REG - Hornby PLC - Annual Financial Report
11/07/2024 12:00
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RNS Number : 0822W Hornby PLC 11 July 2024
11 July 2024
HORNBY PLC
HORNBY ANNOUNCES ANNUAL RESULTS
Hornby Plc ("Hornby" or the "Group"), the international models and
collectibles group, today announces its results for the year ended 31 March
2024
Highlights 2024
Revenue (2023: £55.1m)
£56.2m
Operating loss (2023: £5.0m loss)
(£7.1m)
Reported loss before taxation (2023: £5.9m loss)
(£8.7m)
Underlying1 loss before taxation (2023: £1.1m loss)
(£7.3m)
Reported loss after taxation (2023: £5.9m loss)
(£12.1m)
Reported loss per share (2023: 3.50p loss)
(7.10p)
Underlying2 basic loss per share (2023: 1.22p)
(6.40p)
Net debt (2023: £5.5m) (see Note 28)
(£14.3m)
1 Underlying profit before taxation is before amortisation of
intangibles (brand names and customer lists), and net unrealised foreign
exchange movements on intercompany loans, exceptional items and share-based
payments (see page 10).
2 Underlying basic profit per share is before amortisation of
intangibles (brand names and customer lists), and net unrealised foreign
exchange movements on intercompany loans, exceptional items and shared-based
payments (see note 7).
Hornby Plc
Olly Raeburn, CEO
Kirstie Gould, CFO
Holly Barnett, Head of PR
01843 233500
Web: www.hornby.plc.uk (http://www.hornby.plc.uk/)
Liberum Capital Limited (Nominated Advisor & Broker)
Andrew Godber
Edward Thomas
Anake Singh
020 3100 2222
Non-Executive Chairman's Report
The Strategic Report comprises the Non-Executive Chairman's report, the Chief
Executive's Report, the Operating and Financial Review of the year and our Key
Performance Indicators ('KPIs')
Revenue in the year of £56.2 million (2023: £55.1 million) was 2% above the
previous year. Underlying loss before tax was £7.3 million (2023:
£1.1million loss). Reported loss after tax was £12.1 million (2023: £5.9
million loss).
Sales were slightly depressed in March compared to expectations by Red Sea
delivery delays and the resultant movement of some high value containers into
April.
Hornby group (pre-acquisition) stocks were £21.0 million (2023: £21.3
million) however total stock increased very slightly due to the acquisition of
Corgi Model Club in March 2024 bringing total stock at year end to £21.5
million. Nevertheless net debt at year end increased to £14.3 million (2023:
£5.5 million) due to increased overheads and capital expenditure on tooling
and Wonderworks in Margate.
WonderWorks
During the year the Hornby Visitor Centre was totally refurbished and
modernised into a state-of-the-art visitor attraction, rebranded WonderWorks
and launched in November. The new facility displays the group's history and
products in a modern environment and initial customer reaction has been
extremely encouraging.
Board Changes
For personal, health related, reasons Lyndon Davies stepped down from his
position as Chairman on 30 April 2024 and continues to serve on the Board as
a Non-Executive Director. John Stansfield, an existing Non-Executive Director,
and past Chairman of Hornby PLC, stepped into the role as Interim Chairman
while the search for an Independent Non-Executive Chairman is conducted.
The group thanks Lyndon for his service in the role over the last 15 months
and welcomes his continued involvement on the Board.
Governance
Good corporate governance provides a framework for delivering the objectives
of the Company and is fundamental to a sound decision making process. It
supports the executive management to control and achieve the maximum
performance of the Company. I am pleased to report that the Board believes it
applies the ten principles of the Quoted Companies Alliance Code ('QCA'). In
the current uncertain economic and political period, management of risks
remains a key focus for the Board. The Board has in place a robust process for
identifying the major risks facing the business and for developing appropriate
polices to manage those risks. The Board reviews those risks on an annual
basis carrying out regular reviews and annual updates on our compliance with
the QCA Code.
I am delighted that once again this year, we will be hosting our Annual
General Meeting at the Hornby headquarters in Margate on Wednesday 11
September 2024. This will be an excellent opportunity for shareholders to see
the new products for themselves and to understand the progress that the
Company is making. Personally I am looking forward to welcoming as many
shareholders as possible that are able to attend.
John Stansfield
Non-Executive Chairman
10 July 2024
CEO Report
As outlined in the last couple of trading statements, this has been a year of
significant change - structurally, strategically, culturally and
operationally. We have made promising progress on multiple fronts and there
are many success stories to celebrate. Unsurprisingly, this progress has
required investment in people, technology and time, impacting our
profitability this year. All of which, however, has set solid foundations for
future growth.
In this report I will be covering;
1. Headlines and financial overview
· Revenue growth of 2%, D2C (direct to consumer) growth of 18%
· Increase in fixed costs due to investments in future growth
· £7.1 million operating loss, but improvements in H2
2. Key initiatives and continuous improvement
· Investments in people and structural change: Creation of Brand MD
roles, plus strengthened Export Sales, Insights and Digital capabilities
· Acquisitions and partnerships: Acquisitions of a 25% stake in
Warlord Games and 100% of the trade and assets of The Corgi Model Club, plus a
partnership with Mash Holdings following a further share purchase from Frasers
Group
· Retail Experience: Encouraging performance from our first site -
footfall +42%, NPS (Net Promoter Score) above 50%
· Loyalty and CRM: 80% increase in Hobby Rewards members and over
£450K of incremental revenue from CRM initiatives
· TT:120: Continued growth in this initiative with sales of £2.8
million since launch
· Digital Channel: Re-platforming almost completed and relaunch of
all brand websites over the coming months
3. A focus on the next 12 month
· Improved inventory management and exploration of pricing and
subject matter development
· A robust approach to capital allocation
· The journey to profitability
1. Headlines and financial overview
H1 revenues were in line with expectations with £23.8 million being 6% ahead
of last year. A strong third quarter, bolstered by highly effective Black
Friday activities, driving a 10% outperformance vs last year for November, saw
us hold that 6% outperformance to end of December.
Whilst fourth quarter revenue performance was ahead of management
expectations, the compound impact of an early Easter and shipping delays due
to Red Sea disruption saw us fall 8% behind the same period last year.
For the full year, and for the fifth year in a row, we saw an improvement in
sales at the top line, growing 2% to £56.2 million. Another strong year of
growth in our D2C channel saw digital revenues up 18% vs last year, to £10
million.
Gross margin fell by 5%, to 44%, for the full year, although we saw an
improvement of 1.2% in H2. As highlighted in previous trading updates, the
greatest contributor to margin reduction relates to high tooling amortisation
charges, on account of higher CapEx in prior financial years. The balance of
the negative impact was driven by rising costs, investment in growth
initiatives and our decision to withhold from putting through any price
increases. This was a deliberate and conscious choice in a year where consumer
spending was impacted by ongoing rises in cost of living.
Gross profit reduced by £1.9 million, to £25.0 million, for the year, albeit
76% of that difference, or £1.3 million, directly relates to tooling
amortisation charges. Critical investments for the future in sales, insights,
data & loyalty, digital marketing and development, contributed to an 11%
increase in fixed costs.
Net debt still remains high at £14.3 million compared to £5.5 million at
the end of March 2023, but shows a slight improvement from £14.6 million at
the half year. Similarly, inventory is still too high at £21.0 million
(excluding acquisition stocks of £471,000) compared to £21.3 million in the
prior year, but has reduced by 12%, or £3 million, since the half year.
Whilst a full year operating loss of £7.1 million, versus an H1 operating
loss of £4.9 million, is a disappointing outcome, the progress in several
areas in H2 represents the start of the journey to the return to
profitability, and the early signs of the positive impact of the investments
that have been made in the year.
Sales and margins are ahead of prior year for the first two months of the
current year.
Key figures and KPI's:
2024 2023
£'000 £'000
Sales 56,244 55,105
Growth 2.07% 2.50%
Variable Costs (31,248) (28,165)
Gross Profit 24,996 26,940
Margin % 44% 49%
Underlying margin* 31,869 32,449
Underlying margin % 56.7% 58.9%
Fixed Costs (31,631) (28,009)
Operating Loss (7,124) (1,069)
Operating margin % (12.67%) (1.50%)
Underlying Operating Loss (5,679) (309)
Underlying operating loss % (10.10%) (0.60%)
KPI's
Digital sales 9,998 8,501
Digital sales Growth 17.61% 49.00%
Tooling Capex 4,946 4,640
Underlying Gross profit per capex (PY capex) £6.87 £9.69
Net debt 14,292 5,530
Gross cash 1,116 1,337
Inventory 21,484 21,282
% of sales 38% 39%
*Underlying margin is pure cost of goods sold margin
2. Key initiatives and continuous improvement
As will always be the case with a business going through a turnaround, there
are many actions and initiatives being developed across the organisation and
across the globe. All of the updates that follow represent momentum in a
changing strategy that sees us broadening our footprint, appeal and
opportunity to engage with new customers. Alongside all of these new growth
initiatives there is a very clear focus on ensuring we continue to support and
serve our existing customer base. Some of the more significant highlights
include;
(i) Investment in people and structural change
· Brand MDs and Commercial Ownership
In the H1 Interims we talked about the need to give greater individuality to
the brands, creating a structure that champions and supports their differing
strengths, trajectories and opportunities. By creating a new role in the
organisation, the Brand MD, we have restructured to give those at the coal
face greater autonomy, accountability and responsibility for driving brands as
business units. This restructuring is now complete, and we enter the new
financial year with a far greater focus on the differences between the brands
and their unique potential for growth.
We have appointed Brand MDs in 3 of our 5 core brands already; Martyn Weaver
was promoted from Head of Brand to Brand MD for Hornby, Scott Elsey was
promoted from Development Manager for Corgi and Pocher, to Brand MD for Pocher
and Guy Stainthorpe, previously MD of Corgi Model Club (CMC), who joined the
business as part of the CMC acquisition, has been appointed Brand MD for
Corgi. We have yet to appoint Brand MDs for Airfix and Scalextric, although we
will be doing so in due course.
The Brand MDs are entirely focused on driving profitable growth of their
business unit, and charged with delivering positive contribution before shared
costs.
· Export Sales
A Head of Export Sales was a key hire last summer, tasked with opening up new
international retail partnerships, with an initial focus on the USA. Having
had no national distribution in the US at the start of the year, we now find
ourselves with orders for Airfix in 850 Michael's Craft stores and for
Quickbuild in 1,600 Lowes stores, giving us presence in almost 2,500 locations
across the states ahead of the peak season in 2024. In addition to these
developments in the US, we have seen orders from new partners in Latin
America, Indonesia and Australia.
· Insights
Another gap in our capabilities was insights and research. Our Head of
Insights joined us, from Lego, in January 2024 and is making a significant
impact on our ability to understand customer dynamics, desires and behaviours.
With projects under way for Hornby, Airfix, Scalextric and Pocher, we are
already starting to shape plans and initiatives for new product development
and new subject matter, new propositions and new territories for expansion.
· Digital Marketing and Development
A significant change in our operating model has seen us 'in-housing' digital
marketing and development over the second half of the year. Having been
outsourcing the majority of these competencies, at a cost of more than £1
million per annum, as we were building our digital proposition, we have since
bolstered our internal team to include front-end and back-end development and
full digital marketing capabilities. This delivers a significant cost saving,
upskills our teams and gives us far greater flexibility and agility in
execution.
(ii) Acquisitions and Partnerships
· Warlord Games
In July 2023 we announced our acquisition of a 25% share of Warlord Games, a
Nottingham-based designer and manufacturer of tabletop war games, miniatures
and accessories. The last 9 months has seen us building a strong relationship
with the team at Warlord and many initiatives are underway. In addition to
collaborations around sales and distribution we are exploring the potential
for a jointly branded range of paints, drawing on our Humbrol inventory and
creating a Warlord specific set of products.
· Corgi Model Club
In March 2024 we announced the acquisition, via a trade and assets deal, of
the Corgi Model Club, a subscription-based proposition set up in partnership
with Hornby in 2021. The acquisition immediately brought in £2 million of
annualised revenue at 15% operating margin and represents an excellent
opportunity for further growth. In the early weeks since the acquisition we
are in advanced stages of planning the launch of Corgi Model Club USA, cross
selling the proposition within the wider Hornby Hobbies brand ecosystem (i.e.
to existing customers of Corgi, Hornby and Airfix) and exploring new routes to
market, including Direct Response TV.
· Frasers Group and Mash Holdings
We were delighted to report that Frasers increased their shareholding in the
Group to 9.1% through two separate transactions across February and March. Our
brands are already part of GAME's product offering and we're looking forward
to exploring other opportunities, including leveraging Frasers Group's scale
in retail logistics and distribution. An additional benefit from these
transactions has been the consultancy agreement the Group has entered into
with Mike Ashley, through Mash Holdings, which will see him providing
support to the Board wherever relevant.
(iii) Retail Experience: The WonderWorks
As highlighted in the last report, we strongly believe that bringing our
brands to life in a meaningful way in an experiential retail environment
provides an opportunity to deepen engagement and drive growth as a result. Our
first purposeful experiment in this space saw us opening The WonderWorks in
Margate, on the site of the old Hornby Visitor Centre, at the end of October
2023.
The project encompassed the reimagining of 11,000 sq ft of space and creating
a blended experience including a shop, a café and an engaging set of
immersive attractions that showcase our key brands. After a successful
opening, with significant broadcast, digital and print media coverage, we have
continued to test and learn on site over the first 6 months since launch.
Footfall and ticket sales have lifted by 42%, café sales have lifted by 29%
but shop sales are flat meaning overall revenue for the site has only lifted
by 8%. Given that average transaction values in the shop have also remained
flat, we surmise that we are driving more visits from the same captive
audience and are not seeing retail spend increase with those return visits as
a result.
Pleasingly, we are seeing the NPS (Net Promoter Score) from visitors
consistently growing over time, as evidenced in the table below, suggesting
that the experience is improving as the team is more settled over time. Also
worth noting that anything above 50% is considered world class for this
category so these are very encouraging results:
There were many good reasons for trialling our first WonderWorks on the site
of the old Hornby Visitor Centre and we have benefitted from the proximity to
the office in many ways. The insurmountable challenge is that there is almost
no opportunity to capture passing footfall or drive new footfall to a trading
estate on the outskirts of Margate.
We still believe in the value of bringing our brands to life in an
experiential retail setting and are evaluating options and timings for the
next iteration of The WonderWorks as a result. The likely outcome of this work
will see us identifying a location with high footfall and creating a
commercial model that ensures most effective allocation of capital, based on
learnings to date
(iv) TT:120
As highlighted this time last year, November 2022 saw the launch of TT:120,
arguably the first major development in model railway systems in the UK for
decades. TT:120 revenues to date are c£2.8 million, up from c£1.5 million at
the end of March 2023.
TT:120 has been received extremely well by the Model Rail community attracting
a lot of interest at events and through our owned media. In addition to owned
media, specialist TT:120 social media groups have been formed with ever
growing audiences and content.
Initially launched with 6 models, a further 8 have been added to broaden the
scope of interest by era and region. By the end of March 2024, over 4,000
TT:120 sets had been sold, with an additional 8,000 locomotives and a
staggering 30,000 coaches and wagons, reflecting the appetite for a new scale
in the hobby.
TT:120 sets sales have surpassed our forecasts resulting in 3 re-orders on key
product lines and the TT:120 Scotsman set has become the best-selling
trainset, in value terms, from the entire Hornby catalogue over the last 18
months.
Initially launched as a D2C exclusive through www.hornby.com
(http://www.hornby.com) , TT:120 was opened up to the independent trade in
late 2023 to grow the accessibility and footprint of the range and continues
to be a focus for growth in the coming year.
(v) Loyalty & Customer Relationship Management
· Hobby Rewards
Launched in November 2022, Hobby Rewards is a loyalty currency that will allow
us to create value in the relationships with our customers, vertically, within
each of our brands, and horizontally across the portfolio.
From a base of 36,000 customers in March 2023 we have seen an 80% increase in
membership to 65,000 at end of March 2024, and membership continues to grow at
an average rate of 600 new customers per week.
Whilst this last year has seen Hobby Rewards members make up 39% of the total
active D2C base, they have delivered over 53% of total D2C revenue, having
contributed less than 50% in the previous year.
· D2C CRM
Unlocking value from existing customer data was one of the things we
highlighted as an opportunity in the last Annual Report. With expertise in
place we started running our first CRM campaigns, focused on incentivising
growth from our existing base, in August 2023. Key strategies have been
concerned with (i) converting 'never purchased' and 'purchased once' to their
first / next purchase, and (ii) targeted, 10-day, Spend Stretch campaigns
designed to grow basket size through a time limited offer.
We have grown our consented customer volumes by 17% in the year, to 65,000,
and have generated £435,000 of incremental revenue from these two initial CRM
strategies since August.
The real beauty of these campaigns is that, outside of the cost of the
incentive - which equates to £44,000 - they require no investment in terms
of production and distribution, and the number of concurrent campaigns and
strategies can grow exponentially as they are all driven via automated
journeys. As such, the year ahead will see us broadening the numbers of
campaigns, and associated revenue will grow as a result.
· B2B CRM
Off the back of the success of our initial D2C CRM activity we trialed our
first B2B CRM campaign in the run up to Christmas with an Advent Calendar
campaign. This resulted in c£150,000 of orders being written and is a clear
indication of the opportunity to further expand these B2B initiatives
throughout the coming financial year.
(vi) Digital platform
In another year of solid growth we saw digital revenue increase by 18% and
traffic to all sites increased by 15% to just over 10 million visits.
In the 12 months to end of March 2024 we saw an average basket value
of £70.31, compared to £66.96 in the prior 12 months.
One of the deliberate changes in strategy across the year was to shift the
focus of our marketing and merchandising towards increasing in-stock orders
(i.e. transactions for products that were immediately available) and relying
less on advanced pre-orders. The result was a 38% uplift in in-stock orders
and a 22% reduction in pre-order cancellations.
In addition to the drive to upskill our in house digital marketing and
development teams and reduce reliance on, and investment in, external support,
our focus for 2024/25 is to migrate all of our websites to a headless
ecommerce infrastructure. This will provide a framework which will
significantly improve foundations for future growth and development, giving us
greater control, flexibility and agility in our D2C actions.
With a new infrastructure in place we will also be launching newly designed
websites, across the full suite of brands, which will build on our overall
strategy of presenting each one in a more individual and engaging way.
3. A focus on the next 12 months
(i) Inventory Management
The current inventory position is still too high and in large part a
reflection of an over-commitment to evergreen stock in prior years. Continuing
to look at ways of reducing that number is a key focus in the next twelve
months.
We have deliberately avoided the temptation to sell large quantities, and
values, of stock at prices that would quickly reduce the volume and release
some cash, as this short-term solution comes with unintended longer term
consequences. Flooding the market with heavily discounted product, simply
limits opportunities to build the business effectively in the following months
and years.
Where we can find outlets that don't damage future potential (internationally,
for example, where the dynamics and impact are different to the UK market), we
will continue to do so.
Equally, we are very focused on ensuring that future buying decisions are
firmly rooted in performance analysis and customer understanding, mitigating
the likelihood of repeating or sustaining this over-stocked scenario.
A continued emphasis on commercial analysis of performance of specific product
categories, and subject matter, will improve the quality of our
decision-making moving forwards.
(ii) Pricing and Subject Matter
In the last Annual Report we highlighted the need to review our pricing and
approach to entry level products across the brands. We have a very loyal base
of existing customers who we continue to serve in ways we know to be
effective. Acquiring new customers that help build our brands into the future
requires some recalibration of pricing and subject matter to drive trial and
engagement.
By way of example, in the last 12 months we have seen some good work on
exploring the impact of more accessibly priced Scalextric Sets, driving
significant uplifts in sales through our D2C channel with a test in the run up
to Christmas. Reducing a 1:32 set to sub £100 drove a 100% increase in total
set volumes from our website vs same period last year, and 66% of the total
volume was driven by the sub £100 set.
Similarly, we have been working hard on successfully driving down the cost of
goods (at source) for our Hornby train sets and our Micro Scalextric sets.
Getting more sets into the market, at the right price, is a critical
requirement for driving growth and new customer acquisition. We anticipate a
positive impact from this work to flow through during peak trading in the
current financial year.
Our existing Airfix customers are huge fans of military subject matter and we
have been serving their needs extremely well in recent years. Initial studies
carried out by our Head of Insights, however, have highlighted the
opportunities that exist in attracting new customers, pre-disposed to engaging
in modelling, with alternative subject matter. We are at the early stages of
this process but anticipate introducing new mini-ranges, of new subject
matter, in the year ahead as part of our ongoing efforts to grow the brand and
category.
These examples are indications of a new approach to driving growth through
testing and learning, based on customer and market insight, and form a key
component of our product strategy moving forwards.
(iii) Capital Allocation
Investment in growth is a critical part of our strategy as we positively
impact the trajectory and performance of the business. A key element of
getting that right requires a greater focus on the merits of, and approach to,
capital allocation on a case by case basis.
Strategic transactions like the acquisition of the business and assets of
Corgi Model Club evidenced a thoughtful and effective approach to capital
allocation, and we must ensure we continue to take a similar approach to the
way we drive growth through investment on an ongoing basis.
Given that capital expenditure is fundamental requirement of a business that
is concerned with introducing new product and driving customer growth, we are
constantly reviewing and recalibrating our approach to capex in terms of
volume and frequency across the brands.
In recent years we have allowed capex to grow disproportionately versus the
returns it delivers, and this has been a key contributor to our high debt and
inventory positions, as well as impacting our operating profit / loss position
through amortisation charges.
Redressing this situation is a key focus for the year ahead.
(iv) The journey to profitability
Our overall financial results for the year, culminating in a £6.5 million
operating loss, are a long way from the desired outcomes for the business, but
we have to recognise that a turnaround of this nature requires investment and
takes time.
We came into the last financial year with a number of challenging headwinds
relating to debt, inventory and operational inefficiencies, none of which
could be addressed with quick fixes, without unintended consequences.
A year into the process, we have covered a huge amount of ground and made some
very promising progress in many areas. The change in trajectory in the second
half of the year gives us early indications that the investments in people,
processes and product are starting to make a positive impact.
That notwithstanding, our commitment in the coming year is to get us back
towards profitability with a continued effort on delivering more of the
revenue driving initiatives outlined in this report, and a very clear focus on
greater cost control, higher contribution and improved profitability.
The past 12 months have been both challenging and rewarding, but I remain
resolute that this is a business with enormous potential. We have wonderful
product, loyal customers and a great opportunity to drive change and growth,
as a result.
I am hugely enthusiastic about building on the progress we have made this
year, and look forward to leading the business back to success and
profitability in the future.
Olly Raeburn
CEO
10 July 2024
Section 172 Statement and Stakeholder Engagement
As required by Section 172 of the Companies Act, a director of a company must
act in the way he or she considers, in good faith, would likely promote the
success of the company for the benefit of the shareholders. In doing so, the
director must have regard, amongst other matters, to the following issues:
• likely consequences of any decisions in the long term;
• interests of the company's employees;
• need to foster the company's business relationships with
suppliers/customers and others;
• impact of the company's operations on the community and
environment;
• the company's reputation for high standards of business
conduct; and
• need to act fairly between members of the company.
Culture
Our values and leadership behaviours are a vital part of our culture to ensure
that through good governance, our conduct and decision making we do the right
thing for the business and our stakeholders. The Board acknowledges that every
decision it makes will not necessarily result in a positive short-term outcome
for all of the Group's stakeholders. We believe in creating solid foundations
for the future, so there is a balance between short term success and
longer-term prosperity.
Shareholders
The Board values the views of our shareholders and recognises their interest
in our strategy and performance. We endeavour to update shareholders on the
Board's expectations for the outlook of the business and as and when this
changes. As much as possible, we try to provide information that is relevant
to our shareholders on our corporate website; in our annual report and
accounts; and through regulatory news announcements throughout the year.
We also believe in knowing and understanding our shareholders. We encourage
our shareholders to attend our Annual General Meetings (AGMs) and we welcome
questions from them. At our AGMs, we provide the platform for robust
discussions with our shareholders, during which the participants, both
Directors and shareholders alike, are engaged with the proceedings. We believe
this reflects the connection to the business which we have cultivated and
continue to cultivate in our shareholders. In addition, the review of investor
relations activity and analysis of our shareholder register is a standing item
at each Board meeting. Our corporate website http://www.hornby.plc.uk/
(http://www.hornby.plc.uk/) also includes the outcomes of shareholder votes
cast at the AGMs, as well as Annual and Interim Reports from previous years.
The primary mechanism for engaging with our shareholders is through the
Company's AGM and also through the publication of the Group's financial
results for the half year and full year. Further information is disclosed in
the Corporate Governance Statement on pages 13 to 16. The Board reviews
feedback received from institutional investors following publication of our
financial results. At the AGM we encourage our shareholders to ask questions
and participate in debate about our performance and products.
Customers
Understanding our customers and what matters to them is key to the future
success of Hornby. We listen and talk to them using all of the tools at our
disposal. Our customers operate in a global, but niche market, we interact
with them either directly, or via our retailers, wholesalers and distributors.
Suppliers
We have long-standing close relationships with our suppliers overseas, who we
would normally visit on a regular basis. During the pandemic we have
communicated via video conferencing, working together with a common goal,
giving them visibility, sharing our plans allowing them to plan their
factories capacity well into the future. We are have made several visits this
year now that COVID restrictions in China have been lifted.
Employees
A key to the Group's future success is an engaged workforce. The Group's
Directors, alongside our executive management teams, work hard to provide a
positive working environment. As a well-respected local employer within each
of the communities we operate, it is important for us to provide opportunities
for all of our staff to allow them to grow and achieve their potential.
Community and environment
We are proud to employ people in the communities that we operate. The strength
of our brands allows us to promote both local and national charitable causes.
We have product standards, policies and guidance covering the products we make
to help ensure that they are manufactured safely, legally and to the required
quality standards and is an environmentally friendly way as possible.
Operating and Financial Review of the Year
Financial Review
2024 2023
Revenue £56.2m £55.1m
Gross profit £25.0m £26.9m
Gross profit margin 44.4% 48.8%
Overheads £31.7m £28.0m
Exceptionals £0.5m £4.0m
Operating Loss before exceptionals (£6.6m) (£1.1m)
Reported loss before tax (£8.7m) (£5.9m)
Underlying loss before tax* (£7.3m) (£1.1m)
Reported loss after tax (£12.1m) (£5.9m)
Basic loss per share (7.10p) (3.50p)
Underlying basic loss per share* (6.40p) (1.22p)
Net debt (£14.3m) (£5.5m)
Undrawn Facilities £5.2m £11.7m
* Stated before amortisation of intangibles (brands and customer lists), net
unrealised foreign exchange movements on intercompany loans, goodwill
impairments and exceptional items.
Performance on a statutory basis
Consolidated revenue for the year ended 31 March 2024 was £56.2 million, an
increase of 2% compared to the previous year's £55.1 million. The revenue in
the second half of the year of £32.4 million was inline with previous year
which was £32.7 million. Gross profit margin was lower, at 44.4% (2023:
48.8%) primarily due to higher tooling amortisation costs and an increase in
supply chain costs not passed on to the consumer.
Overheads increased year-on-year by 13.2% from £28.0 million to £31.7
million. UK distribution costs were higher than prior year due to an increase
in revenue and minimum wage increases. Sales and marketing costs increased by
£2.1 million year-on-year due to ongoing investment in direct relationships
with our customers, restructuring of the sales teams, and investment in
customer loyalty, insight and PR. Administration costs were £1.3 million
higher due to increased Board costs, share-based payment accruals and rising
insurance, maintenance and utility costs. Other operating expenses in the year
of £0.2 million (2023: £0.7 million) includes foreign exchange losses and
amortization of brand names.
Exceptional costs totalling £0.5 million (2023: £4.0 million) are
predominantly intangible impairment on some international brands and
restructuring costs as senior heads in sales and marketing were replaced.
Performance on an underlying basis
The underlying loss before taxation is shown to present a clearer view of the
trading performance of the business. Management identified the following
items, whose inclusion in performance distorts underlying trading performance:
shared-based payments and the amortisation of intangibles which result from
historical acquisitions. Additionally, exceptional items including refinance,
relocation and restructuring costs are one off items and therefore have also
been added back in calculating the underlying profit before taxation.
Group
2024 2023
£'000 £'000
Statutory loss before taxation (8,726) (5,875)
Adjustments:
Amortisation of intangibles - brands 227 227
Share-based payments 669 532
Exceptional items:
Restructuring costs 73 -
Costs relating to Hornby World - 910
Goodwill impairment 10 2,915
Intangibles impairment 404 -
Refinancing 2 149
Underlying loss before taxation (7,341) (1,142)
Segmental analysis
Third party sales by the UK business of £40.2 million increased by 1.5% in
the year as a result of an increase in direct sales via the website. The loss
before taxation of £8.6 million compared to £5.9 million loss last year
reflects the increased overheads as a result of investment in direct sales,
restructuring of sales and marketing teams and a significant increase in the
cost of finance (as a result of base rate increases and increases in
borrowing).
Sales by the European businesses of £11.9 million increased by 12.3% in the
year as a result of supply chain issues being resolved and goods arriving in a
timely matter. We have also managed to streamline the delivery of pallets into
Europe following the Brexit changes. The profit before tax was £0.6 million
compared to £0.7 million profit last year.
Sales in the US business of £4.1 million decreased by 16%. The trading loss
of £0.7 million compares to £0.6 million loss in last year. We expect sales
to increase in this key market in the longer term and overheads to reduce
following the recruitment of a new Head of Export and the listings of certain
products into new stores as mentioned previously.
Statement of Financial Position
Property, plant and equipment increased year-on-year by £2.5 million to
£14.5 million as a result of increased expenditure in tooling for new
products and the opening of WonderWorks 1.0 in Margate. Group inventories
increased from £21.3 million to £ 21.7 million due to a short Q4 due to
Easter and the acquisition of £0.5 million of Corgi Model Club stock. Without
this acquisition the group stock would have been slightly lower than previous
year. Trade and other receivables was the same as the previous year. Trade and
other payables are £3.3 million higher than previous year due to timing of
supplier payments falling due over Easter while the offices were closed.
Overall investment in new tooling, new intangible computer software,
WonderWorks and other capital expenditure was £6.4 million (2023: £5.1
million).
Dividend
The Group is still in the turnaround phase and there will not be a dividend
payment this year (2023: £nil). The Board continues to keep the dividend
policy under review.
Financing
At 31 March 2024 the UK had a £12 million Asset Based Lending facility with
Secure Trust Bank Limited ("STB") and a £11.25 million loan facility with
Phoenix Asset Management Partners.
The facility with STB is a floating facility based on the current asset
position capped at £12 million and has been extended post year end to expire
December 2025 and carries a margin of 2.5‐3% over base rate. The STB
Facility has a fixed and floating charge on the assets of the Group. The
Company provides customary operational covenants to STB on a monthly basis
such as inventory turn, credit note dilutions and management accounts.
The Phoenix Facility was an £11.25 million facility which attracts interest
at a margin of 5% over SONIA on funds drawn. Undrawn funds attract a
non‐utilisation fee of the higher of 1% or SONIA. This facility has been
extended post year end to expire December 2025 with a facility limit of
£12.55 million and interest margin is 5% over SONIA on £11.25 million and
15% on any drawings over £11.25 million up to £12.55 million. In addition
Phoenix have provided a shareholder support letter for an additional £7
million expiring December 2025.
Borrowings in the year ended 31 March 2024 were £15,408,000 (2023:
£6,867,000). This consists of a CBIL loan with £117,000 outstanding
(acquired with LCD), amounts owing to STB of £5,742,000 and £9,549,000
shareholder loan drawdown.
Net debt at 31 March 2024 was £14.3 million compared with net debt of £5.5
million at 31 March 2023.
Our Key Performance Indicators ('KPIs')
The Directors are of the opinion that the financial KPIs are revenues, gross
margins, underlying operating profit, capex productivity, inventory, digital
change, variable and fixed costs the information for which is available in
these financial statements and summarised on the financial highlights section
earlier in this report. We provide current and historical analysis in the
CEO's Report on pages 3 to 8 and will continue to report in future Annual
Reports. The Board monitors progress against plan on a regular basis adjusting
future objectives annually in line with current circumstances.
Identification of principal risks and uncertainties
The Board has the primary responsibility for identifying the major risks
facing the Group and developing appropriate policies to manage those risks.
The Board completes an annual risk assessment programme to identify the major
risks and has reviewed and determined any mitigating actions required as set
out below. The risk assessment has been completed in the context of the
overall strategic objectives and the Business Plan of the Group.
Principal risks and uncertainties
Risk Description Impact/Sensitivity Mitigation/Comment
Market competition The Group has competition in the model railway, slot racing, model kits, die The Group performance is impacted by the actions of competitors and changes in In many of our markets the Group still enjoys a strong market position due to
cast and paint markets. Loss of market share to increased competitor activity the wider retail landscape. the continued development of our brands. We will strive to further improve the
or alternative hobbies would have a negative impact on the Group's results. strength of our brands. Production of high-quality products which customers
Failure to evolve and innovate products may lead to brands becoming less want is a key mitigating factor.
relevant in the marketplace.
The Business Plan The Business Plan may not fully achieve the aims of returning the Group to The increase in business scale and reduction of costs and the increase in The Group has developed clear targets and has cost saving contingencies in the
positive cash generation in 2024/25. direct sales currently anticipated is not achieved and the Group does not plan being actioned to put the necessary resources in place to deliver the
achieve sustainable profit and cash generation. aims of the plan.
Hobby market Overall decline in the hobby market could lead to greater levels of Failing interest in traditional hobbies may impact our core Independent and In many of our markets the Group enjoys a strong market position due to the
competition in the medium term, which could have a negative impact on the National retailers and have a consequent impact upon the Group's performance. continued development of our brands. Brands are extremely important in the
Group's results. model sector with market entry costs being prohibitive. In the short-term
there is an opportunity to regain market share lost through previous
underperformance. We have also implemented tiering and only allowing certain
percentage of our goods to go wholesale with balance only being available on
our website.
Exchange rates The Group purchases goods in US Dollars and sells in Pounds Sterling, Significant fluctuations in exchange rates to which the Group is exposed could The Group continues to hedge short-term exposures by establishing forward
Euros and US Dollars and is therefore exposed to exchange rate fluctuations. have a material adverse effect on the Group's future results. In particular currency purchases using fixed rate and participating forward contracts up to
the negative impact on Sterling of Brexit and the continuing uncertainties twelve months ahead. It is deemed impractical to hedge exchange rate movements
could make the US Dollar purchase of its goods more expensive. beyond that period.
.
Supply chain The Group's products are manufactured by artisan labour in China, India and The Group does not have exclusive arrangements with its suppliers and there is The Group is continuing to develop and review its vendor portfolio and has
Vietnam. Risk that capacity is lost which could lead to delays in production. a risk that competition for manufacturing capacity could lead to delays in started diversifying the supplier base. A 26-step critical path analysis tool
introducing new products or servicing existing demand. has been developed to monitor the whole manufacturing process to identify and
deal with issues as they arise. The Group has its own storage facilities in
China where its tooling is secured and managed.
The Group manages the supply chain forecasts continuously and communicates
regularly with suppliers and customers in turn. The Group maintains
significant stock levels in the UK at any time and therefore this allows
additional time to plan for stock output variances from overseas suppliers in
time for the peak season.
Capital allocation New tooling is important to support the production of new products. The risk is that the Group has insufficient capital to fund new tooling or The business plan includes significant capital expenditure to fund suitable
invests ineffectively in the wrong products. products to underpin the implementation of the business plan strategy of the
Group. This process will be underpinned by a robust capital allocation
process aligned to brand strategies and brand delivery targets.
Product compliance The Group's products are subject to compliance with toy safety legislation Failure to comply could lead to a product recall resulting in damage to Robust internal processes and procedures, active monitoring of proposed
around the world. Company and brand reputation along with an adverse impact on the Group's legislation and involvement in policy debate and lobbying of the relevant
results. authorities.
Stock obsolescence Stock held in the Group's warehouses ages and becomes obsolescent The risk is that the Group has working capital tied up for too long in stock. Robust internal processes and procedures to constantly monitor ageing stock
and liaise with sales teams to focus on sell through.
Liquidity Insufficient financing to meet the needs of the business. Without the appropriate level of financing, it would be increasingly difficult The Group has a £12.0 million ABL facility with Secure Trust Bank (STB) and
to execute the Group's business plans. an £12.55 million revolving loan facility with Phoenix Asset Management
Partners. Both facilities have been renewed post year end to expire December
2025. The Group's policy on liquidity risk is to maintain adequate facilities
to meet the future needs of the business.
System and cyber risk The Group continues to invest in the development of its website and ERP This exposes the business to greater risk of financial loss, disruption or The Group is investing significant time and cost into new websites and
systems. damage to the reputation of an organisation from a failure of its information upgrading the current ERP system that went live in 2015. The Group has
technology systems. dedicated web and ERP teams to monitor and maintain the Group's systems and
holds appropriate insurance policies to minimise material risk.
Talent and skills Recruitment, development and retention of talented people are the key to the The Group fails to retain the necessary skills and talent to deliver the Management team to encourage and empower employees. Key lost talent has been
success of any business. Group's plans. reacquired and brought back into the Company. All employees (after 12 months
service) participate in profits of the Group.
Economic climate Further cost of living increases could impact our sales The further increase could inhibit sales as less residual income. The ongoing situation is being monitored and we are ensuring that our products
are priced competitively.
Main control procedures
Management establishes control policies and procedures in response to each of
the key risks identified. Control procedures operate to ensure the integrity
of the Group's financial statements and are designed to meet the Group's
requirements and both financial and operational risks identified in each area
of the business. Control procedures are documented where appropriate and
reviewed by management and the Board on an ongoing basis to ensure control
weaknesses are mitigated.
The Group operates a comprehensive annual planning and budgeting system. The
annual plans and budgets are approved by the Board. The Board reviews the
management accounts at its monthly meetings and financial forecasts are
updated monthly. Performance against budget is monitored and where any
significant deviations are identified appropriate action is taken.
The Strategic Report incorporates the statements on pages 3 to 11 and has been
signed on behalf of the Board.
Kirstie Gould
Chief Finance Officer
10 July 2024
Corporate Governance Report
Corporate Governance
For the year ended 31 March 2024, and up to the date of this report, the
Company has applied the main principles of the QCA Corporate Governance Code
("the Code") and complied throughout the period under review. Full details of
our approach to governance are set out below and, as a Board, we continue to
be committed to good standards in governance practices and will continue to
review the governance structures in place, to ensure that the current
practices are appropriate for our current shareholder base and that, where
necessary, changes are made.
The key governance principles and practices are described in the statement
below, together with the Audit and Nomination and Remuneration Committees'
reports on pages 19 to 23 and the Directors report on pages 25 to 30.
Board of Directors
Lyndon Davies - aged 63 Oliver Raeburn - aged 53 Kirstie Gould - aged 51 Daniel Carter John Stansfield Nick Batram
Non-Executive Director Chief Executive Officer Chief Finance Officer - aged 29 - aged 69 - aged 56
& Independent Interim Independent Independent
Company Secretary Non-Executive Director Non-Executive Chairman Non-Executive Director
Lyndon joined the Board as Chief Executive in October 2017 and was appointed Oliver Raeburn was appointed as CEO on 23 January 2023. Kirstie Gould was appointed as Chief Finance Officer of the Company in January Daniel Carter was appointed as a Non-Executive Director in July 2020. John Stansfield was appointed interim Non-Executive Chairman on 30 April 2024. Nick Batram was appointed as Non-Executive Director on 12 February 2024.
to Executive Chairman in February 2022.
2018 after spending over 2 years with Hornby as a consultant in the finance
John was previously Independent Non-Executive Chairman in August 2018 to
department. Kirstie also acts as Company Secretary. February 2022. Prior to that, he had been a non-executive Director of the
Company, having been appointed in January 2018.
A psychology graduate of the University of Leicester, Olly's career started Daniel is an Investment Analyst at Phoenix Asset Management which controls the
Nick has an extensive background in finance, with over 30 years experience
He is a highly-experienced model and hobby professional with 45 years' out in advertising, including a 9 year stint as owner / manager of a London
funds that own 73.38% of the ordinary shares of Hornby Plc. working for financial institutions. The vast majority of his time was spent
experience in the industry. He has built Oxford Diecast into a successful agency. A move into the corporate world saw Olly spend the next 6 years as Kirstie is a Fellow of the Institute of Chartered Accountants in England and
focused on researching and advising small and mid-cap companies.
international business over the past two decades, focusing on Diecast Marketing Director at Coral and subsequently Brand Director for Ladbrokes and Wales, qualifying with PricewaterhouseCoopers in 1997 and has since held John is a Fellow of the Chartered Institute of Management Accountants and
vehicles, aircraft and, more recently, rail-based products. Coral in the newly formed Ladbrokes Coral PLC. Two years as Chief Marketing senior management and directorship roles across a number of high growth SME
spent 31 years with the Group, 12 years of which he was Group Finance
Officer at Rank PLC were followed by a move to Paperchase as CMO in 2019. firms including Affini Technology Limited (part of the TTG Group) and Gamma Daniel studied Economics at The University of Bath. Director.
Having been promoted to CEO in 2020 he guided the company through an Communications plc.
In 2016, Nick joined Entain Plc, the FTSE 100 sports betting and gaming group,
administration process during the Covid pandemic, followed by a turnaround
initially heading up Investors Relations & Strategy and until recently as
Lyndon is also Chairman of Oxford Diecast ("Oxford"), a business founded in process, refinancing and sale of the business in August 2022.
Group Director of M&A and Corporate Development.
1993. He was the majority shareholder of LCD Enterprises Limited, the ultimate
Daniel is Chair of the Remuneration and Nomination Committee and a member of He re-joined the Company, after having left in 2013.
owner of the Oxford Diecast brands until July 2021 when Hornby acquired the the Audit Committee.
remaining stake.
Nick is a member of the Remuneration and Nomination Committee and a member of
John helped to deliver some of the Group's most profitable years and has a the Audit Committee
wealth of experience in the toy and hobby sectors.
Lyndon is a member of the Remuneration and Nomination Committee and a member
of the Audit Committee.
John is also Chair of the Audit Committee and a member of the Remuneration and
Nomination Committee.
Our Board and Committees Membership
The Board met twelve times during the year
Director Board Audit Remuneration & Nomination Number of meetings attended
John Stansfield Chair Chair Member 10
Lyndon Davies Member Member Member 9
Kirstie Gould Member 12
Daniel Carter Member Member Chair 12
Nick Batram Member Member Member 2
Oliver Raeburn Member 12
Composition and independence of the Board
The Board is comprised of two executive directors and four non-executive
directors. During the year, the Board is of the opinion that the composition
of the Board, continues to represent an appropriate balance between executive
and non-executive directors, given our size and our operations. John
Stansfield is considered independent due to the time elapsed since his
employment with the Group originally. Daniel Carter is considered independent
as he has no control over the voting shares of Phoenix Asset Management. Nick
Batram is considered independent. Lyndon is not considered independent due to
the time elapsed since his employment and his shareholding.
The Board members collectively have skills and expertise embracing a range of
areas including finance, auditing, e-commerce, engineering, manufacturing,
design, general management, sales and innovation. The Non-executive Chairman
and Lyndon Davies in particular, have extensive, directly applicable
experience of working within the toy and hobby products industry while Nick
Batram has extensive corporate finance and M&A experience.. We do however
intend to carry out periodic reviews of the composition of the Board to ensure
that its skillset and experience are appropriate for the effective leadership
and long-term success of the business as it develops. These reviews will give
due consideration to having more diversity on the Board, as well as to other
priorities.
Details of each Directors' background and experience are set out in the table
above.
Appointments to the Board and re-election
The Board takes decisions regarding the appointment of new directors as a
whole following the recommendations of its Remuneration and Nomination
Committee. The task of searching for appropriate candidates and assessing
potential candidates' skills and suitability for the role has been delegated
to the Remuneration and Nomination Committee. Further information on the roles
of the Remuneration and Nomination Committee and also the Audit Committee of
the Board can be found on pages 19 to 23.
The Company's Articles of Association require that one-third of directors
(excluding any directors who have been appointed since the last Annual General
Meeting (AGM)), retire by rotation at each AGM. In accordance with best
practice in corporate governance, all the Directors will offer themselves for
re-election.
Division of responsibilities
There is a formal schedule of matters reserved for the Board which is set out
in detail on the Hornby Plc corporate website at http://www.hornby.plc.uk/
(http://www.hornby.plc.uk/) and summarised further on in this report.
The Board is responsible for the formulating of the overall business strategy
and the Executive team is responsible for the managing of the business to
realise this strategy. The Non-executive Chairman is responsible for
overseeing the Board and the implementation of the Company's strategy and its
operational performance.
Executive Directors
The Executive Directors, as with the Non-Executive Directors, are encouraged
to use their independent judgement in the discharging of their duties. They
are responsible for the day-to-day management of the business, including its
trading, financial and operational performance. Issues and progress made are
reported to the Board by the CEO.
Executive Directors are full-time employees of the Company and have entered
into service agreements with the Company. Directors' contracts are available
for inspection at the Company's registered office and at the Annual General
Meeting.
Non-Executive Directors
The Board considers the Non-Executive Directors to be sufficiently competent.
They provide objectivity and substantial input to the activities of the Board,
from their various areas of expertise.
Non-Executive Directors are contracted to work no less than 15 days per year.
Succession Planning
During the year, the Remuneration and Nomination Committee has been tasked
with strengthening the expertise and diversity on the Board. As a result Nick
Batram joined the Board in February and the search continues for a new
Chairman who will replace John Stansfield who is the current interim Chairman.
The Board also recognises that diversity is a key element in strengthening the
contribution made to Board deliberations and in the course of our search for
suitable candidates, due regard is given to this in addition to the skills and
experience a potential candidate brings.
How the Board operates
The Board retains control of certain key decisions through the Schedule of
Matters reserved for the Board. Other matters, responsibilities and
authorities have been delegated to its Audit and Remuneration and Nomination
Committees and these are documented in the terms of reference of each of those
committees, which can be found on the Company's corporate website at
http://www.hornby.plc.uk/ (http://www.hornby.plc.uk/) .
The Board is responsible for:
· overall management of the business;
· developing the Company's strategy, business planning, budgeting
and risk management;
· monitoring performance against agreed objectives;
· setting the business' values, standards and culture;
· internal control and risk management;
· remuneration;
· membership and chairmanship of Board and Board Committees;
· relationships with shareholders and other stakeholders;
· determining the financial and corporate structure of the
business;
· major investment and divestment decisions;
· the Company's compliance with relevant legislations and
regulations; and
· other ad hoc matters such as the approval of the Company's
principal advisors.
The main activities of the Board during the year
Key Board activities this year included:
· recruitment of a new NED
· discussing strategic priorities
· reviewing feedback from our institutional shareholders following
our full and half year results; and
· input into implementing the next phase of the Turnaround Plan.
· approving revised borrowing and credit facilities.
The Board Committees
The Board delegates authority to two committees: the Audit and the
Remuneration and Nomination Committees, to assist in meeting its business
objectives. The Committees meet independently of Board meetings.
Each committee has terms of reference setting out their responsibilities,
which were reviewed and approved by the Board during the year. These are
available on the Company's corporate website http://www.hornby.plc.uk/
(http://www.hornby.plc.uk/)
We have made some improvements in our governance arrangements including
introducing reporting by the Remuneration and Nomination Committee as well as
the Audit Committee in our Annual Report and Accounts. These reports can be
found on pages 19 to 23.
The Audit Committee comprises the independent non-executive directors of the
Company and met three times during the year. The Chief Executive Officer,
Chief Finance Officer and other managers attend by invitation. The external
auditors attend meetings and have direct access to the Committee.
The Remuneration and Nomination Committee meet at least once a year with all
members being present. The members are all non-executive directors. The
Committee is responsible for establishing and reporting to the Board,
procedures for determining policy on executive remuneration and also the
performance-related elements of remuneration, which align the interest of the
directors with those of the shareholders.
Its remit also includes matters of nomination and succession planning for
Directors and senior key executives, with the final approval for appointments
resting with the Board. Directors excuse themselves from meetings where the
matter under discussion is their own succession when appropriate.
External Advisors
The Board makes use of the expertise of external advisors where necessary, to
enhance knowledge or gain access to particular skills or capabilities. Areas
where external advisors are used include and are not limited to: diligence
work on major contracts; recruitment; and Company secretarial and corporate
governance. The list of external advisors is set out on page 24.
Directors' Induction, Development, Information and Support
The Board considers all Directors to be effective and committed to their
roles.
All Directors receive regular and timely information on the business's
operational and financial performance. Ahead of the Board and Committee
meetings, papers are circulated to all Directors to ensure that they are fully
informed and can participate fully in discussions.
Directors keep their skillset up to date through a combination of attendance
at industry events, individual professional development and experience gained
from other Board roles. The Company Secretary ensures that the Board is aware
of any applicable regulatory changes and updates as and when relevant. The
Board is also given an annual refresher in AIM Rules and this was last
provided in February 2024 by its Nominated Advisors, Liberum Capital Limited.
This refresher is designed to enable Directors to keep abreast of corporate
governance developments.
Directors are also able to take independent professional advice in the
furtherance of their duties, if necessary, at the Company's expense. Directors
also have direct access to the advice and services of the Company Secretary.
The Company Secretary supports the Non-Executive Chairman in ensuring that the
Board receives the information and support it needs to carry out its roles.
Conflicts of Interest
Outside interests and commitments of Directors, and changes to these
commitments are reported to and agreed by the Board. In addition, no one
member of the Board has unfettered powers to make decisions.
Performance Evaluation
The Non-Executive Chairman considers the operation of the Board and
performance of the Directors on an ongoing basis as part of his duties and
will bring any areas of improvement he considers are needed to the attention
of the Board. However, the Board recognises the need to put in place an annual
formal evaluation process for the Board, its Committees and individual
directors.
The effectiveness of the Board, its Committees and Directors will be reviewed
on an annual basis.
Accountability
Although the Board delegates authority to its committees and also the
day-to-day management of the business to the Executive Directors, it is
accountable for the overall leadership, strategy and control of the business
in order to achieve its strategic aims in accordance with good corporate
governance principles.
Risk Management and Internal Control
Mitigating the risks that a Company faces as it seeks to create long-term
value for its shareholders, is the positive by-product of applying good
corporate governance. At Hornby, all employees are responsible for identifying
and monitoring risks across their areas. However, the Board sets the overall
risk strategy for the business. The business maintains a Risk Register and a
Fraud Register, which are presented and considered at the Audit Committee
meetings.
Financial and Business Reporting
In our half-year, final and any other ad hoc reports and other information
provided by the Company, the Board seeks to present a fair, balanced and
understandable assessment of the business' position and prospects. The Board
receives a number of reports, including those from the Audit Committee, to
enable it to monitor and clearly understand the business' financial position.
The Board considers that this Annual Report and financial statements, taken as
a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance, business model
and strategy.
Business Ethics
Our commitment to our customers and having a people-oriented ethos is central
to the success of achieving our strategy. We value the skills of our employees
and it is through the efforts of these dedicated people that we are able to
grow our customer base.
We endeavour to conduct our business affairs in a way that reflects our
values. Our suppliers are audited to ensure that their policies and procedures
comply with the Modern Slavery and Human Trafficking Act, which ensures that
workplace and conditions of employment for their employees are of an
acceptable standard. We reinforce our expectations to achieve and maintain
these standards. Our Statement on Modern Slavery and Human Trafficking can be
found on our corporate website http://www.hornby.plc.uk/
(http://www.hornby.plc.uk/) .
Whistleblowing
The business has procedures in place for detecting fraud and for
whistleblowing to ensure that arrangements are in place for all employees to
raise concerns in confidence, about possible irregularities and non-compliance
in matters of financial reporting or other matters. These procedures and
policies are reviewed by the Audit Committee.
Audit Committee Report
As Chair of the Audit Committee ("the Committee"), I am pleased to present our
Audit Committee Report for the year ended 31 March 2024.
Membership
The Audit Committee comprises four members, Daniel Carter, Nick Batram, Lyndon
Davies and myself, John Stansfield. All of us are independent Non-Executive
Directors of the Company. I am the member of the Committee, who with the
background as a chartered management accountant has significant, recent and
relevant financial experience. Our biographies are set out on page 15.
Meetings and attendance
The Committee met three times during the year ended 31 March 2024. All members
of the Committee at the time of each meeting were present at the meetings. At
least one of these meetings was with the external auditor, without the
executive Board members present. Olly Raeburn and Kirstie Gould also attended
meetings by invitation.
Duties:
The full list of the Committee's responsibilities is set out in its Terms of
Reference, which is available on the Company's website at
http://www.hornby.plc.uk/ (http://www.hornby.plc.uk/) and is summarised below
as follows:
- External Audit;
- Financial Reporting;
- Internal Control and Risk Management;
- Internal Audit; and
- Reporting on activities of the Committee.
The terms of reference for the Committee are reviewed annually and approved by
the Board.
The main items of business considered by the Committee during the year
included:
- a review of the year-end external audit plan, consideration of the scope of
the audit and the external auditor's fees;
- consideration and approval of the external audit report and management
representation letter;
- a review of the Annual Report and financial statements, including
consideration of the significant accounting issues relating to the
financial statements, the consistency in the application of accounting
policies and the going concern review;
- a review and approval of the internal financial statement;
External Auditor
The Committee has the primary responsibility for recommending the appointment
of the external auditor and reviewing the findings of the auditor's work. The
Company's external auditor is Crowe U.K. LLP. There will be ongoing dialogue
between the Committee and the auditor on actions to improve the effectiveness
of the external audit process.
Having reviewed the auditor's independence and performance to date, the
Committee has recommended to the Board that they be reappointed for the 2024
audit. A resolution to reappoint Crowe U.K LLP as the Company's auditor is to
be proposed at the forthcoming Annual General Meeting (AGM) in September
2024.
Non-audit services
In addition to the audit services they provide, Crowe U.K. LLP also provide
tax compliance services. These fees are within the 1:1 ratio of audit
services.
Audit process
The external auditor prepares an audit plan setting out how the auditor will
review the interim and audit the full-year financial statements. The audit
plan is reviewed, agreed in advance and overseen by the Committee. The plan
includes the proposed scope of the work, the approach to be taken with the
audit and also describes the auditor's assessment of the principal risks
facing the business.
Prior to approval of the financial statements, the external auditor presents
its findings to the Committee, highlighting areas of significant financial
judgement for discussion.
Internal Audit
The Audit Committee has considered the need for an internal audit function
during the year and is of the view that, given the size and nature of the
Company's operations and finance team, there is no current requirement to
establish a separate internal audit function.
Risk Management and Internal Controls
Through the work of the Committee, the Board carries out an annual risk
assessment programme to identify the principal risks to the business and these
include:
- UK market dependence and conditions;
- the New Business Plan;
- the status of the model/hobby market;
- exchange rates;
- the supply chain function;
- capital allocation;
- product compliance;
- liquidity;
- systems and cyber risks; and
- talent and skills;
The Committee also reviews the effectiveness of control policies and
procedures in place to deal with the risks mentioned. Further details on the
business risks identified and the actions being taken are set out on pages 12
to 13 of the Operating and Financial Review Report.
The process of risk management in the business is continually reviewed.
John Stansfield
Chairman of the Audit Committee
10 July 2024
Remuneration and Nomination Committee Report
As Chairman of the Remuneration and Nomination Committee ("the Committee"), I
am pleased to present our report for the year ended 31 March 2024 which sets
out details of the composition, structure and activities of the Committee and
remuneration paid to Directors during the year.
The Board has taken the decision to expand the schedule of matters it has
delegated to its Remuneration Committee, to include matters which are
typically within the remit of a nomination committee. Its terms of reference
were revised accordingly and the Committee was renamed the Remuneration and
Nomination Committee.
Membership
The Committee currently comprises four Non-Executive Directors, John
Stansfield, Lyndon Davies, Nick Batram and myself, Daniel Carter, whose
biographies are set out on page 15.
Meetings and attendance
The Committee meets at least once a year and at such other times during the
year as is necessary to discharge its duties. During the year, the Committee
met twice. Only members of the Committee have the right to attend meetings,
although other individuals, such as the CEO and external advisers, may be
invited to attend for all or part of any meeting.
Duties
The Committee works closely with the Board to formulate remuneration policy
and consider succession plans and possible internal candidates for future
Board roles, having regard to the views of shareholders. The main duties of
the Committee are set out in its Terms of Reference, which are available on
the Company's website (http://www.hornby.plc.uk/ (http://www.hornby.plc.uk/) )
and include the following key responsibilities:
Remuneration
· set remuneration policy for all Executive Directors (including
pension rights and any compensation payments), and in the process, review and
give due consideration to pay and employment conditions throughout the
Company, especially when determining annual salary increases;
· approve the design of, and determine targets for any
performance-related pay schemes operated by the Company;
· recommend and monitor the level and structure of remuneration for
senior management; and
· review the design of all share incentive plans for approval by
the Board and shareholders.
Nomination
· regularly review the structure, size and composition, (including
the skills, experience, knowledge and diversity) of the Board and make
recommendations to the Board as to any changes necessary;
· give full consideration to succession planning for directors and
other senior executives in the course of its work, taking into account the
challenges and opportunities facing the Company and the skills and expertise
needed on the Board in the future;
· lead the process for all potential appointments to the Board and
making recommendations to the Board in relation to them;
· evaluate the balance of skills, experience, independence and
knowledge on the Board; and following any evaluation, identify and nominate
for approval by the Board, potential candidates to fill Board vacancies as and
when they arise.
Principal activities during the year
The Committee considered:
· Executive Directors' bonuses and salaries;
· Succession planning and the search for a new Chairman;
· succession planning and the search for an additional
Non-Executive director;
· election and re-election of directors at the AGM;
· a review of the Committee's terms of reference.
The Committee considers business' strategy when recommending the appointment
of directors and setting and reviewing remuneration.
Diversity
It is the Board's view and commitment that recruitment, promotion and any
other selection exercises are conducted on the basis of merit against
objective criteria that avoid discrimination. No individual should be
discriminated against on the ground of race, colour, ethnicity, religious
belief, political affiliation, gender, age or disability, and this extends to
Board appointments.
The Board recognises the benefits of diversity, including gender diversity, on
the Board, although it believes that all appointments should be made on merit,
while ensuring there is an appropriate balance of skills and experience within
the Board. The Board currently consists of 17% (one) female and 83% (five)
male Board members. The Board's age demographic ranges from 29 to 69. The
business consists of 65% male employees and 35% female employees.
Remuneration policy
The objective of the remuneration policy is to promote the long-term success
of the Company, giving due regard to the views of shareholders and
stakeholders. In formulating remuneration policy for the Executive Directors,
the Committee:
-considers Directors' experience and the nature and complexity of their work
in order to pay a competitive salary, (in line with comparable companies),
that attracts and retains directors of the highest quality;
-considers pay and employment conditions within the Company and salary levels
within listed companies of a similar size;
-considers Directors' personal performance; and
-links individual remuneration packages to the business' long-term performance
and continued success of the business through the award of annual bonuses and
share-based incentive schemes.
Executive Directors
Base salary
Executive Directors' base salaries are reviewed annually by the Committee,
taking into account the responsibilities, skills and experience of each
individual, pay and employment conditions within the Company and the salary
levels within listed companies of a similar size.
Annual bonus
The CEO is subject to a bonus scheme related to the market capitalisation
increase over the three-year period ending January 2026 and adjusted for
certain factors.
For the first two years of this scheme, the CEO may receive a discretionary
bonus up to 38.9% of their base salary. Payments made during these years will
be subtracted from the ultimate award amount due under this scheme.
The CEO bonus scheme, previously accounted for under IAS 19, is now being
accounted for under IFRS 2 using Black-Scholes valuation. The bonus scheme
pays a bonus for any uplift in the enterprise value of the business less any
capital invested as at the 26 January 2026.
At 31 March 2024 the valuation model, using 50% share volatility, 4% risk-free
rate of return and an option value of 0.165 leads to a provision being made in
the year of £668,975. This is included in the Statement of Comprehensive
Income within Administrative expenses.
The bonuses for other executives are reviewed annually by the committee
following recommendations by the CEO.
Long-term Incentive Plan
There are currently no long-term incentive plans in place. The Remuneration
committee will review and consider a suitable scheme for the future.
Other benefits
Policies concerning benefits are reviewed periodically. Currently taxable
benefits comprise Company car allowance or a travel allowance and private
health cover. The Committee also retains the discretion to offer additional
benefits as appropriate.
The Executive Directors and senior managers are members of defined
contribution pension schemes and annual contributions are calculated by
reference to base salaries, with neither annual bonuses nor awards under the
share incentive schemes taken into account in calculating the amounts due.
Service agreements and termination payments
Details of the Executive Directors' service agreements are set out below.
Director Date of Contract Unexpired Term Notice period by Company Notice period by Director
Oliver Raeburn 23 January 2023 Rolling contract 3 months 3 months
Kirstie Gould 21 December 2017 Rolling contract 9 months 6 months
Compensation for loss of office is based on the base salary of the Director.
Employees' pay
Employees' pay and conditions throughout the business are considered when
reviewing remuneration policy for Executive Directors.
A profit share scheme exists for all employees (excluding Executive
Directors), and 15% of operating profit is shared among employees
proportionately. This is a mechanism aimed at addressing issues of motivation
of employees below Board level. It is also to ensure that the Company attracts
and retains the best talent and that their interests align with that of
shareholders.
Non-Executive Directors
The remuneration payable to Non-Executive Directors is decided by the
Non-executive Chairman and Non-Executive Directors (but excluded from
discussing their personal fees). The remuneration payable to the Non-exec
Chairman is decided by the other Board members.
Fees are designed to ensure the Company attracts and retains high calibre
individuals. They are reviewed on an annual basis and account is taken of the
level of fees paid by other companies of a similar size and complexity.
Non-Executive Directors do not participate in any annual bonus, share options
or pension arrangements. The Company repays the reasonable expenses that
Non-Executive Directors incur in carrying out their duties as Directors.
Terms of appointment
Each of the Non-Executive Directors signed a letter of appointment for an
initial period of two years which can be terminated by either party giving to
the other prior written notice of three months. John Stansfield signed a
letter on 2 January 2018, Daniel Carter signed his on 16 July 2020, Lyndon
Davies signed his on 22 February 2023 and Nick Batram signed his on 12
February 2024. The contract continues as long as the Non-Executive Directors
are re-elected at the AGM. All non-executive directors will stand for
re-election at the next AGM in September 2024.
Daniel Carter
Chairman of the Remuneration and Nomination Committee
10 July 2024
Directors and Corporate Information
Directors Independent Auditors
The full details of all directors who served in the year ended 31 March 2024 Crowe U.K. LLP
can be found below.
John Stansfield Riverside House
Non-Executive Chairman 40-46 High Street
Oliver Raeburn Maidstone
Chief Executive Officer Kent ME14 1JH
Kirstie Gould
Chief Finance Officer Solicitors
Daniel Carter Taylor Wessing LLP
Non-Executive Director 5 New Street Square
Lyndon Davies London EC4A 3TW
Non-Executive Director Principal Bankers
Henry de Zoete (resigned 30 June 2023) Barclays Bank PLC
Non-Executive Director 9 St George's Street
Nick Batram Canterbury
Non-Executive Director Kent CT1 2JX
Kirstie Gould
Company Secretary
Nominated Advisor and Brokers
Registered office Liberum Capital Limited
Enterprise Road Ropemaker Place
Westwood Industrial Estate 25 Ropemaker Street
Margate, Kent CT9 4JX London EC2Y 9LY
Registrars and Transfer Agents
Company Registered Number Link Asset Services
Registered in England Number: 01547390 The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Directors' Report
The Directors present their Annual Report together with the audited
consolidated and Company financial statements for the year ended 31 March
2024.
STATUTORY INFORMATION CONTAINED ELSEWHERE IN THE ANNUAL REPORT
Information required to be part of the Directors' Report can be found
elsewhere in this document, as indicated, and is incorporated into this report
by reference:
The Group's business review is set out in the Strategic Report on pages 10 to
11.
The Corporate Governance statement on page 16 to 23.
Details of the Directors who served during the year including their salaries,
bonuses, benefits and share interests are on pages 29 to 30.
Directors' responsibility statements on page 27.
Likely future events are disclosed within the CEO report on page 8.
Post balance sheet events are set out in note 30.
Principal activities
The Company is a holding Company, limited by shares, registered (and
domiciled) in England Reg. No. 01547390 with a Spanish branch and has seven
operating subsidiaries: Hornby Hobbies Limited and Hornby World Limited in the
United Kingdom with a branch in Hong Kong, Hornby America Inc. in the US,
Hornby España S.A. in Spain, Hornby Italia s.r.l. in Italy, Hornby France
S.A.S. in France, Hornby Deutschland GmbH in Germany, Hornby Hobbies India
Private Limited in India and LCD Enterprises Limited in the United Kingdom.
Hornby PLC is a public limited Company which is a member of AIM and
incorporated and operating in the United Kingdom.
The Group is principally engaged in the development, design, sourcing and
distribution of hobby and interactive products.
Results and dividends
The results for the year ended 31 March 2024 are set out in the Group
Statement of Comprehensive Income. Revenue for the year was £56.2 million
compared to £55.1 million last year. The loss for the year attributable to
equity holders amounted to £11.4 million (2023: £5.9 million loss). The
position of the Group and Company is set out in the Group and Company
Statements of Financial Position. Future developments are set out within the
CEO Statement.
No interim dividend was declared in the year (2023: £nil) and the Directors
do not recommend a final dividend (2023: £nil).
GOING CONCERN
The Group has in place a £12.0 million Asset Based Lending (ABL) facility
with Secure Trust Bank PLC ("STB") through to December 2025. The Company
provides customary operational covenants to STB on a monthly basis such as
inventory turn, credit note dilutions and management accounts. In addition,
the Group has a committed £12.55 million loan facility with Phoenix Asset
Management Partners Limited (the Group's largest shareholder) if it should be
required currently expires December 2025.
The Group has prepared trading and cash flow forecasts for a period of three
years, which have been reviewed and approved by the Board. On the basis of
these forecasts, assuming the facilities with STB and Phoenix are renewed and
after a detailed review of trading, financial position and cash flow models,
the Directors have a reasonable expectation that the Group and Company have
adequate resources to continue in operational existence for the foreseeable
future. The Company has received a letter of support from Phoenix Asset
Management confirming their intention to provide funds up to an additional £7
million to support the Company's business plan until at least 31 December
2025. The current budgets do not show the Group requiring support beyond the
already committed facilities. For these reasons, the Directors continue to
adopt the going concern basis of accounting in preparing the annual financial
statements.
Research and development
The Board considers that research and development into products continues to
play an important role in the Group's success. R&D costs of £1.8 million
(see Note 4) incurred in the year have been charged to the Statement of
Comprehensive Income as these costs all relate to research activities.
Directors' indemnities
The Company maintained liability insurance for its Directors and officers
during the financial year and up to the date of approval of the Annual Report
and Accounts. The Company has also provided an indemnity for its Directors and
the secretary, which is a qualifying third party indemnity provision for the
purposes of the Companies Act 2006.
STREAMLINED ENERGY AND CARBON REPORTING (SECR)
Streamlined Energy and Carbon Reporting (SECR) is the UK Government's name for
energy and carbon reporting and taxation.
As a largely office-based business, the Group has a relatively low carbon
presence. Under the SECR requirements we are reporting energy use and business
mileage for all our UK operations.
2024 2024 2023 2023
Scope Activity Consumption kWh Consumption (tCO2e) Consumption kWh Consumption (tCO2e)
Scope 1 Business Mileage 137,593 34.5 112,748 28.3
Scope 2 Purchased Electricity 506,620 107.6 529,956 112.5
Purchased Gas 281,672 57.4 199,449 40.6
925,885 199.5 842,153 181.4
Intensity metric
An intensity metric of tCO2e per £m revenue has been applied for the annual
total consumption
2024 2023
tCO2e/£m Revenue 3.55 3.29
During the reporting year the gas has increased due to the increased use of
gas heating in the new Wonderworks building in Margate.
Substantial shareholdings
The Company has been notified that at close of business on 9 July 2024 the
following parties were interested in 3% or more of the Company's ordinary
share capital.
Shareholder Number of ordinary shares Percentage held
Phoenix Asset Management 121,662,481 71.63
Artemis Fund Managers Limited 16,543,775 9.74
Fraser Group Plc 15,719,424 9.25
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the Group and
Company financial statements in accordance with UK-adopted international
accounting standards in conformity with the requirements of the Companies Act
2006. Under Company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of the profit or loss of the
Group and Company for that period. In preparing the financial statements, the
directors are required to:
· select suitable accounting policies and then apply them
consistently;
· state whether applicable UK-adopted international accounting
standards in conformity with the Companies Act 2006 have been followed,
subject to any material departures disclosed and explained in the financial
statements;
· make judgements and accounting estimates that are reasonable and
prudent; and
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and Company will continue
in business.
The directors are also responsible for safeguarding the assets of the Group
and Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group and Company's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and Company and enable them to ensure that the financial statements
comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group and Company's position and performance,
business model and strategy.
In the case of each director in office at the date the Directors' Report is
approved:
· so far as the director is aware, there is no relevant audit
information of which the Group and Company's auditors are unaware; and
· they have taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that the Group and Company's auditors are aware of that
information.
Financial instruments
The Group's financial instruments, other than derivatives, comprise
borrowings, cash and liquid resources, and various items, such as trade
receivables, trade payables, etc. that arise directly from its operations. The
Group's financial liabilities comprise borrowings, trade payables, other
payables and finance leases. The main purpose of the Group's borrowings is
to provide finance for the Group's operations. The Group has financial assets
comprising cash and trade and other receivables.
The Group also enters into derivatives transactions (principally forward
foreign currency contracts). The purpose of such transactions is to manage the
currency risks arising from the Group's operations. It is, and has been
throughout the period under review, the Group's policy that no speculative
trading in financial instruments shall be undertaken.
FINANCIAL RISK MANAGEMENT
The financial risk is managed by the Group and more information on this can be
found within the Notes to the financial statements.
Personnel policies
Hornby is committed to eliminating discrimination and encouraging diversity
amongst our workforce. Our aim is that our workforce will be truly
representative of all sections of society and each employee feels respected
and able to give of their best.
To that end the purpose of personnel policies are to provide equality and
fairness for all in our employment and not to discriminate on grounds of
gender, marital status, race, ethnic origin, colour, nationality, national
origin, disability, sexual orientation, religion or age. We oppose all forms
of unlawful and unfair discrimination.
All employees, whether part time, full time or temporary, are treated fairly
and with respect. Selection for employment, promotion, training or any other
benefit is on the basis of aptitude and ability. All employees are helped and
encouraged to develop their full potential and the talents and resources of
the workforce are fully utilised to maximise the efficiency of the
organisation.
Our commitments are:
· To create an environment in which individual differences and the
contributions of all our staff are recognised and valued;
· Every employee is entitled to a working environment that promotes
dignity and respect to all. No form of intimidation, bullying or harassment is
tolerated;
· Training, development and progression opportunities are available
to all staff;
· Equality in the workplace is good management practice and makes
sound business sense;
· To regularly review all our employment practices and procedures
to ensure fairness;
· Breaches of our equality policy are regarded as misconduct and
may lead to disciplinary proceedings; and
· These policies will be monitored and reviewed on a regular basis.
The Group places importance on the contributions made by all employees to the
progress of the Group and aims to keep them informed via formal and informal
meetings.
ARTICLES OF ASSOCIATION
The rules governing the appointment and replacement of Directors are set out
in the Company's Articles of Association. The Articles of Association may be
amended by a special resolution of the Company's shareholders.
Share capital
The share capital of the Company comprises ordinary shares of 1p each. Each
share carries the right to one vote at general meetings of the Company. The
issued share capital of the Company, together with movements in the Company's
issued share capital is shown in Note 21. Ordinary shareholders are entitled
to receive notice and to attend and speak at general meetings.
Each shareholder present in person or by proxy (or by duly authorised
corporate representatives) has, on a show of hands, one vote. On a poll, each
shareholder present in person or by proxy has one vote for each share held.
Other than the general provisions of the Articles (and prevailing legislation)
there are no specific restrictions of the size of a holding or on the transfer
of the ordinary shares.
The Directors are not aware of any agreements between holders of the Company's
shares that may result in the restriction of the transfer of securities or on
voting rights. No shareholder holds securities carrying any special rights or
control over the Company's share capital.
Authority to purchase own shares
The Company was authorised by shareholder resolution at the 2023 Annual
General Meeting to purchase up to 10% of its issued share capital. A
resolution will be proposed at the forthcoming Annual General Meeting and
authority sought to purchase up to 10% of its issued share capital. Under this
authority, any shares purchased must be held as treasury shares or, otherwise,
cancelled resulting in a reduction of the Company's issued share capital.
No shares were purchased by the Company during the year.
Change of control - significant agreements
There are a number of agreements that may take effect, alter or terminate on a
change of control of the Company. None of these are considered to be
significant in their likely impact on the business as a whole.
POLITICAL DONATIONS
The Company has made no political donations during the year.
Independent auditor
A resolution to reappoint the auditor Crowe U.K. LLP, will be proposed at the
forthcoming Annual General Meeting.
Annual General Meeting
The Annual General Meeting is to be scheduled for 11 September 2024. A notice
of the Annual General Meeting will be sent out to shareholders separately to
this Annual Report and Accounts.
DIRECTORS' REMUNERATION
Executive Directors' base salaries are reviewed annually by the Remuneration
and Nomination Committee taking into account the responsibilities, skills and
experience of each individual, pay and employment conditions within the
Company and salary levels within listed companies of a similar size.
The following table summarises the total salary and pension contributions
received by Directors for 2023/24 and 2022/23 in line with the Companies Act
2006 requirement:
AUDITED
Year ended 31 March 2024 Year
ended
31
March
2023
Basic salary Pension Bonus Total Basic salary Pension LTIP LTIP Total
& fees contributions & fees contributions - shares - cash
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
O Raeburn (Appointed 23 January 2023) 270 14 105 389 51 2 - - 53
K Gould (Appointed 4 January 2018) 198 37 56 291 191 36 186 178 591
L Davies (Appointed 5 October 2017) 175 6 - 181 247 6 186 178 617
D Carter (Appointed 16 July 2020) - - - - - - - - -
J Stansfield (Appointed 4 January 2018) 50 - - 50 51 - - - 51
Nick Batram (Appointed 12 February 2024) 6 - - 6 - - - - -
H De Zoete (Appointed 5 January 2022, resigned 30 June 2023.) 11 - - 11 45 - - - 45
Total 710 57 161 928 585 44 372 356 1,357
Performance Share Plan awards outstanding (Audited)
At 31 March 2024, there are no outstanding awards to Directors under any PSP
scheme.
Benefits and Pension (Unaudited)
Policies concerning benefits, including the Group's Company car policy, are
reviewed periodically. Currently, benefits in kind comprise motor cars or a
travel allowance and private health cover, both of which are
non-performance related. The Executive Directors and senior managers are
members of defined contribution pension schemes and annual contributions are
calculated by reference to base salaries, with neither annual bonuses nor
awards under the share incentive schemes taken into account in calculating the
amounts due.
Executive Directors' service contracts (Unaudited)
Executive Directors do not have fixed period contracts.
Payments to Past Directors, policy on payment of loss of office and
termination payments (Audited)
There were no payments to past directors made during the year. Notice periods
are set under individual service contracts but the Company has a policy for
Executive directors of a notice period of nine months to be given by the
Company and of six months to be given by the individual. The compensation for
loss of office is based upon the respective service contracts and the
components are based on the base salary of the director.
DIRECTORS' INTERESTS
Interests in shares
Interests of the Directors in the shares of the Company at 31 March 2024 and
31 March 2023 were:
At At
31 March 31 March
2024 2023
number number
Executive Directors
O Raeburn - -
K Gould 786,489 786,489
Non-Executive Directors
L Davies 1,526,627 1,526,627
H De Zoete (resigned 30 June 2023) - -
D Carter - -
J Stansfield 85,358 85,358
N Batram - -
Apart from the interests disclosed above no Directors were interested at any
time in the year in the share capital of any other Group Company. Daniel
Carter is also an employee at Phoenix Asset Management Partners Limited who
hold a substantial shareholding in Hornby PLC.
On behalf of the Board
Kirstie Gould
Chief Finance Officer
Westwood
Margate
CT9 4JX
10 July 2024
Independent auditor's report to the members of Hornby PLC
Opinion
We have audited the financial statements of Hornby Plc (the "Parent Company")
and its subsidiaries (the "Group") for the year ended 31 March 2024, which
comprise:
· the Group statement of comprehensive income for the year ended 31
March 2024;
· the Group and Parent Company statements of financial position as
at 31 March 2024;
· the Group and Parent Company statements of cash flows for the
year then ended;
· the Group and Parent Company statements of changes in equity for
the year then ended; and
· the notes to the financial statements, including significant
accounting policies.
The financial reporting framework that has been applied in the preparation of
the financial statements is applicable law and UK-adopted international
accounting standards.
In our opinion the financial statements:
· give a true and fair view of the state of the Group's and of the
Parent Company's affairs as at 31 March 2024 and of the Group's loss for the
period then ended;
· have been properly prepared in accordance with UK-adopted
international accounting standards;
· have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the UK,
including the FRC's Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the Group's and Parent Company's ability to continue to adopt
the going concern basis of accounting included:
· testing the cash flow model provided by management and
challenging the assumptions made;
· assessing the accuracy of past budgeting, as well as a review of
the April management accounts compared to forecast;
· considering the cash position of the business along with current
facilities available for drawdown including obtaining evidence of the signed
facility agreements;
· considering the appropriateness of the going concern period;
· reviewing sensitised forecasts and considering whether the
sensitivities applied were appropriate and reflected a reasonable 'severe but
plausible downside' scenario;
· evaluating the support provided by Phoenix UK Fund Limited. In
reviewing this support we considered the ability of Phoenix UK Fund Limited to
provide the support, whether the support was legally enforceable and whether
the support offered was appropriate in light of the sensitised forecasts;
· discussing the support directly with representatives from Phoenix
UK Fund; and
· considering the appropriateness of the related disclosures
against the requirements of the accounting standards.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and Parent Company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An
item is considered material if it could reasonably be expected to change the
economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of
misstatements identified.
Based on our professional judgement, we determined overall materiality for the
Group financial statements as a whole to be £250,000 (2023 £250,000), based
on turnover and the underlying profitability of the business. We consider
these to be the key performance metric reported by management to shareholders
to assess the performance of the business. Materiality represents
approximately less than 0.5% of turnover and 3% of loss before tax (2023: 0.5%
of turnover and 9% of loss before tax).
Overall Parent Company materiality was set at £200,000 (2023: £200,000)
based on net assets, restricted so as not to exceed Group materiality.
We use a different level of materiality ('performance materiality') to
determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as
adjusted for the judgements made as to the entity risk and our evaluation of
the specific risk of each audit area having regard to the internal control
environment. Performance materiality was set at £175,000 (2023: £175,000)
for the Group and £140,000 (2023 : £140,000) for the Parent Company.
Where considered appropriate performance materiality may be reduced to a lower
level, such as, for related party transactions and directors' remuneration.
We agreed with the Audit Committee to report to it all identified errors in
excess of £10,000 (2023: £10,000). Errors below that threshold would also be
reported to it if, in our opinion as auditor, disclosure was required on
qualitative grounds.
Overview of the scope of our audit
We performed an audit of the financial information of two full scope
components, Hornby Plc and Hornby Hobbies Limited. The European sales
offices, the US trading subsidiary, Hornby World, Hornby India, LCD
Enterprises Limited and Oxford Diecast Limited were audited using a component
materiality level of £200,000 for the purposes of the consolidation only.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
We considered going concern to be a key audit matter. Our observations on
this area are set out in the Conclusions relation to Going Concern section of
the auditors' report.
This is not a complete list of all risks identified by our audit.
Key audit matter How the scope of our audit addressed the key audit matter
Carrying value of goodwill and intangibles and investments - Notes 8, 9 and 11 We tested management's impairment review which includes impairment reviews for
investments and intercompany debt in the parent and goodwill and intangible
The Group holds goodwill at a carrying value of £2m and brand relations at a assets at group level.
carrying value of £1.3m.
The audit work relied on forecasts of future cash flows based on board
The Parent Company also holds significant investments and debtor balances with approved forecasts. We challenged management on the assumptions made,
Group companies. including the forecast growth rate, profitability, terminal growth rates
applied and discount rate applied. We used the expertise of our valuations
Recovery of these assets is dependent upon future cash flows which are team to review the discount rate. As part of our testing we benchmarked
required to be discounted. Recovery is based on future cashflows which are assumptions such as the terminal growth rate and inputs into the calculation
inherently subjective, and this increases the risk the cashflow forecasts may of the cost of capital (discount rate).
not be met.
For investments and intercompany balances we considered the fair value of the
group with reference to market capitalisation of the group.
We also consider there to be a risk that cashflows have not been discounted at
an appropriate rate. If the cash flows do not meet expectations the assets
may become impaired
Inventory provisioning - Note 13 We obtained the aged inventory reports and recalculated the provision. We also
verified the accuracy of the ageing report.
The Group is holding £21.5m of inventory at the year end. There is a risk
that inventory may become difficult to sell and thereby become impaired. We compared the assumptions used to those used in the prior year and
challenged management where assumptions had either changed or no longer
We consider that, due to the losses in the group and the persistent high appeared appropriate.
levels of stock, there is an increased risk of either stock obsolescence or
stock being valued above its net realisable value. We compared the aging of stock year on year to consider whether the stock was
getting older that may indicate a need for a provision. For a sample of
Management provides for key lines of stock based on a historical provisioning older stock items we examined evidence that stock lines were moving and that
policy. We therefore consider there to be risk that this provision is these were being sold above cost.
incorrectly calculated, the historical assumptions are incorrect or that there
are lines of stock, not in the provision, that require providing for. For a sample of the remainder of inventory, we reviewed sales post year end to
consider if any items were being sold below cost.
Our audit procedures in relation to these matters were designed in the context
of our audit opinion as a whole. They were not designed to enable us to
express an opinion on these matters individually and we express no such
opinion.
Other information
The directors are responsible for the other information contained within the
annual report. The other information comprises the information included in the
annual report, other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion based on the work undertaken in the course of our audit
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the directors' report and strategic report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and the Parent
Company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the parent company financial statements are not in agreement with
the accounting records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit.
Responsibilities of the directors for the financial statements
As explained more fully in the directors' responsibilities statement set out
on page 25, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
A further description of our responsibilities is available on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor's report.
Extent to which the audit is capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We identified and assessed the risks of material misstatement of
the financial statements from irregularities, whether due to fraud or error,
and discussed these between our audit team members. We then designed and
performed audit procedures responsive to those risks, including obtaining
audit evidence sufficient and appropriate to provide a basis for our opinion.
We obtained an understanding of the legal and regulatory frameworks within
which the company operates, focusing on those laws and regulations that have a
direct effect on the determination of material amounts and disclosures in the
financial statements. The laws and regulations we considered in this context
were the Companies Act 2006 and Taxation legislation.
Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of the Directors and
other management and inspection of regulatory and legal correspondence, if
any.
We identified the greatest risk of material impact on the financial statements
from irregularities, including fraud, to be the override of controls by
management and the recognition of revenue. Our audit procedures to respond to
these risks included:
• enquiry of management about the Group's policies, procedures and related
controls regarding compliance with laws and regulations and if there are any
known instances of non-compliance;
• examining supporting documents for all material balances, transactions and
disclosures;
• review of the board meeting minutes;
• enquiry of management and review and inspection of relevant correspondence
with any legal firms;
• detailed testing of a sample of sales made during the year and around the
year and agreeing these through to invoices and despatch records;
• testing the appropriateness of a sample of significant journal entries
recorded in the general ledger and other adjustments made in the preparation
of the financial statements; and
• review of accounting estimates for biases.
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. We are not responsible for preventing
non-compliance and cannot be expected to detect non-compliance with all laws
and regulations.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Mark Sisson (Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
40-46 High Street
Maidstone
Kent ME14 1JH
11 July 2024
Group Statement of Comprehensive Income
for the Year Ended 31 March 2024
Group
Note 2024 2023
£'000 £'000
Revenue 2 56,244 55,105
Cost of sales (31,248) (28,166)
Gross profit 24,996 26,939
Distribution costs (8,991) (8,196)
Selling and marketing costs (13,523) (11,448)
Administrative expenses (8,982) (7,712)
Other operating expenses (135) (653)
Operating loss before Exceptional items (6,635) (1,070)
Exceptional items 4 (489) (3,974)
Operating loss (7,124) (5,044)
Finance income 3 26 11
Finance costs 3 (1,688) (843)
Net finance expense (1,662) (832)
Share of profit of investments using the equity method 11 60 -
Loss before taxation (8,726) (5,876)
Income tax 5 (3,361) (46)
Loss for the year after taxation (12,087) (5,922)
Loss for the year after taxation attributable to:
Equity holders of the Company (12,064) (5,905)
Non-controlling interests (23) (17)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Cash flow hedges 474 (932)
Currency translation gains/(losses) (110) 161
Other comprehensive (loss)/income for the year, net of tax 364 (771)
Total comprehensive (loss)/income for the year (11,723) (6,693)
Comprehensive income attributable to:
Equity holders of the Company (11,700) (6,676)
Non-controlling interests (23) (17)
(Loss)/Profit per ordinary share
Basic 7 (7.10p) (3.50p)
Diluted 7 (7.10p) (3.50p)
All results relate to continuing operations.
The notes on pages 40 to 70 form part of these accounts.
Group and Company Statements of Financial Position as at 31 March 2024 Company
Group
Note 2024 2023 2024 2023
£'000 £'000 £'000 £'000
Assets
Non-current assets
Goodwill 8 2,001 1,732 - -
Intangible assets 9 2,656 2,986 - -
Property, plant and equipment 10 14,507 12,041 - -
Investments 11 1,498 - 27,092 25,509
Right of Use Assets 12 2,312 2,087 - -
Deferred tax assets 21 279 3,571 - -
23,253 22,417 27,092 25,509
Current assets
Inventories 13 21,484 21,282 - -
Trade and other receivables 14 9,245 9,181 13,829 14,978
Derivative financial instruments 20 23 2 - -
Cash and cash equivalents 15 1,116 1,337 1 1
31,868 31,802 13,830 14,979
Liabilities
Current liabilities
Borrowings 19 (15,341) (6,750) - -
Trade and other payables 16 (11,337) (8,067) (11,459) (11,065)
Lease liabilities 18 (479) (409) - -
Derivative financial instruments 20 (104) (557) - -
(27,261) (15,783) (11,459) (11,065)
Net current assets 4,607 16,019 2,371 3,914
Non-current liabilities
Borrowings 19 (67) (117) (5,711) (5,871)
Lease liabilities 18 (2,249) (2,047) - -
Other payables 23 (669) - (669) -
Deferred tax liabilities 21 (559) (233) - -
(3,544) (2,397) (6,380) (5,871)
Net assets 24,316 36,039 23,083 23,552
Group and Company Statements of Financial Position as at 31 March 2024
Group Company
Note 2024 2023 2024 2023
£'000 £'000 £'000 £'000
Equity attributable to owners of the parent
Share capital 22 1,699 1,699 1,699 1,699
Share premium 52,857 52,857 52,857 52,857
Capital redemption reserve 55 55 55 55
Translation reserve 24 (1,763) (1,653) (1,029) (1,232)
Hedging reserve 24 (81) (555) - -
Other reserves 24 1,688 1,688 19,145 19,145
Accumulated losses 24 (30,111) (18,047) (49,644) (48,972)
Equity attributable to PLC shareholders 24,344 36,044 23,083 23,552
Non-controlling interests (28) (5)
Total equity 24,316 36,039
The Company made a loss after tax of £672,000 (2023: £36,704,000). The loss
made in the previous year was due to impairment of investments.
The notes on page 40 to 70 form part of these accounts. The financial
statements on pages 34 to 70 were approved by the Board of Directors on 10
July 2024 and were signed on its behalf by:
K Gould, Director, Registered Company Number: 01547390
Group and Company Statements of Changes in Equity
For the Year Ended 31 March 2024
GROUP Share capital Share premium Capital Translation reserve Hedging reserve Other reserves Non-controlling interests Accumulated losses Total equity
redemption reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 March 2022 and 1 April 2022 1,669 52,857 55 (1,814) 377 1,688 12 (11,734) 43,110
Loss for the year - - - - - - (17) (5,905) (5,922)
Other comprehensive - - - 161 (932) - - - (771)
(expense)/income for the year
Total comprehensive (loss)/income for the year - - - 161 (932) - (17) (5,905) (6,693)
Transactions with owners
Share-based payments - cash 30 - - - - - - (940) (910)
Share-based payments - non-cash - - - - - - - 532 532
Total transactions with owners 30 - - - - - - (408) (378)
Balance at 31 March 2023 1,699 52,857 55 (1,653) (555) 1,688 (5) (18,047) 36,039
Loss for the year - - - - - - (23) (12,064) (12,087)
Other comprehensive - - - (110) 474 - - - 364
(expense)/income for the year
Total comprehensive (loss)/income for the year - - - (110) 474 - (23) (12,064) (11,723)
Balance at 31 March 2024 1,699 52,857 55 (1,763) (81) 1,688 (28) (30,111) 24,316
COMPANY Share Capital Share premium Capital redemption reserve Translation reserve Other reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 March and 1 April 2022 1,669 52,857 55 (963) 19,145 (11,860) 60,903
Loss for the year - - - - - (36,704) (36,704)
Other comprehensive expense for the year - - - (269) - - (269)
Total comprehensive income/(expense) for the year - - - (269) - (36,704) (36,973)
Transactions with owners
Share-based payments (Note 22) 30 - - - - (408) (378)
Total transactions with owners 30 - - - - (408) (378)
Balance at 31 March 2023 1,699 52,857 55 (1,232) 19,145 (48,972) 23,552
Loss for the year - - - - - (672) (672)
Other comprehensive expense for the year - - - 203 - - 203
Total comprehensive income/(expense) for the year - - - 203 - (672) (469)
Balance at 31 March 2024 1,699 52,857 55 (1,029) 19,145 (49,644) 23,083
The notes on page 40 to 70 form part of these accounts.
Group and Company Cash Flow Statements
for the Year Ended 31 March 2024
Group Company
Note 2024 2023 (restated) 2024 2023
£'000 £'000 £'000 £
'
0
0
0
Loss before taxation (8,726) (5,876) (672) (36,704)
Interest payable 1,527 689 213 212
Interest paid on Lease liabilities 162 153 - -
Interest receivable (26) (11) (175) (175)
Share of profit of Investments using the equity method (60) - (60) -
Amortisation of intangible assets 564 553 - -
Impairment of intangible assets 404 - - -
Impairment of goodwill/intercompany balances 10 2,915 - 33,389
Depreciation 3,901 2,762 - -
Depreciation on right of use assets 499 528 - -
Share-based payments (non cash) 669 532 669 266
Share-based payments (cash) - (940) - -
Decrease / (increase) in inventories 218 (4,680) - -
Decrease / (increase) in trade and other receivables 199 (373) 1,315 (870)
Increase in trade and other payables 1,328 366 233 3,851
Cash flows from operating activities 669 (3,382) 1,523 (31)
Interest paid (566) (322) - -
Interest element of ROU lease payments (162) (153) - -
Net cash (used in)/generated from operating activities (59) (3,857) 1,523 (31)
Cash flows from investing activities
Purchase of interest in associate (net of cash acquired) 11 (1,438) - (1,438) -
Equity investment in subsidiary company - - (85)
Purchase of property, plant and equipment 10 (6,369) (4,744) - -
Purchase of intangible assets 9 (451) (351) - -
Interest received 26 11 - -
Net cash (used in)/generated from investing activities (8,232) (5,084) (1,523) -
Cash flows from financing activities
Proceeds from issuance of ordinary shares - 30 - 30
Repayment of CBIL loan (50) (50) - -
Proceeds from Asset Based Lending Facility 1,152 4,590 - -
Shareholder Loan 7,439 2,000 - -
Payment of lease liabilities (462) (460) - -
Net cash generated from/(used in) financing activities 8,079 6,110 - 30
Net (decrease)/increase in cash and cash equivalents (212) (2,831) - (1)
Cash and cash equivalents at the beginning of the year 1,337 4,139 1 2
Effect of exchange rate movements (9) 29 - -
Cash and cash equivalents at the end of year 1,116 1,337 1 1
Cash and cash equivalents consist of:
Cash and cash equivalents 15 1,116 1,337 1 1
Cash and cash equivalents at the end of year 1,116 1,337 1 1
The cashflow for year ended March 2023 has been restated due to a prior year
error in the split of interest paid and accrued.
Notes to the Financial Statements
1. MATERIAL ACCOUNTING POLICIES
Accounting policies for the year ended 31 March 2024
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated. The registered
address and principal place of business is Westwood Industrial Estate,
Enterprise Road, Margate CT9 4JX.
BASIS OF PREPARATION
The financial statements are presented in sterling, which is the Group's
functional currency and the Group's presentation currency. The figures shown
in the financial statements are rounded to the nearest thousand pounds.
The financial information for the year ended 31 March 2024 has been prepared
in accordance with UK-adopted international accounting standards. The
consolidated Group and Parent Company financial statements have been prepared
on a going concern basis and under the historical cost convention, as modified
by the revaluation of certain financial assets and liabilities (including
derivative instruments) at fair value through profit or loss. Under section
408 of the Companies Act 2006 the Company is exempt from the requirement to
present its own income statement or statement of comprehensive income.
The preparation of financial statements in conformity with UK-adopted IAS
requires the use of estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from
those estimates.
GOING CONCERN
The Group has in place a £12.0 million Asset Based Lending (ABL) facility
with Secure Trust Bank PLC ("STB") through to December 2025. The Company
provides customary operational covenants to STB on a monthly basis such as
inventory turn, credit note dilutions and management accounts. In addition,
the Group has a committed £12.55 million loan facility with Phoenix Asset
Management Partners Limited (the Group's largest shareholder) which currently
expires December 2025.
The Group has prepared trading and cash flow forecasts for a period of three
years, however for the purposes of going concern review we have looked in
detail at the period to December 2025 which is when the facilities with STB
and Phoenix currently expire. which have been reviewed and approved by the
Board. On the basis of these forecasts, and after a detailed review of
trading, financial position and cash flow models, the Directors have a
reasonable expectation that the Group and Company have adequate resources to
continue in operational existence for the foreseeable future. The Company has
received a legally binding letter of support from Phoenix UK Fund Limited
confirming to provide funds if required up to an additional £7 million to
support the Company's business plan until at least 31 December 2025. The
current budgets do not show the Group requiring support beyond the already
committed facilities. The Board have prepared a severe but plausible downside
scenario and consider that the Group will continue to be a going concern with
the additional support provided by Phoenix UK Fund. The Board have also
considered various mitigating actions that could be taken if required. For
these reasons, the Directors continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
BASIS OF CONSOLIDATION
Subsidiaries are all entities over which the Group has control. The Group
controls an entity where the Group is exposed to, or has the rights to,
variable returns from its involvement with the entity and has the ability to
affect those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The acquisition method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued, liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired, and liabilities and contingent
liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date, irrespective of the extent of any
non-controlling interest. The excess of the cost of acquisition over the fair
value of the Group's share of the identifiable net assets acquired is recorded
as goodwill.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
but considered an impairment indicator of the asset concerned. Accounting
policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
ADOPTION OF NEW AND REVISED STANDARDS
The following standards and interpretations relevant to the Group are in issue
but are not yet effective and have not been applied in the historical
financial information. In some cases these standards and guidance have not
been endorsed for use.
· IAS 1 Presentation of liabilities as current or non-current
· IAS 8 definition of accounting estimates
· amendments to IFRS 16 re lease liability in a sale and leaseback
· IAS 7 and IFRS 7 re supplier finance disclosures
Adoption of these standards is not expected to have a material impact on the
group.
REVENUE RECOGNITION
The Group's revenue is mostly from product sales and is recognised as follows:
(a) Sale of goods
Sales of goods are recognised when a Group entity
has delivered products to the customer. The customer is either a trade
customer or the consumer when sold through Hornby concessions in various
retail outlets, or via the internet.
(b) Royalty income
Royalty income is recognised when the performance obligation is satisfied
depending on the terms of the contract and the amount of revenue can be
measured reliably.
(c) Sales returns
The Group establishes a refund liability (included
in trade and other payables) at the period end that reduces revenue in
anticipation of customer returns of goods sold in the period. Accumulated
experience is used to estimate such returns at the time of sale at a portfolio
level (expected value method). Goods to be returned are not recognised as
assets until they are returned and have been inspected.
(d) Hornby Visitor Centre
Revenue is generated from the ticket and
product sales at our Visitor Centre in Margate and recognised at the point of
sale.
(e) Customer Loyalty
Loyalty points issued by Hornby when a customer purchases goods from the
website are a separate performance obligation providing a material right to a
future discount. The amount allocated to loyalty points is deferred as a
contract liability within trade and other payables. Revenue is recognised as
the points are redeemed by the customer. As the scheme is still in its early
years we fully accrue the liability. Revenue is adjusted by 1p for every £1
spent by a Hornby Rewards customer. When the points are redeemed and the Group
fulfils its obligationsthe revenue that was deferred is recognised.
Dividend income in the Company is recognised upon receipt. Revenue from
management services are recognised in the accounting period in which the
services are rendered.
EXCEPTIONAL ITEMS
Where items of income and expense included in the statement of comprehensive
income are considered to be exceptional in nature, separate disclosure of
their nature and amount is provided in the financial statements. These items
are classified as exceptional items. The Group considers the size and nature
of an item both individually and when aggregated with similar items when
considering whether it is material, for example impairment of intangible
assets or restructuring costs.
OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of the
Company that makes strategic decisions.
Operating profit of each reporting segment includes revenue and expenses
directly attributable to or able to be allocated on a reasonable basis.
Segment assets and liabilities are those operating assets and liabilities
directly attributable to or that can be allocated on a reasonable basis.
BUSINESS COMBINATIONS
Goodwill arising on a business combination, is not subject to amortisation but
tested for impairment on an annual basis. Intangible assets, excluding
goodwill, arising on a business combination are separately identified and
valued, and subject to amortisation over their estimated economic lives.
ASSOCIATE WITH EQUITY ACCOUNTING
The investment in July 2023 in 25% of Warlord Games Limited is included in
these accounts using the Equity Method.
Associates are all entities over which the Group has significant influence but
not control, generally accompanying a shareholding of between 20% and 50% of
the voting rights. Investments in associates are accounted for using the
equity method of accounting. Under the equity method, the investment is
initially recognised at cost and the carrying amount is increased or decreased
to recognise the investor's share of the profit or loss of the investee after
the date of acquisition. The Group's investment in associates includes
goodwill identified on acquisition.
The Group's share of post-acquisition profit or loss is recognised in the
income statement, and its share of post-acquisition movements in other
comprehensive income is recognised in other comprehensive income with a
corresponding adjustment to the carrying amount of the investment. When the
Group's share of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred legal or constructive
obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective
evidence that the investment in the associate is impaired. If this is the
case, the Group calculates the amount of impairment as the difference between
the recoverable amount of the associate and its carrying value and recognises
the amount as 'share of profit/(loss) of associates' in the income statement.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair
value of the Group's share of the net identifiable assets of the acquired
subsidiary at the date of acquisition.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying amount of
goodwill relating to the entity sold. Goodwill is allocated to cash-generating
units for the purpose of impairment testing. The allocation is made to those
cash-generating units or Groups of cash-generating units that are expected to
benefit from the business combination in which the goodwill arose identified
according to operating segment. Goodwill is recorded in the currency of the
cash generating unit to which it is allocated.
INTANGIBLES
Other intangibles include brands, customer lists and computer software. They
are recognised initially at fair value determined in accordance with
appropriate valuation methodologies and subjected to amortisation and annual
impairment reviews, as follows:
(a) Brand names
Brand names, acquired as part of a business combination, are
capitalised at fair value as at the date of acquisition. They are carried at
cost less accumulated amortisation and any accumulated impairment losses.
Amortisation is calculated using the straight-line method to allocate the fair
value of brand names over their estimated economic life of 15-20 years.
(b) Customer lists
Customer lists, acquired as part of a business combination, are
capitalised at fair value as at the date of acquisition. They are carried at
their fair value less accumulated amortisation and any accumulated impairment
losses. Amortisation is calculated using the straight-line method to allocate
the fair value of customer relationships over their estimated economic life of
ten years. Customer lists have been valued according to discounted incremental
operating profit expected to be generated from each of them over their
useful lives of 10 years.
(c) Computer software and website costs
Computer software and website expenditure is capitalised at the value at the
date of acquisition and depreciated over a useful economic life of 4-6 years.
PROPERTY, PLANT AND EQUIPMENT
Land and buildings are shown at cost less accumulated depreciation. Other
property, plant and equipment are shown at historical cost less accumulated
depreciation. Cost includes the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition for its
intended use.
Depreciation is provided at rates calculated to write off the cost or
valuation of each asset, on a straight-line basis (with the exception of tools
and moulds) over its expected useful life to its residual value, as follows:
Plant and equipment - 5 to 10 years
Motor vehicles - 4 years
Tools and moulds are depreciated at varying rates in line with the related
product production on an item-by-item basis up to a maximum of four years.
Tools and moulds purchased but not ready for production are not depreciated.
LEASES
The Group assesses whether a contract is or contains a lease, at inception of
the contract. Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate implicit in the lease unless (as is
typically the case) this is not readily determinable, in which case the
Group's incremental borrowing rate on commencement of the lease is used.
INTERCOMPANY BALANCES
Recovery of intercompany receivable balances is reviewed annually. The Company
guarantees the amounts due from other companies to its subsidiaries. This
guarantee is not contractual and therefore amounts are provided for within the
parent Company statement of financial position in accordance with IAS 37 when
the recoverability of the balance is not probable.
IMPAIRMENT OF NON-CURRENT ASSETS
Assets that have an indefinite useful life, for example goodwill, are not
subject to amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment when events or changes
in circumstances indicate that the carrying value may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
value exceeds its recoverable amount, which is considered to be the higher of
its value in use and fair value less costs to sell. In order to assess
impairment, assets are grouped into the lowest levels for which there are
separately identifiable cash flows (cash-generating units). Cash flows used to
assess impairment are discounted using appropriate rates taking into account
the cost of equity and any risks relevant to those assets.
INVESTMENTS
In the Company's financial statements, investments in subsidiary undertakings
are stated at cost less any impairment. Investments in associates are
recognised using the equity method of accounting, where the investments are
initially recognised at cost and adjusted thereafter to recognise the Group's
share of the profits or losses of the investee. Dividend income is shown
separately in the Statement of Comprehensive Income.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is
predominantly determined using the first-in, first-out ('FIFO') method. The
cost of finished goods comprise item cost, freight and any product specific
development costs.
Net realisable value is based on anticipated selling price less further costs
expected to be incurred to completion and disposal. Provisions are made
against those stocks considered to be obsolete or excess to requirements on an
item-by-item basis.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the Group and
Company's statements of financial position when the Group or Company becomes a
party to the contractual provisions of the instrument.
TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost less provision for impairment. To establish the
provision for impairment, the Group applies IFRS 9 simplified approach to
measuring expected credit losses which uses a lifetime expected loss allowance
for all trade receivable.
To measure the expected credit losses, trade receivables have been grouped
based on shared credit risk characteristics and the days past due. The
expected loss rates are based on the payment profiles of sales over a period
of twelve months before 31 March 2024 and the corresponding historical credit
losses experienced within this period.
FINANCIAL LIABILITIES AND EQUITY
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the
assets of the Group and Company after deducting all of its liabilities. Equity
instruments issued by the Group and Company are recorded at the proceeds
received, net of direct issue costs.
REFUND LIABILITY
Provisions for sales returns are recognised for the products expected to be
returned. Accumulated experience is used to estimate such returns at the time
of sale at a portfolio level (expected value method).
CUSTOMER LOYALTY LIABILITY
Loyalty points issued by Hornby when a customer purchases goods from the
website are a separate performance obligation providing a right to a future
discount. The amount allocated to loyalty points is deferred as a contract
liability within trade and other payables. Revenue is recognised as the points
are redeemed by the customer. As the scheme is still in its early years we
fully accrue the liability. Points awarded expire after 24 months.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of the cash flow statement includes
cash in hand, deposits at banks, other liquid investments with insignificant
risk of changes in value with original maturities of three months or less and
bank overdrafts. Bank overdrafts or loans where there is no right of set off
are shown within borrowings in current or non-current liabilities on the
statement of financial position as appropriate.
BORROWING COSTS
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the Statement of Comprehensive Income over the period
of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred
until the draw-down occurs and subsequently amortised over the life of the
facility. To the extent that there is no evidence that it is probable that
some or all of the facility will be drawn down, the fee is capitalised as a
prepayment for liquidity services and amortised over the period of the
facility to which it relates.
TRADE PAYABLES
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
TAXATION INCLUDING DEFERRED TAX
Corporation tax, where payable, is provided on taxable profits at the
current rate.
The taxation liabilities of certain Group undertakings are reduced wholly or
in part by the surrender of losses by fellow Group undertakings.
Deferred tax is provided on all temporary differences at the statement of
financial position date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary differences,
carry-forward of unused tax assets and unused tax losses, to the extent that
it is probable that taxable profit will be available against which the
deductible temporary differences, and the carry-forward of unused tax assets
and unused tax losses can be utilised. The carrying amount of deferred income
tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available
to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax
liabilities, and when the deferred income tax assets and liabilities relate to
income taxes levied by the same taxation authority on either the taxable
entity or different taxable entities where there is an intention to settle the
balances on a net basis.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date. Tax relating to items
recognised directly in equity is recognised in equity and not in the Statement
of Comprehensive Income.
EMPLOYEE BENEFIT COSTS
During the year the Group operated a defined contribution money purchase
pension scheme under which it pays contributions based upon a percentage of
the members' basic salary. The scheme is administered by trustees either
appointed by the Company or elected by the members (to constitute one
third minimum).
Contributions to defined contribution pension schemes are charged to the
Statement of Comprehensive Income according to the year in which they
are payable.
Further information on pension costs and the scheme arrangements is provided
in Note 25.
The Group has a profit share scheme for all employees below Executive level.
This scheme commenced in 2020/21 with a 5% bonus for all when the Group broke
even. Thereafter, 15% of all Group operating profit will be shared between the
employees every year.
The CEO is subject to a bonus scheme related to the market capitalisation
increase over the three-year period ending January 2026 and adjusted for
certain factors. The bonus has been determined as a cash settled share-based
payment arrangement. Further details are included in note 23.
For the first two years of this scheme, the CEO may receive a discretionary
bonus up to 38.9% of their base salary. Payments made during these years will
be subtracted from the ultimate award amount due under this scheme.
The bonuses for other executives are reviewed annually by the committee
following recommendations by the CEO.
FINANCIAL RISK MANAGEMENT
DERIVATIVE FINANCIAL INSTRUMENTS
To manage exposure to foreign currency risk, the Group uses foreign currency
forward contracts, also known as derivative financial instruments.
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured at their fair value
at the end of each reporting period. The Group documents at the inception of
the transaction the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various
hedge transactions. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging instrument and,
if so the nature of the item being hedged.
(a) Cash flow hedge
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges are recognised in the
hedging reserve within equity and through the Statement of Comprehensive
Income within Other Comprehensive Income. The gain or loss relating to the
ineffective portion is recognised immediately in the Statement of
Comprehensive Income within operating expenses.
Amounts accumulated in Other Comprehensive Income are recycled in
the Statement of Comprehensive Income in the periods when the hedged item
affects profit or loss (for instance when the forecast purchase that is hedged
takes place). The gain or loss relating to the effective portion of forward
foreign exchange contracts hedging import purchases is recognised in the
Statement of Comprehensive Income within 'cost of sales'. However, when the
forecast transaction that is hedged results in the recognition of a
non-financial asset (for example, inventory) the gains and losses previously
deferred in Other Comprehensive Income are transferred from the hedging
reserve and included in the initial measurement of the cost of the asset. The
deferred amounts are ultimately recognised in cost of goods sold in the case
of inventory.
When a hedging instrument expires or is sold, or when a hedge no
longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised in income
when the forecast transaction is ultimately recognised in the Statement of
Comprehensive Income. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss is immediately transferred to the Statement
of Comprehensive Income.
The company only hedges for future inventory and tooling purchases
in US dollars.
FAIR VALUE ESTIMATION
The fair values of short-term deposits, loans and overdrafts with a maturity
of less than one year are assumed to approximate to their book values.
The fair values of the derivative financial instruments used for hedging
purposes are disclosed in Note 19.
FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the relevant
functional currency at the exchange rates ruling at the date of the
transaction. Foreign exchange gains and losses resulting from such
transactions are recognised in the Statement of Comprehensive Income, except
when deferred and disclosed in Other Comprehensive Income as qualifying cash
flow hedges. Monetary assets and liabilities denominated in foreign currencies
are translated at the exchange rates ruling at the balance sheet date and any
exchange differences are taken to the Statement of Comprehensive Income.
Foreign exchange gains/losses recognised in the Statement of Comprehensive
Income relating to foreign currency loans and other foreign exchange
adjustments are included within operating profit.
On consolidation, the Statement of Comprehensive Income and cash flows of
foreign subsidiaries are translated into Sterling using average rates that
existed during the accounting period. The balance sheets of foreign
subsidiaries are translated into Sterling at the rates of exchange ruling at
the balance sheet date. Gains or losses arising on the translation of opening
and closing net assets are recognised in Other Comprehensive Income.
CRITICAL ESTIMATES AND JUDGEMENTS IN APPLYING THE ACCOUNTING POLICIES
The Group's estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
Critical accounting estimates and assumptions:
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are addressed below.
(a) Impairment of goodwill, intangibles and investments
The Group tests annually whether any goodwill, investment or intangible asset
has suffered any impairment. The recoverable amounts of cash-generating units
(CGUs) have been determined based on value-in-use calculations. The critical
areas of estimation applied within the impairment reviews conducted include
the weighted average cost of capital used in discounting the cash flows of the
cash generating units, the forecast margin growth rate, the growth rate in
perpetuity of the cash flows and the forecast operating profits of the cash
generating units. The judgements used within this assessment are set out
within Note 8.
Other estimates and assumptions:
(a) Inventory provision
Whenever there is a substantiated risk that an item of stock's sellable value
may be lower than its actual stock value, a provision for the difference
between the two values is made. Management review the stock holdings on a
regular basis and consider where a provision for excess or obsolete stock
should be made based on expected demand for the stock and its condition.
(b) Receivables provision
The Group reviews the amount of credit loss associated with its trade
receivables, intercompany receivables and other receivables based on forward
looking estimates that consider current and forecast credit conditions as
opposed to relying on past historical default rates.
(c) Fair value of derivatives
The fair value of the financial derivatives is determined by the mark to
market value at the year end date with any movement in fair value going
through Other Comprehensive Income if qualifying as a cash flow hedge.
(d) Refund liability
The refund liability is based on accumulated experience of returns at the time
of sale at a portfolio level (expected value method). Because the number of
products returned has been steady for years, it is highly probable that a
significant reversal in the cumulative revenue recognised will not occur. The
validity of this assumption and the estimated amount of returns are reassessed
at each reporting date. The right to the returned goods is measured by
reference to the carrying amount of the goods.
Critical judgements in applying the Group's accounting policies:
(a) Recognition of deferred tax on losses
Deferred tax assets are recognised for deductible temporary differences,
carry-forward of unused tax assets and unused tax losses, to the extent that
it is probable that the taxable profit will be available against which the
deductible temporary differences, and the carry-forward of unused tax assets
and unused tax losses can be utilised. The carrying amount of deferred tax
assets is reviewed at each balance sheet date and reduced to the extent that
it is no longer probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be utilised.
(b) Going concern
The directors apply judgement to assess whether it is appropriate for the
Group to be reported as a going concern by considering the business activities
and the Group's principal risks and uncertainties. Details of the
consideration made are included within the Directors report (page 23) and the
basis of preparation (page 42).
A number of assumptions and estimates are involved in arriving at this
judgement including management's projections of future trading performance and
expectations of the external economic environment.
Other judgements:
(a) IFRS 16 Estimates
The Group makes judgement to estimate the incremental borrowing rate used to
measure lease liabilities based on expected third party financing costs when
the interest rate implicit in the lease cannot be readily determined. This is
explained further in the Leases accounting policy. Where leases include break
dates the management make decisions as to whether the lease is likely to be
broken and calculations are based on this judgement.
2. SEGMENTAL REPORTING
Management has determined the operating segments based on the reports reviewed
by the Board (chief operating decision-maker) that are used to make
strategic decisions.
The Board considers the business from a geographic perspective.
Geographically, management considers the performance in the UK, USA, Spain,
Italy and the rest of Europe.
Although the USA segment does not meet the quantitative thresholds required by
IFRS 8, management has concluded that this segment should be reported, as it
is closely monitored by the Board as it is outside Europe.
The Company is a holding Company operating in the United Kingdom and its
assets and liabilities given in the Company Statement of Financial Position on
page 34. Other Company information is provided in the other notes to
the accounts.
Year ended 31 March 2024
UK USA Spain Italy Rest of Total Reportable Intra Group
Europe Segments Group
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - External 40,200 4,125 2,056 3,907 5,956 56,244 - 56,244
- Other segments 2,527 - - - - 2,527 (2,527) -
Operating (Loss)/Profit before (6,881) (679) 48 380 497 (6,635) - (6,635)
exceptional items
Exceptional items (456) (10) - - (23) (489) - (489)
Operating Profit/(Loss) (7,337) (689) 48 380 474 (7,124) - (7,124)
Finance income - External 26 - - - - 26 - 26
- Other segments 460 - - - - 460 (460) -
Finance costs - External (1,668) (14) (1) (2) (3) (1,688) - (1,688)
- Other segments (175) - (213) - (72) (460) (460) -
Minority interest 60 - - - - 60 - 60
Profit/(Loss) before taxation (8,634) (703) (166) 378 399 (8,726) - (8,726)
Taxation (3,305) - - (28) (28) (3,361) - (3,361)
Profit/(Loss) for the year (11,940) (703) (166) 350 371 (12,087) - (12,087)
Segment assets 70,790 2,404 6,141 565 5,610 85,510 - 85,510
Less intercompany receivables (18,556) - (6,052) (820) (4,961) (30,389) - (30,389)
Total assets 52,234 2,404 89 (255) 649 55,121 - 55,121
Segment liabilities (46,484) (8,237) (5,946) (530) (6,601) (67,798) - (67,798)
Less intercompany payables 15,965 8,108 5,841 123 6,397 36,434 - 36,434
Add tax liabilities 559 - - - - 559 - 559
Total liabilities (29,960) (129) (105) (407) (204) (30,805) - (30,805)
Other segment items
Capital expenditure 6,356 - 6 7 - 6,369 - 6,369
Depreciation 3,878 16 3 4 - 3,901 - 3,901
Net foreign exchange on intercompany loans (210) - - - - (210) - (210)
Amortisation of intangible assets 564 - - - - 564 - 564
Year ended 31 March 2023
UK USA Spain Italy Rest of Total Reportable Intra Group
Europe Segments Group £
'
0
0
0
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - External 39,617 4,875 1,464 3,494 5,655 55,105 - 55,105
- Other segments 3,193 - - - - 3,193 (3,193) -
Operating (Loss)/Profit before (1,467) (598) 21 371 603 (1.070) - (1,070)
exceptional items
Exceptional items (3,974) - - - - (3,974) - (3,974)
Operating Profit/(Loss) (5,441) (598) 21 371 603 (5,044) - (5,044)
Finance income - External 11 - - - - 11 - 11
- Other segments 473 - - - - 473 (473) -
Finance costs - External (825) (12) (1) (2) (3) (843) - (843)
- Other segments (174) - (212) (15) (72) (473) 473 -
Profit/(Loss) before taxation (5,956) (610) (192) 354 528 (5,876) - (5,876)
Taxation (21) - - (25) - (46) - (46)
Profit/(Loss) for the year (5,977) (610) (192) 329 528 (5,922) - (5,922)
Segment assets 65,951 2,307 6,222 198 5,401 80,079 - 80,079
Less intercompany receivables (18,215) - (6,136) (424) (4,657) (29,432) - (29,432)
Add tax assets 3,637 - - (65) 3,572 - 3,572
Total assets 51,373 2,307 86 (291) 744 54,219 - 54,219
Segment liabilities (33,244) (7,611) (5,852) (442) (6,756) (53,905) - (53,905)
Less intercompany payables 15,523 7,537 5,760 127 6,545 35,492 - 35,492
Add tax liabilities 233 - - - - 233 - 233
Total liabilities (17,488) (74) (92) (315) (211) (18,180) - (18,180)
Other segment items
Capital expenditure 4,721 16 - 7 - 4,744 - 4,744
Depreciation 2,739 17 2 4 - 2,762 - 2,762
Net foreign exchange on intercompany loans (313) - - - - (313) - (313)
Amortisation of intangible assets 553 - - - - 553 - 553
3. NET FINANCE EXPENSE
Group
2024 2023
£'000 £'000
Finance costs:
Interest expense on bank borrowings (565) (322)
Interest expense on shareholder loan (961) (368)
Interest element of lease payments made (162) (153)
(1,688) (843)
Finance income:
Bank interest 26 11
Net finance costs (1,662) (832)
4. PROFIT/(LOSS) BEFORE TAXATION
2024 2023
£'000 £'000
The following items have been included in arriving at loss before taxation:
Staff costs 12,201 10,316
Inventories:
- Cost of inventories recognised as an expense (included in cost of sales) 24,375 22,656
- Stock provision (138) 29
Depreciation of property, plant and equipment:
- Owned assets 3,901 2,763
- Leased assets 499 492
Repairs and maintenance expenditure on property, plant and equipment 48 65
Research and development expenditure 1,818 1,719
Impairment of trade receivables 4 (31)
Share-based payment charge(Note 23) 669 532
Goodwill impairment 10 2,915
Other operating expenses/(income):
- Foreign exchange on trading transactions (64) 426
- Amortisation of intangible brand assets and customer lists 223 227
Group
2024 2023
£'000 £'000
Exceptional items comprise:
- Refinancing costs 2 149
- Hornby World Experience - 910
- Goodwill impairment 10 2,915
- Intangible impairment 404 -
- Restructuring costs 73 -
489 3,974
The group exceptional items totalling £489,000 (2023: £3,974,000) are costs
relating to restructuring of the sales and marketing teams, intangible
impairment on International Brands and customer lists and a small goodwill
impairment. These are classified as exceptional as they are one off,
non-recurring costs.
AUDITORS REMUNERATION
During the year the Group (including its overseas subsidiaries) obtained the
following services from the Company's auditors and network firms as
detailed below:
Group
2024 2023
£'000 £'000
Fees payable to the Company's auditors for the audit of Parent Company and 144 98
consolidated accounts
Fees payable to the Company's auditors and its associates for other services:
- The auditing of accounts of the Company's subsidiaries 12 38
- Audit-related assurance services - -
- Tax services 9 8
165 144
In the prior financial year the level of non-audit fees were £8k and related
to tax services and was within the 1:1 ratio to audit fees as per Audit
Committee policy.
5. INCOME TAX (CREDIT)/CHARGE
Analysis of tax (credit)/charge in the year
Group Company
2024 2023 2023 2022
£'000 £'000 £'000 £'000
Current tax
UK Taxation:
- Current - - - -
- Adjustments in respect of prior years (280) (32) - -
Overseas taxation 70 97 - -
Deferred tax (Note 20)
Current year - - - -
Origination and reversal of temporary differences 3,571 (19) - -
Effect of tax rate change on opening balance - - - -
Total tax charge to the loss before tax 3,361 46 - -
The tax for the year differs to the standard rate of corporation tax in the UK
of 19%. Any differences are explained below:
Group
2024 2023
£'000 £'000
Profit/(Loss)before taxation (8,726) (5,876)
Loss on ordinary activities multiplied by rate of
Corporation tax in UK of 25% (2023: 19%) (2,182) (1,116)
Effects of:
Adjustments to tax in respect of prior years (280) (32)
Permanent differences 118 (35)
Non taxable income (15) -
Plant and machinery super-deduction - (265)
Difference on overseas rates of tax 48 57
Deferred tax not recognised 5,672 1,437
Effect of tax rate change - -
Total taxation 3,361 46
The Company's profits for this accounting year are taxed at an effective rate
of 25% (2023: 19%)
UK deferred tax balances have been carried forward at a rate of 25% (2023:
25%)
Unrecognised deferred tax relates to UK and overseas subsidiaries and is not
recognised, except to the extent of the prior year movement in the change in
tax rate noted above. This is due to the directors taking the view that
deferred tax should only be recognised to the extent significant taxable
profits are likely to be achieved in the short term. More detail can be found
in Note 20.
6. DIVIDENDS
No interim or final dividends were paid in relation to the year ended 31 March
2023 and no interim dividend has been paid in relation to the year ended 31
March 2024. The Directors are not proposing a final dividend in respect of the
financial year ended 31 March 2024.
7. LOSS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
For diluted loss per share, the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares that have satisfied the appropriate performance criteria at 31 March
2024.
The underlying loss per share is shown to present a clearer view of the
trading performance of the business. Management identified the following
items, whose inclusion in performance distorts underlying trading performance:
net foreign exchange (gains)/losses on intercompany loans which are dependent
on exchange rate fluctuations and can be volatile, and the amortisation of
intangibles which results from historical acquisitions. Additionally,
share-based payments and exceptional items including refinance are one off
items and therefore have also been added back in calculating underlying
profit/(loss) per share.
Reconciliations of the profit and weighted average number of shares used in
the calculations are set out below.
2024 2023
(Loss) / earnings Weighted average number of shares Per-share amount (Loss) / earnings Weighted average number of shares Per-share amount
£'000 '000s pence £'000 '000s pence
REPORTED
Basic (loss)/profit per share
(Loss)/Profit attributable to ordinary shareholders (12,063) 169,854 (7.10) (5,904) 168,812 (3.50)
Effect of dilutive share options - - - - - -
Diluted (loss)/profit per share (12,063) 169,854 (7.10) (5,904) 168,812 (3.50)
UNDERLYING
(Loss)/Profit attributable to ordinary shareholders (12,063) 169,854 (7.10) (5,904) 168,812 (3.50)
Share-based payments 502 - 0.30 431 - 0.26
Amortisation of intangibles 223 - 0.13 180 - 0.11
Refinance costs - - - 121 - 0.07
Hornby World costs - - - 737 - 0.44
Goodwill impairment 10 - 0.01 2,361 - 1.40
Intangible impairment 404 - 0.23
Restructuring costs 56 - 0.03 - - 0.00
Underlying basic (loss)/profit /EPS (10,701) 169,854 (6.40) (2,074) 168,812 (1.22)
The above numbers used to calculate the underlying EPS for the year ended 31
March 2024 have been tax effected at
the rate of 25% where applicable (2023: 19%).
8. GOODWILL
GROUP £'000
COST
At 1 April 2023 13,138
Exchange adjustments (1)
Acquisition (note 17) 280
At 31 March 2024 13,417
AGGREGATE IMPAIRMENT
At 1 April 2023 11,406
Impairment charge in the year 10
At 31 March 2024 11,416
Net book amount at 31 March 2024 2,001
Net book amount at 31 March 2023 1,732
The Company has no goodwill.
The goodwill impairment in the year relates to goodwill on Hornby USA. The
Directors have taken the approach of no longer recognising this goodwill due
to the continued local losses. Details of valuation method are detailed below
in impairment tests for goodwill. The impairment charge for the year has been
included with exceptional items (see note 4).
The goodwill has been allocated to cash-generating units and a summary of
carrying amounts of goodwill by brand and geographical segment (representing
cash-generating units) at 31 March 2024 and 31 March 2023 is as follows:
GROUP UK France Germany USA Total
£'000 £'000 £'000 £'000 £'000
At 31 March 2024 1,439 365 197 - 2,001
At 31 March 2023 1,160 365 197 10 1,732
Goodwill allocated to the above cash-generating units of the Group has been
measured based on benefits each geographical segment is expected to gain from
the business combination.
Impairment tests for goodwill
Management reviews the business performance based on geography. Budgeted
revenue was based on expected levels of activity given results to date,
together with expected economic and market conditions. Budgeted operating
profit was calculated based upon management's expectation of operating costs
appropriate to the business as reflected in the business plan.
The relative risk adjusted (or 'beta') discount rate applied reflects the risk
inherent in hobby-based product companies. The 31 March 2024 forecasts are
based on a 3 year business plan for the years ending 31 March 2025 to 31 March
2027. Cash flows beyond these years are extrapolated using an estimated 2.0%
year on year growth rate. The cash flows were discounted using a pre-tax
discount rate of 16.9% (2023: 15.5%) which management believes is appropriate
for all territories.
The key assumptions used for value-in-use calculations for the year ended 31
March 2024 and 2023 are as follows:
2024
GROUP UK France Germany
Gross Margin(1) 61.0% 43.5% 47.10%
Growth rate to perpetuity(2) 2.00% 2.00% 2.00%
Revenue growth(3) 10.2% 14.9% 3.8%
Growth rate to perpetuity 2.0% 2.00% 2.00%
1. Average of the variable yearly gross margins used over the period 24'25 to
26'27. Airifx and Humbrol margins are higher than overall group margins
2. Weighted average growth rate used to extrapolate cash flows beyond the
budget period reflecting the long term future growth rate of the economy.
3. Average growth over the period 24'25 to 26'27
2023
GROUP UK France Germany
Gross Margin(1) 55.30% 43.80% 49.30%
Growth rate to perpetuity(2) 2.00% 2.00% 2.00%
Revenue growth(3) 13.15% 26.80% 4.98%
Growth rate to perpetuity 2.00% 2.00% 2.00%
The 2023 gross margins have been restated to include variable costs of sales
to be consistent with this year and presentation in the financial statements.
1. Average of the variable yearly gross margins used over the period 23'24 to
25'26.
2. Weighted average growth rate used to extrapolate cash flows beyond the
budget period.
3Average growth over the period 24'25 to 26'27
These assumptions have been used for the analysis of each CGU within the
operating segments.
For the UK CGU, the recoverable amount calculated based on value in use
exceeded carrying value by £5.6 million. A reduction of the average gross
margin to 53.3% for Airfix / Humbrol, or a rise in discount rate to
respectively 62.6% for the UK would remove the remaining headroom.
For the France CGU, the recoverable amount calculated based on value in use
exceeded carrying value by £6.1 million. A reduction of the average gross
margin to 16.8%, or a rise in discount rate to 110.5% would remove the
remaining headroom.
For the Germany CGU, the recoverable amount calculated based on value in use
exceeded carrying value by £6.5 million. A reduction of the average gross
margin to 20.3%, or a rise in discount rate to 115.0% would remove the
remaining headroom.
9. INTANGIBLE ASSETS
GROUP Brand names £'000 Customer lists Computer Software and Website £'000 Total
£'000 £'000
COST
At 1 April 2023 5,200 1,459 4,676 11,335
Additions - - 451 451
Acquired in business - 187 - 187
At 31 March 2024 5,200 1,646 5,127 11,973
ACCUMULATED AMORTISATION
At 1 April 2023 3,679 1,419 3,251 8,349
Charge for the year 223 4 337 564
Impairment charge 368 36 - 404
At 31 March 2024 4,270 1,459 3,588 9,317
Net book amount at 31 March 2024 930 187 1,539 2,656
GROUP Brand names £'000 Customer lists Computer Software and Website £'000s Total
£'000 £'000
COST
At 1 April 2022 5,200 1,459 4,325 10,984
Additions - - 351 351
At 31 March 2023 5,200 1,459 4,676 11,335
ACCUMULATED AMORTISATION
At 1 April 2022 3,456 1,415 2,925 7,796
Charge for the year 223 4 326 553
At 31 March 2023 3,679 1,419 3,251 8,349
Net book amount at 31 March 2023 1,521 40 1,425 2,986
All amortisation charges in the year relating to brand names and customer
lists have been charged in other operating expenses. Amortisation in relation
to computer software and website is withing admin costs. The Group holds
intangible computer software and website assets that are fully amortised but
still in use and therefore the cost is still included.
The intangible impairment in the year relates to brand names and customer
lists for international brands. The Directors have taken the approach of no
longer recognising these intangible assets due to an increase in the discount
rate and a more prudent forecast over the next couple of years. The impairment
charge has been included in exceptional items (see note 4).
The Company held no intangible assets.
10. PROPERTY, PLANT AND EQUIPMENT
GROUP Plant and equipment Motor Tools and moulds Total
£'000 Vehicles
£'000 £'000 £'000
COST
At 1 April 2023 1,761 53 81,653 83,467
Exchange adjustments (19) - - (19)
Additions at cost 1,423 - 4,946 6,369
Disposals (56) - - (56)
At 31 March 2024 3,109 53 86,599 89,761
ACCUMULATED DEPRECIATION
At 1 April 2023 1,417 53 69,956 71,426
Exchange adjustments (17) - - (17)
Charge for the year 266 - 3,635 3,901
Disposals (56) - - (56)
At 31 March 2024 1,610 53 73,591 75,254
Net book amount at 31 March 2024 1,499 - 13,008 14,507
Depreciation is charged in the Group's statement of comprehensive income
within cost of sales for tooling amortisation and Administrative expenses for
all other depreciation.
GROUP Plant and equipment Motor Tools and moulds Total
£'000 Vehicles
£'000 £'000 £'000
COST
At 1 April 2022 1,706 55 77,013 78,774
Exchange adjustments 31 1 - 32
Additions at cost 104 - 4,640 4,744
Disposals (80) (3) - (83)
At 31 March 2023 1,761 53 81,653 83,467
ACCUMULATED DEPRECIATION
At 1 April 2022 1,320 50 67,347 68,717
Exchange adjustments 26 1 - 27
Charge for the year 150 4 2,609 2,763
Disposals (79) (2) - (81)
At 31 March 2023 1,417 53 69,956 71,426
Net Book Value at 31 March 2023 344 - 11,697 12,041
The Company does not hold any property, plant and equipment.
11. INVESTMENTS
The Group investment comprises the associate, included in the company balance
sheet, details of which are given below.
COMPANY
The movements in the net book value of interests in subsidiary and associated
undertakings are as follows:
Interests in subsidiary undertakings £'000 Interests in associate undertakings £'000 Loans to subsidiary undertakings Total
£'000 £'000
At 1 April 2023 21,160 - 4,349 25,509
Warlord Games Limited Acquisition 1,438 1,438
Share of profit of investments accounted for using the equity method - 60 - 60
Capital contribution to Hornby India 85 - - 85
At 31 March 2024 21,245 1,498 4,349 27,092
At 1 April 2022 21,743 - 4,349 26,092
Capital contribution relating to share-based payment 266 - - 266
Options granted (849) - - (849)
At 31 March 2023 21,160 - 4,349 25,509
Interest was charged on loans to subsidiary undertakings at 4.6%.
Loans are unsecured and exceed five years' maturity.
GROUP SUBSIDIARY UNDERTAKINGS
Details of the subsidiaries of the Group are set out below. Hornby Hobbies
Limited is engaged in the development, design, sourcing and distribution of
models. Hornby America Inc., Hornby Italia s.r.l., Hornby France S.A.S.,
Hornby España S.A., Hornby Deutschland GmbH, Hornby Hobbies India Private
Limited, Hornby LCD Enterprises Limited and Oxford Diecast Limited are
distributors of models. Hornby World Limited is a retail and consumer
experience business. Hornby Industries Limited and H&M (Systems) Limited
are dormant companies. All subsidiaries are held directly by Hornby PLC with
the exception of Oxford Diecast Limited which is held by LCD Enterprises
Limited and Hornby Hobbies India Private Limited with 1% ownership by Hornby
Hobbies Limited.
Proportion of nominal value of issued shares held
Registered office Description of shares held Group Company
% %
Hornby Hobbies Limited Westwood, Margate, Kent CT9 4JX, UK Ordinary shares 100 100
Hornby America Inc. 3900 Industry Dr E, Fife, WA 98424, USA Ordinary shares 100 100
Hornby España S.A C/Federico Chueca, S/N, E28806 ALCALA DE HENARES Spain Ordinary shares 100 100
Hornby Italia s.r.l. Viale dei Caduti, 52/A6 25030 Castel Mella (Brescia), Italy Ordinary shares 100 100
Hornby France S.A.S. 31 Bis rue des Longs Pres, 92100 Boulogne, Billancourt, France Ordinary shares 100 100
Hornby Deutschland GmbH Oeslauer StraBe 36, 96472, Rodental, Germany Ordinary shares 100 100
Hornby Industries Limited Westwood, Margate, Kent CT9 4JX, UK Ordinary shares 100 100
H&M (Systems) Limited Westwood, Margate, Kent CT9 4JX, UK Ordinary shares 100 100
Hornby World Limited Westwood, Margate, Kent CT9 4JX, UK Ordinary shares 100 100
Hornby Hobbies India Private Limited 205, 2nd Floor, Plot 67, Hem Bldg Hatkesh Society, N S Road No. 8, JVPD Ordinary shares 100 99
Scheme, Vileparle West, Juhu, Mumbai-400049
LCD Enterprises Limited Unit 6 119 Ystrad Road, Fforestfach, Swansea, Wales, SA5 4JB Ordinary shares 100 100
Oxford Diecast Limited Unit 6 119 Ystrad Road, Fforestfach, Swansea, Wales, SA5 4JB Ordinary shares 91 91
12. RIGHT OF USE ASSETS
GROUP Property Motor Fixtures, Fittings and Equipment Total
Vehicles
£'000
£'000 £'000 £'000
COST
At 1 April 2023 3,757 310 22 4,089
Additions at cost 485 105 11 601
Adjustment (10) - - (10)
Lease adjustment 133 - - 133
At 31 March 2024 4,365 415 33 4,813
ACCUMULATED DEPRECIATION
At 1 April 2023 1,697 287 18 2,002
Charge for the year 456 42 1 499
At 31 March 2024 2,153 329 19 2,501
Net book amount at 31 March 2024 2,212 86 14 2,312
GROUP Property Motor Fixtures, Fittings and Equipment Total
Vehicles
£'000
£'000 £'000 £'
00
0
COST
At 1 April 2022 3,726 346 22 4,094
Additions at cost 207 - - 207
Adjustment (176) - - (176)
Disposal - (36) - (36)
At 31 March 2023 3,757 310 22 4,089
ACCUMULATED DEPRECIATION
At 1 April 2022 1,266 226 18 1,510
Charge for the year 431 61 - 492
At 31 March 2023 1,697 287 18 2,002
Net book amount at 31 March 2023 2,060 23 4 2,087
The adjustment in the year relates to a lease incentive previously classified
under accruals. The lease adjustment relates to a rent review on the head
office in Margate.
13. INVENTORIES
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Finished goods 21,484 21,282 - -
21,484 21,282 - -
Movements on the Group provision for impairment of inventory is as follows:
2024 2023
£'000 £'000
At 1 April 2,453 2,428
Provision for inventory impairment 139 29
Exchange adjustments (1) (4)
At 31 March 2,591 2,453
14. TRADE AND OTHER RECEIVABLES
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
CURRENT:
Trade receivables 7,415 7,425 - -
Less: loss allowance for receivables (762) (777) - -
Trade receivables - net 6,653 6,648 - -
Other receivables 829 543 - -
Prepayments 1,763 1,990 77 58
Amounts owed by subsidiary undertaking - - 13,752 14,920
9,245 9,181 13,829 14,978
We initially recognise trade and other receivables at fair value, which is
usually the original invoiced amount. They are subsequently carried at
amortised cost using the effective interest method. The carrying amount of
these balances approximates to fair value due to the short maturity of amounts
receivable.
We provide goods to business customers mainly on credit terms. We know that
certain debts due to us will not be paid through the default of a small number
of customers. Because of this, we recognise an allowance for doubtful debts on
initial recognition of receivables, which is deducted from the gross carrying
amount of the receivable. The allowance is calculated by reference to credit
losses expected to be incurred over the lifetime of the receivable. In
estimating a loss allowance we consider historical experience and informed
credit assessment alongside other factors such as the current state of the
economy and particular industry issues. We consider reasonable and supportive
information that is relevant and available without undue cost.
Once recognised, trade receivables are continuously monitored and updated.
Allowances are based on our historical loss experiences for the relevant aged
category as well as forward-looking information and general economic
conditions.
Concentrations of credit risk with respect to trade receivables are limited
due to the Group's customer base being large and unrelated and therefore the
loss allowance for trade receivables is deemed adequate. Other receivables
include deposits paid to suppliers for tooling.
Gross trade receivables can be analysed as follows:
2024 2023
£'000 £'000
Fully performing 6,152 6,426
Past due 501 222
Fully impaired 762 777
Trade receivables 7,415 7,425
As of 31 March 2024 trade receivables of £501,000 (2023: £222,000) were past
due but not impaired. These relate to a number of independent customers for
whom there is no recent history of default.
As of 31 March 2024, trade receivables of £762,000 (2023: £789,000) were
impaired and provided for in full.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade
receivables.
Movements on the Group loss allowance for trade receivables is as follows:
2024 2023
£'000 £'000
At 1 April 777 789
(Decrease)/increase in loss allowance 4 (31)
Receivables written-off during the year as uncollectible - -
Exchange adjustments (19) 19
At 31 March 762 777
The decrease in loss allowance has been included in 'administrative expenses'
in the Statement of Comprehensive Income.
Amounts owed to the Company by subsidiary undertakings are repayable on
demand, unsecured and interest bearing. Recoverability review is performed
annually and balances impaired if not considered recoverable.. The fair value
of the business was used to calculate the impairment and was determined with
reference to the company's market capitalisation and share price at 31 March
2024 but adjusted based on management's understanding of the business.
The carrying amounts of the Group and Company trade and other receivables
except prepayments and Amounts owed by subsidiary undertaking are denominated
in the following currencies:
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Sterling Intercompany - - 13,829 14,978
Sterling 4,758 3,103 - -
Euro 1,838 2,657 - -
US Dollar 895 1,318 - -
7,491 7,078 13,829 14,978
15. CASH AND CASH EQUIVALENTS
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Cash at bank and in hand 1,116 1,337 1 1
Cash at bank of £1,116,000 (2023: £1,337,000) is with financial institutions
with a credit rating of A3 per Moody's rating agency.
16. TRADE AND OTHER PAYABLES
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
CURRENT:
Trade payables 4,514 4,194 - -
Other taxes and social security 1,138 913 51 36
Other payables 3,190 1,034 1,305 1,124
Refund liability 264 260 - -
Accruals and contract liabilities 2,231 1,666 245 47
Group receivables guarantee (note 28) - - 9,858 9,858
11,337 8,067 11,459 11,065
Revenue of £464,000 has been deferred into 2024 as delivery had not taken
place at year end. Revenue of £320,000 deferred in 2023, was recognised as
income in the year ended 31 March 2024.
Hornby Plc have provided a guarantee of £9.858 million against intercompany
receivables in Hornby Hobbies. This guarantee is included in liabilities.
17. ACQUISITION
On 9 March 2024 The Group acquired the assets, trade and intellectual property
of The Corgi Model Club for cash consideration of £655,000 and deferred
contingent consideration of £236,000 uncapped. The deferred consideration
is payable to Conrad Lewcock based on profitability of CMC over the next three
years. No adjustment has been made for discounting as this is not considered
to be material. The acquisition adds a subscription base of c6,000 die-cast
customers
Book value Fair value adjustments Fair value
£'000 £'000 £'000
Intangible assets 187 187
Stock 471 471
Deferred tax liability (46) (46)
Total fair value 471 141 612
Consideration 892 892
Goodwill 280
Goodwill relates to expected synergies from combining CMC into the Hornby
Group and the effect of brand and product expertise being brought into the
Group.
Since the acquisition £148,000 revenue and £82,000 gross profit has been
included within the Group's financial statements. Had the acquisitions been
included from the start of the period revenue of £1,984,000 and gross profit
of £953,000 would have been included in the Group's financial statements for
the period.
18. RIGHT OF USE LEASE LIABILITIES
The movement in the right of use lease liability over the year was as follows:
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
As at 1 April 2,456 2,746 - -
New leases 601 206 - -
Disposals - (36)
Lease modification 133 - - -
Interest payable 162 153 - -
Repayment of lease liabilities (624) (613) - -
As at 31 March 2,728 2,456 - -
Lease liability less than one year 479 409 - -
Lease liability greater than one year and less than five years 767 677 - -
Lease liability greater than five years 1,482 1,370 - -
Total Liability 2,728 2,456 - -
Maturity analysis of contracted undiscounted cashflows is as follows:
Group Company
2024 2023 2024 2022
£'000 £'000 £'000 £'000
Lease liability less than one year 679 544 - -
Lease liability greater than one year and less than five years 1,465 1,191 - -
Lease liability greater than five years 2,049 1,836 - -
Total Liability 4,193 3,571 - -
Finance charges included above (1,465) (1,115) - -
2,728 2,456 - -
19. BORROWINGS
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Secured borrowing at amortised cost
CBIL Bank Loan 117 167 - -
Asset Based Lending Facility 5,742 4,590 - -
Shareholder Loan 9,549 2,110 - -
Loan from subsidiary undertakings - - 5,711 5,871
15,408 6,867 5,711 5,871
Total borrowings
Amount due for settlement within 12 months 15,341 6,750 - -
Amount due for settlement after 12 months 67 117 5,711 5,871
15,408 6,867 5,711 5,871
The Company borrowings are denominated in Sterling. All intercompany
borrowings are formalised by way of loan agreements. The loans can be repaid
at any time however the Company has received confirmation from its subsidiary
that they will not require payment within the next twelve months.
The principal features of the Group's borrowings are as follows:
At 31 March 2023 the UK had a £12 million Asset Based Lending facility with
Secure Trust Bank PLC (STB) expiring October 2024 and an £11.25 million
shareholder loan facility with Phoenix Asset Management Partners expiring
December 2024.
The £12 million facility with STB has been extended until December 2025 and
carries a margin of 2.5‐3% over base rate. The STB Facility has a fixed and
floating charge on the assets of the Group. The Company is expected to provide
customary operational covenants to STB on a monthly basis such as inventory
turn, credit note dilutions and management accounts.
The Phoenix Facility was an £11.25 million facility with a current expiration
date of December 2024 but has recently been extended to December 2025 and
increased to £12.55 million facility and attracts interest at a margin of 5%
over SONIA on funds drawn up to £11.25 million and 15% over SONIA on funds
drawn over £11.25 million. Undrawn funds attract a non‐utilisation fee of
the higher of 1% or SONIA.
LCD Enterprises Limited has a CBIL loan of £117,000 being repaid at £4,167
per month. This should be repaid by August 2026.
Undrawn borrowing facilities
At 31 March 2024, the Group had available £5,199,695 (2023: £11,742,338) of
undrawn committed borrowing facilities in respect of which all conditions
precedent had been met. The facility from Secure Trust Bank PLC has limits
based on the Group's asset position at any one time.
20. FINANCIAL INSTRUMENTS
CLASSIFICATION AND MEASUREMENT
Under IFRS 9 the Group classifies and measures its financial instruments as
follows:
• Derivative financial instruments: classified and measured at fair value
through profit or loss;
• All other financial assets: classified as receivables and measured at
amortised cost; and
• All other financial liabilities: classified as other liabilities and
measured at amortised cost.
CARRYING VALUE AND FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
Amortised Cost Held at Fair Value
Financial Assets Financial Liabilities Cash flow hedges Carrying value Fair value
£'000 £'000 £'000 £'000 £'000
At 31 March 2024
Trade and other receivables 7,481 - - 7,481 7,481
Trade and other payables - (8,372) - (8,372) (8,372)
Derivative Financial instruments - - (81) (81) (81)
Borrowings (15,408) - (15,408) (15,408)
Cash and cash equivalents 1,116 - - 1,116 1,116
Lease liabilities - (2,728) - (2,728) (2,728)
Amortised Cost Held at Fair Value
Financial Assets Financial Liabilities Cash flow hedges Carrying value Fair value
£'000 £'000 £'000 £'000 £'000
At 31 March 2023
Trade and other receivables 7,191 - - 7,191 7,191
Trade and other payables - (5,228) - (5,228) (5,228)
Derivative Financial instruments - - (555) (555) (555)
Borrowings - (6,867) - (6,867) (6,867)
Cash and cash equivalents 1,337 - - 1,337 1,337
Lease liabilities - (2,456) - (2,456) (2,456)
The Group's policies and strategies in relation to risk and financial
instruments are detailed in note 1.
Assets Liabilities
GROUP 2024 2023 2024 2023
£'000 £'000 £'000 £'000
Carrying values of derivative financial instruments
Forward foreign currency contracts - cash flow hedges 23 2 (104) (557)
The hedged forecast transactions denominated in foreign currency are expected
to occur at various dates during the next 12 months. Gains and losses
recognised in reserves on forward foreign exchange contracts as of 31 March
2024 are recognised in the Statement of Comprehensive Income first in the
period or periods during which the hedged forecast transaction affects the
Statement of Comprehensive Income, which is within twelve months from the
balance sheet date.
At 31 March 2024 and 31 March 2023, the gross value of forward currency
contracts was as follows:
2023 2023
'000s '000s
US Dollar 15,100 18,750
The contracts are expected to be used at various dates within the next twelve
months. The average rate for the outstanding contracts is 1.255.
The fair value for the forward foreign currency contracts is an asset of
£23,000 (2023: £2,000 asset) and a liability of £104,000 (2023: £557,000)
of which £81,000 net liability (£555,000 net liability) represents an
effective hedge at 31 March 2024 and has therefore been credited to Other
Comprehensive Income. During the year hedge ineffectiveness was not considered
material and therefore no amount has been expensed.
The Group has reviewed all contracts for embedded derivatives that are
required to be separately accounted for if they do not meet certain
requirements set out in the standard. No embedded derivatives have
been identified.
The Company has no derivative financial instruments.
Maturity of financial liabilities
GROUP 2024 2023
£'000s £'000
Less than one year 23,523 12,387
Between one and five years 1,503 794
More than five years 1,482 1,370
26,508 14,551
COMPANY 2024 Intercompany Debt 2023 Intercompany Debt
£'000 £'000
Between one and five years 669 -
More than five years (Note 18) 5,711 5,871
HIERARCHY OF FINANCIAL INSTRUMENTS
The following tables present the Group's assets and liabilities that are
measured at fair value at 31 March 2024 and 31 March 2023. The table analyses
financial instruments carried at fair value, by valuation method. The
different levels have been defined as follows:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (Level 1).
· Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (Level 2).
· Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3).
There were no transfers or reclassifications between Levels within the year.
Level 2 hedging derivatives comprise forward foreign exchange contracts and
have been fair valued using forward exchange rates that are quoted in an
active market. The effects of discounting are generally insignificant for
Level 2 derivatives.
The fair value of the following financial assets and liabilities approximate
their carrying amount: Trade and other receivables, other current financial
assets, cash and cash equivalents (excluding bank overdrafts), trade and
other payables.
Financial Instruments
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Derivatives used for hedging - 23 - 23
Total assets as at 31 March 2024 - 23 - 23
Liabilities
Derivatives used for hedging - (104) - (104)
Net liabilities at 31 March 2024 - (81) - (81)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Derivatives used for hedging - 2 - 2
Total assets as at 31 March 2022 - 2 - 2
Liabilities
Derivatives used for hedging - (557) - (557)
Net liabilities at 31 March 2023 - (555) - (555)
Interest rate sensitivity
The Group is exposed to interest rate risk as the Group borrows funds at both
fixed and floating interest rates. The exposure to these borrowings varies
during the year due to the seasonal nature of cash flows relating to sales.
In order to measure risk, floating rate borrowings and the expected interest
costs are forecast on a monthly basis and compared to budget using
management's expectations of a reasonably possible change in interest rates.
The effect on both income and equity based on exposure to borrowings at the
balance sheet date for a 1% increase in interest rates is £126,000 (2023:
£41,000) before tax. A 1% fall in interest rates gives the same but opposite
effect.
Foreign currency sensitivity in respect of financial instruments
The Group is primarily exposed to fluctuations in US Dollars, and the Euro.
The following table details how the Group's income and equity would increase
on a before tax basis, given a 10% revaluation in the respective currencies
against Sterling and in accordance with IFRS 7 all other variables remaining
constant. A 10% devaluation in the value of Sterling would have the opposite
effect. The 10% change represents a reasonably possible change in the
specified foreign exchange rates in relation to Sterling.
Comprehensive Income and Equity Sensitivity
2024 2023
£'000 £'000
US dollars 953 714
Euros 434 120
1,387 834
Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. The ratio is
calculated as net (cash)/debt divided by total capital. Net debt is calculated
as total borrowings as shown in the Statement of Financial Position less cash
and cash equivalents. Total capital is calculated as 'equity' as shown in the
Statement of Financial Position plus net debt.
2024 2023
£'000 £'000
Total borrowings (Note 18) 15,408 6,867
Less:
Total cash and cash equivalents (Note 15) (1,116) (1,337)
Net debt (cash) 14,292 5,530
Total equity 25,603 36,040
Total capital 39,895 41,570
Gearing (35%) (13%)
Financial risk factors
The Group's operations expose it to a variety of financial risks that include
the effects of changes in foreign currency exchange rates, market interest
rates, credit risk and its liquidity position. The Group has in place a risk
management programme that seeks to limit adverse effects on the financial
performance of the Group by using foreign currency financial instruments.
(a) Foreign exchange risk
The Group is exposed to foreign exchange risks against Sterling
primarily on transactions in US Dollars. It enters into forward currency
contracts to hedge the cash flows of its product sourcing operation (i.e. it
buys US Dollars forwards in exchange for Sterling) and looks forward
six-twelve months on a rolling basis at forecasted purchase volumes. The
policy framework requires hedging between 70% and 100% of anticipated import
purchases that are denominated in US Dollars.
The Company has granted Euro denominated intercompany loans to subsidiary
companies that are translated to Sterling at statutory period ends thereby
creating exchange gains or losses. The loans to the subsidiaries, Hornby
Deutschland GmbH, Hornby Italia s.r.l. and Hornby France S.A.S. are classified
as long-term loans and therefore the exchange gains and losses on
consolidation are reclassified to the translation reserve in Other
Comprehensive Income as per IAS 21. The loan to the branch in Spain is
classified as a long-term loan however repayable on a shorter timescale than
those of the other subsidiaries and therefore the exchange gains or losses are
taken to Statement of Comprehensive Income.
(b) Interest rate risk
The Group finances its operations through a mixture of Asset Based
lending facilities and shareholder loans. The Group borrows, principally in
Sterling, at floating rates of interest to meet short-term funding
requirements. At the year end the Group's borrowings were £15,408,000.
(c) Credit risk
The Group manages its credit risk through a combination of internal
credit management policies and procedures.
(d) Liquidity risk
At 31 March 2024 the UK had a £12 million Asset Based Lending facility with
Secure Trust Bank PLC and an £11.25 million loan facility with Phoenix Asset
Management Partners. The funding needs are determined by monitoring forecast
and actual cash flows. The Group regularly monitors its performance against
its banking covenants to ensure compliance.
21. DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the
liability method.
Deferred tax assets have been recognised in respect of certain UK timing
differences only. Temporary differences giving rise to deferred tax assets
have been recognised in the UK where it is probable that those assets will
be recovered.
No deferred tax is provided for tax liabilities which would arise on the
distribution of profits retained by overseas subsidiaries because there is
currently no intention that such profits will be remitted.
The movements in deferred tax assets and liabilities during the year are shown
below.
Deferred tax assets and liabilities are only offset where there is a legally
enforceable right of offset.
Acquisition intangibles Fixed Asset & Other UK temporary timing differences
Total
Deferred tax liabilities £'000 £'000 £'000
At 1 April 2023 233 339 572
Charge to Statement of Comprehensive Income - (60) (60)
Acquisition of trade and assets 47 - 47
At 31 March 2024 280 279 559
At 1 April 2022 233 485 718
Charge to Statement of Comprehensive Income - (19) (19)
Charge to Other Comprehensive Income - (127) (127)
At 31 March 2023 233 339 572
Group
Deferred tax assets Acquisition intangibles Fixed Asset and other UK temporary timing differences Total
£'000 £'000 £'000
At 1 April 2023 - 3,910 3,910
Charge to Statement of Comprehensive Income (3,631) (3,631)
At 31 March 2024 - 279 279
At 1 April 2022 - 3,910 3,910
Charge to Statement of Comprehensive Income - - -
At 31 March 2023 - 3,910 3,910
Net deferred tax (liability)/asset
At 31 March 2024 (279) - (279)
At 31 March 2023 (233) 3,571 3,338
Management have released the deferred tax asset and will recognise when
profits are made.
2024 2023
GROUP Recognised £'000 Not recognised £'000 Recognised £'000 Not recognised £'000
Deferred tax comprises:
Depreciation in excess of capital allowances (279) 4,916 3,338 249
Acquisition of trade and assets (280)
Losses and other temporary differences - UK 279 6,319 - 5,513
Losses and other temporary differences - Overseas - 2,178 - 2,212
Deferred tax asset (280) 13,413 3,338 7,974
2024 2023
COMPANY Recognised £'000 Not recognised £'000 Recognised £'000 Not recognised £'000
Deferred tax comprises:
Other timing differences - (253) - (206)
Deferred tax (asset)/liability - (253) - (206)
The UK deferred tax asset not recognised of £11,236,000 (2023: £5,762,000)
primarily relates to unrecognised losses in Hornby Hobbies Limited of
£22,734,000 (potential deferred tax asset of £5,683,000), Hornby Plc of
£1,012,000 (potential deferred tax asset of £253,000) and Hornby World
Limited of £910,000 (potential deferred tax asset of £228,000),along with
other timing differences of £624,000 (potential deferred tax asset of
£156,000).. It also relates to an unrecognised gross temporary difference of
£4,916,000 (2023:£795,000) related to unclaimed capital allowances.
The deferred tax asset not recognised in respect of overseas losses carried
forward of £2,178,000 relates to losses carried forward of £1,274,000 in
respect of Hornby Espana SA (potential deferred tax asset of £319,000,
£958,000 in respect of Hornby Deutschland GmbH (potential deferred tax asset
of £287,000), £2,948,000 in respect of Hornby Italia srl (potential deferred
tax asset of £708,000) and £4,116,000 in respect of Hornby America Inc
(potential deferred tax asset of £864,000).
No further deferred tax has been recognised at this point as they are not
expected to be utilised in the short term. The deferred tax losses do not have
an expiry date.
22. SHARE CAPITAL
GROUP AND COMPANY
Allotted, issued and fully paid:
2024 2023
Number of shares £'000 Number of shares £'000
Ordinary shares of 1p each:
At 1 April and 31 March 169,853,770 1,699 169,853,770 1,699
23. SHARE-BASED PAYMENTS ('PSP')
There are no Performance Share Plan ('PSP') awards outstanding at 31 March
2024 and 2023.
The CEO bonus scheme, was previously accounted for under IAS 19 and no charge
was recorded in the financial statements in the year ending 31 March 2023.
Following a significant movement in the share price in the year the accounting
for this bonus scheme was reconsidered and it was determined that the
arrangement fell within the scope of IFRS 2. Had the bonus scheme been
accounted for under IFRS 2 as at 31 March 2023 the charge would have not been
material. The bonus scheme pays a bonus for a percentage uplift in the
enterprise value of the business less any capital invested over the three year
period to 26 January 2026.
At 31 March 2024, using a Black-Scholes valuation model, using 50% share
volatility, 4% risk-free rate of return and an option value of 0.165 leads to
a provision being made in the year of £668,975. This is included in the
Statement of Comprehensive Income within Administrative expenses.
24. RESERVES
GROUP
Capital Redemption Reserve
This reserve records the nominal value of shares repurchased by the Company.
Share Premium reserve
Share premium represents the excess of the fair value of consideration
received for the equity shares, net of expenses of the share issue, over the
nominal value of the equity shares.
Accumulated losses
This reserve represents accumulated gains and losses less distributions to the
shareholders.
Translation Reserve
The translation reserve represents the foreign exchange movements arising from
the translation of financial statements in foreign currencies.
Hedging Reserve
The hedging reserve comprises the effective portion of changes in the fair
value of forward foreign exchange contracts that have not yet occurred.
Other Reserves
This reserve represents historic negative goodwill arising prior to the
transition to IFRS.
Share-based payment reserve
The share-based payment reserve arises from the requirement to value share
options in existence at the fair value at the date they are granted.
COMPANY
Capital Redemption Reserve
This reserve records the nominal value of shares repurchased by the Company.
Translation Reserve
The translation reserve represents the foreign exchange movements arising from
the translation of financial statements in foreign currencies.
Other Reserves
This reserve represents the revaluation of investments in subsidiaries as
allowable under previous UK GAAP. The reserve was frozen on transition to
IFRS in 2006.
Accumulated losses
This reserve represents accumulated gains and losses less distributions to the
shareholders.
25. EMPLOYEES AND DIRECTORS
Group Company
2023 2023 2024 2023
£'000 £'000 £'000 £'000
Staff costs for the year:
Wages and salaries 9,644 8,301 866 585
Share-based payment (Note 23) 669 532 669 266
Social security costs 1,155 963 117 82
Other pension costs (Note 26) 678 520 51 44
Redundancy and compensation for loss of office 56 - - -
12,202 10,316 1,703 977
The redundancy costs form part of the restructuring costs in the year
classified as exceptional items.
Average monthly number of people (including Executive Directors) employed by
the Group:
Group Company
2024 2023 2024 2023
Operations 86 80 - -
Sales, marketing and distribution 107 98 - -
Administration 34 34 6 4
227 212 6 4
Key management compensation:
Group Company
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Salaries and short-term employee benefits 1,204 1,022 873 585
Share-based payments 669 532 669 266
Other pension costs 66 47 56 44
Redundancy and compensation for loss of office 45 - - -
1,984 1,601 1,598 895
Key management comprise the individuals involved in major strategic decision
making and includes all Group and subsidiary Directors.
A detailed numerical analysis of Directors' remuneration and share options
showing the highest paid Director, number of Directors accruing benefits under
money purchase pension schemes, is included in the Directors' Report on pages
25 to 28 and forms part of these financial statements.
26. PENSION COMMITMENTS
The Group operates a defined contribution pension scheme by way of a
Stakeholder Group Personal Pension Plan set up through the Friends Provident
Insurance Group.
Alexander Forbes International is appointed as Independent Financial Adviser
to work in liaison with the Group.
The level of contributions to the Group Personal Pension Plan for current
members is fixed by the Group.
The Group pension cost for the year was £678,000 (2023: £520,000)
representing the actual contributions payable in the year and certain scheme
administration costs. The Company pension cost for the year was £56,000
(2023: £44,000). No contributions were outstanding at the year end of 31
March 2024.
27. FINANCIAL COMMITMENTS
GROUP 2024 2023
£'000 £'000
At 31 March capital commitments were:
Contracted for but not provided 1,477 2,757
The commitments relate to the acquisition of property, plant and equipment.
The Group issued an unsecured convertible term loan facility to Warlord which
expires 7 July 2024 and will not be drawn down before expiry.
The Company does not have any capital commitments.
Contingent Liabilities
The Company and its subsidiary undertakings are, from time to time, parties to
legal proceedings and claims, which arise in the ordinary course of business.
The Directors do not anticipate that the outcome of these proceedings and
claims, either individually or in aggregate, will have a material adverse
effect upon the Group's financial position.
28. NET FUNDS RECONCILIATION AND MATURITY ANALYSIS
Maturity of financial liabilities 2024 2023
£'000 £'000
Cash and cash equivalents 1,116 1,337
Borrowings - repayable within one year (15,341) (6,750)
Borrowings - repayable after one year (67) (117)
Net Funds (14,292) (5,530)
Cash and liquid investments 1,116 1,337
Gross debt - variable interest rates (15,408) (6,867)
Net Funds (14,292) (5,530)
GROUP Borrowings Leases Deferred Total
Consideration
£'000s £'000s £'000s £'000s
At 31 March 2022 327 2,746 - 3,073
New leases - 206 - 206
Cash flows 6,540 (613) - 5,927
Interest - 153 - 153
Disposal - (36) - (36)
At 31 March 2023 6,867 2,456 - 9,323
New leases - 601 - 601
Cash flows 8,541 (624) - 7,917
Interest - 162 - 162
Disposal - 133 - 133
Contingent consideration - - 236 236
Deferred consideration - - 656 656
Balance at 31 March 2024 15,408 2,728 892 19,028
29. RELATED PARTY DISCLOSURES
Hornby Hobbies Limited purchased services from a company called Rawnet Limited
which is 100% owned by Phoenix Asset Management, the controlling party of the
Group.
Therefore transactions between the parties are related party transactions and
disclosed below:
2024 2023
Transactions Balance at year end Transactions Balance at year end
Company £'000 £'000 £'000 £'000
Rawnet Limited (supplier) 919 47 1,201 72
Warlord Games Limited (supplier) 5 - - -
Warlord Games Limited (customer) 8 - - -
Phoenix Asset Management Partners who own the majority shareholding in Hornby
PLC have also provided a funding facility to the Group (see note
18).
There were no other contracts with the Company or any of its subsidiaries
existing during or at the end of the financial year in which a Director of the
Company or any of its subsidiaries was interested. There are no other
related-party transactions.
The Company received management fees from subsidiaries of £1,658,000 (2023:
£2,188,000), interest of £175,000 (2023: £175,000) and incurred interest of
£213,000 (2023: £212,000) on intercompany borrowings.
Hornby Plc have provided a guarantee of £9,858,000 (2023: £9,858,000)
against intercompany receivables in Hornby Hobbies. This guarantee is
included in liabilities.
30. ULTIMATE PARENT UNDERTAKING AND CONTROLLING PARTY
The Group is 71.63% owned by Phoenix Asset Management, Artemis Fund Managers
Limited hold 9.74% and Fraser Group Plc own 9.25%. The remaining 9.38% of the
shares are widely held. As a result of these arrangements, there is no
ultimate parent undertaking, and the funds managed by Phoenix Asset Management
are therefore the controlling party.
31. EVENTS AFTER THE END OF THE REPORTING PERIOD
Facilities with both STB and Phoenix Asset Management were extended through to
December 2025 post year end.
No other significant events have occurred between the end of the reporting
period and the date of the signature of the Annual Report.
Shareholders' Information Service
Hornby welcomes contact with its shareholders.
If you have questions or enquiries about the Group or its products,
please contact:
K Gould, Chief Finance officer
Hornby PLC
Westwood
Margate
Kent CT9 4JX
www.hornby.com
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