Titon warns of weakness after first-half losses widen
By Josh White
Date: Friday 19 May 2023
(Sharecast News) - Window, door and ventilation hardware maker Titon reported a 5.2% increase in first-half net revenue to £12.08m on Friday, driven by stronger trading in the UK and Europe, slightly surpassing the board's expectations.
The AIM-traded firm, however, said its EBITDA in the six months ended 31 March decreased 35.7% to £0.18m, which it put down to lower gross margins, which stood at 26% in the period, down from 28% a year earlier.
It said it had faced challenges in managing labour, material, and energy cost inflation.
The company's loss before tax amounted to £0.45m after accounting for depreciation and amortisation charges of £0.49m, widening from its £0.25m loss a year earlier.
Basic losses per share declined 96% to 2.86p, while the interim dividend was lowered 66.7% to 0.5p.
The firm's cash balance at the end of the period totalled £1.61m, reflecting a 56.8% decrease from £1.7m on 30 September last year.
Titon put the decrease down to the payment of dividends to shareholders, partially offset by a dividend receipt from the company's associate, Browntech Sales.
Looking ahead, the construction industry in the UK was expected to face challenges, with the Office for Budget Responsibility predicting two quarters of negative growth in GDP, and the Construction Products Association forecasting a 17% decline in private housebuilding output in 2023, followed by a 4% recovery in 2024.
Additionally, refurbishment, maintenance, and improvement activity was expected to decrease by 9% in 2023, but rise 2% in 2024.
Despite such challenging market conditions, Titon said it remained committed to achieving its business imperatives for the rest of the year.
The firm said it would focus on managing costs and improving operational efficiency.
While it expected slightly lower revenues from the UK and Europe in the second half due to a slowdown in the housing market, the full-year trading performance was projected to meet prior expectations, supported by the first-half results.
In South Korea, Titon said it anticipated ongoing difficulties and further losses in the second half, and so it expected its full-year results to be lower than previously anticipated.
As previously announced, the firm was planning to streamline the corporate structure and operations of its Korean business.
The interim dividend of 0.5p per share, as approved by the board, would be paid to shareholders on 7 July.
"The trading performance of the group over the six months to 31 March generated good levels of sales in our main UK and European markets for our products," said non-executive chair Keith Ritchie.
"Trading in South Korea remained difficult as the construction market saw projects delayed, and losses were higher than we expected.
"Although our full year performance in the UK and Europe is expected to be consistent with our prior expectations, our group results for the full year to 30 September will be lower than we previously expected as a result of the weak trading in South Korea that we continue to suffer from."
Ritchie said the firm had continued to invest in its products and people during the period, with a number of new hires as the company seeked to change and improve the business.
"We have started a recruitment process to hire a new chief executive after the departure of Alexandra French, and will update shareholders at the appropriate time.
"We continue to benefit from the strength of our balance sheet, the range of products that we manufacture and sell and markets in which we trade.
"The group is well capitalised with a strong balance sheet and no debt - we remain confident in the long-term prospects of the business."
At 1159 BST, shares in Titon Holdings were down 8.05% at 80p.
Reporting by Josh White for Sharecast.com.
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