Condititoning

Initiation of our coverage was 16 March 2016 at 101.5p. In February 2018, the price was 215p and it stayed north of £2 for another year. In fiscal 2019, though, Titon weathered a perfect storm most notably in its largest profit earner, South Korea. Titon’s PBT dropped by a fifth and, now, early in fiscal 2020, a profit warning. Titon is a veteran with branded products and core financial strength. It is battening down the hatches and cutting costs. It will prevail.

• AGM: On 18 February, Titon announced that trading conditions across its markets in the first four months of the year were tougher than anticipated; as a result, the board anticipates that underlying PBT for the year ending 30 September 2020 will be materially below management’s expectations.
• UK: Sales of ventilation systems have risen slightly in the early fiscal year but window and door hardware have been lower than expected, as the UK economy showed little or no growth and “competition intensified”. Nor has Titon seen any uplift in trading in 2020 following the General Election.
• South Korea: Activity levels in the new-build market have continued to fall as the Government intervenes to slow house price growth through restricting lending. This means that full-year sales at Titon Korea are expected to be ca.10% lower than forecast in December 2019.
• Action: Management is disappointed that current trading has continued to be challenging. However, it has taken steps to manage the cost base by reducing headcount and continuing “to bear down” on all costs in the business. Note, too, net cash at the end of January was just over £4m.
• Condititoning: In the past 12 months, Titon’s total shareholder return (TSR) has been minus 39%. Remember, though, in the calendar years 2016 through 2018, its TSR averaged 31% p.a. The company was founded in 1972 and is empirically equipped to deal with slings and arrows. Hardman & Co’s formal association with Titon ends this month (hence no forecasts) but we will be cheering from the bleachers.