We identified the standard costing model applied to the Group’s inventory balance as carrying a risk of material
misstatement due to the use of key management judgements in respect of overhead and labour recovery rates. 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 the scope of our audit addressed the key audit matter:
We assessed the overhead and labour costs used in the calculation of standard costs by agreeing a sample of all costs
to the machine and payroll costs. We further compared the results of our recalculated standard cost to the standard
costs set by Management. We assessed the cost types included within the apportionment calculation and checked that
only the appropriate cost types were included as per the applicable accounting standard guidance on costs that meet
the definition of inventory cost. We further examined the calculations by recalculating and performing a comparison to
the prior year to test the accuracy and completeness of the calculation.
We evaluated the judgments applied by Management in setting the efficiency rate by considering actual results as well
as Management’s plans for improved production methods. We further evaluated the rigour of the process by which
standard production times are set by recalculating Management’s efficiency rate and evaluating the judgments made
in adjusting the average efficiency for the year to determine that the final efficiency rate was reasonable by comparing
the final efficiency rate used by Management to the average of operational months.
Key Observations:
As a result of performing the above procedures, we did not identify any matters which indicate that Management’s
judgements relating to the costing of stock were not reasonable.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
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. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
36
Titon Holdings Plc 2020 Annual Report misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Group financial statements
Parent company financial statements
2020
£
2019
£
2020
£
2019
£
£150,000
£150,000
£100,000
£110,000
0.7% of Revenue
7% of Profit before Tax
1.5% of Gross Assets
capped at £ 100,000
due to aggregation risk.
1.5% of Gross Assets
Materiality
Basis for determining
materiality
Rationale for the
benchmark applied
There has been a
change in basis in
calculating materiality
from profit before
tax to revenue in the
current year due to
the volatility in trading
resulting from the
impact of the COVID-19
pandemic. We have
considered that revenue
still represents a
performance based
measure that would
interest shareholders
and the users of the
financial statements.
Profit before tax
was used due to the
shareholders and users
being mostly interested
in the performance of
the business.
Titon Holdings is a
holding company and
only has intercompany
revenue therefore Gross
Assets was considered
to be the most
appropriate basis.
Titon Holdings is a
holding company and
only has intercompany
revenue therefore Gross
Assets was considered
to be the most
appropriate basis.
Performance materiality
£105,000
£105,000
£70,000
£77,000
70% of materiality
Basis for determining
performance materiality
This has been based on a number of factors including:
- Expected total value of known and likely misstatements
- Managements attitude toward proposed adjustments
- Number of accounts where amounts are subject to estimation
- Brought forward adjustments from prior years
Component materiality
We set materiality for each component of the Group based on a percentage of between 43% and 90% of Group materiality
dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £65,000 to £135,000. In the audit of each component, we further applied performance materiality levels of
70% of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £3,000
(2019: £3,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including assessing whether there was evidence of
bias by the Directors that may have represented a risk of material misstatement.
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 LLP
also conducted a full scope audit on the Parent Company. The Group’s North American subsidiary, Titon Inc., was
37
Titon Holdings Plc 2020 Annual Report Independent Auditor’s Report (continued)
evaluated as being a non-significant component on which we performed a limited scope review 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.
Profit before tax
Revenue
4%
46%
24%
9%
45%
Gross assets
8%
15%
69%
77%
Audit – BDO UK
Audit – other BDO member firms
BDO UK Limited Scope Review
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed in order to be able
to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group
financial statements as a whole.
Our involvement with component auditors included being 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 remotely from the UK and attended virtual meetings.
Other information
The Directors are responsible for the other information. The other information comprises the information included in
the Annual Report and Financial Statements, 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.
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 the Parent Company and its environment obtained
in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
●
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting records and returns; or
●
●
● we have not received all the information and explanations we require for our audit.
certain disclosures of Directors’ remuneration specified by law are not made; or
38
Titon Holdings Plc 2020 Annual Report
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 20, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the 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.
Matt Crane (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
14 January 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
39
Titon Holdings Plc 2020 Annual Report Consolidated Income Statement
for the year ended 30 September 2020
Revenue
Cost of sales
Grant Income
Gross profit
Distribution costs
Administrative expenses
Research and development expenses
Grant Income
Transaction related expenses
Other income
Operating (loss) / profit
Finance income
Finance expense
Share of post-tax profits from associate
Profit before tax
Income tax credit / (expense)
Profit after income tax
Attributable to:
Equity holders of the parent
Non-controlling interest
Profit for the year
Earnings per share attributed to equity holders of the parent:
Basic
Diluted
Note
3
4
4
5
5
13
6
7
9
9
2020
£’000
2019
£’000
20,652
27,157
(15,200)
(18,959)
202
5,654
(1,289)
(4,305)
(446)
326
-
21
(39)
10
(36)
83
18
104
122
58
64
122
-
8,198
(1,489)
(4,415)
(504)
-
(181)
20
1,629
12
-
329
1,970
(186)
1,784
1,423
361
1,784
0.52p
0.52p
12.84p
12.68p
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2020
Profit for the year
Other comprehensive income - items which may be reclassified to profit or loss in
subsequent periods:
Exchange difference on retranslation of net assets of overseas operations
Total comprehensive income for the year
Attributable to:
Equity holders of the parent
Non-controlling interest
* The notes on pages 46 to 73 form part of these financial statements.
2020
£’000
122
(62)
60
(17)
77
60
2019
£’000
1,784
(201)
1,583
1,323
260
1,583
40
Titon Holdings Plc 2020 Annual Report Consolidated Statement of Financial Position
at 30 September 2020
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments in associates
Deferred tax assets
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total Assets
Liabilities
Deferred tax liability
Lease liabilities
Total non-current liabilities
Trade and other payables
Lease liabilities
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
10
11
13
16
14
15
20
16
18
17
18
19
19
2020
£’000
3,469
772
753
2,877
333
8,204
4,367
3,779
5,572
2019
£’000
3,799
-
718
2,894
281
7,692
4,884
5,446
4,587
13,718
14,917
21,922
22,609
-
531
531
4,303
277
-
4,580
5,111
1,113
1,049
56
(27)
327
13,425
15,943
83
-
83
4,793
-
12
4,805
4,888
1,113
1,049
56
(27)
402
13,669
16,262
868
1,459
16,811
17,721
21,922
22,609
The notes on pages 46 to 73 form part of these financial statements.
These financial statements were approved and authorised for issue by the Board on 14 January 2021 and signed on
its behalf by:
KA Ritchie
Chairman
41
Titon Holdings Plc 2020 Annual Report
Company Statement of Financial Position
at 30 September 2020
Company No. 01604952
Assets
Property and motor vehicles
Investments in subsidiaries
Investments in associates
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total Assets
Liabilities
Deferred tax
Total non-current assets
Trade and other payables
Total current liabilities
Total Liabilities
Equity
Share capital
Share premium account
Capital redemption reserve
Treasury shares
Retained earnings
Total Equity
Total Liabilities and Equity
Note
10
12
13
15
20
16
17
19
2020
£’000
1,910
554
225
2,689
3,147
2,001
5,148
7,837
232
232
211
211
443
1,113
1,049
56
(27)
5,203
7,394
7,837
2019
£’000
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
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 2020 of £517,000 (2019: profit £246,000).The notes on pages 46 to 73 form
part of these financial statements.
These financial statements were approved and authorised for issue by the Board on 14 January 2021
and signed on its behalf by:
KA Ritchie
Chairman
42
Titon Holdings Plc 2020 Annual Report Consolidated Statement of Changes in Equity
at 30 September 2020
Share
capital
Share
premium
reserve
Capital
redemption
reserve
Foreign
exchange
reserve
Treasury
shares
Retained
earnings
Total
Non-
controlling
interest
Total
Equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
At 30 September 2018
1,113
1,049
Accounting policy change
IFRS 9
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
At 30 September 2019
1,113
1,049
Accounting policy change
IFRS 16
-
-
At 1 October 2019
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
-
-
-
-
-
-
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
(526)
(526)
-
63
-
63
361
260
-
(488)
1,784
1,583
(526)
(488)
-
63
402
(27)
13,669
16,262
1,459
17,721
-
402
(27)
(75)
-
(75)
-
-
-
-
-
-
-
-
-
-
(16)
(16)
-
(16)
13,653
16,246
1,459
17,705
-
(75)
58
58
58
(17)
(332)
(332)
13
64
77
-
(62)
122
60
(332)
-
46
-
46
(668)
(668)
-
46
At 30 September 2020
1,113
1,049
56
327
(27)
13,425
15,943
868
16,811
The notes on pages 46 to 73 form part of these financial statements.
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share capital
Share premium
Capital redemption
Treasury shares
Foreign exchange reserve
Retained earnings
Non-controlling interest
Nominal value of the issued share capital of the Company
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
Interest in subsidiaries not owned by Titon Holdings Plc shareholders
43
Titon Holdings Plc 2020 Annual Report
Company Statement of Changes in Equity
at 30 September 2020
Share
capital
Share
premium
reserve
Capital
redemption
reserve
Treasury
shares
Retained
earnings
Total
Equity
At 1 October 2018
1,113
1,049
56
(27)
5,189
£’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
7,380
246
246
246
246
(526)
(526)
63
-
63
79
At 30 September 2019
1,113
1,049
56
(27)
4,972
7,163
Profit for the year
Total Comprehensive Income for the year
Dividends paid
Share-based payment expense
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
517
517
517
517
(332)
(332)
46
46
At 30 September 2020
1,113
1,049
56
(27)
5,203
7,394
The notes on pages 46 to 73 form part of these financial statements.
The following describes the nature and purpose of each reserve within equity:
Reserve
Description and purpose
Share capital
Share premium
Capital redemption
Treasury shares
Retained earnings
Nominal value of the issued share capital of the Company
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
44
Titon Holdings Plc 2020 Annual Report
Group and Company Statement of Cash Flows
for the year ended 30 September 2020
Group
Company
Cash generated from operating activities
Profit / (loss) before tax
Depreciation of property, plant & equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Profit on sale of plant & equipment
Share based payment expense – equity settled
Finance income
Finance costs
Share of associate’s post-tax profit
Decrease in inventories
Decrease / (increase) in receivables
(Decrease) / increase in payables and other current liabilities
Cash generated by / (used) in operations
2020
£’000
18
559
257
236
(16)
46
(10)
36
(83)
1,043
519
1,667
(468)
2,761
2019
£’000
1,970
543
-
228
-
63
(12)
-
(329)
2,463
690
2,146
(2,033)
3,266
Income taxes paid
(43)
(203)
Net cash generated by / (used in) operating activities
2,718
3,063
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
(246)
(271)
46
10
-
(694)
(209)
7
12
-
Net cash (used in) / generated by investing activities
(461)
(884)
Cash flows from financing activities
Dividends paid to equity shareholders of the parent
Dividends paid to non-controlling shareholders of a subsidiary
Payment of lease liability
Finance costs
Cash withdrawn from treasury deposit accounts
(332)
(668)
(261)
(36)
-
Net cash (used in) / generated by financing activities
(1,297)
(526)
(488)
-
-
900
(114)
Net increase in cash (including movement on treasury
deposits)**
Foreign exchange
Cash at beginning of the year (excluding treasury deposits)
Cash at end of the year (excluding treasury deposits)
960
2,065
25
4,587
5,572
7
2,515
4,587
2020
£’000
(43)
77
-
-
-
46
(9)
-
-
71
-
(25)
126
172
-
172
-
-
-
9
658
667
2019
£’000
(288)
77
-
-
-
63
(7)
-
-
(155)
-
(316)
(122)
(593)
-
(593)
-
-
-
7
480
487
(332)
(526)
-
-
-
-
(332)
507
-
1,494
2,001
-
-
-
900
374
268
-
1,226
1,494
The Group cash and cash equivalents figure on the Consolidated Statement of Financial Position totals £5,572,000 at
30 September 2020 (2019: £4,587,000). See Note 20.
**The net increase in Group cash is £985,000 (2019: £1,172,000).
The notes on pages 46 to 73 form part of these financial statements.
45
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
General information
The consolidated financial statements of the Group for the year ended 30 September 2020 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 14 January 2021.
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 with those parts of the Companies Act 2006 applicable
to companies preparing their accounts under IFRS.
The financial statements have been prepared on a going concern basis. In adopting the going concern basis the
Directors have considered potential scenarios arising from the COVID-19 pandemic, the risks associated with the UK
leaving the EU, and from its other principal risks set out on pages 16 to 18. Under the worst case scenario considered,
which is severe and considered highly unlikely, the Group remains liquid for a period of more than 12 months from the
date of reporting and the Directors therefore believe, at the time of approving the financial statements that the Group is
well placed to manage its business risks successfully and remains a going concern. The key facts and assumptions in
reaching this determination are detailed on page 22.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgment in applying the Group’s accounting policies. The
areas where significant judgments and estimates have been made in preparing the financial statements and their effect
are disclosed in note 2.
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 16 is noted in the section below.
i New standards, interpretations and amendments effective from 1 October 2019
The standard impacting the Group that will be adopted in the annual financial statements for the year ended 30
September 2020, and which has given rise to changes in the Group’s accounting policies is:
IFRS 16 ’Leases’ replaces IAS 17 ‘Leases’ and was adopted at 1 October 2019 without restatement of comparative
figures using the modified retrospective approach. The adoption of this IFRS 16 has resulted in the Group recognising
the right-of-use assets and related lease liabilities in connection with all former operating leases, where applicable at 1
October 2019 and as shown below, except for intra-group leases for property assets. In addition, for leases with a low
value assets and those with a duration of 12 months or less, the Group has elected to account for the lease expense
on a straight-line basis over the remaining lease term.
At 1 October 2019, the Group measured each lease liability at the present value of the contractual lease payments
unpaid at that date, discounted using the interest rate implicit in the lease, where that was rate readily available, or used
the incremental borrowing rate applying a single rate to a portfolio of leases with reasonably similar characteristics. The
incremental borrowing being the rate the lessee would have to pay to borrow the funds necessary to obtain an asset
similar to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Right-of-use assets recognised - see Note 18
Lease Liabilities recognised
Reduction in Retained Earnings at 01/10/19
£000s
770
(786)
(16)
The new Standard has been applied as at 1 October 2019 with the cumulative effect of adopting IFRS 16 being
recognised in Equity as a reduction in Retained Earnings of £16,000. Prior periods have not been restated. See note
25 for further information on the implementation of this standard.
Other new and amended standards and Interpretations issued by the IASB that will apply for the first time in the
next annual financial statements are not expected to impact the Group as they are either not relevant to the Group’s
activities or require accounting which is consistent with the Group’s current accounting policies.
46
Titon Holdings Plc 2020 Annual Report ii New IFRS standards not applied by the Group
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact
on the group.
(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 2020. Control exists when
the Company is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability
to affect those returns through its power over the subsidiary.
Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions,
are eliminated in preparing the financial statements.
Non-controlling interests
A non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. Non-controlling
interests at the end of reporting period represent the non-controlling shareholders’ portion of the fair values of the
identifiable assets and liabilities of the subsidiary at the acquisition date and the non-controlling interests’ portion of
movements in equity since the date of the combination. Non-controlling interest is presented within equity, separately
from the parent’s shareholders’ equity.
Losses within a subsidiary are attributed to the non-controlling interest even if that results in deficit balance.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially recognised in the consolidated balance sheet at cost.
The Group’s share of post-acquisition profits and losses is recognised in the consolidated income statement, except
that losses in excess of the Group’s investment in the associate are not recognised unless there is an obligation to make
good those losses. Profits and losses arising on transactions between the Group and its associates are recognised only
to the extent of unrelated investors’ interests in the associate.
The investors’ share in the associate’s profits and losses resulting from these transactions is eliminated against the
carrying value of the associate. Any premium paid for an associate above the fair value of the Group’s share of the
identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the
associate. The carrying amount of the investment in associates is subject to impairment in the same way as goodwill
arising on a business combination (see accounting policy (h)).
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% (2019: 90%) of sales from the Group’s UK business are invoiced in Sterling.
47
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
1 - Summary of significant accounting policies (continued)
(d) Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation.
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part
of such an item when that cost is incurred, if it is probable that the future economic benefits embodied within the item
will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income
statement as incurred.
Freehold land is not depreciated. Depreciation is provided on all other items of property, plant and equipment to write
off the carrying value of items over their expected useful economic lives. It is applied at the following rates:
Freehold buildings
Improvements to leasehold property
Plant and equipment
Motor vehicles
- 2% per annum straight line
- 10% to 20% per annum straight line (or the lease term, if shorter)
- 10% to 33.3% per annum straight line
- 25% per annum straight line
The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable (see accounting policy (h)).
The Group also recognises right-of-use assets and lease liabilities under IFRS 16 (see note 25), for most leases with
the exception of low value assets based on the value of the underlying asset when new or for short-term leases with a
lease term of 12 months or less. Right-of-use assets, which include Property (factory units and office accommodation),
plant and equipment and motor vehicles are initially measured at an amount equal to the lease liability, adjusted by the
amount of any prepaid or accrued lease payments, and are depreciated on a straight line basis to write off the carrying
value of the assets over the contractual term of each lease.
The carrying values of right-of-use assets are reviewed for impairment when events, such as a change in the term of
the lease, or in other circumstances indicate the carrying value may not be recoverable (see accounting policy (h)).
(e) Intangible assets
Intangible assets other than goodwill that are acquired by the Group are stated at cost less accumulated amortisation
and impairment losses (see accounting policy (h)). Amortisation is charged to Administrative Expenses within the
Consolidated Income Statement.
i Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary or associate at the date of acquisition and subject to annual impairment testing.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill associated with the acquisition of
associates is included within the investment in associates.
Goodwill is not subject to amortisation, but is tested for impairment annually. On disposal of a subsidiary the attributable
amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal.
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.
48
Titon Holdings Plc 2020 Annual Report 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 Assets under development
Assets under development are not amortised until they are complete and in use by the Group.
vi 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.
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.
49
Titon Holdings Plc 2020 Annual Report
Notes to the Consolidated Financial Statements
at 30 September 2020
1 - Summary of significant accounting policies (continued)
(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.
(l) Finance income
Finance income comprises interest receivable on funds invested.
(m) Corporation and deferred taxes
Tax on the profit or loss for the periods presented comprises current and deferred tax.
Current tax
Current tax is the expected corporation tax payable on the taxable income for the year, using rates and laws enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax
Deferred tax is provided using the balance sheet liability method, using rates and laws enacted or substantively enacted
at the balance sheet date, providing for temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Temporary differences are not provided on goodwill that is not deductible for tax purposes or on the initial recognition of
assets or liabilities that affect neither accounting nor taxable profit, to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement
of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet
date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
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
All leases are accounted for by recognising a right-of-use asset and a lease liability except for:
Leases of low value assets; and
Leases with a duration of twelve months or less.
●
●
IFRS 16 was adopted on 1 October 2019 without restatement of comparative figures. For an explanation of the
transitional requirements that were applied as at 1 October 2019, see Note 25. The following policies apply subsequent
to the date of initial application, 1 October 2019.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term,
with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this
is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is
used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or
rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged
throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial
recognition, the carrying value of the lease liability also includes:
Amounts expected to be payable under any residual value guarantee;
The exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that
option;
Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of
termination option being exercised.
●
●
●
50
Titon Holdings Plc 2020 Annual Report Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received,
and increased for:
●
●
●
Lease payments made at or before commencement of the lease;
Initial direct costs incurred; and
The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore
the leased asset (typically leasehold dilapidations – see note 18).
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the
balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to
be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of
a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect
the payments to make over the revised term, which are discounted at the same discount rate that applied on lease
commencement. The carrying value of lease liabilities is similarly revised when the variable element of future lease
payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying value
of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
(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 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
43. 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.
(s) Government grants
The Group has taken advantage of the Coronavirus Job Retention Scheme during the year in the UK. This income
is recognised in the period to which the furloughed staff costs relate to and only when it is reasonably likely for the
conditions are to be met. The payroll liability has been incurred by the Group and therefore has met the conditions to
claim for the payroll period. All other conditions have been satisfied. The Group has elected to net the grant income
against the costs to which it relates i.e. wages and salaries.
51
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
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). The Group also calculates an amount representing wages and
overheads for direct labour and includes an estimate of this amount in the valuation of inventory.
Revenue recognition
The timing of revenue recognition is a significant area of risk to accurate financial reporting and the Group also ensures
that accurate estimates of credit note provisions and warranty provisions are made.
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).
Expected credit losses and asset impairment
Expected credit losses are assessed under IFRS9 using reasonable information about past events and current
conditions and forecasts of future events. Asset impairment considers the likely returns from financial assets owned by
the Group and their recoverability, based on market values and management’s judgement of any other relevant factors.
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
South Korea
North America
All other countries
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
Sales of passive ventilation products to construction companies
Sales of passive ventilation products to window and door manufacturers
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.
52
Titon Holdings Plc 2020 Annual Report 3 - Revenue and segmental information (continued)
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
2020
£’000
687
(687)
478
478
2019
£’000
1,347
(1,327)
667
687
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.
Operating segment
The Directors’ primary review of performance is by geographical regions.
For the year ended
30 September 2020
Segment revenue
Inter-segment revenue
Total Revenue
Segment (loss) / profit
Tax credit
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
12,570
(365)
12,205
(205)
891
15,555
2,877
481
£’000
4,919
-
4,919
222
161
6,058
-
297
£’000
777
-
777
182
-
309
-
-
£’000
2,751
-
2,751
(181)
-
-
-
-
£’000
21,017
(365)
20,652
18
104
122
1,052
21,922
2,877
778
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 £83,000.
Sales to BTS of £4.92m represented 24% of Group Revenue (2019: £8.33m – 31%). 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 2020
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
14,956
12,205
£’000
£’000
-
2,694
777
777
£’000
4,919
4,919
By entities’ country of domicile
4,903
-
40
3,261
£’000
-
57
-
Total
£’000
20,652
20,652
8,204
53
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
3 - Revenue and segmental information (continued)
Operating segment
For the year ended
30 September 2019
Segment revenue
Inter-segment revenue
Total Revenue
Segment profit / (loss)
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
£’000
15,567
(496)
15,071
878
706
14,459
2,894
867
South
Korea
£’000
8,329
-
8,329
1,186
65
7,846
-
36
North
America
£’000
983
-
983
-
-
304
-
-
All other
countries
Consolidated
£’000
2,774
-
2,774
(94)
-
-
-
-
£’000
27,653
(496)
27,157
1,970
(186)
1,784
771
22,609
2,894
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
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
2020
£’000
14,593
6,059
20,652
2019
£’000
20,134
7,023
27,157
54
Titon Holdings Plc 2020 Annual Report 4 - Directors and employees
Staff costs, including Directors, were as follows:
Wages and salaries
Grant Income
Wages and salaries after Government grant
Employer’s social security costs and similar taxes
Defined contribution pension cost
Share based payment expense – equity settled
Group
Company
2020
£’000
6,232
(528)
5,704
557
457
46
2019
£’000
6,281
-
6,281
598
525
63
6,764
7,467
2020
£’000
293
(15)
278
39
17
6
340
2019
£’000
317
-
317
39
16
6
378
Grant income represents amounts claimed under coronavirus job retention scheme.
The average monthly number of employees
during the year was as follows:
Manufacturing
Sales, marketing and administration
Group
Company
2020
2019
2020
2019
Number
Number
Number
Number
128
69
197
144
73
217
-
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 25 to 28.
5 - Finance income and expense
Finance income
Bank interest receivable on short term deposits
Finance expense
Interest expense on lease liabilities
Group
Company
2020
£’000
10
2019
£’000
12
2020
£’000
9
Group
Company
2020
£’000
36
2019
£’000
-
2020
£’000
-
2019
£’000
-
2019
£’000
-
55
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
6 - Profit before tax
This is arrived at after charging/(crediting):
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Research and development expenditure written off
Short term rentals - land and buildings
Short term 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 the 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 34
- non-audit services - comprising other assurance services
7 - Tax credit/(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 credit / (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% (2019: 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 credit / (expense)
2020
£’000
559
257
236
446
-
16
7
46
16
12
79
16
-
1
2020
£’000
(38)
7
(31)
135
104
2019
£’000
543
-
228
504
214
138
(39)
63
-
13
63
13
90
1
2019
£’000
(73)
-
(73)
(113)
(186)
18
1,970
(4)
171
16
(28)
(44)
(7)
104
(374)
148
63
25
(48)
-
(186)
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.
56
Titon Holdings Plc 2020 Annual Report 8 - Dividends
Final 2019 dividend of 3.00 pence (2018: 3.00 pence) per ordinary share proposed and paid during
the year relating to the previous year’s results
Interim dividend of 0.00 pence (2019: 1.75 pence) per ordinary share paid during the year
2020
£’000
332
-
332
2019
£’000
332
194
526
The Directors are proposing a final dividend of 2.0 pence (2019: 3.0 pence) per share. This will result in a final dividend
totalling £221,675 (2019: £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
2020
£’000
58
2019
£’000
1,423
Number
Number
Weighted average number of ordinary shares for the purposes of basic earnings per share
11,083,750
11,083,750
Effect of dilutive potential ordinary shares: share options
83,375
142,560
Weighted average number of ordinary shares for the purposes of diluted earnings per share
11,167,125
11,226,310
Earnings per share (pence)
Basic
Diluted
The total number of options in issue is also disclosed in note 23.
0.52p
0.52p
12.84p
12.68p
57
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
10 - Property, plant and equipment
Group
Cost
At 1 October 2018
Additions
Disposals
At 1 October 2019
Additions
Disposals
Foreign exchange revaluation
Freehold
land and
buildings
Improvements
to leasehold
property
Plant and
equipment
Motor
vehicles
Total
£’000
3,455
-
-
3,455
-
-
-
£’000
64
110
-
174
15
-
4
£’000
7,432
546
(6)
7,972
201
(59)
83
At 30 September 2020
3,455
193
8,197
Depreciation
At 1 October 2018
Charge for the year
Disposals
At 1 October 2019
Charge for the year
Disposals
Foreign exchange revaluation
At 30 September 2020
Net book value at 30 September 2020
At 30 September 2019
At 1 October 2018
1,426
64
-
1,490
64
-
-
1,554
1,901
1,965
2,029
-
10
-
10
33
-
4
47
146
164
64
6,049
390
(6)
6,433
394
(49)
70
6,848
1,349
1,539
1,383
£’000
343
38
(32)
349
30
(119)
-
260
164
79
(25)
218
68
(99)
-
187
73
131
179
£’000
11,294
694
(38)
11,950
246
(178)
87
12,105
7,639
543
(31)
8,151
559
(148)
74
8,636
3,469
3,799
3,655
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 2020, the Group had entered into contractual commitments for the acquisition of plant and equipment
amounting to £18,000 (2019: £36,000).
58
Titon Holdings Plc 2020 Annual Report 10 - Property, plant and equipment (continued)
Group: right-of-use assets
Cost
Adjustment on transition to IFRS16
At 1 October 2019
Additions
Disposals
Foreign exchange revaluation
At 30 September 2020
Depreciation
At 1 October 2019
Charge for the year
Disposals
Foreign exchange revaluation
At 30 September 2020
Net book value at 30 September 2020
Company
The Company has no right-of-use assets (2019: £nil)
Company: property and motor vehicles
Cost
At 1 October 2018
Additions
Disposals
At 1 October 2019
Additions
Disposals
At 30 September 2020
Depreciation
At 1 October 2018
Charge for the year
Disposals
At 1 October 2019
Charge for the year
Disposals
At 30 September 2020
Net book value at 30 September 2020
At 30 September 2019
At 1 October 2018
Leasehold
property
Plant and
equipment
Motor
vehicles
£’000
£’000
465
465
194
-
3
662
-
132
-
1
133
529
Freehold
land and
buildings
£’000
3,455
-
-
3,455
-
-
3,455
1,426
64
-
1,490
64
-
1,544
1,901
1,965
2,029
-
-
25
-
-
25
-
4
-
-
4
21
Motor
vehicles
£’000
52
-
-
52
-
-
52
17
13
-
30
13
-
43
9
22
35
Total
£’000
770
770
261
(8)
-
£’000
305
305
42
(8)
(3)
336
1,023
-
121
(8)
1
114
222
Total
£’000
3,507
-
-
3,507
-
-
3,507
1,443
77
-
1,520
77
-
1,597
1,910
1,987
2,064
-
257
(8)
2
251
772
59
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
11 - Intangible assets
Group
Cost
At 1 October 2018
Additions
Disposals
At 1 October 2019
Additions
Disposals
Foreign exchange revaluation
At 30 September 2020
Amortisation
At 1 October 2018
Charge for the year
Disposals
At 1 October 2019
Charge for the year
Disposals
Foreign exchange revaluation
At 30 September 2020
Net book value
at 30 September 2020
At 30 September 2019
At 1 October 2018
Computer
software
Development
costs
(internally
generated)
Goodwill
Assets under
development
Patents
Total
£’000
823
86
(5)
904
-
(99)
-
805
450
77
(5)
522
89
-
-
611
194
382
373
£’000
£’000
£’000
778
123
-
901
186
(5)
-
1,082
494
150
-
644
147
(5)
-
786
296
257
284
78
-
-
78
-
-
-
78
-
-
-
-
-
-
-
-
78
78
78
-
-
-
-
179
-
-
179
-
-
-
-
-
-
-
-
179
-
-
£’000
249
-
-
£’000
1,928
209
(5)
249
2,132
5
-
3
370
(104)
3
257
2,401
247
1
-
248
-
-
3
1,191
228
(5)
1,414
236
(5)
3
251
1,648
6
1
2
753
718
737
All assets have an average useful economic life of 3.1 years (2019: 3.1 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 £85,000 at 30 September 2020 (2019: £135,000) and a remaining amortisation period of 1.9 years (2019: 2.9
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 (2019: £nil)
60
Titon Holdings Plc 2020 Annual Report 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
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
Proportion of
voting rights held
at 30 September
2019 and 2020
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
2020
£’000
554
2019
£’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
2019 and 2020
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
2020
£’000
225
2019
£’000
225
61
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
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
2020
£’000
6,607
305
6,912
1,341
101
1,442
5,470
2,680
197
2,877
2020
£’000
7,312
83
2019
£’000
11,943
138
12,081
6,577
-
6,577
5,504
2,697
197
2,894
2019
£’000
12,960
672
BTS did not record any other comprehensive income for the years ended 30 September 2020 or 30 September
2019 in its own accounts, although the Consolidated Statement of Comprehensive Income includes £100,000 of
other comprehensive expense for 2020 (2019: income £21,000). BTS has been included based on audited financial
statements drawn up for the year to 30 September 2020. Transactions between it and the Group are set out in note 24.
The Group’s investment in BTS at 30 September 2020 includes £197,000 (2019: £197,000) of goodwill.
14 - Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2020
£’000
1,805
551
2,011
4,367
2019
£’000
2,144
581
2,159
4,884
No inventories (2019: £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
£189,000 (2019: net debit of £48,000) to the Consolidated Income Statement 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 £14,928,000 (2019: £18,959,000).
Company
The Company had no inventories at 30 September 2020 (2019: £nil).
62
Titon Holdings Plc 2020 Annual Report 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
Grants receivable
Prepayments and accrued income
Total trade and other receivables
Group
Company
2020
£’000
3,211
(114)
3,097
293
-
293
258
12
119
2019
£’000
2,951
(48)
2,903
2,010
(35)
1,975
300
-
268
2020
£’000
-
-
-
3,143
-
3,143
1
2
1
2019
£’000
-
-
-
3,117
-
3,117
1
-
4
3,779
5,446
3,147
3,122
Other than the amounts due from related parties there were no significant concentrations of credit risk at either 30
September 2020 or 30 September 2019.
The average credit period taken on sale of goods by the Group’s trade debtors is 46 days (2019: 64 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
2020
£’000
2020
£’000
2019
£’000
2019
£’000
Gross
trade and
related party
receivables
Loss
provision
(ECL)
Gross
trade and
related party
receivables
Loss
provision
(ECL)
2,458
853
133
56
4
(27)
(27)
(33)
(23)
(4)
3,916
913
77
52
3
3,504
(114)
4,961
(47)
(13)
(8)
(12)
(3)
(83)
Of the £114,000 ECL provision, £nil (2019: £35,000) relates to amounts due from the Group’s associate. See note 13.
Due to the pandemic the assessed level of credit risk has increased due to the likely amount of bad debts rising.
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 2020 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 2020 that are overdue for payment is 32% (2019: 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.
63
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
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
2020
£’000
83
113
(19)
(63)
114
2019
£’000
53
105
(23)
(52)
83
16 - Deferred tax
Group
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19.0% (2019:
17.0%). The movement on the deferred tax account is as shown below:
Total
deferred tax
at 1 October
2019
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
Total
deferred
tax at 30
September
2020
Liability
2020
UK
Asset
2020
Non-UK
UK accelerated capital allowances
Non-UK accelerated capital allowances
UK other temporary and deductible differences
Non-UK other temporary and deductible differences
UK available losses
Non-UK available losses
Total deferred tax
£’000
(295)
£’000
(35)
-
102
258
110
23
198
-
8
-
30
-
3
£’000
62
2
(63)
(227)
215
143
132
£’000
(268)
£’000
(268)
2
47
31
355
166
333
-
47
-
355
-
134
£’000
-
2
-
31
-
166
199
Total
deferred tax
at 1 October
2018
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
UK accelerated capital allowances
UK other temporary and deductible differences
Non-UK other temporary and deductible differences
UK available losses
Non-UK available losses
Total deferred tax
£’000
£’000
£’000
£’000
£’000
£’000
(247)
89
235
210
24
311
-
-
-
-
-
-
(48)
13
23
(100)
(1)
(113)
(295)
102
258
110
23
198
(295)
102
-
110
-
(83)
-
-
258
-
23
281
There are no unrecognised deferred tax assets at 30 September 2019 or 30 September 2020.
64
Titon Holdings Plc 2020 Annual Report 16 - Deferred tax (continued)
Company
Deferred tax is calculated in full on timing differences under the liability method using a tax rate of 19.0% (2019: 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
2019
Effect of
rate change
on opening
balances
Credited /
(expensed)
to Income
Statement
£’000
(228)
26
68
£’000
(27)
3
8
(134)
(16)
£’000
13
(19)
(76)
(82)
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 30
September
2020
£’000
(242)
10
-
Liability
2020
UK
£’000
(242)
10
-
(232)
(232)
Total
deferred
tax at 30
September
2019
£’000
(228)
26
68
Liability
2019
UK
£’000
(228)
26
68
(134)
(134)
Group
Company
2020
£’000
2,261
342
511
1,189
4,303
2019
£’000
2,433
364
576
1,420
4,793
2020
£’000
-
-
-
211
211
2019
£’000
-
-
-
85
85
Group trade creditors and accruals principally comprise amounts outstanding for trade purchases and ongoing costs.
Year-end Group trade creditors represent 58 days (2019: 48 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.
65
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
18 - Leases
Nature of leasing activities (in the capacity as lessee)
The group leases a number of properties in the jurisdictions from which it operates. In some jurisdictions it is customary
for lease contracts to provide for payments to increase each year by inflation and in others to be reset periodically to
market rental rates. In some jurisdictions property leases the periodic rent is fixed over the lease term.
The group also leases certain items of plant and equipment. In some contracts for services with distributors, those
contracts contain a lease of vehicles. Leases of plant, equipment and vehicles comprise only fixed payments over the
lease terms.
The group sometimes negotiates break clauses in its property leases. On a case-by-case basis, the group will consider
whether the absence of a break clause would exposes the group to excessive risk. Typically factors considered in
deciding to negotiate a break clause include:
the length of the lease term;
●
●
● whether the location represents a new area of operations for the group
the economic stability of the environment in which the property is located; and
At 30 September 2020 the carrying amounts of lease liabilities are not reduced by the amount of payments that would
be avoided from exercising break clauses because on both dates it was considered reasonably certain that the group
would not exercise its right to exercise any right to break the lease. Total lease payments of £330,000 (2019: £330,000)
are potentially avoidable were the group to exercise break clauses at the earliest opportunity.
Right-of-Use Assets
At 1 October 2019
Additions
Amortisation
Foreign exchange revaluation
At 30 September 2020
Lease Liabilities
At 1 October 2019
Additions
Interest expense
Lease payments
Foreign exchange revaluation
At 30 September 2020
Lease liabilities
At 1 October 2019
At 30 September 2020
Lease expense
Short term lease expense
Low value lease expense
Aggregate undiscounted commitments for short term leases
66
Freehold land
and buildings
Plant and
equipment
Motor
vehicles
Total
£’000
£’000
£’000
£’000
305
42
(121)
(4)
222
770
261
(257)
(2)
772
465
194
(132)
2
529
-
25
(4)
-
21
£’000
786
261
36
(274)
(1)
808
Up to
1 year
Between 1
and 2 years
Between 2
and 5 years
Over
5 years
Total
£’000
212
277
£’000
199
211
£’000
£’000
135
84
786
808
£’000
240
236
2020
£’000
16
-
-
16
Titon Holdings Plc 2020 Annual Report
19 - Share capital
Authorised
13,600,000 ordinary shares of 10p each
2020
£’000
1,360
2019
£’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
11,133,750
Share options exercised during the year
-
-
-
2020
Number
2020
£’000
2019
Number
2019
£’000
1,113
-
At the end of the year
11,133,750
1,113
11,133,750
1,113
Treasury shares held by the Group
At the beginning of the year
Treasury shares purchased
At the end of the year
2020
Number
50,000
-
50,000
2020
£’000
27
-
27
2019
Number
50,000
-
50,000
2019
£’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 2020
At 30 September 2019
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 2020 and 14 January 2021.
67
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
20 - 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 51 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
2020
£’000
4,082
110
218
1,162
5,572
2019
£’000
2,893
518
138
1,038
4,587
2020
£’000
2,001
-
-
-
2019
£’000
1,494
-
-
-
2,001
1,494
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
Group
Company
2020
£’000
5,572
2019
£’000
4,587
2020
£’000
2,001
2019
£’000
1,494
The Group had no floating term deposits with banks at 30 September 2020 (2019: deposit weighted average interest
rate 0.55%).
Financial liabilities
The Group had no floating rate financial liabilities at 30 September 2020 (2019: £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.
21 - 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 20, and the Report on
Risk Management on pages 16 to 18 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 33 and 34.
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 20).
68
Titon Holdings Plc 2020 Annual Report 21 - 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% (2019:10%) of
sales from the UK businesses not invoiced in Sterling, gives rise to foreign currency exposure which is detailed in the
table below.
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
2020
£’000
(242)
90
(152)
2019
£’000
(178)
624
446
69
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
21 - Financial instruments – risk management (continued)
The effect of a 10% weakening of the Euro and the US Dollar against Sterling at the reporting date of 30 September
2020 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 £13,000 (2019: decrease of £40,000). A 10% strengthening in the exchange rate would, on the same
basis, have increased pre-tax profit and increased net assets by £15,000 (2019: increase of £44,000).
22 - Pensions
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 £34,000 (2019: £36,000).
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.
In the year to 30 September 2020 no share options were granted (2019: nil).
Details of the share options granted and exercised during the year and the assumptions used in the Black-Scholes
model for each share-based payment are as follows:
Date of share option grant
09/06/11
03/01/13
15/01/14
05/01/15
30/01/18
Number
of share
options
Exercise price (pence)
Number of share options
granted initially
Number of share options
outstanding at 01/10/19
Share options exercised
Share options lapsed
Number of share options
outstanding at 30/09/19
Share options granted
Share options exercised
Number of share options
outstanding at 30/09/20
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
70
48.0
24.5
58.0
67.0
156.5
259,950
203,000
320,000
25,000
205,000
10,000
-
-
10,000
-
-
10,000
111
6
2.5
5
-
-
-
-
-
-
-
114
6
1.08
5
200,000
-
-
200,000
-
-
200,000
116
6
2.18
5
-
-
-
-
-
-
-
102
6
1.28
5
205,000
415,000
-
-
-
-
205,000
415,000
-
-
-
-
205,000
415,000
88
6
1.13
3
£75,000
£37,000
£114,000
£9,000
£188,000
Titon Holdings Plc 2020 Annual Report 23 - Share-based payments (continued)
During the year 210,000 share options, included in the table above, met the conditions of exercise (2019: 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 (2019: 210,000 at 57.5p). The 415,000 share options outstanding at 30 September 2020 had a
weighted average price of 106.4p (2019: 415,000 at 106.4p) and a weighted average remaining contractual life of 5.2
years (2019: 6.2 years).
The share price at 30 September 2020 was 81.5p (2019: 130p). The average market price during the year was 95.5p
(2019: 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 £46,000 was recognised in respect of share options in the year (2019: £63,000) of which
£4,000 (2019: £6,000) was the charge made in respect of key management personnel.
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 £752,000 (2019: £734,000). See Note 15 for the related party balances at 30 September 2020.
Titon Korea Co. Ltd., the Company’s 51% owned subsidiary, paid a dividend during the year to its shareholders
amounting to £1,364,000 (2019: £996,000). Of this amount, £696,000 (2019: £508,000) before withholding tax, was
paid to the Company with the other £668,000 (2019: £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
2020
£’000
4,919
2019
£’000
8,329
Amount owed by
related party
2020
£’000
293
2019
£’000
1,975
Browntech Sales Co. Ltd
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. Mr D. Ruffell has an interest in an agreement with the Company relating to his
departure from the Company in April 2021 which could result in a payment to him of £90,000. 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, The Directors’ remuneration is disclosed in the Remuneration Report on page 26
of this document.
Remuneration paid to key management personnel during the year was as follows:
Short term benefits
Post-employment benefits
Share based payments
2020
£’000
625
57
4
686
2019
£’000
676
56
6
738
The Non-executive Directors received fees for their services to the Titon Holdings Plc Board as disclosed in the
Directors’ Remuneration Report.
71
Titon Holdings Plc 2020 Annual Report Notes to the Consolidated Financial Statements
at 30 September 2020
25 - Effects of change in accounting policies
The Group adopted IFRS 16 with a transition date of 1 October 2019. The Group has chosen not to restate comparatives
on adoption of the standard, and therefore, the revised requirements are not reflected in the prior year financial
statements. Rather, these changes have been processed at the date of initial application (i.e. 1 October 2019) and
recognised in the opening equity balances. Details of the impact this standard has had are given below. Other new and
amended standards and Interpretations issued by the IASB did not impact the Group as they are either not relevant to
the Group’s activities or require accounting which is consistent with the Group’s current accounting policies.
Effective 1 January 2019, IFRS 16 has replaced IAS 17 Leases and IFRIC 4 Determining whether an Arrangement
Contains a Lease.
IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases,
together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of
low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17, with the distinction between operating
leases and finance leases being retained. The Group does not have significant leasing activities acting as a lessor.
Transition Method and Practical Expedients Utilised
The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments
on the date of initial application (1 October 2019), without restatement of comparative figures. The Group elected to
apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application.
Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not
reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after
1 October 2019.
IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard.
The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating
leases under IAS 17:
(a) Apply a single discount rate to a portfolio of leases with reasonably similar characteristics;
(b) Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for
leases where the right-of-use asset was determined as if IFRS 16 had been applied since the commencement
date;
(c) Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of
lease term remaining as of the date of initial application.
As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether
the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognizes
right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use
assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new
or for short-term leases with a lease term of 12 months or less.
On adoption of IFRS 16, the Group recognised right-of-use assets and lease liabilities as follows:
Classification under
IAS 17
Operating leases
Right-of-use assets
Lease liabilities
Right-of-use assets are measured at an
amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued
lease payments and subject to the practical
expedients noted above.
Measured at the present value of the
remaining lease payments, discounted
using the Group’s incremental borrowing
rate as at 1 October 2019. The Group’s
incremental borrowing rate is the rate
at which a similar borrowing could be
obtained from an independent creditor
under comparable terms and conditions.
The weighted-average rate applied was
4.7%.
Finance leases
Measured based on the carrying values for the lease assets and liabilities immediately
before the date of initial application (i.e. carrying values brought forward, unadjusted).
72
Titon Holdings Plc 2020 Annual Report 25 - Effects of change in accounting policies (continued)
Measurement of right-of-use assets
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had
always been applied. Other right-of use assets were measured to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised in the Statement of Financial Position as at 30
September 2019.
The following table presents the impact of adopting IFRS 16 on the Statement of Financial Position as at 1 October
2019:
Assets
Property, plant and equipment
Liabilities
Lease liabilities
Equity
Retained earnings
Adjustments
30.09.19
as originally
presented
£000s
-
-
-
(a)
IFRS 16
01.10.19
£000s
770
786
(16)
£000s
770
786
(16)
(a) Retained earnings were adjusted to record the net effect of all other adjustments noted.
The following table reconciles the minimum lease commitments disclosed in the Group’s 30 September 2019 annual
financial statements to the amount of lease liabilities recognised on 1 October 2019:
Measurement of lease liabilities
Minimum operating lease commitments disclosed as at 30 September 2019
Less: short-term leases not recognised under IFRS 16
Less: low-value leases not recognised under IFRS 16
Add: additional costs recognised under IFRS 16
Less: effect of discounting using the incremental borrowing rate as at the date of initial application
Lease liability recognised as at 1 October 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
26 - Post balance sheet events
£000s
731
-
(16)
135
850
(64)
786
171
615
Subsequent to the balance sheet date, a dividend of circa £391,000 was approved to be paid from Titon Korea to Titon
Holdings Plc. This also results in a cash outflow from the Group to the minority shareholders of circa £396,000. This
is due for payment by the end of January 2021.There have been no other events since the balance sheet date that
materially affect the position of the Group.
73
Titon Holdings Plc 2020 Annual Report Five Year Summary
Summarised consolidated results
Results
Revenue
Gross profit
Operating (loss) / profit
Share of profit from associate
Profit before tax
Income tax credit / (expense)
Profit after tax
Dividends
2020
£’000
20,652
5,654
(39)
83
18
104
122
332
2019
£’000
2018
£’000
2017
£’000
2016
£’000
27,157
29,774
28,011
23,721
8,198
1,629
329
8,604
2,016
741
7,265
1,850
633
7,048
1,772
356
1,970
2,770
2,493
2,136
(186)
(315)
(269)
(184)
1,784
2,455
2,224
1,952
526
489
410
324
Basic earnings per share
0.52p
12.84p
18.21p
16.55p
15.21p
Assets Employed
Property, plant & equipment
Net cash and cash equivalents
Net current assets
Financed by
3,469
5,572
9,138
3,799
4,587
10,112
3,655
3,415
9,838
3,548
3,269
9,972
3,511
2,438
9,039
Shareholders’ funds: all equity
15,943
16,262
15,421
14,215
13,060
The five year summary does not form part of the audited financial statements.
74
Titon Holdings Plc 2020 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 10 March 2021 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 9 and 12 and 13 will be
proposed as Ordinary Resolutions and of which Resolutions 10 and 11 will be proposed as Special Resolutions.
Given the COVID-19 pandemic and existing government restrictions shareholders are urged not to attend the
meeting in person and to vote either via a proxy form or electronically via Link Group.
Explanatory notes in respect of the resolutions are set out on pages 22 to 24 of the Directors’ Report which accompanies
this Notice.
Please note you will not receive a form of proxy for the 2021 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 Group, on 0371 664 0300. For full details on
proxy voting please see the notes below, which accompany this Notice of Annual General Meeting.
1.
2.
3.
4.
5.
6.
7.
8.
9.
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 2020.
To declare a final dividend of 2.0p per ordinary share payable to shareholders on the Company’s register of
members at close of business on 5 February 2021 payable on 12 March 2021.
To re-elect Mr John Neil Anderson who retires from the Board in accordance with Article 104, as a Director of
the Company.
To re-elect Mr Kevin Sargeant, who retires from the Board in accordance with Article 104, as a Director of the
Company.
To re-elect Mr Nicholas Charles Howlett, who retires from the Board in accordance with Article 104, as a
Director of the Company.
To re-elect Mr Bernd Ratzke, who retires from the Board in accordance with Article 104, as a Director of the
Company.
To re-appoint BDO LLP as Auditors of the Company and to authorise the Directors to determine their
remuneration.
That the Directors’ Remuneration Report set out on pages 25 to 28 of the Annual Report and Financial
Statements for the year ended 30 September 2020, 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 14 January 2021) for a period expiring (unless
previously revoked, varied or renewed) on 9 June 2022 or, if sooner, at the end of the 2022 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.
10.
That subject to the passing of Resolution 9 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 9 as if section 561(1) of the Companies Act 2006 did not apply to such allotment, provided that this
power shall expire on 9 June 2022 or, if sooner, the end of the 2022 Annual General Meeting of the Company.
This power shall be limited to the allotment of equity securities:
10.1
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
75
Titon Holdings Plc 2020 Annual Report
Notice of Annual General Meeting (continued)
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
10.2
otherwise than pursuant to paragraph 10.1 up to an aggregate nominal amount of £150,000
(representing approximately 14.6% of the nominal value of the ordinary shares in issue on 14 January
2021);
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 9” were omitted.
11.
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:
11.1
11.2
the maximum number of ordinary shares hereby authorised to be purchased is 1,090,000 (representing
approximately 10% of the nominal value of the ordinary shares in issue on 14 January 2021);
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);
11.3
the minimum price which may be paid for each ordinary share shall be 10p; and
11.4
this authority (unless previously revoked, varied or renewed) shall expire on 9 June 2022 or, if sooner,
the end of the 2022 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.
That the Titon EMI Share Option Plan 2021 (the principal terms of which are summarised in the Appendix
below and the Rules of which are produced in draft form to this meeting and, for the purposes of identification,
initialled by the Chairman) be and it is hereby adopted and the Rules be and are hereby approved in such
draft form, subject to such amendments thereto approved by, or by a committee of, the Directors as are
necessary to carry the same into effect and/or are necessary or desirable to obtain HMRC or other regulatory
approval thereto and the Directors be authorised to do all acts and things which they may consider necessary
or expedient for implementing and giving effect to the said plan.
That the Directors be authorised to vote and to be counted in a quorum at any meeting of the Directors at which
any matter connected with the Titon EMI Share Option Plan 2021 is under consideration notwithstanding that
they may be interested in the same in any present or proposed capacity whatsoever and that this resolution
shall operate so far as is necessary by way of suspension and relaxation of the prohibition on interested
Directors voting contained in the Articles of Association of the Company, provided that no Director may vote
or be counted in a quorum when the Directors are considering any matter concerning his individual rights of
participation in the said plan.
12.
13.
By order of the Board
C Isom
Secretary
14 January 2021
Registered Office:
894 The Crescent
Colchester Business Park
Colchester
Essex
CO4 9YQ
76
Titon Holdings Plc 2020 Annual Report
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 Group , on
0371 664 0300 (Calls are charged at the standard geographic rate and will vary by provider. Calls outside
the United Kingdom will be charged at the applicable international rate. We are open between 09:00 - 17:30,
Monday to Friday excluding public holidays in England and Wales) and returning it to the address shown on
the form. The appointment of a proxy will not prevent a member from subsequently attending and voting at the
meeting in person.
2.
Members of the Company are entitled to appoint a proxy to exercise all or any of their rights to attend and to
speak and vote at a meeting of the Company. A proxy does not need to be a member of the Company. A
member may appoint more than one proxy in relation to a meeting provided that each proxy is appointed to
exercise the rights attached to a different share or shares held by that member. To appoint more than one
proxy you may photocopy the proxy form.
Procedure for appointing a proxy
3.
To be valid, the proxy instruction must be received by one of the below methods no later than 11.00 a.m. on
Monday 8 March 2021. 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 Group, 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.
7.
8.
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.
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
Group (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.
77
Titon Holdings Plc 2020 Annual Report Notice of Annual General Meeting (continued)
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 8 March 2021,
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 13 January 2021, 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.
15.
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.titon.com/uk/investors/.
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 0371 664 0300 Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international
rate. We are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and
Wales; or
● write to Link Group , 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.
78
Titon Holdings Plc 2020 Annual Report APPENDIX
A. The Titon EMI Share Option Plan 2021
The principal features of the Plan are:
1.
2.
3.
4.
Eligibility
Only those directors or employees of the Company and its subsidiaries (the “Group”) who devote substantially
all their working time to the business of any company in the Group (and who do not hold more than 30% of the
ordinary share capital of the company) will be eligible to participate, and must commit a minimum of 25 hours
per week working time to the Company.
Participants in the Plan will be selected at the discretion of the Remuneration Committee (“the Committee”).
Exercise Price
The exercise price for an option will be determined by the Committee but may not be less than the
higher of the nominal value of any ordinary share (if the option is an option to subscribe for Ordinary
Shares) and its market value. Market value will be taken to be the middle market quotation of an
Ordinary Share on the dealing day of the Alternative Investment Market of the London Stock Exchange
on the date of grant as derived from the Daily Official List of the Alternative Investment Market.
Grant of Options
Options granted under the Plan will be subject to an objective performance condition imposed by the
Committee so that they may not be exercised unless the condition has been satisfied. The performance
condition to be imposed will require that the group Earnings per Share will grow by at least 9% more than
Consumer Price Index growth over a three year period. The condition will not be subject to re-testing.
Exercise of Options
Options may normally only be exercised by an option holder who is still an employee or director of a company
in the Group after the third anniversary of their date of grant and before the tenth anniversary of their date of
grant.
If an option holder ceases employment or to hold office due to injury, ill health, disability, redundancy or
retirement, because the company which employs him/her or with which they hold office leaves the Group
or because the business to which their office or employment relates is transferred outside the Group, their
options may be exercised until the expiry of 90 days from cessation. Their options will then lapse.
If an option holder dies, his/her options that have vested may be exercised within twelve months of their death
by their legal personal representatives. Their options will then lapse.
Options will also be exercisable during limited periods if the Company is taken over, wound up or if there is a
scheme of reconstruction.
Options may not be exercised in any event more than ten years after the date of grant and will lapse if any
performance condition attached to them has not been achieved by the tenth anniversary of the date of grant.
Options may be exercised in whole or in part.
5.
Limitations on the Grant of Options
Individual limit
An option may only be granted to an individual if the aggregate market value at the date of grant of the
Ordinary Shares to be subject to the option and the market value on the date of grant of all Ordinary Shares
comprised in subsisting options granted to them under the Plan and any company share option scheme would
not exceed £250,000.
Overall limit
At any time, the total market value (at the relevant dates of grant) of the Ordinary Shares that can be acquired
on the exercise of all EMI options over the shares must not exceed £3 million.
79
Titon Holdings Plc 2020 Annual Report
Notice of Annual General Meeting (continued)
B. Other Features of the Plan
1.
2.
3.
4.
5.
Substitution of Shares
Where there is a general offer to acquire the Company, options may by agreement between the offeror and
the option holder be rolled over into options over the shares of the offeror.
Variation of share capital
On a variation of the Company’s share capital by way of a capitalisation issue (other than a scrip dividend),
rights issue, consolidation, subdivision or reduction of capital or otherwise, the exercise price and the number
of shares comprised in an option can be varied at the discretion of the Committee subject to certification from
the Company’s auditors that in their opinion the variation is fair and reasonable.
General
Ordinary shares allotted on the exercise of options rank pari passu with Ordinary Shares in issue at the date
of allotment but shall not rank for dividends the record date for which precedes the date of exercise of the
option.
The Company must have sufficient available unissued ordinary share capital to meet the exercise of options,
taking into account any arrangements made to procure a transfer by a third party of issued shares.
The Company will be responsible for obtaining a listing for Ordinary Shares issued on the exercise of an
option.
Options may not be transferred or charged and if an option holder attempts to do so their options will lapse
immediately.
If an option holder ceases employment they will not be entitled to compensation for the loss of any right under
the Plan.
Each option holder indemnifies the Company for any income tax and NIC liabilities that may be incurred on
the exercise or sale of their Ordinary Shares.
Amending the Plan
The Board may amend the Plan from time to time, but:
a) may not amend the Plan if the amendment applies to options granted before the amendment was made
and materially adversely affects the interests of option holders, unless each option holder consents to the
amendment.
b) while Shares are traded on AIM, the Board may not make any amendment to the advantage of Option
Holders if that amendment relates to the definition of employee, the individual or overall limits, or variation
in capital rules, without the prior approval of the Company in general meeting.
Limitations on the Plan
An option will not be granted under the Plan if the number of Ordinary Shares over which it is proposed to
grant the option when aggregated with the number of Ordinary Shares which have been issued or may be
issued pursuant to options granted in the ten year period prior to the proposed date of grant under this Plan
and any other share option scheme approved by the Company in general meeting exceeds 10 per cent of the
issued ordinary share capital of the Company at the proposed date of grant.
80
Titon Holdings Plc 2020 Annual Report
Directors and Advisers
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
SECRETARY AND REGISTERED OFFICE
C Isom
894 The Crescent
Colchester Business Park
Colchester
Essex
CO4 9YQ
COMPANY REGISTRATION NUMBER
1604952 (Registered in England & Wales)
WEBSITE
www.titon.com/uk/investors
AUDITORS
BDO LLP
55 Baker Street
London
W1U 7EU
NOMINATED ADVISER
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 Group
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
81
Titon Holdings Plc 2020 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.titon.com/uk/investors/