REG - Hornby PLC - Half-year Report
20/11/2024 07:00
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RNS Number : 8353M Hornby PLC 20 November 2024
20 November 2024
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 2024.
Interim Results Highlights
Financial
- Group revenue of £25.0 million (2023: £22.7 million) an
increase of 10% on prior year
- Operating Group loss before exceptionals of £3.8 million (2023:
loss of £4.1 million)
- Statutory loss before taxation for the period of £5.1 million
(2023: loss of £4.9 million)
- Inventory at 30 September of £19.8 million (2023: £24.1
million) a decrease of 18%
- Net debt £18.9 million (September 2023: Net debt £14.8
million)
Operational
- A continued focus on customer research and insights - informing
new product selection and identifying new routes to market
- Headcount reduction and restructuring in September - removed
c£1 million annualised central cost, with a further £500K to come out in
2025
- Moving Logistics operations from incumbent in Kent to a new
partner in the Midlands - driving significant operational, service and cost
efficiencies in 2025
- New COO recently appointed to drive the operational backbone of
the business - Logistics, Purchasing, Supply Chain, Quality and Demand
Planning
- Rationalisation of portfolio of brands - sale of Oxford Diecast
generates capital, reduces inventory position and allows a greater focus on
Corgi in diecast collectables
- Digital channel continues to perform well - revenues of +12% vs
H1 2023 and +45% H1 2022
Post year end
- On 5 November 2024, Hornby announced the proposed disposal of
interests in LCD Enterpises Limited for an aggregate consideration of
approximately £1.38 million.
Olly Raeburn, Hornby Chief Executive, commented:
We continue to make good progress with our turnaround strategy. H1 2024 has
seen us make a number of strategic and structural changes. These will deliver
clear operational efficiencies and significant cost savings. Whilst the impact
of some of these decisions will not be fully felt until the next financial
year, we are firmly focused on right-sizing the business for sustainable
growth. Revenue performance versus last year has been solid, and we exit the
half year with a clear, and aggressive, plan for maintaining that momentum
through the critical Black Friday and Christmas trading periods. As ever, the
third quarter is a crucial one for us so we look forward to sharing the
outcomes in our January update.
-ends-
20 November 2024
Enquiries:
Hornby plc
Olly Raeburn, CEO
01843 233 500
Kirstie Gould, CFO
Holly Barnett, Head of PR
Panmure
Liberum
Andrew Godber
020 3100 2222
Edward Thomas
Ailsa MacMaster
Hornby Plc ("Hornby" or "the Group")
INTERIM REPORT FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2024
CEO Statement
Having been in the role for a little over 18 months, we are now half-way
through a three-year turnaround at the end of September 2024. Whilst the first
12 months were spent assessing, understanding and stabilising, in the last 6
months we have started to see the impact of some of the actions taken,
strategically, structurally and operationally.
Whilst the turnaround is well underway and progress is being made, there is
still further work required before we are back to consistent and profitable
growth. That said, we are on the right track and see improvements vs H1 2023
on a number of critical KPIs.
Hornby Hobbies boasts a family of world-renowned brands and is a wonderful
business, with a great heritage and enormous potential. The build-up of
challenges on multiple fronts, however, including ambitious CapEx commitments,
rising central costs, excessive inventory levels and growing debt, needed to
be addressed with purpose. These actions were required to lay a solid and
sustainable foundation for future success.
In this letter to shareholders, I will shine a light on some of the
initiatives that are driving a much-needed change of direction and giving us
growing confidence that we can deliver the improvements required.
Insight Driven Decision Making
I have shared, in my previous reports, details of the creation of an Insights
function in the business for the first time. Launched with the hire of our
Head of Insights in January 2024, we set about the process of better
understanding our customers, both existing and potential, their needs, desires
and experiences.
Customer insights are already starting to inform actions and decisions for our
brands. Customers of the Scalextric brand, for example, have demonstrated a
great love for the product, but a combination of lack of visibility and
inaccessible pricing for, sets in particular, has impacted performance in
recent years. The Airfix product range serves existing, loyal and valuable,
customers very well but we haven't seen macro brand growth. Through our
insights work we've identified the need to explore new Airfix subject matter
to attract new audiences and find new routes to market.
Similarly, the Hornby brand provides wonderful, high quality, product and
experiences for established railway hobbyists, a vital and enormously
important customer group. However, our insights work highlights that it is
through strengthening our entry level proposition, and continuing to support
the TT:120 scale, that we will attract new customers for future growth.
These insights, and many more, all supported by robust data, are baked into
our product development, communication and pricing plans as we move forward.
This work helps us acquire new customers as well as supporting existing ones,
enabling long term growth for our brands.
New Territories and New Routes to Market
It is clear that a key component in driving growth needs to come from opening
up new territories and identifying new routes to market. We have already
enjoyed successes in finding new distribution through national retail partners
in the United States. From October this year, and for the first time, we have
our Airfix and Quickbuild product in more than 2,500 stores through the
Michael's and Lowes chains across North America. These are businesses of
significant scale with 2023 turnover of over $5Bn and over $90Bn,
respectively, helping us present our products to an important, and untapped,
new customer base
The scale and impact of these new listings, along with the reintroduction of
the full Humbrol range to 130 HobbyCraft stores across the UK in July this
year, has contributed to a 20% uplift in total units sold across the group in
H1 2024 vs H1 2023.
Equally, there has been some good work undertaken in recent months to secure
new distribution partners in China, initially for the Pocher brand. There is a
significant opportunity to grow the footprint of this premium brand in the Far
East. That work is bearing fruit already, with new orders for over 1,000 units
coming from the first, exploratory commitments from new partners.
I am delighted to report that we have also recently secured an exclusive
licensing agreement with Ferrari for the Pocher brand. The appeal of the
Ferrari marque, globally, helps us establish a footprint in the Far East, in
addition to our existing European and North American footprint. With the first
Ferrari kits being made available in early 2026, this represents a significant
growth opportunity for the future.
CapEx Analysis and Range Planning
In the first half of this year we have conducted a detailed analysis of the
impact of our CapEx investments over recent years, across the portfolio.
Whilst it is clear that many of the CapEx choices, and the associated
allocation of capital, have been effective in isolation, we have not paid
enough attention to the role of CapEx investment in driving overall brand
growth.
The foundational work that has taken place over the last 6 months has
generated valuable insights into the need to revisit our approach to range
planning. Finding the balance between new CapEx for traditional subject
matter, supporting our installed customer base, and investing in new CapEx for
growth areas to drive new customer acquisition, marks a critical change in
approach.
The outcomes of this work will start to flow through in 2025/26 CapEx
projects, and we will share more detail on these developments in our full year
report.
Acquisitions and Portfolio Rationalisation
The acquisition of The Corgi Model Club (CMC) and the securing of the services
of Guy Stainthorpe, the MD of that business, as our Corgi Brand MD, have
already proven to be very effective additions to the Hornby Hobbies family.
CMC has gone from strength to strength since we acquired the business, and we
have used our infrastructure to launch the proposition in the US and in
Australia in the last 6 months. It is also worth noting that, under Guy's
leadership, the Corgi brand, in totality, is not only outperforming previous
year performance, but also this year's forecast.
Our portfolio is a great asset, but we recognise that a successful business
for the future requires a determined focus on our core brands. We have
recently agreed terms for the sale of the, loss-making, Oxford Diecast brand,
which both simplifies and focuses our diecast collectibles proposition to the
Corgi brand, alone, and has a welcome and positive impact on our inventory
position at Group level.
Aged Stock and Inventory Management
As reported in every update since I started in role last January, we continue
to work hard on managing our aged stock and inventory position. Whilst
reducing this historical build up is a priority, we are always mindful of
striking the balance between driving the absolute number down and,
potentially, damaging our future business through releasing too much stock
into the market at unfavourable prices.
The teams are working on this challenge on a daily basis and H1 2024 shows a
reduction of 7% in inventory levels vs H1 2023. Moreover, the recent sale of
the Oxford Diecast brand, subject to shareholder approval, will reduce the
position by a further 11%.
Central Overheads
We have enjoyed revenue growth at the top line for 5 years in a row, but our
return to profitability has been held back, in part, by a central cost base
that has grown disproportionately over the years and is suited to a larger
business.
In H1 2024 we spent a great deal of time looking at structures and costs
across the organisation and enacted a significant headcount reduction in the
Margate Head Office in September.
This initiative has reduced our annualised people costs by c£1M and we
anticipate a further £500K of central costs coming out by July 2025.
We continue to review our central overheads, and cost base in totality, and
there are a number of live initiatives in play that will further, positively,
impact this number moving forwards.
Efficiencies in Logistics and Distribution
In addition to driving efficiencies in cost, we have also been looking at all
significant operating areas of the business through the same lens.
In H1 2024, as a break in contract with our current partner presented itself,
we went to market to benchmark service levels and understand the potential
impact of relocating to a more established third-party logistics provider.
This process has concluded in recent weeks and will see us moving to a new
third-party logistics provider at the end of the first quarter of the next
financial year.
Given the increased scale of the operation and the number of additional
businesses served by our new provider, the move will result in greater
flexibility in how we serve our UK digital customers, and will significantly
improve our ability to support our international business and platforms like
Amazon and eBay.
Whilst cost was not necessarily a key driver for the exploration at the
outset, there are significant commercial benefits to be gained from relocating
operations from Kent to the middle of the country, closer to a national
delivery hub, and we will also see ongoing savings as a result of changes in
process and new technology that come from the move.
Strengthening the Leadership Team
We reported the appointment of Neil Sachdev to our Board as Non-Exec Chairman
back in July and his input, leadership and contribution is already making an
impact.
In other, PLC Board news, part of the terms agreed around the sale of the
Oxford Diecast brand sees Lyndon Davies, former CEO of Hornby Hobbies and
Non-Exec PLC Chairman, stepping down, having given up his Chairmanship earlier
in the year, sadly, on account of ill health. We thank Lyndon for all of his
commitment and support over the last 7 years and wish him well for the future.
Finally, and after a stint consulting on various change projects, we have
recently appointed Penny Teale to the Operating Board in the role of COO.
Having not had a COO in place since July 2023, Penny now brings a wealth of
experience from retail and manufacturing businesses and will have overall
responsibility for Purchasing, Logistics, Quality, Supply Chain and Demand
Planning. These areas represent the backbone of the product and operational
side of our business and Penny's ownership of them will add rigour and control
to these critical functions.
Digital Update
We continue to grow D2C sales through strengthening the skills and depth of
our digital team. Having previously outsourced both Digital Marketing and
Digital Development, we have now brought both of those functions in house,
giving us far more control and creating far more efficiency.
In H1 2024 vs H1 2023 we have seen a 31% reduction in the costs associated
with Digital Marketing and a 39% reduction in Development costs. In the same
period, we have seen our conversion rate across all sites improve by 12%, ROAS
(return on advertising spend) improve by 33% and revenue directly attributable
to paid digital channels improve by 5%.
H1 2024 overall digital performance has seen an uplift of c12% vs H1 2023 and
c45% vs H1 2022, reflecting the ongoing health of the digital channel as a key
driver of growth.
Disposal of interests in LCD Enterprises Limited
As part of the strategic review discussed in the Annual Report earlier this
year, Hornby is looking to rationalise its portfolio of brands to ensure that
management, and the business, are focused on core product and markets. As part
of this process, on 5 November 2024 Hornby entered into a conditional
agreement to dispose of its wholly-owned subsidiary LCD Enterprises Limited
to EKD Enterprises Limited, a company owned by Lyndon Davies and his family
for an aggregate consideration of approximately £1.38 million. Lyndon
Davies will step down from the Board and his role as a Non-Executive Director
of Hornby with immediate effect from completion.
Outlook
As highlighted at the start of this letter to shareholders, and evidenced
throughout, progress is being made on many fronts, but we still have work to
do.
We exit H1 2024 in a healthier position versus H1 2023 but maintaining that
momentum through Q3 and into Q4 is critical for our continued journey back to
profitability.
For now, our order book is looking strong as we approach peak trading, and we
have a whole host of new initiatives and activities in place for the run up to
Black Friday and through the all-important festive period.
The outcomes of this work will be shared in the January 2025 trading update.
Financial review
Performance
Group revenue for the six months to September 2024 of £25.0 million was 10%
higher than the prior year (2023: £22.7 million). The gross margin for the
period was 43% (2023: 44%), a slight decrease reflecting the product/channel
mix, increased container costs and sell through of older stock.
Overheads increased year-on-year from £14.2 million to £14.7 million, or by
3%, reflecting an increase in variable selling costs, minimum wages and
general inflationary increases.
The operating loss before exceptional costs for the six months to September
2024 was £3.8 million compared to a loss of £4.1 million for the same period
last year. This is due to the increased sales in the period.
Exceptional costs during the first half year were £0.4 million (2023: £0.05
million) and these comprised of one-off costs relating to restructuring at
head office and the impairment of goodwill and intangibles associated with the
sale of LCD Enterprises Limited.
Group loss before tax was £5.1 million (2023: loss of £4.9 million). The
basic loss per share was 3.03p (2023: loss per share of 2.77p).
Segmental analysis
Third party revenue for the UK business increased by 7% in the period and
generated a loss before taxation of £4.7 million compared to £4.8 million
loss last year.
The International segment revenue in H1 2024 was the same as H1 2023 and
generated an underlying loss of £0.4 million (2023: £0.4 million loss). The
decrease in revenue is a result of the global cost of living crisis impacting
European markets.
Balance sheet
Group inventories decreased during the period by 8% from £21.5 million at
March 2024 to £19.8 million at September 2024, due to a seasonal build-up of
stocks in the lead-up to the busy Christmas trading period offset by the
conditional sale of LCD Enterprises with a stock holding of £2.5 million at
30 September 2024. Inventory levels are £4.1m (18%) lower than September
2023.
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 £2.3 million (2023: £2.9 million).
Capital structure
There was an increase in net debt compared to 31 March 2024. The September
period end net debt balance stood at £18.8 million, from £14.2 million of
net debt at the end of the last financial year. This is due to the operational
cash outflow in the business, 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 2024 was £2 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 December 2025. The STB
Covenants are customary operational covenants applied on a monthly basis. In
addition, the Group has a committed £12.55 million loan facility with Phoenix
Asset Management Partners Limited (the Group's largest shareholder) which runs
through to December 2025
The Group has prepared trading and cash flow forecasts for a period of two
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 2024
Six months to Six months to Year to
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
REVENUE FROM CONTINUING OPERATIONS 4 24,965 22,671 53,790
Cost of Sales (14,125) (12,593) (29,388)
GROSS PROFIT 10,840 10,078 24,402
Distribution costs (4,503) (3,976) (8,906)
Selling and marketing costs (6,342) (6,456) (13,455)
Administrative expenses (3,775) (3,673) (8,300)
Other operating expenses (49) (115) (143)
OPERATING LOSS BEFORE EXCEPTIONAL (3,829) (4,142) (6,402)
Exceptional Items 5 (382) (47) (489)
OPERATING PROFIT/(LOSS) (4,211) (4,189) (6,891)
Finance income 8 11 26
Finance costs (1,022) (719) (1,673)
Net finance costs (1,014) (708) (1,647)
Share of profit of investments accounted for using the equity method 91 (2) 60
LOSS BEFORE TAXATION 4 (5,134) (4,899) (8,478)
Taxation 14 (10) (14) (3,347)
LOSS FROM CONTINUING OPERATIONS (5,144) (4,913) (11,825)
Profit/(Loss) from discontinued operations (attributable to equity holders of (35) (180) (262)
the company)
LOSS FOR THE PERIOD (5,179) (5,093) (12,087)
OTHER COMPREHENSIVE (LOSS)/INCOME
(Items that may be classified subsequently to profit and loss)
Cash flow hedges (454) 794 474
Currency translation differences (196) 48 (110)
OTHER COMPREHENSIVE (LOSS)/INCOME FOR THE PERIOD, NET OF TAX (650) 842 364
TOTAL COMPREHENSIVE LOSS FOR THE PERIOD (5,829) (4,251) (11,723)
Comprehensive income attributable to:
Equity holders of the Company (5,824) (4,235) (11,700)
Non-controlling interests (5) (16) (23)
(LOSS) PER ORDINARY SHARE
Basic (3.05)p (3.00)p (7.10)p
Diluted (3.05)p (3.00)p (7.10)p
The notes form an integral part of this condensed consolidated half-yearly
financial information.
BALANCE SHEET
As at 30 September 2024
Six months to Six months to Year to
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Notes £'000 £'000 £'000
ASSETS
NON-CURRENT ASSETS
Goodwill 6 1,915 1,731 2,001
Intangible assets 6 2,493 2,724 2,656
Investment 7 1,572 1,437 1,498
Property, plant and equipment 6 12,754 13,786 14,507
Right of Use Lease Asset 9 2,003 2,144 2,312
Deferred income tax assets 162 3,571 279
20,899 25,393 23,253
CURRENT ASSETS
Inventories 19,795 24,112 21,484
Trade and other receivables 9,400 9,115 9,245
Derivative financial instruments 13 - 256 23
Cash and cash equivalents 730 1,014 1,116
29,925 34,497 31,868
Assets classified as held for resale 4,480
34,405 34,497 31,868
LIABILITIES
CURRENT LIABILITIES
Borrowings 12 (19,587) (6,219) (15,341)
Derivative financial instruments 13 (535) (17) (104)
Trade and other payables (11,600) (9,509) (11,337)
Lease liabilities 10 (399) (403) (479)
(32,121) (16,148) (27,261)
Liabilities directly associated with assets classified as held for resale (2,089) - -
(34,210) (16,148) (27,261)
NET CURRENT ASSETS 195 18,349 4,607
NON-CURRENT LIABILITIES
Borrowings 12 - (9,595) (67)
Lease liabilities 10 (2,051) (2,125) (2,249)
Other payables (276) - (669)
Deferred tax liabilities (280) (233) (559)
(2,607) (11,953) (3,544)
. .
NET ASSETS 18,487 31,789 24,316
SHAREHOLDERS' EQUITY
Share capital 11 1,699 1,699 1,699
Share premium 52,857 52,857 52,857
Capital redemption reserve 55 55 55
Translation reserve (1,959) (1,605) (1,763)
Hedging reserve (535) 239 (81)
Other reserves 1,688 1,688 1,688
Retained earnings (35,285) (23,123) (30,111)
Equity attributable to PLC shareholders 18,520 31,810 24,344
Non-controlling interests (33) (21) (28)
Total equity 18,487 31,789 24,316
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2024
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 2024 1,699 52,857 55 (1,763) (81) 1,688 (28) (30,111) 24,316
Loss for the period - - - - - - (5) (5,174) (5,179)
Other comprehensive income/(loss) for the period - - - (196) (454) - - - (650)
Total comprehensive loss for the period - - - (196) (454) - (5) (5,174) (5,829)
Balance at 30 September 2024 1,699 52,857 55 (1,959) (535) 1,688 (33) (35,285) 18,487
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
STATEMENT OF CASH FLOWS
for the six months ended 30 September 2024
Six months to Six months to Year to
30 September 30 September 31 March
Note 2024 2023 2024
£'000 £'000 £'000
Loss before taxation (5,134) (5,078) (8,726)
Interest payable 919 653 1,527
Interest paid on Lease liabilities 10 103 72 162
Interest receivable (8) (11) (26)
Share of profit of Minority Interest (91) 2 (60)
Amortisation of intangible assets 263 288 564
Impairment of Goodwill 83 - 10
Impairment of Intangible 243 - 404
Depreciation 2,291 1,819 3,901
Depreciation on right of use assets 9 282 243 499
Share-based payments (non cash) (393) - 669
(Increase)/decrease in inventories (939) (2,799) 218
(Increase)/decrease in trade and other receivables (471) 225 199
Increase in trade and other payables 968 1,301 1,328
Net cash from continuing activities (1,884) (3,285) 669
Net cash from discontinued activities 133 - -
Net cash from operating activities (1,751) (3,285) 669
Interest paid (282) (653) (566)
Interest element of ROU lease payments (103) (72) (162)
Net cash (used in)/generated from operating activities (2,136) (4,010) (59)
Cash flows from investing activities
Purchase of interest in associate (net of cash acquired) 7 - (1,439) (1,438)
Purchase of property, plant and equipment 6 (1,960) (3,562) (6,369)
Purchase of intangible assets 6 (344) (25) (451)
Interest received 8 11 26
Dividend income received 17 - -
Net cash (used in)/generated from investing activities (2,279) (5,015) (8,232)
Cash flows from financing activities
Repayment of CBIL loan - (50) (50)
Proceeds from Asset Based Lending Facility 1,296 1,579 1,152
Shareholder Loan 3,000 7,418 7,439
Payment of lease liabilities (256) (228) (462)
Net cash generated from/(used in) financing activities 4,040 8,719 8,079
Net decrease in cash and cash equivalents (375) (306) (212)
Cash, cash equivalents and bank overdrafts at beginning of the year 1,116 1,337 1,337
Effect of exchange rate movements (11) (17) (9)
Cash, cash equivalents and bank overdrafts at end of year 730 1,014 1,116
Cash, cash equivalents and bank overdrafts consist of:
Cash and cash equivalents 730 1,014 1,116
Cash, cash equivalents and bank overdrafts at end of year 730 1,014 1,116
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 19 November 2024.
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 2024
were approved by the Board of Directors on 10 July 2024 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 2024 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 2024 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 2024, 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 2024.
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 2024.
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 2024.
Further details of the Group's financial instruments are set out within note
13 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 2024 (unaudited)
Revenue - External 18,089 2,119 853 1,158 2,746 - 24,965
Inter-segment revenue 1,647 - - - - (1,647) -
Revenue from Discontinued operations 1,191 1,191
Operating (Loss)/Profit from continuing operations (3,930) (407) (4) (5) 135 - (4,211)
Operating Loss from discontinued operations (30) (30)
Finance income - external 8 - - - - - 8
Finance income - other segments 228 - - - - - 228
Finance costs - external (1,002) (14) (2) (1) (3) - (1,022)
Finance costs - other segments (88) 0 (105) 0 (35) - (228)
Finance costs - discontinued operations (5) (5)
Share of profit of investments accounted for using the equity method 91 - - - - - 91
(Loss)/Profit before taxation (4,728) (421) (111) (6) 97 - (5,169)
Taxation - - - - (10) - (10)
(Loss)/Profit after taxation (4,728) (421) (111) (6) 87 - (5,179)
5. EXCEPTIONAL ITEMS
Six months to Six months to Year to
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Exceptional items comprise:
- Refinancing costs - - 2
- Goodwill impairment 83 - 10
- Intangible impairment 243 - 404
- Restructuring costs 56 47 73
382 47 489
The exceptional items totalling £382,000 (2023: £47,000) include
restructuring costs within various departments at Head office in Margate and
impairment of goodwill and intangibles on the acquisition of LCD Enterprises.
6. TANGIBLE AND INTANGIBLE ASSETS AND GOODWILL
The additions comprise new product tooling (£1,930,000), property, plant and
equipment (£30,000) and intangible assets - computer software (£344,000).
The Group has again performed impairment reviews as at 30 September 2024 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 2024
have remained constant with the impairment reviews conducted in March 2024.
Tangible and intangible assets and goodwill (unaudited) Six months ended Six months ended
30 September 2024 30 September 2023
£'000 £'000
Opening net book amount 1 April 2024 and 1 April 2023 19,164 16,759
Exchange adjustment (4) 2
Additions 2,304 2,868
Depreciation, amortisation and impairment (2,880) (2,107)
Transfer to assets classified as held for sale (1,422) -
Closing net book amount 30 September 2024 and 30 September 2023 17,162 17,522
2024 2023
CAPITAL COMMITMENTS (unaudited) (unaudited)
£'000 £'000
At 30 September commitments were:
Contracted for but not provided for 1,001 2,175
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 2024 -
Acquisition of 25% of Warlord Games Limited including costs 1,498
Share of profit of investments accounted for using the equity method 91
Dividend received (17)
At 30 September 2024 1,572
8. DISCONTINUED OPERATION
In the period the group initiated an active program to sell LCD Enterprises
Limited back to the Davies family. The associated assets and liabilities are
consequently presented as held for sale in these interim results.
The subsidiary was conditionally sold on 5 November 2024, with effect from 27
November (subject to
shareholder approval) and is reported in the current period as a discontinued
operation.
Financial information relating to the discontinued operation for the period to
30 September 2024 and
comparative periods to 30 September 2023 and 31 March 2024 are set out below.
Financial performance and cash flow information
Six months to Six months to Year to
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (unaudited)
Revenue 1,191 1,123 2,454
Expenses (1,226) (1,303) (2,703)
Profit/ (loss) before income tax (35) (180) (249)
Income tax expense 0 0 (13)
Profit/ (loss) after income tax of discontinued operation (35) (180) (262)
Net cash inflow from operating activities 133 34 162
Net cash inflow from investing activities (73) (135) (239)
Net cash outflow from financing activities (57) (54) (116)
Net increase in cash generated by subsidiary 3 (155) (193)
Assets and liabilities of disposal group classified as held for sale
30 September
2024
(unaudited)
Assets classified as held for sale
Property, plant and equipment 1,422
ROU 22
Def tax 148
Inventories 2,489
Trade and other receivables 257
Cash and cash equivalents 142
Total assets of disposal group held for sale 4,480
Liabilities directly associated with assets classified as held for sale
Trade and other payables (1,666)
Borrowings (92)
Def tax (309)
Lease liabilities (22)
Total liabilities of disposal group held for sale (2,089)
9. RIGHT OF USE ASSETS
GROUP Property Motor Fixtures, Fittings and Equipment Total
Vehicles
£'000
£'000 £'000 £'000
COST
At 1 April 2024 4,365 415 33 4,813
Additions at cost - - - -
Adjustment (5) (5)
At 30 September 2024 4,360 415 33 4,808
ACCUMULATED DEPRECIATION
At 1 April 2024 2,153 329 19 2,501
Charge 259 21 2 282
At 30 September 2024 2,412 350 21 2,783
Transfer to assets classified as held for sale (22) (22)
Net book amount at 30 September 2024 1,926 65 12 2,003
10. RIGHT OF USE LEASE LIABILITIES
The movement in the right of use lease liabilities over the period was as
follows:
2024 2023
£'000 £'000
As at 1 April 2,728 2,456
New leases 300
Interest payable 103 72
Repayment of lease liabilities (359) (300)
Transfer to liabilities classified as held for sale (22)
As at 30 September 2,450 2,528
Lease liability less than one year 399 403
Lease liability greater than one year and less than five years 632 677
Lease liability greater than five years 1,419 1,448
Total Liability 2,450 2,528
Maturity analysis of contracted undiscounted cashflows is as follows:
30 September 2024 30 September 2023
£'000 £'000
Lease liability less than one year 581 549
Lease liability greater than one year and less than five years 1,300 1,143
Lease liability greater than five years 1,929 1,911
Total Liability 3,810 3,603
Finance charges included above (1,360) (1,075)
2,450 2,528
11. SHARE CAPITAL
At 30 September 2024 the Group had 169,853,770 ordinary 1p shares in issue
with nominal value £1,698,538 (2023: £1,698,538).
12. BORROWINGS
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (unaudited)
£'000 £'000 £'000
SECURED BORROWING AT AMORTISED COST
CBIL Bank Loan - (146) (117)
Shareholder Loan (12,549) (9,449) (5,742)
ABL Facility (7,038) (6,169) (9,549)
(19,587) (15,814) (15,408)
Total borrowings
Amounts due for settlement within 12 months (19,587) (6,219) (15,341)
Amounts due for settlement after 12 months - (9,595) (67)
(19,587) (15,814) (15,408)
At 30 September 2024 the Group has in place a £12.0 million Asset Based
Lending (ABL) facility with Secure Trust Bank PLC through to December 2025.
The Covenants are customary operational covenants applied on a monthly basis.
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. The facility currently expires December 2025.
13. FINANCIAL INSTRUMENTS
The following tables present the Group's assets and liabilities that are
measured at fair value at 30 September 2024 and 31 March 2024. 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 - -
Total assets as at 30 September 2024 - -
Liabilities
Derivatives used for hedging - (535) - (535)
Total liabilities at 30 September 2024 - (535) - (535)
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Derivatives used for hedging - 23 - 23
Total assets at 31 March 2024 - 23 - 23
Liabilities
Derivatives used for hedging - (104) - (104)
Net liabilities at 31 March 2024 - (81) - (81)
14. 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.
15. EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share attributable to equity holders of the Company arises
from total operations as follows:
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
Earnings/(loss) per share from total operations
attributable to the equity of the Company
- basic (3.05)p (3.00)p (7.10)p
- diluted (3.05)p (3.00)p (7.10)p
16. DIVIDENDS
No interim dividend has been declared for the interim period ended 30
September 2024 (2023: £nil).
17. 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.
18. PERFORMANCE SHARE PLANS AWARDS
There are no Performance Share Plan ('PSP') awards outstanding at 30 September
2024 or 2023.
The CEO 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 30 September 2024, using a Black-Scholes valuation model, using 50% share
volatility, 4% risk-free rate of return and an option value of 0.057 leads to
a provision being made in the year of £275,635, this resulted in a release of
£393,339 to the Statement of Comprehensive Income within Administrative
expenses.
19. KEY MANAGEMENT COMPENSATION
Key management compensation amounted to £118,000 for
the six months to 30 September 2024 (2023: £769,000). Reduction is due to
lower Boards costs and release of share-based payment accrual for the CEO LTIP
bonus. Key management include directors and senior management.
For the period to 30 September 2024:
30 September 30 September 31 March
2024 2023 2024
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Salaries and other short-term benefits 480 692 1,204
Other pension costs 31 32 66
Compensation for loss of office - 45 45
Share-based payments (393) - 669
118 769 1,984
20. RELATED-PARTY TRANSACTIONS
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 £636,675 were accrued and remain unpaid at 30 September
2024.
Hornby Hobbies Limited purchased services totalling £167,278 from Rawnet
Limited which is 100% owned by Phoenix Asset Management, the controlling party
of the Group. At 30 September 2024 nothing 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.
21. 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 13 and 14 of the Group's Annual report for the year
ended 31 March 2024 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.
22. SEASONALITY
Sales are subject to seasonal fluctuations, with peak demand in the October -
December quarter. For the six months ended 30 September 2024 sales
represented 46 per cent of the annual sales for the year ended 31 March 2024
(2023: 43 per cent of the annual sales for the year ended 31 March 2023).
23. SUBSEQUENT EVENTS
On 5 November 2024 the Company entered into a conditional agreement to dispose
of its wholly-owned subsidiary LCD Enterprises Limited ("LCD") to EKD
Enterprises Limited, a company owned by Lyndon Davies and his family for an
aggregate consideration of approximately £1.38 million. The Disposal will
release the Oxford Diecast brand from the Company's portfolio.
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
19 November 2024
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