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
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
£'000
|
2023
£'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, 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/
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.
|
|
|
|
|
2024
£'000
|
2023
£'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 cast and paint markets. Loss of market
share to increased competitor activity or alternative hobbies would
have a negative impact on the Group's results. Failure to evolve
and innovate products may lead to brands becoming less relevant in
the marketplace.
|
The Group performance is impacted by the
actions of competitors and changes in the wider retail
landscape.
|
In many of our markets the Group still enjoys a
strong market position due to the continued development of our
brands. We will strive to further improve the strength of our
brands. Production of high-quality products which customers want is
a key mitigating factor.
|
|
The Business Plan
|
The Business Plan may not fully achieve the
aims of returning the Group to positive cash generation in
2024/25.
|
The increase in business scale and reduction of
costs and the increase in direct sales currently anticipated is not
achieved and the Group does not achieve sustainable profit and cash
generation.
|
The Group has developed clear targets and has
cost saving contingencies in the plan being actioned to put the
necessary resources in place to deliver the aims of the
plan.
|
|
Hobby market
|
Overall decline in the hobby market could lead
to greater levels of competition in the medium term, which could
have a negative impact on the Group's results.
|
Failing interest in traditional hobbies may
impact our core Independent and National retailers and have a
consequent impact upon the Group's performance.
|
In many of our markets the Group enjoys a
strong market position due to the continued development of our
brands. Brands are extremely important in the 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, Euros and US Dollars and is
therefore exposed to exchange rate fluctuations.
|
Significant fluctuations in exchange rates to
which the Group is exposed could have a material adverse effect on
the Group's future results. In particular the negative impact
on Sterling of Brexit and the continuing uncertainties could
make the US Dollar purchase of its goods more expensive.
|
The Group continues to hedge short-term
exposures by establishing forward currency purchases using fixed
rate and participating forward contracts up to twelve months ahead.
It is deemed impractical to hedge exchange rate movements beyond
that period.
.
|
|
Supply chain
|
The Group's products are manufactured by
artisan labour in China, India and Vietnam. Risk that capacity is
lost which could lead to delays in production.
|
The Group does not have exclusive arrangements
with its suppliers and there is a risk that competition for
manufacturing capacity could lead to delays in introducing new
products or servicing existing demand.
|
The Group is continuing to develop and review
its vendor portfolio and has started diversifying the supplier
base. A 26-step critical path analysis tool 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 invests ineffectively in the wrong
products.
|
The business plan includes significant capital
expenditure to fund suitable 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 around the world.
|
Failure to comply could lead to a product
recall resulting in damage to Company and brand reputation along
with an adverse impact on the Group's results.
|
Robust internal processes and procedures,
active monitoring of proposed legislation and involvement in policy
debate and lobbying of the relevant 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 to execute the Group's business
plans.
|
The Group has a £12.0 million ABL facility with
Secure Trust Bank (STB) and 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 systems.
|
This exposes the business to greater risk of
financial loss, disruption or damage to the reputation of an
organisation from a failure of its information technology
systems.
|
The Group is investing significant time and
cost into new websites and upgrading the current ERP system
that went live in 2015. The Group has 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 success of any
business.
|
The Group fails to retain the necessary skills
and talent to deliver the Group's plans.
|
Management team to encourage and empower
employees. Key lost talent has been 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
Non-Executive Director
|
Oliver Raeburn - aged
53
Chief
Executive Officer
|
Kirstie Gould
- aged 51
Chief
Finance Officer
&
Company
Secretary
|
Daniel
Carter
- aged
29
Independent
Non-Executive Director
|
John
Stansfield
-
aged 69
Interim
Independent
Non-Executive Chairman
|
Nick
Batram
- aged
56
Independent
Non-Executive Director
|
|
Lyndon joined the Board as Chief
Executive in October 2017 and was appointed to Executive Chairman
in February 2022.
He is a highly-experienced model and
hobby professional with 45 years' experience in the industry. He
has built Oxford Diecast into a successful international business
over the past two decades, focusing on Diecast vehicles, aircraft
and, more recently, rail-based products.
Lyndon is also Chairman of Oxford
Diecast ("Oxford"), a business founded in 1993. He was the majority
shareholder of LCD Enterprises Limited, the ultimate owner of the
Oxford Diecast brands until July 2021 when Hornby acquired the
remaining stake.
Lyndon is a member of the
Remuneration and Nomination Committee and a member of the Audit
Committee.
|
Oliver Raeburn was appointed as CEO
on 23 January 2023.
A psychology graduate of the
University of Leicester, Olly's career started out in advertising,
including a 9 year stint as owner / manager of a London agency. A
move into the corporate world saw Olly spend the next 6 years as
Marketing Director at Coral and subsequently Brand Director for
Ladbrokes and Coral in the newly formed Ladbrokes Coral PLC. Two
years as Chief Marketing Officer at Rank PLC were followed by a
move to Paperchase as CMO in 2019. Having been promoted to
CEO in 2020 he guided the company through an administration process
during the Covid pandemic, followed by a turnaround process,
refinancing and sale of the business in August 2022.
|
Kirstie Gould was appointed as Chief
Finance Officer of the Company in January 2018 after spending over
2 years with Hornby as a consultant in the finance department.
Kirstie also acts as Company Secretary.
Kirstie is a Fellow of the Institute
of Chartered Accountants in England and Wales, qualifying with
PricewaterhouseCoopers in 1997 and has since held senior management
and directorship roles across a number of high growth SME firms
including Affini Technology Limited (part of the TTG Group) and
Gamma Communications plc.
|
Daniel Carter was appointed as a
Non-Executive Director in July 2020.
Daniel is an Investment Analyst at
Phoenix Asset Management which controls the funds that own 73.38%
of the ordinary shares of Hornby Plc.
Daniel studied Economics at The
University of Bath.
Daniel is Chair of the Remuneration
and Nomination Committee and a member of the Audit
Committee.
|
John Stansfield was appointed
interim Non-Executive Chairman on 30 April 2024. John was
previously Independent Non-Executive Chairman in August 2018 to
February 2022. Prior to that, he had been a non-executive Director
of the Company, having been appointed in January 2018.
John is a Fellow of the Chartered
Institute of Management Accountants and spent 31 years with the
Group, 12 years of which he was Group Finance Director.
He re-joined the Company, after
having left in 2013.
John helped to deliver some of the
Group's most profitable years and has a wealth of experience in the
toy and hobby sectors.
John is also Chair of the Audit
Committee and a member of the Remuneration and Nomination
Committee.
|
Nick Batram was appointed as
Non-Executive Director on 12 February 2024.
Nick has an extensive background in
finance, with over 30 years experience working for financial
institutions. The vast majority of his time was spent focused on
researching and advising small and mid-cap companies.
In 2016, Nick joined Entain Plc, the
FTSE 100 sports betting and gaming group, initially heading up
Investors Relations & Strategy and until recently as Group
Director of M&A and Corporate Development.
Nick is a member of the Remuneration
and Nomination Committee and a member of the Audit
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/
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/.
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/
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/.
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/
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/)
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 can be found
below.
|
Crowe U.K. LLP
|
|
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
31 March
2024
number
|
|
|
At
31 March
2023
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
The Group holds goodwill at a
carrying value of £2m and brand relations at a carrying value of
£1.3m.
The Parent Company also holds
significant investments and debtor balances with Group
companies.
Recovery of these assets is
dependent upon future cash flows which are required to be
discounted. Recovery is based on future cashflows which are
inherently subjective, and this increases the risk the cashflow
forecasts may not be met.
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
|
We tested management's impairment
review which includes impairment reviews for investments and
intercompany debt in the parent and goodwill and intangible assets
at group level.
The audit work relied on forecasts
of future cash flows based on board approved forecasts. We
challenged management on the assumptions made, including the
forecast growth rate, profitability, terminal growth rates applied
and discount rate applied. We used the expertise of our
valuations team to review the discount rate. As part of our
testing we benchmarked assumptions such as the terminal growth rate
and inputs into the calculation of the cost of capital (discount
rate).
For investments and intercompany
balances we considered the fair value of the group with reference
to market capitalisation of the group.
|
|
Inventory provisioning - Note 13
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 consider that, due to the
losses in the group and the persistent high levels of stock, there
is an increased risk of either stock obsolescence or stock being
valued above its net realisable value.
Management provides for key lines
of stock based on a historical provisioning policy. We therefore
consider there to be risk that this provision is incorrectly
calculated, the historical assumptions are incorrect or that there
are lines of stock, not in the provision, that require providing
for.
|
We obtained the aged inventory
reports and recalculated the provision. We also verified the
accuracy of the ageing report.
We compared the assumptions used
to those used in the prior year and challenged management where
assumptions had either changed or no longer appeared
appropriate.
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 older
stock items we examined evidence that stock lines were moving and
that these were being sold above cost.
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
|
|
|
|
|
|
Note
|
2024
£'000
|
2023
£'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
|
|
|
|
|
|
Note
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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
redemption reserve
|
Translation reserve
|
Hedging
reserve
|
Other reserves
|
Non-controlling interests
|
Accumulated losses
|
Total
equity
|
|
|
|
|
|
|
£'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
(expense)/income for the
year
|
-
|
-
|
-
|
161
|
(932)
|
-
|
-
|
-
|
(771)
|
|
|
|
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
(expense)/income for the
year
|
-
|
-
|
-
|
(110)
|
474
|
-
|
-
|
-
|
364
|
|
|
|
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
|
£'000
|
|
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
exceptional items
|
(6,881)
|
(679)
|
48
|
380
|
497
|
(6,635)
|
-
|
(6,635)
|
|
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
|
£'000
|
|
£'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
exceptional items
|
(1,467)
|
(598)
|
21
|
371
|
603
|
(1.070)
|
-
|
(1,070)
|
|
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
|
|
|
|
|
2024
£'000
|
2023
£'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
|
|
|
|
|
|
2024
£'000
|
2023
£'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 consolidated
accounts
|
144
|
98
|
|
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
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2023
£'000
|
2022
£'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:
|
|
|
|
|
2024
£'000
|
2023
£'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
£'000
|
France
£'000
|
Germany
£'000
|
USA
£'000
|
Total
£'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 Margin1
|
|
61.0%
|
43.5%
|
47.10%
|
|
Growth rate to
perpetuity2
|
|
2.00%
|
2.00%
|
2.00%
|
|
Revenue
growth3
|
|
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 Margin1
|
|
55.30%
|
43.80%
|
49.30%
|
|
Growth rate to
perpetuity2
|
|
2.00%
|
2.00%
|
2.00%
|
|
Revenue
growth3
|
|
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
£'000
|
Computer Software and Website
£'000
|
Total
£'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
£'000
|
Computer Software and Website
£'000s
|
Total
£'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
£'000
|
Motor
Vehicles
|
Tools
and moulds
|
Total
|
|
£'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
£'000
|
Motor
Vehicles
|
Tools
and moulds
|
Total
|
|
£'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 Scheme, Vileparle West, Juhu,
Mumbai-400049
|
Ordinary shares
|
100
|
99
|
|
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
£'000
|
Motor
Vehicles
|
Fixtures, Fittings and Equipment
|
Total
|
|
£'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
£'000
|
Motor
Vehicles
|
Fixtures, Fittings and Equipment
|
Total
|
|
£'000
|
£'000
|
£'000
|
|
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
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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
£'000
|
2023
£'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
£'000
|
2023
£'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
|
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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:
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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:
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2022
£'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
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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.
|
|
|
|
|
GROUP
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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
'000s
|
2023
'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
£'000
|
2023 Intercompany Debt
£'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
£'000
|
Level 2
£'000
|
Level 3
£'000
|
Total
£'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
£'000
|
Level 2
£'000
|
Level 3
£'000
|
Total
£'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
£'000
|
2023
£'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
£'000
|
|
2023
£'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
|
|
|
|
|
|
2023
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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:
|
|
|
|
|
|
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:
|
|
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'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
£'000
|
2023
£'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
Consideration
|
Total
|
|
£'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
