REG - Hornby PLC - Final Results <Origin Href="QuoteRef">HRN.L</Origin> - Part 6
16/07/2015 11:29
- Part 6: For the preceding part double click ID:nRSR4957Qe
- 2,046 - -
- Other - (266) - -
1,303 3,718 103 85
-
(266)
-
-
1,303
3,718
103
85
Restructuring costs of £0.8 million for the year ended 31 March 2015 comprise mainly the costs of moving warehouses in the
UK, to the new warehouse run by our third party provider, DS Logistics, but also include elements of redundancy and other
one off items.
Services provided by the Company's auditor and network firms
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company's auditors
and network firms as detailed below:
Fees payable to the Company's auditors for the audit of Parent Company and consolidated accounts 99 97 15 15
Fees payable to the Company's auditors and its associates for other services:
- The auditing of accounts of the Company's subsidiaries 37 42 - -
- Audit-related assurance services 25 25 25 25
- Tax advisory services 31 19 - -
- Tax compliance services 28 14 5 5
- Other advisory work 34 - - -
254 197 45 45
34
-
-
-
254
197
45
45
In the current financial year the level of non-audit fees was within the 1:1 ratio to audit fees as per Audit Committee
policy.
5. TAXATION
Analysis of tax (credit) / charge in the year
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
Current tax
- UK taxation (7) (248) 99 100
adjustments in respect of prior years 103 (17) - -
- overseas taxation 138 (8) (43) (42)
adjustments in respect of prior years - 207 - 2
234 (66) 56 60
Deferred tax (note 20)
- current year (216) (75) (2) (22)
- overseas taxation 60 29 - -
- adjustments in respect of prior years (142) - (3) -
(298) (46) (5) (22)
Total tax (credit)/charge to the profit before tax (64) (112) 51 38
38
The tax for the year differs to the standard rate of corporation tax in the UK of 21%. Any differences are explained
below:
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
(Loss)/profit before taxation (184) (4,557) 440 343
(Loss)/profit on ordinary activities multiplied by rate of
Corporation tax in UK of 21% (2014 - 23%) (39) (1,048) 92 79
Effects of:
Adjustments to tax in respect of prior years (39) 190 (5) 2
Income not taxable - - - -
Difference on overseas rates of tax 18 (128) (17) 14
Impact of overseas losses not recognised 12 922 - -
Remeasurement of deferred tax
- change in UK tax rate to 20% - (214) - 2
Other (16) 164 (19) (59)
Total taxation (64) (112) 51 38
38
During the year, the UK main corporation tax rate was reduced from 23% to 21%. This was substantively enacted on 2 July
2013 and became effective from 1 April 2014. As a result of this, a rate of 21% has been used to calculate tax payable on
taxable income in the year.
In addition to the changes in rates of Corporation tax disclosed above, further changes to the UK Corporation tax rates
were substantively enacted as part of the Finance Bill 2013 on 2 July 2013. These included a reduction to the main rate to
20% from 1 April 2015. UK deferred tax is therefore recognised at the reduced rate of 20%.
6. DIVIDENDS
No interim of final dividends were paid in relation to the year ended 31 March 2014 and no interim dividend has been paid
in relation to the year ended 31 March 2015. The Directors are not proposing a final dividend in respect of the financial
year ended 31 March 2015.
7. (LOSS) / EARNINGS 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, excluding those held in the employee share trust (note 22) which are
treated as cancelled.
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 2015. For the year
ended 31 March 2015, there was no difference in the weighted average number of shares used for basic and diluted net loss
per ordinary share as the effect of all potentially dilutive ordinary shares was nil as both the outstanding options and
PSP awards have not vested.
Reconciliations of the (loss)/earnings and weighted average number of shares used in the calculations are set out below.
REPORTED
Basic loss per share
Loss attributable to ordinary shareholders (120) 39,164 (0.31) (4,445) 39,152 (11.35)
Effect of dilutive securities
Options - - - - - -
Diluted loss per share (120) 39,164 (0.31) (4,445) 39,152 (11.35)
UNDERLYING
(Loss) / Earnings attributable to ordinary shareholders (120) 39,164 (0.31) (4,445) 39,152 (11.35)
Amortisation of intangibles 302 - 0.77 300 - 0.77
Impairment of goodwill - - - 2,046 - 5.22
Restructuring costs 649 - 1.66 674 - 1.72
Net foreign exchange translation adjustments 494 - 1.26 83 - 0.21
Underlying basic Earnings / (loss) /EPS 1,325 39,164 3.38 (1,342) 39,152 (3.43)
Underlying diluted Earnings / (loss) /EPS 1,325 39,164 3.38 (1,342) 39,152 (3.43)
3.38
(1,342)
39,152
(3.43)
Underlying diluted Earnings / (loss) /EPS
1,325
39,164
3.38
(1,342)
39,152
(3.43)
The above numbers used to calculate the EPS for the year ended 31 March 2015 and 31 March 2014 have been tax effected at
the rate of 20% and 23% respectively with the exception of Hornby Italia where the net deferred tax asset associated with
the impairment in 2014 has not been recognised.
8. GOODWILL
COST
At 1 April 2014 13,027
Exchange adjustments (54)
At 31 March 2015 12,973
AGGREGATE IMPAIRMENT
At 1 April 2014 4,497
Charge for the year -
Exchange adjustments 12
At 31 March 2015 4,509
Net book amount at 31 March 2015 8,464
COST
At 1 April 2013 13,135
Exchange adjustments (108)
At 31 March 2014 13,027
AGGREGATE IMPAIRMENT
At 1 April 2013 2,537
Charge for the year 2,046
Exchange adjustments (86)
At 31 March 2014 4,497
Net book amount at 31 March 2014 8,530
Net book amount at 31 March 2013 10,598
Net book amount at 31 March 2013
10,598
The Company has no goodwill.
The goodwill has been allocated to cash-generating units and a summary of carrying amounts of goodwill by geographical
segment (representing cash-generating units) at 31 March 2015 is as follows:
At 31 March 2015 3,992 8 3,990 - 474 8,464
At 31 March 2014 3,992 8 3,990 - 542 8,532
At 31 March 2014
3,992
8
3,990
-
542
8,532
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 growth was based on expected levels of
activity given results to date, together with growth based upon internal improvements, marketing initiatives, and expected
economic and market conditions. Budgeted operating profit was calculated based upon management's expectation of operating
costs appropriate to the growing business.
The relative risk adjusted (or 'beta') discount rate applied reflects the risk inherent in hobby based product companies.
In determining this discount rate, management has applied an adjustment for risk of such companies in the industry on
average determined using the betas of comparable hobby based product companies. The forecasts are based on approved budgets
for the year ending 31 March 2016. Subsequent cash flows for the following two years have been increased in line with
expectation of 5% growth based on the 3 year working capital model adopted by the business which incorporates the Group's
strategy to integrate the European operations, reducing costs and opening up new revenue opportunities, particularly
through E-Commerce. This model and its associated document have been reviewed with external advisors as part of the recent
refinancing process. Cash flows beyond the four-year period are extrapolated using the estimated growth rates stated below.
The cash flows were discounted using a pre-tax discount rate of 10% (2014 - 10%) which management believes is appropriate
for all territories.
The key assumptions used for value-in-use calculations for the year ended 31 March 2015 are as follows:
Gross Margin1 30.3% 47.0% 37.9% 22.62% 32.4% 26.06%
Growth rate to perpetuity2 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Growth rate to perpetuity2
2.0%
2.0%
2.0%
2.0%
2.0%
2.0%
The key assumptions used for value-in-use calculations for the year ended 31 March 2014 are as follows:
Gross Margin1 30.3% 47.0% 40.3% 31.0% 32.4% 34.8%
Growth rate to perpetuity2 3.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Growth rate to perpetuity2
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
1. Budgeted gross margin.
2. Weighted average growth rate used to extrapolate cash flows beyond the budget period.
These assumptions have been used for the analysis of each CGU within the operating segments.
In France, the recoverable amount calculated based on value in use exceeded carrying value by £119,000. A reduction in
operating margin to 24%, or a rise in discount rate to 13.5% would remove the remaining headroom.
9. INTANGIBLE ASSETS
INTANGIBLE ASSETS
COST
At 1 April 2014 4,887 1,423 - 6,310
Additions - - 988 988
Exchange adjustments (204) (51) - (255)
At 31 March 2015 4,683 1,372 988 7,043
ACCUMULATED AMORTISATION
At 1 April 2014 1,756 985 - 2,741
Charge for the year 240 137 - 377
Exchange adjustments (99) (47) - (146)
At 31 March 2015 1,897 1,075 - 2,972
Net book amount at 31 March 2015 2,786 297 988 4,071
Net book amount at 31 March 2015
2,786
297
988
4,071
The Computer equipment has yet to be depreciated as it has not been put into use by the Group at the balance sheet date.
INTANGIBLE ASSETS
COST
At 1 April 2013 4,923 1,432 6,355
Exchange adjustments (36) (9) (45)
At 31 March 2014 4,887 1,423 6,310
ACCUMULATED AMORTISATION
At 1 April 2013 1,526 851 2,377
Charge for the year 246 143 389
Exchange adjustments (16) (9) (25)
At 31 March 2014 1,756 985 2,741
Net book amount at 31 March 2014 3,131 438 3,569
Net book amount at 31 March 2013 3,397 581 3,978
Net book amount at 31 March 2013
3,397
581
3,978
All amortisation charges in the year have been charged in other operating expenses.
The Company held no intangible assets.
10. PROPERTY, PLANT AND EQUIPMENT
COST
At 1 April 2014 3,026 6,172 249 53,178 62,625
Exchange adjustments (74) (93) (10) (1,455) (1,632)
Additions at cost - 531 - 3,542 4,073
Disposals - (12) - (226) (238)
At 31 March 2015 2,952 6,598 239 55,039 64,828
ACCUMULATED DEPRECIATION
At 1 April 2014 1,346 4,719 234 45,943 52,242
Exchange adjustments (22) (73) (8) (1,097) (1,200)
Charge for the year 47 522 4 3,176 3,749
Disposals - (12) - (211) (223)
At 31 March 2015 1,371 5,156 230 47,811 54,568
Net book amount at 31 March 2015 1,581 1,442 9 7,228 10,260
Net book amount at 31 March 2015
1,581
1,442
9
7,228
10,260
COST
At 1 April 2013 3,039 5,908 305 49,758 59,010
Exchange adjustments (13) (38) (2) (219) (272)
Additions at cost - 364 15 3,680 4,059
Disposals - (62) (69) (41) (172)
At 31 March 2014 3,026 6,172 249 53,178 62,625
ACCUMULATED DEPRECIATION
At 1 April 2013 1,301 4,327 255 43,079 48,962
Exchange adjustments (3) (28) (2) (175) (208)
Charge for the year 48 482 19 3,055 3,604
Disposals - (62) (38) (16) (116)
At 31 March 2014 1,346 4,719 234 45,943 52,242
Net book amount at 31 March 2014 1,680 1,453 15 7,235 10,383
Net book amount at 31 March 2013 1,738 1,581 50 6,679 10,048
Net book amount at 31 March 2013
1,738
1,581
50
6,679
10,048
Freehold land amounting to £786,000 (2014 - £786,000) has not been depreciated. The Group holds no finance leases (2014 -
nil).
The Group has taken advantage of the exemption under IFRS 1 to use the valuation of certain land and buildings at the date
of transition to IFRS as deemed cost. All other assets are stated at cost.
COST
At 1 April 2014 and at 31 March 2015 2,428 4 2,432
ACCUMULATED DEPRECIATION
At 1 April 2014 1,187 4 1,191
Charge for the year 34 - 34
At 31 March 2015 1,221 4 1,225
Net book amount at 31 March 2015 1,207 - 1,207
Net book amount at 31 March 2015
1,207
-
1,207
COMPANY Freehold land and buildings £'000 Plant and equipment £'000 Total £'000
COST
At 1 April 2013 and at 31 March 2014 2,428 4 2,432
ACCUMULATED DEPRECIATION
At 1 April 2013 1,153 4 1,157
Charge for the year 34 - 34
At 31 March 2014 1,187 4 1,191
Net book amount at 31 March 2014 1,241 - 1,241
Net book amount at 31 March 2013 1,275 - 1,275
The Company does not hold any assets under finance leases.
Freehold land amounting to £786,000 (2014 - £786,000) has not been depreciated.
11. INVESTMENTS
COMPANY
The movements in the net book value of interests in subsidiary undertakings are as follows:
At 1 April 2014 33,053 4,171 37,224
Capital contribution relating to share-based payment 102 - 102
At 31 March 2015 33,155 4,171 37,326
At 1 April 2013 28,097 9,068 37,165
Capital contribution relating to share-based payment 189 - 189
Capitalisation of loans to equity:
Capital contribution to Hornby Italia s.r.l 2,586 - 2,586
Capital contribution to Hornby Deutschland GmbH 2,181 - 2,181
Repayment of loans by subsidiary undertakings - (4,276) (4,276)
Reclassification of long-term loan with Hornby Hobbies Limited to short-term receivables - (621) (621)
At 31 March 2014 33,053 4,171 37,224
At 31 March 2014
33,053
4,171
37,224
Interest was charged on loans to subsidiary undertakings at Sterling three-month Libor + 3.6%.
Loans are unsecured and exceed five years maturity.
PRINCIPAL GROUP SUBSIDIARY UNDERTAKINGS
Details of the undertakings whose results or financial position principally affected the figures shown in the Company's
annual accounts, are set out below. Hornby Hobbies Limited and Hornby España S.A. are engaged in the development, design,
sourcing and distribution of models. Hornby America Inc., Hornby Italia s.r.l., Hornby France S.A.S. and Hornby Deutschland
GmbH are distributors of models.
Proportion of nominal value of issued shares held
Country of incorporation Description of shares held Group% Company %
Hornby Hobbies Limited United Kingdom Ordinary shares 100 100
Hornby America Inc. USA Ordinary shares 100 100
Hornby España S.A Spain Ordinary shares 100 100
Hornby Italia s.r.l. Italy Ordinary shares 100 100
Hornby France S.A.S. France Ordinary shares 100 100
Hornby Deutschland GmbH Germany Ordinary shares 100 100
100
A full list of subsidiaries is available from the registered office of Hornby Plc; Westwood, Margate Kent, CT9 4JX.
12. INVENTORIES
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
Raw materials 917 301 - -
Work in progress 101 92 - -
Finished goods 11,451 12,772 - -
12,469 13,165 - -
-
13. TRADE AND OTHER RECEIVABLES
CURRENT:
Trade receivables 9,569 8,148 - -
Less: provision for impairment of receivables (375) (377) - -
Trade receivables - net 9,114 7,771 - -
Other receivables 681 722 - -
Prepayments 569 550 12 7
Amounts owed by subsidiary undertaking - - 971 621
10,444 9,043 983 628
-
-
971
621
10,444
9,043
983
628
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 provision for receivables impairments are deemed adequate. Credit insurance policies are in
place in Hornby America Inc., Hornby España S.A., Hornby Italia s.r.l., Hornby France S.A.S. and Hornby Deutschland GmbH
covering trade receivables at 31 March 2015 to the value of £2.3 million (2014 - £6 million).
Gross trade receivables can be analysed as follows:
2015 £'000 2014£'000
Fully performing 7,096 6,540
Past due 2,098 1,231
Fully impaired 375 377
Trade receivables 9,569 8,148
As of 31 March 2015, trade receivables of £2,098,000 (2014 - £1,231,000) were past due but not impaired. These relate to a
number of independent customers for whom there is no recent history of default. The ageing analysis of these trade
receivables is as follows:
2015 £'000 2014£'000
1 - 120 days 1,928 1,085
>120 days 170 146
2,098 1,231
As of 31 March 2015, trade receivables of £375,000 (2014 - £377,000) were impaired and provided for. The amount of
provision was £375,000 (2014 - £377,000) as of 31 March 2015.
Significant financial difficulties of the customer, probability that the customer will enter bankruptcy or financial
reorganisation are considered indications that the trade receivable is impaired.
The ageing of these receivables is as follows:
2015 £'000 2014£'000
1 - 120 days 23 13
> 120 days 352 364
375 377
Movements on the Group provision for impairment of trade receivables are as follows:
2015 £'000 2014£'000
At 1 April 377 401
Provision for receivables impairment 40 250
Receivables written-off during the year as uncollectible (22) (268)
Exchange adjustments (20) (6)
At 31 March 375 377
The charge relating to the increase in provision has been included in 'administrative expenses' in the Statement of
Comprehensive Income.
The carrying amounts of the Group and Company trade and other receivables are denominated in the following currencies:
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
Sterling Intercompany - - 971 621
Sterling 5,617 4,257 12 7
Euro 4,307 4,281 - -
US Dollar 465 392 - -
HK Dollar 55 113 - -
10,444 9,043 983 628
628
14. CASH AND CASH EQUIVALENTS
Cash at bank and in hand 451 619 1 1
2015 £'000
2014£'000
2015 £'000
2014£'000
Cash at bank and in hand
451
619
1
1
Cash of £451,000 above includes restricted cash of £98,000 held within an Escrow account that relates to the exit payment
to our previous principal model railway supplier as mentioned within the Financial and operating review.
15. TRADE AND OTHER PAYABLES
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
CURRENT:
Trade payables 5,114 3,980 - -
Other taxes and social security 950 924 19 19
Other payables 1,041 1,768 - -
Accruals 1,962 946 - 43
9,067 7,618 19 62
62
16. PROVISIONS
Sales returns
At 1 April 238 235 - -
Charge to Statement of Comprehensive Income 597 502 - -
Utilised in the year (580) (499) - -
At 31 March 255 238 - -
(580)
(499)
-
-
At 31 March
255
238
-
-
Provision is made for future sales returns based on historical trends. The provision is expected to be utilised within one
year from the balance sheet date.
17. CURRENT TAX ASSETS AND LIABILITIES
Group Company
2015 £'000 2014£'000 2015£'000 2014£'000
Current tax assets
UK Corporation tax recoverable 371 569 50 -
Overseas Corporation tax recoverable 48 32 31 29
419 601 81 29
Current tax liabilities
UK Corporation tax liability - 100 - 100
Overseas Corporation tax liability 53 28 - -
53 128 - 100
100
18. BORROWINGS
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
Secured borrowing at amortised cost
Bank overdrafts 7,698 6,076 - -
Bank loan 212 1,796 - -
Finance leases - - - -
Loan from subsidiary undertakings - - 4,511 4,984
7,910 7,872 4,511 4,984
Total borrowings
Amount due for settlement within 12 months 7,747 7,630 116 -
Amount due for settlement after 12 months 163 242 4,395 4,984
7,910 7,872 4,511 4,984
4,984
The Group obtained a covenant reset in the year for the following covenant:
The December 2014 quarterly covenant of the ratio of consolidated gross borrowings less consolidated total cash to
consolidated EBITDA.
The Company borrowings are denominated in Sterling. All intercompany borrowings are secured by way of formal 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.
Analysis of borrowings by currency:
GROUP Sterling£'000 Euros£'000 Total £'000
31 March 2015
Bank overdrafts 6,039 1,659 7,698
Bank loan - 212 212
6,039 1,871 7,910
31 March 2014
Bank overdrafts 4,598 1,478 6,076
Bank loan 1,500 296 1,796
6,098 1,774 7,872
The other principal features of the Group's borrowings are as follows:
At 31 March 2015 the Group had a revolving credit facility of £13 million expiring December 2015 and the future interest
rates on this facility are Libor + 3.6%.
The average effective interest rate on bank overdrafts approximated 4.07% (2014 - 4.2%) per annum and is determined based
on 3.6% above three-month Libor from December 2012.
Undrawn borrowing facilities
At 31 March 2015, the Group had available £9.2 million (2014 - £8.9 million) of undrawn committed borrowing facilities in
respect of which all conditions precedent had been met. Included within this the European subsidiaries had available £2.3
million (2014 - £2 million) of undrawn import credit line facilities that could be obtained with security being given
against trade receivables. The Group has recently successfully renegotiated its banking facilities for the next 4 years,
conditional on the successful additional equity raise of £15m, details of which can be found within note 28 Post balance
sheet events.
19. FINANCIAL INSTRUMENTS
The Group's policies and strategies in relation to risk and financial instruments are detailed in note 1.
Assets Liabilities
GROUP 2015 £'000 2014£'000 2015 £'000 2014£'000
Carrying values of derivative financial instruments
Forward foreign currency contracts - cash flow hedges 519 39 (24) (432)
Interest rate swap - cash flow hedge - - - (13)
519 39 (24) (445)
(445)
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 2015 are recognised in
the Income Statement first in the period or periods during which the hedged forecast transaction affects the Income
Statement, which is within twelve months from the balance sheet date.
At 31 March 2015 outstanding forward currency contracts were as follows:
2015 '000s 2014'000s
Hong Kong Dollar - 115,000
US Dollar 21,862 11,300
Euro - -
The total net fair value above for forward foreign currency contracts (and the interest rate swap in 2014) comprises
£495,000 asset (2014 - £406,000 liability) of which £362,000 asset (2014 - £440,000 liability) has been effectively hedged
at 31 March 2015 and therefore credited to Other Comprehensive Income in accordance with IAS 39. The asset balance of
£136,000 (2014 - £5,000 liability) was the unhedged portion and was included within operating expenses.
In accordance with IAS 39, 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.
Fair values of non-derivative financial assets and liabilities
For the Group and the Company, as at 31 March 2015 and 31 March 2014, there is no difference between the carrying amount
and fair value of each of the following classes of financial assets and liabilities, principally due to their short
maturity: trade and other receivables, cash at bank and in hand, trade and other payables and current borrowings. Bank
deposits attract interest within 1.0% of the ruling market rate. There is no significant difference between the fair value
and carrying amount of non-current borrowings as the impact of discounting is not significant.
Maturity of financial liabilities
GROUP Bank loan£'000 Overdraft facilities £'000s Accounts payable and accruals £'000s 2015 Total £'000
Less than one year 49 7,698 8,967 16,714
Between one and two years 49 - - 49
Between two and five years 114 - - 114
More than five years - - - -
212 7,698 8,967 16,877
Bank loan£'000 Overdraft facilities £'000s Accounts payable and accruals £'000s 2014Total£'000
Less than one year 1,500 6,076 7,618 15,194
Between one and two years 54 - - 54
Between two and five years 237 - - 237
More than five years 5 - - 5
1,796 6,076 7,618 15,490
COMPANY 2015 Intercompany Debt £'000 2014 Intercompany Debt £'000
More than five years (note 18) 4,395 4,984
HIERARCHY OF FINANCIAL INSTRUMENTS
The following tables present the Group's assets and liabilities that are measured at fair value at 31 March 2015 and 31
March 2014. 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 period. Level 2 hedging derivatives comprise forward
foreign exchange contracts and an interest rate swap 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
Trading derivatives - - - -
Derivatives used for hedging - 519 - 519
Available-for-sale financial assets - - - -
Total assets as at 31 March 2015 - 519 - 519
Liabilities
Interest rate swap - - - -
Derivatives used for hedging - 24 - 24
Total liabilities at 31 March 2015 - 24 - 24
Level 1£'000 Level 2£'000 Level 3£'000 Total£'000
Assets
Trading derivatives - - - -
Derivatives used for hedging - 39 - 39
Available-for-sale financial assets - - - -
Total assets as at 31 March 2014 - 39 - 39
Liabilities
Interest rate swap - 13 - 13
Derivatives used for hedging 432 - 432
Total liabilities at 31 March 2014 - 445 - 445
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 1.0% increase in
interest rates is £99,000 (2014 - £73,000) before tax. A 1% fall in interest rates gives the same but opposite effect. 1%
is considered an appropriate benchmark given the minimum level of movement in the UK interest rate over recent years and
expectation over the next financial year.
Foreign currency sensitivity
The Group is primarily exposed to 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
2015 £'000 2014£'000
US dollars 60 418
Euros 845 767
905 1,185
1,185
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 debt divided by total capital.
Net debt is calculated as total borrowings as shown in the consolidated balance sheet less cash and cash equivalents. Total
capital is calculated as 'equity' as shown in the balance sheet plus net debt.
2015 £'000 2014£'000
Total borrowings (note 18) 7,910 7,872
Less:
Total cash and cash equivalents (note 14) (451) (619)
Net debt 7,459 7,253
Total equity 31,756 31,370
Total capital 39,215 38,623
Gearing 19% 19%
20. DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the liability method.
The movement on the deferred tax account is as shown below:
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
At 1 April (1,722) (1,555) 126 148
Credit to Statement of Comprehensive Income (note 5) - origination and reversal of temporary differences (298) (46) (5) (22)
Exchange adjustments 52 (1) - -
Reclassification from current to deferred tax in Hornby France S.A.S - (120) - -
At 31 March (1,968) (1,722) 121 126
126
Deferred tax assets have been recognised in respect of tax losses in the Group with the exception of Hornby Deutschland and
Hornby Italia. In Hornby Italia the deferred tax assets recognised have been restricted to the amount expected to be
recoverable by profits generated in the entity over the next three years. Other temporary differences giving rise to
deferred tax assets have been recognised 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.
Group Company
Deferred tax liabilities Revaluation£'000 Accelerated capital allowances£'000 Other£'000 Total £'000 Revaluation £'000 Accelerated capital allowances£'000 Total £'000
At 1 April 2014 117 9 10 136 117 9 126
(Credit)/charge to Statement of Comprehensive Income (3) (2) - (5) (3) (2) (5)
At 31 March 2015 114 7 10 131 114 7 121
At 1 April 2013 139 9 11 159 139 9 148
(Credit)/charge to Statement of Comprehensive Income (22) - - (22) (22) - (22)
Foreign exchange (1) - - (1) - - -
At 31 March 2014 117 9 11 136 117 9 126
126
Of the total deferred tax liability of £131,000, £5,000 was due within one year for the Group (2014 - £5,000) and £5,000
for the Company (2014 - £5,000).
Group Company
Deferred tax assets Short-term incentive plan£'000 Acquisition intangibles£'000 Other£'000 Total £'000 Short-term incentive plan£'000 Total £'000
At 1 April 2014 - (142) (1,716) (1,858) - -
(Credit)/Charge to Statement of Comprehensive Income - (19) (274) (293)
Foreign exchange - - 52 52
At 31 March 2015 - (161) (1,938) (2,099)
At 1 April 2013 - (121) (1,593) (1,714) - -
Charge/(credit) to Statement of Comprehensive Income - (21) (3) (24) - -
Reclassification from current tax in Hornby France - - (120) (120) - -
At 31 March 2014 - (142) (1,717) (1,858) - -
Net deferred tax (asset)/liability
At 31 March 2015 (1,968) 121
At 31 March 2014 (1,722) 126
126
The deferred tax liability arising on the revaluation of freehold land and buildings in 1986 cannot be offset against
deferred tax assets. Therefore, the deferred tax asset of £2,099,000 (2014 - £1,858,000) and deferred tax liability of
£131,000 (2014 - £136,000) at 31 March 2015 and 31 March 2014 have been recognised separately.
2015 2014
GROUP Recognised £'000 Not recognised £'000 Recognised £'000 Not recognised £'000
Deferred tax comprises:
Depreciation in excess of capital allowances (1,054) - (805) -
Other temporary differences - UK (546) - (437) -
Other temporary differences - overseas (368) (934) (480) (922)
Deferred tax (asset)/liability (1,968) (934) (1,722) (922)
(922)
The net deferred tax asset not recognised of £934,000 represents the unrecognised losses in Hornby Deutschland of £67,000
(2014 - £55,000) and in Hornby Italia of £867,000 (2014 - £867,000).
2015 2014
COMPANY Recognised £'000 Not recognised £'000 Recognised £'000 Not recognised £'000
Deferred tax comprises:
Accelerated capital allowances 7 - 9 -
Other timing differences 114 - 117 -
Deferred tax liability 121 - 126 -
-
21. SHARE CAPITAL
GROUP AND COMPANY
Allotted, issued and fully paid:
2015 2014
Ordinary shares of 1p each Number of shares £'000 Number of shares £'000
At 1 April and 31 March 39,164,100 392 39,164,100 392
392
At 31 March 2015 options granted under the Company's share option schemes were outstanding as follows:
Number of options Exercise price Period of option
Date granted 2015 2014
9 June 2005 150,000 365,809 201.0p June 2008 - June 2015
150,000 365,809
365,809
The total number of options outstanding as at the date of this document represent approximately 0.9% (2014 - 0.9%) of the
issued share capital of the Company.
If the respective resolution is passed at the Annual General Meeting and the Company were to exercise the full authority to
buy-back approximately 10% of the issued ordinary shares of the Company, the above options would represent 1.0% (2014 -
1.0%) of the issued share capital of the Company.
22. SHARE-BASED PAYMENTS
Hornby Plc operates three share-based payment plans - Share Option Scheme ('SOS'), Short Term Incentive Plan ('STIP') and
Performance Share Plan ('PSP').
SOS awards
The SOS awards are a reward of share options to Executive Directors and senior management that vest after three years and
must be exercised in a four or seven year exercise window.
The awards issued in previous years were subject to a performance measure of Profit before Interest and Tax ('PBIT') or
Profit before Tax ('PBT') as disclosed by the Group's accounts for any of the years ended 31 March 2006, 31 March 2007, 31
March 2008, 31 March 2009 or 31 March 2010 excluding (i) any profit or loss in relation to property transactions, (ii) any
restructuring and abortive due diligence costs and (iii) any profits or losses arising from businesses acquired by the
Group after the date of grant of the Option. Some awards are subject to achieving a PBIT that is equal to or greater than
£8 million, or to PBT being equal to or greater than £9 million or aggregate PBT for three years ending 31 March 2008, 2009
and 2010 being equal to or greater than £32.7 million. The awards are equity settled.
Activity relating to share options for the years ended 31 March 2015 and 31 March 2014 was as follows:
2015 2014
Number Weighted average exercise price Number Weighted average exercise price
Outstanding at 1 April 365,809 201.0p 365,809 201.0p
Exercised - - - -
Lapsed (215,809) 201.0p - -
Outstanding at 31 March 150,000 201.0p 365,809 201.0p
201.0p
No options were exercised within the financial year (2014 - nil).
The following table summarises information relating to the number of shares under option (SOS awards) and those which were
exercisable at 31 March 2015.
Range of exercise prices Total shares under optionNumber Weighted average remaining contractual lifeMonths Options exercisable at 31 March 2015 Number Options exercisable at 31 March 2014Number Exercisable weighted average exercise price for options exercisable at 31 March 2015
£2.00 - £2.10 150,000 2 150,000 365,809 201.0p
150,000 365,809 201.0p
Performance Share Plan
All Performance Share Plan ('PSP') awards outstanding at 31 March 2015 vest only if performance conditions are met. Awards
granted under the PSP must be exercised within one year of the relevant award vesting date.
The Group operates the PSP for Executive Directors and senior executives. Awards under the scheme are granted in the form
of a nil-priced option, and are satisfied using market-purchased shares. The awards vest in full or in part dependent on
the satisfaction of specified performance targets. 40% of the award vests dependent on TSR performance over a three year
performance period, relative to the constituents of the FTSE Small Cap Index (excluding investment trusts) from the time of
grant, and the remaining 60% vests dependent on performance against earnings per share targets.
All plans are subject to continued employment. To the extent that such shares in the above plans are awarded to employees
below fair value, a charge calculated in accordance with IFRS 2 'Share-based payment' is included within other operating
expenses in the Statement of Comprehensive Income. This charge for the Group amount to £205,000 and the charge for the
Company amounted to £102,000 in the year ended 31 March 2015 (2014 - £274,000 charge for the Group and Company).
The following table summarises the key assumptions used for grants during the year:
2015 PSP1 2014 PSP1
Fair value (p) 46.14P 51.16p
Options pricing model used Black Scholes (Stochastic) Black Scholes (Stochastic)
Share price at grant date (p) 71.0p 81.5p
Exercise price (p) n/a n/a
Expected volatility (%) 34.2% 39.2%
Risk-free rate (%) n/a n/a
Expected option term (years) 3 3
Expected dividends (per year, %) 0% 0%
1Assumptions for TSR component only.
Assumptions on expected volatility and expected option term have been made on the basis of historical data, wherever
available, for the period corresponding with the vesting period of the option. Best estimates have been used where
historical data is not available in this respect.
23. EMPLOYEES AND DIRECTORS
Group Company
2015 £'000 2014£'000 2015 £'000 2014£'000
Staff costs for the year:
Wages and salaries 8,444 8,437 855 848
Share-based payments (note 22) 205 274 103 85
Social security costs 1,131 1,053 110 122
Other pension costs (note 24) 414 526 92 56
Redundancy and compensation for loss of office 16 173 - 40
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