REG - Titon Holdings PLC - Trading Update

Titon HoldingsAnnouncement

22/07/2022 07:00

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RNS Number : 3680T  Titon Holdings PLC  22 July 2022

LEI: 213800ZHXS8G27RM1D97

 

This announcement contains inside information

22 July 2022

 

Titon Holdings Plc

 

Trading Update

 

Titon Holdings Plc ("Titon", the "Group" or the "Company") provides the
following update on trading for the current year to 30 September 2022
("FY21/22").

UK and Europe

As we indicated at the time of the Group's Interim results for FY21/22 trading
conditions in the UK and Europe in 2022 were expected to be affected by
shortages of raw materials and components, and price increases for materials,
components, labour and energy, which would have a negative impact on our sales
and margins. Although we have seen some easing in the supply chain constraints
that held back our performance reported in the FY21/22 interim results, in the
last three months we have continued to see margin erosion from cost inflation
and this has had a significant bearing on our financial results for the second
half of the year.  We will be putting through further price increases for our
own products before the year-end to seek to mitigate the margin impact of
these cost increases going forwards.

Our trading has also been affected by unforeseen operational impacts
associated with the implementation of the new internal ERP system for the UK
and European operations. This new ERP system represents a key business
improvement needed as part of our growth strategy, but the initial
implementation led to short-term production and despatch delays which resulted
in lower than expected revenues for the last three months of trading. This has
been a source of great frustration for the Group as demand from our customers
has remained strong during this time. We have also incurred some increased
costs to implement the new ERP system and for system development, as well as
increased labour costs to ramp up production output and to enhance staff
retention as Titon has sought to address delays to the fulfilment of customer
demand. The ERP implementation challenges are being resolved and our sales
revenues have now returned to more normal monthly levels, but in the current
financial year we do not expect sales in the final months of the year to be
sufficient to recover the sales shortfall we have suffered. As a result of
these items our results for the FY21/22 financial year will be lower than our
prior expectations.

We are working very hard to increase the output of our Ventilation Systems
products as supply shortages ease and have seen increased demand for sales of
our Hardware products since the changes to Building Regulations came into
effect in June 2022. We have also now filled the key management vacancies that
we had identified earlier in the year.

Rest of the World

As set out in the FY21/22 Interim results, revenues from our subsidiary in
South Korea, Titon Korea, have been disappointing this year due to delays in
site construction projects and the shift in market demand to mechanical
ventilation products from natural ventilation. Despite these lower revenues,
we expect that results from Titon Korea and Browntech Sales Co. Ltd, our 49%
owned associate company, will show a small profit for the full year, which is
better than anticipated at the time of the Interim results. We also expect to
see revenues from sales of mechanical products bought-in by Browntech Sales
Co. Ltd, start to accrue in FY 2022/23.

Strong balance sheet

The Group has consistently maintained a strong financial position with an
on-going focus on working capital management and various cost efficiency
initiatives. At 30 June 2022, the Group had cash balances of approximately
£3.0m and no indebtedness.

 

Keith Ritchie, Executive Chairman, commented:

"We are obviously disappointed that the Group's trading performance for the
FY21/22 full year will be lower than previously indicated due to the margin
pressures we have experienced and the production and despatch issues we have
suffered from in the last three months as we implemented our new ERP system.
We will continue to actively manage the market-wide supply chain and
inflationary challenges and seek to increase our factory output for the
remainder of the financial year. We thank all of our customers for their
patience as we work to fulfil their orders and our employees for their
continued hard work. Despite these difficulties we remain confident in our
medium-term future, supported by our strong financial position.

We expect to provide a further update on trading in October 2022 ahead of our
full year results for FY21/22."

 

ENDS

 

For further information please contact:

 

 Titon Holdings Plc

 Keith Ritchie                                 Tel: +44 (0)7748 146834

 Shore Capital (Nominated Adviser and Broker)  Tel: +44 (0)20 7408 4090

 Daniel Bush

 Tom Knibbs

 

 

 

 

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