REG - Hornby PLC - Half-year Report
23/11/2023 07:00
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RNS Number : 3572U Hornby PLC 23 November 2023
23 November 2023
HORNBY ANNOUNCES INTERIM RESULTS
Hornby Plc ("Hornby"), the international hobby products Group, today announces
its unaudited interim results for the six months ended 30 September 2023.
Interim Results Highlights
Financial
- Group revenue of £23.8 million (2022: £22.4 million) an increase
of 6% on prior year
- Underlying Operating Group loss before tax* of £4.2 million (2022:
loss of £1.5 million)
- Statutory loss before taxation for the period of £5.1 million
(2022: loss of £2.9 million)
- Net debt £14.6 million (September 2022: Net debt £4.9 million)
* Stated before exceptional items, FX, share based payment and amortisation of
intangibles.
Operational
- New senior team in place, including a Chief Marketing Officer (ex
Lego) and a Group Sales Director (ex Mattel)
- Launch of our first retail experience under the name The WonderWorks
(www.wonderworksmargate.co.uk (http://www.wonderworksmargate.co.uk) )
- Continued revenue growth in the digital channel, up +30% YOY
- Further progress made on driving price down on select products,
through further supply chain diversification into India.
Olly Raeburn, Hornby Chief Executive, commented:
"In a year of structural, strategic and operational change, we are starting to
see critical improvements in many areas of the business. Whilst topline
revenue is growing, and remains in line with management guidance for the full
year, there is a cost increase associated with what's being implemented. We
head into the key Christmas trading period with a strong order book, a full
calendar of promotional activity and a strong team in place. Whilst we do not
expect the full benefits of this year's initiatives to take effect until the
next financial year, I remain excited about the progress being made and look
forward to seeing the impact of these changes over the next 12 months."
-ends-
23 November 2023
Enquiries:
Hornby plc
Olly Raeburn, CEO
01843 233 500
Kirstie Gould, CFO
Liberum
Andrew Godber
020 3100 2222
Edward Thomas
Miquela Bezuidenhoudt
Hornby Plc ("Hornby" or "the Group")
INTERIM REPORT FOR THE SIX
MONTHS ENDED 30 SEPTEMBER 2023
CEO Statement
In my letter to shareholders as part of the Annual Report that was released in
June, I highlighted a number of key areas of focus for the remainder of this
financial year. To accompany these half year results, I shall talk to progress
made in some of those areas, as well as referencing the changes we have made
from a key personnel perspective.
Brand and Strategy
I shared details of the Brand Positioning work we had undertaken in the early
part of the year, identifying 'Building Happiness' as the core proposition for
Hornby, with our Mission being 'To build a happier world for all of us'. These
two organising thoughts have become integrated into our product and
communications planning this year and, more importantly, are a fundamental
component of the FY24 strategy and planning process.
Beyond the proposition work, a key part of my vision for the future sees the
Group being organised to give greater individuality to the brands, and that
process is already underway. It's an evolutionary transformation that should
see the brands, which have different audiences, develop in different ways and
at different rates.
Ultimately, we will see the structure of the Group evolve from a traditional
corporate hierarchy, towards a confederation of semi-autonomous,
brand-focused, business units. This approach will give those at the coal face
greater autonomy, accountability and capacity to obsess about the brands and
how to drive growth in distinctive ways.
Significant progress has been made during the last quarter, and we expect to
start implementing change before the end of the current financial year,
allowing us to see the associated benefits come through from the start of the
next one.
Product Development and Merchandising
One of the challenges we were facing as we exited the last financial year was
a significant stock holding on account of a combination of over-commitment and
under performance in the second half of last year. We committed to improving
our analysis of stock performance and inventory management, and to reduce the
volume of aged stock in the business, whilst protecting brand value by
avoiding aggressive discounting.
Our approach to inventory management is evolving, but we will not see the
impact and benefit of that until the second half of the next financial year
when the decisions made in the last 6 months flow through.
Whilst we materially reduced forward inventory orders at the start of the
year, the lead times in our supply chain mean we are still receiving product
from the orders placed between 12 and 18 months ago. This unavoidable reality,
combined with the normal stock build for forthcoming peak trading, means that
our overall stock holding in the business at the half year, remains at similar
levels to the start of the year. That said, we have reduced the amount of
stock aged more than 12 months, that we held at 31(st) March, by 18%, through
effective promotional activity and close management of key existing retailer
relationships.
Additionally, we have opened up new channels through rekindling some lapsed
relationships with valuable National retailers, and adding additional, sector
specific, independent retailers to our portfolio. That said, as we hit the
half year, our inventory position still remains high on account of the natural
stock build ahead of peak trading.
Entry Level Product and Pricing
Having identified a clear opportunity to present some of our product at more
accessible prices, we have undertaken a number of workstreams in this area. We
have developed some prototype entry-level priced Hornby train sets and
Scalextric sets that were well received when presented to potential buyers at
the New York Toy Fair at the end of September. We are continuing to develop
this initiative through gleaning end-consumer feedback and further buyer
input.
Additionally, we have now moved production of the majority of our Quickbuild
product from the UK to India where we will see significant savings, enabling
us to present this high-potential range at a much more attractive price point
from the end of the current financial year.
Data, Loyalty and CRM
In the Annual Report I talked about our desire to use pre-existing data to
start to build better relationships with our customers, based on their
preferences and their behaviours. Since then, through our Customer Loyalty
Lead, we have been able to build a view of previous browsing and transaction
history to create a series of automated CRM / email journeys to drive
consideration and purchase.
Launched in August, these programmes are running in the background and created
c£100K of incremental revenue in their first six weeks. This is just the
beginning and we are increasing the number of 'live' journeys to ensure this
revenue stream continues to grow, adding value and contribution on an ongoing
basis.
As our understanding of customer behaviour deepens, so too will the volume and
impact of the automated CRM journeys that will continue to run in the
background, supporting our BAU customer development activities.
Customer Experience and Retail
One of the first outward manifestations of the new strategy at Hornby is the
opening of The
WonderWorks in Margate (www.wonderworksmargate.co.uk
(http://www.wonderworksmargate.co.uk) ) on the site of the old Hornby
Visitors' Centre. Our first experiential site is set over 11,000 sq ft of
engaging and immersive space, comprising an exhibit, a large retail space and
a café.
This is our first experiential site that hosts all the hobbies and products of
the Group, including Warlord Games. Many new concepts are being trialled for
the first time, and once we have learned lessons from this site, and assuming
it is successful, we aim to develop more sites in the future.
We opened the doors to The WonderWorks in Margate on 30(th) October and,
whilst it's early days, we have
consistently seen close to 100% increases in revenues from the site, versus
the same period last year through the Hornby Visitors' Centre.
As evidenced in the progress we're making with Data, Loyalty and CRM, we want
to develop deeper, more
insight driven, direct relationships with our existing and potential
customers; The WonderWorks is another way in which we can begin do that, and
early reactions give us high hopes for its success.
People Changes
Much of what I have described above represents a new direction for Hornby, and
a critical contributing factor to our future success relies on us having the
right people in key roles. With the departures of Simon Kohler (Marketing and
Development Director) and Tim Mulhall (COO) earlier in the year, we have
invested in a handful of high calibre, senior, individuals to help drive the
new strategy forward, including;
· Chief Marketing Officer (ex Lego)
· Group Sales Director (ex Mattel)
· Head of Export Sales (ex WHSmith)
· Head of Research and Insight (ex Lego)
With a stronger and more diverse senior team in place we are already starting
to see the impact of new strategies for improving performance, albeit the
benefits will accelerate and truly start to flow through into the next
financial year.
Digital Update
Direct sales via our website continue to increase, with a year-on-year uplift
of more than 30% in the first two quarters of 2023/24. I expect this increase
to continue to accelerate into the second half of our financial year.
Q1 Q2 Q3 Q4
2018/19 £301,100 £479,767 £582,434 £362,688
2019/20 £426,382 £497,494 £731,252 £638,260
2020/21 £1,222,578 £1,169,936 £1,574,834 £976,711
2021/22 £849,782 £1,038,172 £2,128,918 £1,687,916
2022/23 £1,389,736 £1,519,917 £2,834,467 £2,863,283
2023/24 £1,787,510 £1,981,956
In addition to a general improvement in performance, we are also seeing the
benefits of bringing more digital capability in-house and relying less on
external agency support. This not only allows us to be more agile and
responsive but also upskills the organisation, making us better fit for future
growth.
Outlook
As with the 2022/2023 financial year, we expect profitability to be depressed
in 2023/2024 as we restructure the business and make necessary investments in
people and processes. We certainly expect 2023/2024 to show improvement at the
topline, and our guidance of 'high single digit / low double digit revenue
growth' remains unchanged. It is from next year onwards that we are targeting
a return to profitability as the restructuring improves efficiencies and
margins on continued increasing revenues.
As far as current trading and the outlook for the second half of the year are
concerned, our order book is strong and although, like everyone, we are seeing
the ramp up into Christmas trade coming later than in previous years, we are
starting to see some encouraging increases in performance. We have a stronger
calendar of seasonal promotional activities than in previous years and are
operating in a far more joined up way in execution, so remain positive about
the potential for the coming months.
A more comprehensive analysis of the year will be given in the January 2024
trading update.
Financial review
Performance
Group revenue for the six months to September 2023 of £23.8 million was 6%
higher than the prior year (2022: £22.4 million). The gross margin for the
period was 44% (2022: 48%), a slight decrease reflecting the product/channel
mix in the first half of 2023 compared to prior year and increased tooling
amortisation costs.
Underlying overheads increased year-on-year from £12.5 million to £14.6
million, or by 17%, reflecting an increase in minimum wages, general
inflationary increases and increased focus on direct selling routes and
e-commerce costs including personnel.
The operating loss before exceptional costs (including IFRS 16) for the six
months to September 2023 was £4.3 million compared to a loss of £2.6 million
for the same period last year. This is due to the increased overheads as
mentioned above and changes to senior staff within sales and marketing and
associated costs.
Exceptional costs during the first half year were £0.05 million (2022: £0.2
million) and these comprised of one-off costs relating to the departure of 2
senior executives.
Group loss before tax was £5.1 million (2022: loss of £2.9 million). The
basic loss per share was 3.00p (2022: loss per share of 1.29p).
Segmental analysis
Third party revenue for the UK business increased by 4% in the period and
generated a loss before taxation of £5.0 million compared to £2.3 million
loss last year. Revenue for the first half of 2023 has increased slightly
compared with the same period last year due to the increase in sales direct to
consumers.
The International segment revenue decreased by 17% in the period and generated
an underlying loss of £0.1 million (2022: £0.6 million loss). The decrease
in revenue is a result of the global cost of living crisis impacting European
markets..
Balance sheet
Group inventories increased during the period by 13% from £21.3 million at
March 2023 to £24.1 million at September 2023, due to a seasonal build-up of
stocks in the lead-up to the busy Christmas trading period.
Trade & other receivables and Trade & other payables are higher than
the start of the year due to seasonality of the business.
Investment in new tooling, new computer software and other capital expenditure
was £2.9 million (2022: £1.9 million).
Capital structure
There was an increase in net debt compared to 31 March 2023. The September
period end net debt balance stood at £14.8 million, from £5.5 million of net
debt at the end of the last financial year. This is due to the operational
cash outflow in the business, purchase of 25% stake in Warlord Games Limited
which was announced on 7 July 2023, spending on stocks and tooling ahead of
Christmas trading as budgeted and increased overheads as we continue to invest
in people and technology. Headroom at 30 September 2023 was £5 million.
Going concern
The Group has in place a £12.0 million Asset Based Lending (ABL) facility
with Secure Trust Bank Limited (STB) through to October 2024. The STB
Covenants are customary operational covenants applied on a monthly basis. In
addition, the Group has a committed £11.25 million loan facility with Phoenix
Asset Management Partners Limited (the Group's largest shareholder) which runs
through to December 2024. The Group also carries a Covid Business Interruption
Loan (CBIL) liability as a result of the acquisition of LCD Enterprises
Limited on 30 July 2021. Balance at 30 September 2023 is £142,000.
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, 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. For these reasons, they continue to adopt the
going concern basis of accounting in preparing the financial statements.
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2023
Six months to Six months to Year to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
REVENUE 4 23,794 22,410 55,105
Cost of Sales (13,368) (11,683) (28,166)
GROSS PROFIT 10,426 10,727 26,939
Distribution costs (3,988) (3,833) (8,196)
Selling and marketing costs (6,487) (5,003) (11,448)
Administrative expenses (4,109) (4,183) (7,712)
Other operating expenses (157) (328) (653)
OPERATING PROFIT/(LOSS) BEFORE EXCEPTIONAL (4,315) (2,620) (1,070)
Exceptional Items 5 (47) (148) (3,974)
OPERATING PROFIT/(LOSS) (4,362) (2,768) (5,044)
Finance income 11 4 11
Finance costs (725) (122) (843)
Net finance costs (714) (118) (832)
Share of profit of investments accounted for using the equity method (2) - -
PROFIT/(LOSS) BEFORE TAXATION 4 (5,078) (2,886) (5,876)
Taxation 13 (14) 87 (46)
PROFIT/(LOSS) FOR THE PERIOD AFTER TAXATION (5,092) (2,799) (5,922)
OTHER COMPREHENSIVE INCOME/(LOSS)
(Items that may be classified subsequently to profit and loss)
Cash flow hedges 794 793 (932)
Currency translation differences 48 441 161
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD, NET OF TAX 842 1,234 (771)
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (4,250) (1,565) (6,693)
Comprehensive income attributable to:
Equity holders of the Company (4,234) (1,544) (6,676)
Non-controlling interests (16) (21) (17)
(LOSS)/PROFIT PER ORDINARY SHARE
Basic (3.00)p (1.29)p (3.50)p
Diluted (3.00)p (1.29)p (3.50)p
All of the activities of the Group are continuing. The notes form an integral
part of this condensed consolidated half-yearly financial information.
BALANCE SHEET
As at 30 September 2023
Six months to Six months to Year to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
ASSETS
NON-CURRENT ASSETS
Goodwill 6 1,731 4,647 1,732
Intangible assets 6 2,724 3,097 2,986
Investment 7 1,437 - -
Property, plant and equipment 6 13,786 10,477 12,041
Right of Use Lease Asset 8 2,144 2,484 2,087
Deferred income tax assets 3,571 3,423 3,571
25,393 24,128 22,417
CURRENT ASSETS
Inventories 24,112 22,548 21,282
Trade and other receivables 9,115 9,154 9,181
Derivative financial instruments 12 256 1,808 2
Cash and cash equivalents 1,014 1,874 1,337
34,497 35,384 31,802
LIABILITIES
CURRENT LIABILITIES
Borrowings 11 (6,219) (5,558) (6,750)
Derivative financial instruments 12 (17) - (557)
Trade and other payables (9,509) (8,454) (8,067)
Lease liabilities (403) (450) (409)
(16,148) (14,462) (15,783)
NET CURRENT ASSETS 18,349 20,922 16,019
NON-CURRENT LIABILITIES
Borrowings 11 (9,595) (1,252) (117)
Lease liabilities 9 (2,125) (2,213) (2,047)
Deferred tax liabilities (233) (233) (233)
(11,953) (3,698) (2,397)
. .
NET ASSETS 31,789 41,352 36,039
SHAREHOLDERS' EQUITY
Share capital 10 1,699 1,698 1,699
Share premium 52,857 52,857 52,857
Capital redemption reserve 55 55 55
Translation reserve (1,605) (1,373) (1,653)
Hedging reserve 239 1,356 (555)
Other reserves 1,688 1,688 1,688
Retained earnings (23,123) (14,920) (18,047)
Equity attibutable to PLC shareholders 31,810 41,361 36,044
Non-controlling interests (21) (9) (5)
Total equity 31,789 41,352 36,039
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2023
Capital
Share Share redemption Translation Hedging Other Non-controlling Retained Total
capital premium reserve reserve reserve reserves interests earnings equity
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2023 1,699 52,857 55 (1,653) (555) 1,688 (5) (18,047) 36,039
Profit for the period - - - - - - (16) (5,076) (5,092)
Other comprehensive income/(loss) for the period - - - 48 794 - - - 842
Total comprehensive loss for the period - - - 48 794 - (16) (5,076) (4,250)
Balance at 30 September 2023 1,699 52,857 55 (1,605) 239 1,688 (21) (23,123) 31,789
Balance at 1 April 2022 1,669 52,857 55 (1,814) 377 1,688 12 (11,734) 43,110
Profit for the period - - - - - - (21) (2,778) (2,799)
Other comprehensive income/(loss) for the period - - - 441 979 - - - 1,420
Total comprehensive loss for the period - - - 441 979 - (21) (2,778) (1,379)
Transactions with owners -
Share based payments 29 - - - - - - (408) (379)
Total transactions with owners 29 (408) (379)
Balance at 30 September 2022 1,698 52,857 55 (1,373) 1,356 1,688 (9) (14,920) 41,352
The notes form an integral part of this condensed consolidated half-yearly
financial information.
STATEMENT OF CASH FLOWS
for the six months ended 30 September 2023
Six months to Six months to Year to
30 September 30 September 31 March
Note 2023 2022 2023
£'000 £'000 £'000
Loss before taxation (5,078) (2,886) (5,875)
Interest payable 653 43 322
Interest paid on Lease liabilities 9 72 79 153
Interest receivable (11) (4) (11)
Share of profit of Minority Interest 2 - -
Amortisation of intangible assets 288 259 553
Impairment of Goodwill - - 2,915
Depreciation 1,819 1,311 2,762
Depreciation on right of use assets 8 243 267 528
Share-based payments (non cash) - 532 532
Share-based payments (cash) - (919) (940)
Decrease / (increase) in inventories (2,799) (5,700) (4,680)
Decrease / (increase) in trade and other receivables 225 (199) (373)
(Decrease) / increase in trade and other payables 1,301 634 733
Cash flows from operating activities (3,285) (6,583) (3,381)
Interest paid (653) (43) (322)
Interest element of ROU lease payments (72) (79) (153)
Net cash (used in)/generated from operating activities (4,010) (6,705) (3,856)
Cash flows from investing activities
Purchase of business 7 (1,439) - -
Purchase of property, plant and equipment 6 (3,562) (1,720) (4,744)
Purchase of intangible assets 6 (25) (168) (351)
Interest received 11 4 11
Net cash (used in)/generated from investing activities (5,015) (1,884) (5,084)
Cash flows from financing activities
Proceeds from issuance of ordinary shares - 30 30
Repayment of CBIL loan (50) (25) (50)
Proceeds from Asset Based Lending Facility 1,579 5,508 4,590
Shareholder Loan 7,418 1,000 2,000
Payment of lease liabilities (228) (248) (460)
Net cash generated from/(used in) financing activities 8,719 6,265 6,110
Net (decrease)/increase in cash and cash equivalents (306) (2,324) (2,830)
Cash, cash equivalents and bank overdrafts at beginning of the year 1,337 4,139 4,139
Effect of exchange rate movements (17) 59 28
Cash, cash equivalents and bank overdrafts at end of year 1,014 1,874 1,337
Cash, cash equivalents and bank overdrafts consist of:
Cash and cash equivalents 1,014 1,874 1,337
Cash, cash equivalents and bank overdrafts at end of year 1,014 1,874 1,337
The notes form an integral part of this condensed consolidated half-yearly
financial information.
NOTES TO CONDENSED CONSOLIDATED HALF-YEARLY FINANCIAL REPORT
1. 1. GENERAL INFORMATION
The Company is a public limited liability company incorporated and domiciled
in the UK. The address of the registered office is Enterprise Road, Westwood
Industrial Estate, Margate, CT9 4JX. The Group is principally engaged in the
development, design, sourcing and distribution of hobby and interactive home
entertainment products.
The Company has its primary listing on the Alternative Investment Market and
is registered in England No. 01547390.
This condensed consolidated half-yearly financial information was approved for
issue on 22 November 2023.
This condensed consolidated half-yearly financial information does not
comprise statutory accounts within the meaning of Section 434 of the Companies
Act 2006 and is unaudited. Statutory accounts for the year ended 31 March 2023
were approved by the Board of Directors on 21 June 2023 and delivered to the
Registrar of Companies. The Report of the Auditors on those accounts was
unqualified and did not contain any statement under Section 498 of the
Companies Act 2006.
Forward Looking Statements
Certain statements in this half-yearly report are forward-looking. Although
the Group believes that the expectations reflected in these forward-looking
statements are reasonable, we can give no assurance that these expectations
will prove to be correct. Because these statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by these forward-looking statements.
We undertake no obligation to update any forward-looking statements whether as
a result of new information, future events or otherwise.
2. BASIS OF PREPARATION
The financial statements are presented in sterling, which is the Parent's
functional currency and the Group's presentation currency. The figures shown
in the financial statements are rounded to the nearest thousand pounds.
This condensed consolidated half-yearly financial information for the
half-year ended 30 September 2023 has been prepared in accordance with IAS 34
'Interim Financial Reporting'. The half-yearly condensed consolidated
financial report should be read in conjunction with the annual financial
statements for the year ended 31 March 2023 which have been prepared in
accordance with UK-adopted international accounting standards. The
consolidated Group 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.
The preparation of financial statements in conformity with IFRS 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.
3. ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2023, as described in those
annual financial statements with the exception of tax which is accrued using
the tax rate that would be applicable to expected total annual earnings.
Judgements and Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing this condensed consolidated half-yearly financial report, the
significant judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the same as those
that applied to the consolidated financial statements for the year ended 31
March 2023.
Financial Instruments
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk.
The condensed consolidated half-yearly financial report does not include all
financial risk management information and disclosures required in the annual
financial statements and should be read in conjunction with the Group's annual
financial statements as at 31 March 2023.
There have been no changes in the risk management policies since year end.
The Group's financial instruments, measured at fair value, are all classed as
level 2 in the fair value hierarchy, which is unchanged from 31 March 2023.
Further details of the Group's financial instruments are set out within note
12 of this half-yearly report as required by IFRS 13.
4. SEGMENT INFORMATION
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.
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 rest of Europe. Although these segments do not meet the quantitative
thresholds required by IFRS 8, management has concluded that these segments
should be reported, as it is closely monitored by the chief operating
decision-maker.
Total
UK USA Spain Italy Rest of Europe Intra Group Reportable Segments
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Six months ended 30 September 2023 (unaudited)
Revenue - External 16,932 1,788 978 1,504 2,592 - 23,794
Inter-segment revenue 1,502 - - - - (1,502) -
Operating (Loss)/Profit (4,441) (248) 36 130 161 - (4,362)
Finance income - external 11 - - - - - 11
Finance income - other segments 230 - - - - - 230
Finance costs - external (719) (4) (1) (1) - - (725)
Finance costs - other segments (87) 0 (107) 0 (36) - (230)
Share of profit of investments accounted for using the equity method (2) - - - - - (2)
(Loss)/Profit before taxation (5,008) (252) (72) 129 125 - (5,078)
Taxation - - - - (14) - (14)
Profit/(Loss) after taxation (5,008) (252) (72) 129 111 - (5,092)
5. EXCEPTIONAL ITEMS
Six months to Six months to Year to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Exceptional items comprise: - - -
- Refinancing costs - 149 149
- Hornby World Experience - - 910
- Goodwill impairment - - 2,915
- Restructuring costs 47 - -
47 149 3,974
The exceptional items totalling £47,000 (2022: £148,000) include
restructuring costs within senior management within sales and marketing.
6. TANGIBLE AND INTANGIBLE ASSETS AND GOODWILL
The additions comprise new product tooling (£2,783,000), property, plant and
equipment (£60,000) and intangible assets - computer software (£25,000).
The Group has again performed impairment reviews as at 30 September 2023 and
consider the carrying value of the assets held to be recoverable. The discount
rates and key assumptions used within the updated models at 30 September 2023
have remained constant with the impairment reviews conducted in March 2023.
Tangible and intangible assets and goodwill (unaudited) Six months ended Six months ended
30 September 2023 30 September 2022
£'000 £'000
Opening net book amount 1 April 2023 and 1 April 2023 16,759 17,888
Exchange adjustment 2 14
Additions 2,868 1,888
Depreciation, amortisation and impairment (2,107) (1,569)
Closing net book amount 30 September 2023 and 30 September 2022 17,522 18,221
2023 2022
CAPITAL COMMITMENTS (unaudited) (unaudited)
£'000 £'000
At 30 September commitments were:
Contracted for but not provided for 2,175 3,033
The commitments relate to the acquisition of tooling as part of property,
plant and equipment.
7. INVESTMENTS
Interests in associate undertakings at cost £'000
At 1 April 2023 -
Acquisition of 25% of Warlord Games Limited including costs 1,439
Share of profit of investments accounted for using the equity method (2)
At 30 September 2023 1,437
On 7 July 2023 Hornby Plc acquired a 25% share in Warlord Games Limited for
cash consideration of £1.25 million. Hornby has the option to acquire a
majority stake in Warlord on or around the second anniversary of this initial
acquisition and then to acquire any remaining shares in Warlord on future
anniversaries.
Warlord will continue to be managed by its existing Directors and the Company
believes that this transaction creates a number of opportunities to accelerate
growth of the business further still.
8. RIGHT OF USE ASSETS
GROUP Property Motor Fixtures, Fittings and Equipment Total
Vehicles
£'000
£'000 £'000 £'000
COST
At 1 April 2023 3,757 310 22 4,089
Additions at cost 297 3 - 300
At 30 September 2023 4,054 313 22 4,389
ACCUMULATED DEPRECIATION
At 1 April 2023 1,697 287 18 2,002
Charge 220 23 - 243
At 30 September 2023 1,917 310 18 2,245
Net book amount at 30 September 2023 2,137 3 4 2,144
9. RIGHT OF USE LEASE LIABILITIES
The movement in the right of use lease liabilities over the period was as
follows:
2023 2022
£'000 £'000
As at 1 April 2023 2,456 2,746
New leases 300 166
Interest payable 72 79
Repayment of lease liabilities (300) (328)
As at 30 September 2023 2,528 2,663
Lease liability less than one year 403 450
Lease liability greater than one year and less than five years 677 613
Lease liability greater than five years 1,448 1,600
Total Liability 2,528 2,663
Maturity analysis of contracted undiscounted cashflows is as follows:
30 September 2023 30 September 2022
£'000 £'000
Lease liability less than one year 549 601
Lease liability greater than one year and less than five years 1,143 1,048
Lease liability greater than five years 1,911 2,200
Total Liability 3,603 3,849
Finance charges included above (1,075) (1,186)
2,528 2,663
10. SHARE CAPITAL
At 30 September 2023 the Group had 169,853,770 ordinary 1p shares in issue
with nominal value £1,698,538 (2022: £1,698,538).
11. BORROWINGS
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (unaudited)
£'000 £'000 £'000
SECURED BORROWING AT AMORTISED COST
CBIL Bank Loan (146) (192) (167)
Shareholder Loan (9,499) (1,110) (2,110)
ABL Facility (6,169) (5,508) (4,590)
(15,814) (6,810) (6,867)
Total borrowings
Amounts due for settlement within 12 months (6,219) (5,558) (6,750)
Amounts due for settlement after 12 months (9,595) (1,252) (117)
(15,814) (6,810) (6,867)
At 30 September 2023 the Group has in place a £12.0 million Asset Based
Lending (ABL) facility with Secure Trust Bank PLC through to October 2024. The
Covenants are customary operational covenants applied on a monthly basis. The
Group also has a CBIL loan with Barclays, acquired as part of the LCD
acquisition. The CBIL payback commenced in August 2021 and finishes July 2026.
In addition, the Group has a committed £11.25 million loan facility with
Phoenix Asset Management Partners Limited (the Group's largest shareholder) if
it should be required. The facility currently expires December 2024.
In the period to 30 September 2023 loan repayments were £25,000 (2022:
£25,000).
12. FINANCIAL INSTRUMENTS
The following tables present the Group's assets and liabilities that are
measured at fair value at 30 September 2023 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 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 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, trade
and other payables and bank overdrafts and borrowings.
Fair values are determined by a process involving discussions between the
Group finance team and the Audit Committee which occur at least once every 6
months in line with the Group's reporting dates.
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Derivatives used for hedging - 256 - 256
Total assets as at 30 September 2023 - 256 - 256
Liabilities
Derivatives used for hedging - (17) - (17)
Total liabilities at 30 September 2023 - (17) - (17)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Derivatives used for hedging - 2 - 2
Total assets at 31 March 2023 - 2 - 2
Liabilities
Derivatives used for hedging - (557) - (557)
Total liabilities at 31 March 2023 - (557) - (557)
13. TAXATION
The Group has elected not to recognise a deferred tax movement on the half
year losses at this time and there is no tax credit associated with this in
the profit and loss. There is a small credit associated with a prior year
adjustment on current taxation. The Group has significant brought forward
trading losses which can be utilised.
14. EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share attributable to equity holders of the Company arises
from continuing operations as follows:
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Earnings/(loss) per share from continuing operations
attributable to the equity of the Company
- basic (3.00)p (1.29)p (3.50)p
- diluted (3.00)p (1.29)p (3.50)p
15. DIVIDENDS
No interim dividend has been declared for the interim period ended 30
September 2023 (2022: £nil).
16. 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.
17. PERFORMANCE SHARE PLANS AWARDS
At 30 September 2023, there are no outstanding awards to Directors under any
PSP schemes:
18. RELATED-PARTY TRANSACTIONS
Key management compensation amounted to £769,000 for
the six months to 30 September 2023 (2022: £1,083,000). Key management
include directors and senior management. For the period to 30 September 2023:
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Salaries and other short-term benefits 692 528 1,022
Other pension costs 32 23 47
Compensation for loss of office 45 - -
Share-based payments - 532 532
769 1,083 1,601
Phoenix Asset Management Partners who own the majority shareholding in Hornby
PLC have also provided a funding facility to the Group. During the period
interest fees of £396,426 were accrued and remain unpaid at 30 September
2023.
Hornby Hobbies Limited purchased services totalling £471,808 from Rawnet
Limited which is 100% owned by Phoenix Asset Management, the controlling party
of the Group. At 30 September 2023 £96,790 was owing to Rawnet Limited for
services rendered.
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.
19. RISKS AND UNCERTAINTIES
The Board has reviewed the principal risks and uncertainties and have
concluded that the key risks continue to be UK market dependence, market
conditions, exchange rates, supply chain, product compliance and liquidity.
The disclosures on pages 11 and 12 of the Group's Annual report for the year
ended 31 March 2023 provide a description of each risk along with the
associated impact and mitigating actions. The Board will continue to focus on
risk mitigation plans to address these areas.
20. SEASONALITY
Sales are subject to seasonal fluctuations, with peak demand in the October -
December quarter. For the six months ended 30 September 2023 sales
represented 43 per cent of the annual sales for the year ended 31 March 2023
(2022: 42 per cent of the annual sales for the year ended 31 March 2022).
21. SUBSEQUENT EVENTS
No other significant events have occurred between the end of the reporting
period and the date of signature of the Annual Report and Accounts.
By order of the Board
Oliver
Raeburn
Kirstie Gould
Chief
Executive
Chief Finance Officer
22 November 2023
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