Titon Holdings shares were down 8% to 75.8p in late afternoon trading on Friday on the back of continued margin erosion due to cost inflation, alongside shortages in raw materials and components in FY 2021/2022.
The firm said it would instigate price increases for its products in a move to mitigate the effects of the volatile macro-economic environment and lower the impact on its margins for the FY financial period.
Titon Holdings also noted unforeseen operational impacts linked to the implementation of the new internal ERP system for its UK and Europe operations.
The ERP system is reportedly a critical component for the group’s business improvement and is a necessary part of its growth strategy.
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However, its introduction led to short-term production despatch delays, resulting in lower than expected revenues for the last three months of trading.
Additionally, ERP delays brought further costs for system development, rising labour expenses to ramp up production, and costs for staff retention.
Titon Holdings commented its issues were being resolved and sales had returned to normal levels, but the cost disruption resulted in a sales fall unlikely to be recovered over FY 2021/2022.
The company said it consequently expected its results for the FY term to come beneath management expectations.
The firm added its revenues in the rest of the world had remained unsatisfactory, with South Korea revenues disappointing as a result of delays to construction projects and a shift in market demand to ventilation products from natural ventilation.
Titon Holdings confirmed it expected a better than expected small profit from its Korea and 49%-owned associate company Browntech Sales, despite its problems over the period.
It also mentioned expected revenues from sales of mechanical products bought-in by Browntech Sales to start accruing in FY 2022/2023.
The company currently has a positive balance sheet, with cash balances of approximately £3 million at 30 June 2022 and no debt.
“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,” said Titon Holdings executive chairman Keith Ritchie.
“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.”