Titon : Interim Statement (6 months to 31st March 2023)

Titon Holdings Plc

Interim Statement

2023

Overleaf: Product, top to bottom. Titon Ultimate® Active Vent, Titon FireSafe® 100mm Push Through Wall Kit, Asterion II high security profile cylinder and the HRV 4 range. All products developed and designed by Titon's expert Research and Development team.

2023 Interim Statement

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

Titon Holdings Plc Interim Statement 2023

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Business Review

Chairman's Statement

As we anticipated and set out in the Group's 2022 Annual Report, the business environment has remained challenging for us in the six months to 31 March 2023 as the pressure on our margins continued, resulting in a reported Group loss before tax for the period of £0.45m (2022 loss before tax: £0.25m). However, I am pleased to report that sales were 5% higher than in the period to 31 March 2022 although, as we had forecast, our gross margins are lower compared to last year due to the cost increases we have continued to suffer. I am pleased that in this period we received a dividend from our Associate Company in South Korea of £0.3m, which has benefited our cash position. As indicated in the Group's AGM trading update, overall revenues in the six months to 31 March 2023 were slightly in line with the Board's expectations.

We identified a number of key business imperatives that we wanted to deliver on in 2023 and I am pleased to report that progress has been made in all of these. I can also report that our new ERP system, which caused us some significant challenges in 2022 is working well and we now seek to enhance this system to bring further process improvement and automation where we can. We are committed to achieving all the business imperatives for the rest of the year and these will be replaced by our next set of objectives which will be separate from the work required to set out our medium-term strategic plan, which we will commence this year.

Income Statement

In the six months to 31 March 2023, Titon's net revenue (which excludes inter-segment activity) increased by 5.2% to £12.1 million (2022: £11.5 million). Sales of Window and Door Hardware products fell by 9% in the period due to the lower sales of bought-in hardware products following the ending of a distributor relationship, which benefited the prior year revenues, offset somewhat by growth in sales of Titon manufactured hardware products. Sales of Ventilation Systems products rose by 31% as the backlog of orders from both our UK and European customers were manufactured and despatched. Sales in Titon Korea, our 51% owned subsidiary fell slightly by 1% reflecting the continuing difficult trading conditions and market dynamics in South Korea.

Gross margins fell to 26.1% (2022: 28.0%) due mainly to the cost increases we have been unable to reflect in our own pricing to customers, but also the lower contribution from Titon Korea. EBITDA was 36% lower at £0.18 million (2022: £0.28 million), whilst we made an operating loss of

£0.39 million (2022 loss: £0.21 million). The results from the Group's associate, Browntech Sales Co. Ltd (BTS) in South Korea, amounted to a loss of £54,000 (2022 loss: £29,000) as a result of the continuing weak new build market in Korea and the Korean market shift towards mechanical ventilation. In aggregate, the Group made a loss before tax of £0.45 million (2022 loss before tax: £0.25 million).

The Group's loss per share for the period was 2.86 pence (2022: loss per share of 1.46 pence) with the total loss after tax of £0.39m (2022 loss: £0.21m) and an apportionment to minority shareholders of a loss of £93,000 (2022: loss of £47,000) which reflected the weak trading incurred by Titon Korea.

Whilst it is always disappointing to make a loss in the period, the Group continues to maintain a strong balance sheet and the Board has therefore approved the payment of an interim dividend in respect of the 6 months ending 31 March 2023 of 0.5 pence per share (2022: 1.50 pence per share). The interim dividend is payable on 7 July 2023 to shareholders on the register at 2 June 2023. The ex-dividend date is 1 June 2023.

Balance sheet and cash flow

Net assets including non-controlling interests fell by

3.3% or £0.5 million to £15.4 million (30 September 2022: £16.0 million) with net cash (excluding lease liabilities) of £1.6 million (30 September 2022: £1.7 million) which is equivalent to 11.1% of net assets (30 September 2022: 10.8%). The Group had no financial indebtedness at 31 March 2023, other than lease liabilities. The cash held by Titon Korea reduced to £0.05 million at 31 March 2023 (30 September 2022: £0.07 million).

The half year saw cash generated by operations of £0.02 million (2022: cash used in operations £0.29 million), primarily due to actively improving our working capital management through accurate targeting of stock levels for the main product lines. Capital expenditure in the period was £0.26 million (2022: £0.39 million) as we continue investing in plant and machinery and tooling. We were pleased to receive a dividend from BTS in March 2023 amounting to £0.3 million (net of withholding tax) (2022: nil).

Net current assets were £8.0 million at 31 March 2023 (30 September 2022: £7.6 million) with a Quick Ratio1 of

1.23 (30 September 2022: 1.2). Asset Turn was 1.85 (30 September 2022: 1.65).

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Titon Holdings Plc Interim Statement 2023

Segmental and operational review

As we noted in the Annual Report, we had identified a number of business imperatives that we wanted to deliver on in the current financial period to stabilise the UK and European businesses and to return the Group to growth. The key imperative that we identified was to catch up with backlog of orders caused by the initial implementation issues of the new ERP system in May 2022 and the previous supply chain challenges we had faced and I am pleased to report that we have achieved that. The other key imperative is to reduce the site inventory held and I am pleased to see that this has also started to improve and will continue throughout the rest of this financial year. Revenues in South Korea have stabilised although new building projects continue to be delayed and sales in Titon Inc. have fallen slightly compared to last year.

Gross margins have fallen by 1.9% compared to the same period last year due mainly to the material, labour and energy cost increases we have experienced that we haven't been able to pass on, as previously reported, and the lower contribution from Titon Korea. The reduction in gross margin and an increase in overheads, resulting from enhancing our management team and technology, has meant that our operating result is a loss of £0.39m versus an operating loss of £0.21m in 2022. Titon Korea contributed £0.19m of this loss (2022 loss: £0.12m).

UK and Europe

I am pleased to report that sales in the UK and Europe have increased over the same period last year, rising by 6% as we worked hard to reduce the backlog of orders. Sales in UK Window and Door Hardware have fallen by 9%. Sales of Titon manufactured products rose by 16% against the same prior period but sales of bought-in products fell by 51% due to the lower sales of hardware products following the ending of our distributor relationship with Sobinco, which benefited the prior year's H1 revenues, whilst we develop our new distribution partnership with Roto in order to replace some of those products.

In our Ventilation Systems division, sales in the UK have risen by 6% against the same period last year as sales of Mechanical Ventilation with Heat Recovery products grew. However, sales of ducting bought-in products fell as the production back-log resulted in lower enquiries for whole house systems in the period. Sales of the new Titon Ultimate® dMEV extract fan started to increase with revenues growing by approximately four times in the period

as some initial production issues were resolved. We expect sales of this product to continue to increase in the second half of the year. Sales of the Titon FireSafe® Air Brick range continue at healthy levels as demand continues for this safety product.

In Europe, Ventilation Systems sales rose by 124% as the production backlog eased and outstanding orders for our Export customers were delivered. Exports of our Window and Door Hardware products were up 15% in the period.

South Korea

Revenues from South Korea were marginally lower than in 2022. This reflects the difficult conditions for new build in Korea and the continuing delays in starting new projects. In terms of the segmental contribution from South Korea, the two businesses, Titon Korea and BTS are aggregated. The revenue in the Group's accounts, which is solely that from Titon Korea (the Group's share of BTS's profits/losses are accounted for as an associate) was flat at £1.5 million (2022: £1.5 million).

The segment contribution, which includes the pre-tax loss of Titon Korea plus 49% of the post-tax loss of BTS, was a loss of £245,000 (2022 loss: £152,000) which was higher than we previously expected.

United States

Sales in our US business remain a very small portion of the Group's overall sales and were broadly flat against the same period last year at £279,000 (2022: £290,000). Titon Inc. made a small pre-tax profit in the period.

Board

As we announced on 6 April 2023, Alexandra French stepped down from her role as Chief Executive and left the Board with immediate effect. I thank Alexandra for all her hard work over the 11 months that she was Chief Executive. We have started a recruitment process for her successor and will update shareholders in due course.

I am pleased to say that there have been no other changes to the Board in the period under review.

I personally thank my colleagues on the Board for their hard work and counsel over recent months.

Employees

As usual our employees have continued to show a high level of dedication to the business. In the period under review, we have managed to catch up on our backlog of

Titon Holdings Plc Interim Statement 2023

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