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Titon Holdings Electiton

Tis rare that a company reports on the same day as a general election. Okay, Titon Holdings (LON:TON) gestation was the longer ‒ but the conclusions are the same. “It’s over and yet it has only just begun”. For Boris Johnson, this means actually ‘getting Brexit done’ and running the country. For Titon, it has just reported its full year in which it coped manfully with a number of travails; and now has to do the same in the next one and ‘win the peace’. Boris’s skill-set to deal with in-coming remains the subject of speculation. Not so Titon’s.

  • Vote 1:   On 12 December, the UK voted in a general election and Titon reported its final results. The notice period for the election was shorter than Titon’s but the celebration longer for a majority of voters. Yes, it was a difficult year for the group amid a perfect storm in its largest profit generator, South Korea.
  • Vote 2:   Net revenue was off 9%, at £27.2m, with underlying PBT dropping by more than a fifth to £2.15m. The UK (56% of revenue) was sound with a 5% rise in its contribution to £1.1m. South Korea, however, saw its profits fall by almost 40% to £1.2m. Here, an economic slowdown and undulating product choice did the harm.
  • Vote 3:   As is its wont, though, Titon’s housekeeping was exemplary with a net cash inflow of £1.2m to make a year-end tally of £4.6m; and its quick ratio was above 2.0. The group also turned its capital over more than twice. Note, too, that Titon maintained its dividend. And, yes, it has been operating since 1972.
  • Vote 4:   Fiscal 2020 will not be a banner year; and we have had to take out the red pencil, i.e. reduce our PBT forecast this year and next by an average of £700,000. Not even Titon can push water up-hill. But, South Korea, will turn and, empirically, a number of commentators expects long-term annual growth above 3%.
  • Electiton:  The Hardman UK Building Materials Sector comprises 23 companies worth £9.8bn (+14% in past two months) and 9.9x EV/EBITDA on a trailing 12-month basis (priced 13 December) or 13.9x weighted by market value. Titon is on just 4.3x (okay, rising to 4.9x in 2020E). At the same time, the sector’s TSR over 12 months is 21% actual (with only six negatives) or 47% weighted. Titon is adrift at -28%; remember, though, in 2016 through 2018, it averaged a 31% TSR p.a. It will return.

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