Report & Accounts (year to 30th September 2024)

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Annual Report and Financial Statements

for the year ended 30 September 2024

CONTENTS

Strategic Report

02 Chair's Statement

1. Chief Executive Officer's Review
2. Business Model and Strategy

1. Financial and Operational Review

1. Environmental Social and Governance Report

1. Risk Management

Governance

24 Directors' Report

1. Directors' Remuneration Report

1. Corporate Governance Report

1. Audit Committee Report

Financial Statements

1. Independent Auditor's Report

1. Consolidated Income Statement
2. Consolidated Statement of Comprehensive Income
3. Consolidated Statement of Financial Position
4. Company Statement of Financial Position
5. Consolidated Statement of Changes in Equity
6. Company Statement of Changes in Equity
7. Group and Company Statement of Cash Flows
8. Notes to the Consolidated Financial Statements

1. Five Year Summary
2. Notice of Annual General Meeting

1. Appendix to the Notice of Annual General Meeting

1. Company Information

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Strategic Report

Chair's Statement

This year has been a period of significant transition for Titon Holdings plc. Approaching the conclusion of my first year as Chair, I reflect on the progress made in establishing a clear direction for the company's future. With Tom Carpenter joining as Chief Executive in April, working alongside Carolyn Isom, our Chief Financial Officer, we have started implementing meaningful changes to streamline operations and enhance our team's capabilities. I am confident that these foundations, coupled with the opportunities ahead, position Titon well to realise its full potential.

Financial performance

In the year ended 30 September 2024, the Group's net revenue from continuing operations declined to £15.5m (2023: £19.8m2), reflecting ongoing pressures in the housebuilding sector, particularly within the new build market. This led to an underlying operating loss1 before exceptionals and income tax for continuing operations of £0.9m (2023: underlying operating loss of £0.2m). Despite these challenges, there were clear signs of progress during the second half of the year, with improvements in underlying operating performance, moving us closer to breakeven.

The Group carefully managed cost and volume pressures to deliver a relatively stable gross margin of 28.0% (2023: 28.4%). Underlying EBITDA1 for the year remained positive at £0.005m (2023: £0.7m) and with strong working capital management, we ended the year with a marginally increased cash position on last year of £2.3m (2023: £2.2m). Given the receipt of a further £0.7m net cash proceeds from the disposal of our interests in the Group's South Korean operations post year end; our cash position will provide the financial stability required to support future strategic investments.

We recognise the need to deliver enhanced profitability and cash generation in future years and are encouraged by the strategic progress seen in the latter part of the year and the continuation of this into the new financial year.

Strategy

Under the leadership of our recently appointed Chief Executive, we launched a comprehensive five-year strategic plan with our core goal and purpose being the ambition to drive value for our shareholders and stakeholders. A significant milestone within this strategy was the decision to exit the loss-making South Korean business, enabling us to focus on core markets closer to home where we see the greatest potential for growth and profitability. By simplifying our operations, driving a more focussed product range and prioritising high-margin opportunities, we are laying the foundations to create a more agile organisation, capable of responding effectively to evolving market demands. We continue to explore ways to expand the market opportunity and business, reviewing new adjacent market sectors, widening customer networks and reviewing and improving the product range. The early results of this strategy are promising, and we are committed to its successful execution.

Dividends

Consistent with the decision taken at the time of the Group's interim results, the Board has taken the difficult decision not to recommend a final dividend for this financial year. This approach reflects our priority to rebuild profitability and invest in opportunities that drive long-term shareholder value. We understand the importance of dividends to our shareholders and are committed to reinstating a progressive dividend policy as soon as our performance supports it.

Our people and culture

Our progress would not have been possible without the resilience and commitment of our people. Over the past year, they have adapted to significant changes in leadership and key initiatives while navigating difficult market conditions. I am grateful for their efforts and the culture of ambition and collaboration they have fostered, which is central to Titon's strategy and ambitions.

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Strategic Report

Board

We have seen significant board changes during the year; I expect more stability going forward. I joined in January 2024, and we welcomed Chief Executive Tom Carpenter in April 2024. Tyson Anderson and Nick Howlett left the Board during the latter part of the year, and I want to thank them for their contributions during their many years with Titon. I am confident that we now have a strong and effective Board capable of guiding Titon through the next stage of its evolution.

Investors

Open communication with our investors is a cornerstone of our approach. Throughout the year, we have ensured regular engagement and provided updates on our progress, an area we have focussed on enhancing this year. We remain committed to transparency and welcome dialogue with our shareholders as we continue to execute our strategy.

Outlook

The recent cash completion of our exit from the South Korean operations has reinforced our focus and strengthened our financial position. As we look ahead, we see 2025 as a pivotal year for Titon. While challenges persist, the progress made in realigning our business and focussing on key markets gives us confidence in our future. The performance in the first quarter of 2025 has been slightly ahead of our expectations and the increased order book and book to bill ratio is encouraging. Early signs of market recovery, alongside our strategic initiatives, provide a solid foundation for growth. On behalf of the Board, I thank all our stakeholders for their ongoing support as we work to deliver long term sustainable value.

On behalf of the Board.

Jamie Brooke

Chair

22 January 2025

Notes:

(Non IFRS GAAP measures)

1 The Group uses some alternative performance measures (APMs) to track and assess the underlying performance of the business. These measures include underlying operating loss, underlying loss before tax and underlying EBITDA. The reconciliation of the Group's reported profit before tax to adjusted profit measures of performance is summarised in the table on page 10.

• The Group's FY23 results have been restated to classify the Group's South Korean operations as a discontinued operation, consistent with the FY24 reporting approach. Revenue and performance metrics, including the changes reported in FY24 against FY23, stated in this report therefore represent the continuing operations of the Group, excluding the results of the Group's former South Korean subsidiary and associated company.

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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.

Chief Executive's Review

Overview of 2024

Titon endured a challenging year during 2024, as headwinds in our core residential new-build construction market resulted in a significant drop in both sales and profitability. However, despite this we made significant strategic progress. We introduced new leadership to the business and adopted a more focused and disciplined approach to our decision making. During this period, we restructured the company reducing our operating costs and reached an agreement to divest our stake in the loss-making South Korean business.

Despite recent years of underperformance, Titon's core strengths remain firmly in place. We are free of borrowings, we have maintained our year-end cash position at essentially the same level as at the start of the period, our product offerings remain competitive, and our workforce is committed and engaged.

Considering our performance over the financial year, it is important to provide context regarding the factors that have shaped Titon's current position and to outline the actions being undertaken to restore the company to growth and profitability. Historically, until 2019, our South Korean business was the primary driver of the Group's profitability. This strong performance obscured inefficiencies and weak performance within our core UK business. The subsequent decline in the South Korean market, compounded by the disruptions of the Covid-19 pandemic, a significant downturn in the residential new-build construction sector, and a period of inconsistent leadership, culminated in the underperformance recorded in FY24.

I joined Titon in April 2024, midway through the financial year. My initial assessment was that, while the company had made efforts to strengthen its management team and reduce operational costs, it remained overly inward- looking and lacked strategic clarity and direction. Over time, organic expansion had introduced complexity, resulting in a reactive approach, diminished operational effectiveness and an urgent need for simplification and streamlining. Since joining, my focus has been on developing a comprehensive transformation strategy and initiating key actions to drive alignment, improve efficiency, and position the business for sustainable growth.

Our South Korean business had become loss making and was no longer a strategic fit and was a clear contributor to the unnecessary complexity in the Group. Consequently, in collaboration with the Board, the decision was made to negotiate an exit from the business. On 24 October 2024, we announced that an agreement had been reached to sell our South Korean interests to our partners for a net cash sum of £0.7m. The completion of this transaction was announced on 16 December 2024.

Summary Results

Continuing operations

• Revenue decrease of 22.0% to £15.5m (2023: £19.8m)
• Group underlying operating loss before tax and exceptional items of £0.9m (2023: £0.2m)
• Group operating loss before tax including exceptional items of £2.4m (2023: £0.2m)
• Loss per share of 17.41 pence (2023: 1.51 pence)
• Year-endnet cash of £2.3m (2023: £2.2m)
• Loss for the year from discontinued operations of £1.8m (2023: loss of £0.8m)

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Strategic Report

Business model

In assessing the performance of the business, the Directors evaluate the two primary operating business units:

• Window and Door Hardware: This business unit designs, manufactures and sells natural ventilation products (trickle vents) and hardware solutions for the window and door fabricator markets across the UK, Europe and the United States. Sales from this business unit accounted for 54% of the Groups revenue from continuing operations in this period (2023: 50%).
• Mechanical Ventilation Systems: This business unit designs, manufactures and sells mechanical ventilation systems tailored for residential applications across UK and Europe. Sales from this business unit accounted for 46% of the Groups revenue from continuing operations in this period (2023: 50%).

The principal activities within these business units include design, manufacturing, marketing, and sales.

Titon's strategy is to grow both business units through market expansion, market penetration, and the development of new innovative products.

The Group generally organises its sales and marketing activities into these business units, with manufacturing and all other services supporting them both on a shared basis. The executive leadership team manages both business units.

In the UK, the Group has a direct sales force for each business unit and aims to win specifications for its products through its dealings with developers/housebuilders, architects, building services engineers, window and door profile manufacturers and local authorities. Where a project isn't specified, 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 Systems, is to appoint local distributors. Within the Mechanical Ventilation Systems business unit, the Group also supplies OEM (Original Equipment Manufacturer) products for its customers.

The Group also has a wholly owned subsidiary, Titon Inc., based in Indiana in the USA. Sales into this market accounted for 5% of Group revenue from continuing operations during the year (2023: 4%).

The Group manufactures products in the UK, which are sold domestically and exported. Products manufactured in our UK factory account for 73% (2023: 80%) of overall Group turnover The remaining 27% (2023: 20%) 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.

Our markets

Both business units primarily serve the residential new build market. The United Kingdom remains our largest market, accounting for 81% of Group revenue. This sector is heavily influenced by regulations governing indoor air quality, occupant comfort, security and energy efficiency.

In 2024, the UK residential new-build market experienced a substantial contraction. The Office for National Statistics reported a 56% decline in new build starts, while Savills highlighted an 11% reduction in completions during the first half of the year compared to 2023. However, market forecasts anticipate a return to modest growth in 2025 and 2026. These projections, combined with the objectives of the new UK government and recent growth in our order book, provide a cautious optimism as we enter 2025.

Window and door hardware

Our window and door hardware business unit supplies trickle vents and a wide range of fenestration hardware directly to window, door, and profile manufacturers. Titon holds a leading position in the UK market for trickle vents, offering the most extensive product range available. Additionally, we supply an array of complementary products, including locks, handles, and hinges.

The market can be broadly segmented into PVCu and aluminium products. PVCu dominates the high-volume market, while aluminium is primarily used in premium residential and non-residential applications. For PVCu customers, competitive pricing and exceptional customer service are critical, with most transactions being short cycle, typically fulfilled within the same month. In the aluminium market, product specification, technical expertise, and performance are paramount areas where Titon is well-positioned to excel.

Despite significant contraction in the window and door hardware market linked to new-build projects, evidenced by the exit of several PVCu fabricators, we see opportunities for growth. These include cross-selling a broader product range to existing customers and expanding our focus on the aluminium segment. We anticipate that these initiatives, alongside a broader market recovery, will support modest growth in this business unit in 2025.

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Strategic Report

In 2024, the window and door hardware business unit reported a 16.8% decline in revenue, decreasing from £10.0m in 2023 to £8.3m. This contraction was primarily driven by the UK market, where revenues fell 19.9% year-on-year. In contrast, exports, which represent a smaller portion of total revenue, declined by only 0.9% and remained profitable throughout the year.

A review identified key differences between the UK and export markets. The UK business has been predominantly focused on PVCu window and door manufacturers, while the export business serves higher-end aluminium and wood window manufacturers. The UK window and door hardware business contracted in line with the broader UK PVCu market, leading to intensified price competition amidst declining market volumes.

While we remain committed to serving PVCu customers, we shifted our focus towards aluminium product offerings in the UK during the second half of the year. This strategic pivot began delivering measurable results, improving margins and contributing to an underlying profit for the business unit in the final quarter of 2024 and this has continued into FY25.

Overall, the Group strategy review has enabled us to realign our focus toward markets and opportunities with stronger margins and enhanced returns on investment. Key decisions, including an increased emphasis on the UK aluminium window and door segment, have collectively positioned us more favourably for the year ahead.

Mechanical ventilation systems

Our mechanical ventilation systems business unit delivers a comprehensive range of solutions to the residential new-build market, with Mechanical Ventilation Heat Recovery (MVHR) systems representing our largest product category. As modern homes become increasingly airtight and well-insulated, effective ventilation has transitioned from an optional feature to an essential requirement. This business unit has therefore expanded significantly over the last 15 years and is expected to enjoy further growth over the medium term. This evolution presents growth opportunities for Titon by providing innovative systems meeting both current standards and emerging regulations, such as Part O requirements aimed at mitigating overheating risks.

Operating in a project-driven environment, this business unit typically secures medium to long-term contracts for building developments, with orders fulfilled over months or years. In 2024, market growth for ventilation systems was primarily driven by social housing refurbishment projects, while the residential new-build segment contracted. Simpler refurbishment-oriented solutions, such as Positive Input Ventilation (PIV) systems, performed well, whereas more complex Whole House MVHR systems remained flat. Looking ahead, we expect demand for MVHR solutions to increase in 2025.

The mechanical ventilation systems business unit experienced a 27% decline in revenue during 2024, falling from £9.8m in 2023 to £7.2m. This decline was predominantly driven by ongoing challenges in the European segment, where we supply customised mechanical ventilation products to OEM partners and distributors under their branding. The existing business model has proven ineffective, yielding unsatisfactory margins and returns relative to the resources deployed.

Following a strategic review, we have decided to deprioritise new OEM activities in the European region, concentrating on standard products and engaging only in business opportunities that meet minimum margin thresholds.

In contrast, the UK ventilation systems business demonstrated more promising trends despite a 16.6% year-on- year decline in revenue. Notably, the second half of 2024 saw a substantial increase in ordering activity, with sales growing 9% compared to the first half of the year. Additionally, our market share in MVHR systems improved after four consecutive quarters of decline. Between the start and end of the reporting period, the UK Ventilation Systems order book had more than doubled, positioning the business for a positive start in 2025.

Strategy

While the company has faced significant challenges due to market conditions, our results make it evident that the strategies employed in recent years have not delivered the desired outcomes. Comparative benchmarking against our peers reveals that Titon operates with lower margins, slower growth, and reduced productivity. To address these shortcomings, the management team and the Board have undertaken a comprehensive review of the Group's strategy and developed a clear 5-year strategy and turnaround plan to reposition the company for sustainable success.

Our benchmarking indicates that competitors are achieving profitable growth which when combined with Titon's established product range, production assets, distribution network and relationships, demonstrates that Titon has the potential to do the same. Accordingly, we have set an ambitious target of achieving a blended organic revenue growth rate of 10% and a net margin of 15% by the end of 2028.

Our purpose is to be the premier partner for solutions that enhance in-building air quality, occupant comfort, and security. By delivering competitive solutions and exceptional service, we aim to outpace our competitors and solidify our position as a leading player in our target markets.

Our revenues are currently heavily reliant on the UK New Build market, leaving both business units particularly vulnerable to downturns in this sector. Additionally, our Window and Door Hardware business unit has been overly concentrated on lower-margin PVCu fabricators, limiting profitability.

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Strategic Report

While the UK New Build market remains a key focus, we recognise the need for both business units to diversify into adjacent markets to support sustainable future growth. For example, the Ventilation Systems business can expand into the Social Housing sector, while the Window and Door Hardware business unit can target the RMI and Non- Residential Commercial markets, particularly for aluminium windows and doors.

Geographically, while we will continue to engage with mainland Europe and the United States on a tactical basis, prioritising opportunities where margins are attractive, and our approved and new products align, we believe our core strategic focus must remain on the United Kingdom. This approach will enable us to build a stronger foundation for sustainable growth and resilience. We believe our local design, testing and sales competency here makes us unique.

The Mechanical Ventilation Systems business unit will concentrate on influencing project specifications early in the process through expert design and technical support. Meanwhile, the Window and Door Hardware business unit will prioritise delivering high-quality products, supported by exceptional customer service. To achieve our strategic objectives, we are focused on excelling in the following five key areas:

1. Superior Products: A streamlined product portfolio to prioritise differentiation and market relevance.
2. Consultative Selling: Proactive engagement with customers early in the project lifecycle to influence and shape specifications.
3. Customer Service: Added value delivered through reliability, responsiveness, and comprehensive support.
4. Marketing: Effective communication of our value proposition, brand, and the generation of leads.
5. Efficient Manufacturing and Organisation: Optimised costs, improved processes, and enhanced productivity.

To support these priorities, we have launched a series of internal programs aimed at:

• Improving margins and optimising our product offerings.
• Enhancing our marketing and improving commercial operations.
• Entering new adjacent markets.
• Driving operational excellence and increasing organisational efficiency.
• Engaging employees and developing a high-performance culture.

These initiatives are designed as long-term efforts focused on sustainable, incremental improvements rather than quick fixes. By simplifying our business, strengthening our operations, and optimising our organisational structure, we aim to build a resilient and profitable business that delivers value to all stakeholders.

Organisational structure

We have continued to strengthen our senior leadership team, successfully recruiting a Sales Director for our Mechanical Ventilation Systems business unit at the end of the financial year. This was a strategic appointment that reflects our commitment to driving growth and supporting new sector expansion in this key market.

Additionally, we look forward to onboarding our new Operations Director in February 2025, who we believe will bring added expertise and change management into our leadership team.

Outlook

While the financial results for the year reflect a challenging period, Titon has made significant progress during this period. I am immensely proud of our team's resilience and adaptability, which have enabled us to navigate challenging circumstances and emerge in a stronger position. There is a growing sense that we have turned a corner.

Our order book saw growth in the second half of FY24; we entered into the current financial year with orders at the same levels we exited FY23 and with an improved book-to-bill ratio of 1.13 (FY23 exit book to bill ratio of 0.92).

The new financial year has begun positively, with operating profits in the first 3 months of the year exceeding those of the same period over each of the prior two years. Our cash flow generation remains robust, and our cash reserves have also grown with the receipt of funds realised from the sale of our South Korean operations. These developments underscore the early success of our turnaround strategy.

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Strategic Report

As of January 2025, the UK economy is projected to grow modestly, with forecasts ranging between 1.5% and 2.0% for the year, alongside government targets to boost residential construction, which provides a level of cautious optimism regarding improving market conditions. Whilst we acknowledge the ongoing uncertainties in our relevant sectors and the broader UK economy, we anticipate 2025 to be a transitional year for Titon as we continue to make progress against our turnaround plan. The Board remains confident that both of our business units will achieve meaningful progress in 2025, and further establish a solid foundation for sustained growth and long-term success.

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Strategic Report

Financial and operational review

The Consolidated Income Statement is set out on page 47. A summary of the results for continuing operations along with other selected Key Performance Indicators ("KPIs") is as follows:

Titon faced a challenging financial year in 2024, reflecting ongoing pressures in its core markets and the impact of strategic decisions taken to reposition the business for long-term growth. Revenue decreased by 22%, falling from £19.8m in 2023 to £15.5m in 2024. This decline was largely driven by weaker performance in both business units, primarily influenced by headwinds in the UK New Build market.

Gross profit reduced from £5.6m in 2023 to £4.3m in 2024, with the gross profit margin remaining relatively stable at 28.0% compared to 28.4% in the previous year. This stability underscores the company's ability to manage cost pressures effectively despite the lower revenue base.

The underlying loss before exceptionals and tax widened to £0.9m in 2024, compared to a loss of £0.2m in 2023, reflecting the effect of lower revenue on the Group's overhead cost base.

Exceptional items for the year amounted to £1.5m, a significant increase compared to £0.04m in 2023. These exceptional costs were primarily comprised of £0.2m restructuring costs and £1.3m in a one-off, non-cash inventory write down. The inventory write-down was the result of a comprehensive Board review of the slow- moving inventory and obsolescence allowance. During the Covid-19 pandemic, the company made substantial purchases of excess inventory in anticipation of extended supply lead times. While this decision was deemed necessary to mitigate supply chain disruptions during the global crisis, the Group now recognises the need to reassess and recalibrate its purchasing strategy. Given the decline in trading conditions and the performance challenges faced over the past year, the decision was made to increase the allowance for slow-moving and obsolete inventory. This adjustment reflects a more cautious approach to inventory management moving forward, ensuring that future purchasing aligns more closely with market conditions and performance expectations. The impact of this one-off write-down, while non-cash, underscores the company's commitment to maintaining a more efficient and aligned inventory strategy as it moves forward with its turnaround efforts.

As a result, the operating loss before tax significantly increased to £2.4m in 2024, compared to £0.2m in the prior year.

The loss on discontinued operations reflects the overall impact on the sale of our Korean business. More details on this can be read in note 26.