REG - Hornby PLC - PRELIMINARY RESULTS AND TURNAROUND PLAN <Origin Href="QuoteRef">HRN.L</Origin> - Part 2
22/06/2016 07:05
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Energis,
where he was part of the successful turnaround team. Having qualified with Coopers & Lybrand Steve was a strategy
consultant with OC&C before spending time in senior financial and general management roles at Sainsbury's, Homebase and
B&Q.
David Mulligan, aged 46, was appointed to the board on 25 May 2016. David was formerly Group Finance Director at
construction and regeneration company Morgan Sindall Group plc. Most recently he was Municipal FD at Shanks Group plc.
Prior to this he worked at Smiths Group plc and trained as a chartered accountant at Ernst & Young.
Roger Canham, aged 50, was appointed to the Board on 7 November 2012 and became Chairman on 1 February 2013. Roger has been
Chairman of Phoenix Asset Management Partners Limited ('Phoenix') since 2009 and also owns and manages a number of property
development companies. Prior to that, he was a Non-Executive Director of Goshawk Insurance Holdings PLC from 2007 until the
business was acquired in 2008, and a Director of Brake Bros Limited, for a year following its acquisition of W. Pauley & Co
Limited in 2002. Mr Canham joined W. Pauley & Co Limited in 1990 and became Managing Director in 1996.
David Adams, aged 61, was appointed a Non-executive Director on 9 January 2014. David is currently senior Non-Executive
Director of Halfords plc and chairs Conviviality Retail plc, Ecovision Ltd, Park Cameras Ltd, and Walk the walk (a breast
cancer charity). In addition, he is a Non-Executive Director of Fever-Tree Drinks plc. David chairs the audit committee at
Halfords and Fever-Tree Drinks. Prior to that he was Executive Chairman of Jessops and Chief Financial officer and Deputy
Chief Executive officer at House of Fraser plc.
Charlie Caminada, aged 57, was appointed a Non-Executive Director on 9 January 2014. Charlie was previously Chief Operating
Officer of HIT Entertainment Plc, which is now part of Mattel. His most recent position was the Founder and Chief Operating
Officer of Ludorum, a media investment company that focused on managing IP franchises for children's entertainment brands,
including Chuggington. Charlie led the company's IPO on AIM in 2006. He is a Non-Executive Director of Shoe Zone Plc and
chairs the Remuneration Committee at the Company.
Richard Ames, aged 44, was appointed to the Board on 28 April 2014. Richard resigned on 12 February 2016.
Nick Stone, aged 51, joined the Group on 14 January 2013 and was appointed Group Finance Director on 1 February 2013. Nick
Stone left Hornby in October 2015 and was replaced by Steve Cooke who joined the business on 10 June 2015.
The interests of the Directors in the shares of the Company and in options granted over such shares are disclosed later in
this Report.
Directors' indemnities
The Company maintained liability insurance for its Directors and officers during the financial year and up to the date of
approval of the Annual Report and Accounts. The Company has also provided an indemnity for its Directors and the secretary,
which is a qualifying third party indemnity provision for the purposes of the Companies Act 2006.
Substantial shareholdings
The Company has been notified that at close of business on 17 June 2016 the following parties were interested in 3% or more
of the Company's ordinary share capital.
Phoenix Asset Management Partners Limited 16,257,323 29.58
New Pistoia Income Limited 12,129,000 22.07
Ruffer LLP 7,022,583 12.78
Downing LLP 3,156,437 5.74
Downing LLP
3,156,437
5.74
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Annual Report and accounts in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors
have prepared the group and parent company financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the
company and of the profit or loss of the Company and Group for that period. In preparing these financial statements, the
directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and accounting estimates that are reasonable and prudent
· state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material
departures disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company
and the group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and
enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Disclosure of information to auditors
In the case of each director in office at the date the directors' report is approved, that:
(a) so far as the director is aware, there is no relevant audit information of which the Company's auditors are unaware;
and
(b) he has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant
audit information and to establish that the company's auditors are aware of that information.
Financial instruments
The Group's financial instruments, other than derivatives, comprise borrowings, cash and liquid resources, and various
items, such as trade receivables, trade payables, etc. that arise directly from its operations. The Group's financial
liabilities comprise borrowings, trade payables, other payables and finance leases. The main purpose of the Group's
borrowings is to raise finance for the Group's operations. The Group also has financial assets comprising cash and trade
and other receivables.
The Group also enters into derivatives transactions (principally forward foreign currency contracts). The purpose of such
transactions is to manage the currency risks arising from the Group's operations. It is, and has been throughout the period
under review, the Group's policy that no speculative trading in financial instruments shall be undertaken.
FINANCIAL RISK MANAGEMENT
The financial risk is managed by the Group and more information on this can be found within the Notes to the financial
statements on page 30.
Personnel policies
It is the policy of the Group to follow equal opportunity employment practices and these include the full consideration of
employment prospects for the disabled.
Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant
concerned. It is the policy of the Group that the training, career development and promotion of disabled persons should, as
far as possible, be identical with that of other employees. Arrangements are made, wherever possible, for retraining
employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes.
The Group places importance on the contributions to be made by all employees to the progress of the Group and aims to keep
them informed by the use of formal and informal meetings. One of the Company's incentive schemes includes share scheme
options for Directors and senior management, further detail of which is covered later in this Report.
Share capital
The share capital of the Company comprises ordinary shares of 1p each. Each share carries the right to one vote at general
meetings of the Company. The issued share capital of the Company, together with movements in the Company's issued share
capital is shown in note 21.
Independent auditors
A resolution to reappoint the auditors, PricewaterhouseCoopers LLP, will be proposed at the forthcoming Annual General
Meeting.
Annual General Meeting
The Annual General Meeting is to be scheduled for Summer 2016. A notice of the Annual General Meeting will be sent out to
shareholders separately to this Annual Report and Accounts. The notice of the Annual General Meeting is important and
requires your immediate attention. If you are in any doubt as to what action to take in relation to the Annual General
Meeting, you should consult appropriate independent advisers.
DIRECTORS' REMUNERATION
Executive Directors' base salaries are reviewed annually by the Committee taking into account the responsibilities, skills
and experience of each individual, pay and employment conditions within the Company and salary levels within listed
companies of a similar size.
The following table summarises the total salary and pension contributions received by Directors for 2015-16 and 2014-15 in
line with the Companies Act 2006 requirement:
S Cooke (Joined 10 June 2015) 170 32 202 - - -
R Canham 100 - 100 150 - 150
D Adams 40 - 40 40 - 40
C Caminada 40 - 40 40 - 40
R Ames (Joined 28 April 2014, resigned 12 February 2016) 373* 53 426 287 56 343
N Stone (Resigned 10 June 2015) 148** 21 169 190 36 226
Total 871 106 977 707 92 799
Total
871
106
977
707
92
799
* - included within the basic salary and fees is compensation for loss of office totalling £96,000
** - included within the basic salary and fees is compensation for loss of office totalling £36,000
Performance Share Plan awards outstanding
At 31 March 2016, outstanding awards to Directors under the Performance Share Plan were as follows:
Director Award date Vesting date Market price at Award date At 1 April 2015 Awarded during year Lapsed during year Vested during year At 31 March 2016
S Cooke Aug 2015 Aug 2018 105.0p - 190,476 - - 190,476
R Canham July 2013 July 2016 81.5p 122,699 - - - 122,699
R Ames Sept 2014 Sept 2017 71.0p 845,070 845,070 (845,070) - -
Aug 2015 Aug 2018 105.0p - 292,857 (292,857) - -
N Stone July 2013 July 2016 81.5p 220,859 - (72,883) - 147,976
Sept 2014 Sept 2017 71.0p 253,521 253,521 (253,521) - -
For the 2013 awards, 40% of an award is subject to a TSR condition and 60% is subject to an EPS performance condition, both
of which are measured over a period of three financial years. For the TSR condition, 25% of this part of the award will
vest if Hornby's TSR is equal to the TSR of the median company of the constituents of the FTSE Small Cap (struck at the
date of grant), with full vesting for top quartile performance, with a sliding scale operating between these points. For
the EPS part of the award, 25% vests for average annual underlying EPS growth of RPI+3% p.a., with full vesting for average
annual EPS growth of RPI+12% p.a. A sliding scale operates between these points
For the 2014 awards, 40% of an award is subject to a TSR condition and 60% is subject to an EPS performance condition, both
of which are measured over a period of three financial years. For the TSR condition, 25% of this part of the award will
vest if Hornby's TSR is equal to the TSR of the median company of the constituents of the FTSE Small Cap (struck at the
date of grant), with full vesting for top quartile performance, with a sliding scale operating between these points. For
the EPS part of the award, 25% vests for EPS of 5p for the year ending 31 March 2016, with full vesting for EPS of 12.2p
for the year ending 31 March 2017 with a sliding scale operating between these points.
For the 2015 awards, 40% of an award is subject to a TSR condition and 60% is subject to an EPS performance condition, both
of which are measured over a period of three financial years. For the TSR condition, 25% of this part of the award will
vest if Hornby's TSR is equal to the TSR of the median company of the constituents of the FTSE Small Cap (struck at the
date of grant), with full vesting for top quartile performance, with a sliding scale operating between these points.
Benefits and Pension
Policies concerning benefits, including the Group's company car policy, are reviewed periodically. Currently, benefits in
kind comprise motor cars and private health cover, both of which are non-performance related. The Executive Directors and
senior managers are members of defined contribution pension schemes and annual contributions are calculated by reference to
base salaries, with neither annual bonuses nor awards under the share incentive schemes taken into account in calculating
the amounts due. The contribution level continues to be 20% of base salary for Executive Directors.
Executive Directors' service contracts
The Executive Directors do not have fixed period contracts.
Payments to Past Directors, Policy on payment of loss of office and termination payments
No payments were made to past Directors in the year ended 31 March 2016. Notice periods are set under individual service
contracts but the Company has a policy for Executive directors of a notice period of six months to be given by the Company
which is extended to one year after six months' service and of six months to be given by the individual. The compensation
for loss of office is based upon the respective service contracts and the components are based on the base salary of the
director. IFRS 2 leaver provisions are applied to the PSP share scheme based upon the Directors' service contracts.
DIRECTORS' INTERESTS
Interests in shares
The interests of the Directors in the shares of the Company at 31 March 2016 were:
At 31 March 2016 number At 31 March 2015 number
Executive Directors
S Cooke - -
Non-Executive Directors
R Canham 40,000 40,000
D Adams 10,000 -
C Caminada 32,325 22,325
All the interests detailed above are beneficial. Apart from the interests disclosed above no Directors were interested at
any time in the year in the share capital of any other Group company. Roger Canham is also the chairman of Phoenix Asset
Management Partners who hold a substantial shareholding in Hornby Plc.
On behalf of the Board
David Mulligan
Group Finance Director
3rd Floor The Gateway
Innovation Way
Discovery Park
Sandwich
Kent CT13 9FF
22 June 2016
Independent auditors' report to the members of Hornby Plc
Report on the financial statements
Our opinion
In our opinion, Hornby Plc's Group financial statements and Company financial statements (the "financial statements"):
· give a true and fair view of the state of the Group's and of the Company's affairs as at 31 March 2016 and of the
Group's and the Company's loss and cash flows for the year then ended;
· have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by
the European Union; and
· have been prepared in accordance with the requirements of the Companies Act 2006.
Emphasis of matter - Group going concern
In forming our opinion on the Group financial statements, which is not modified, we have considered the adequacy of the
disclosure made in note 1 to the financial statements concerning the Group's ability to continue as a going concern. The
Group's new business plan requires additional investment. The directors plan to raise this through an equity raise of £8
million, subject to shareholder approval on 8 July 2016. In addition, a new bank facility was signed on 22 June 2016,
conditional on this equity fundraising. Both the equity fund raise and the new bank facility are needed in order to finance
the Group's operations and for it to continue as a going concern for at least the next 12 months. These conditions, in
particular the requirement for shareholder approval of the equity fundraising, along with the other matters explained in
note 1 to the financial statements, indicate the existence of a material uncertainty which may cast significant doubt about
the Group's ability to continue as a going concern. The Group financial statements do not include the adjustments that
would result if the Group was unable to continue as a going concern.
What we have audited
The financial statements, included within the Annual Report and Accounts (the "Annual Report"), comprise:
· the Group and Company Balance Sheet as at 31 March 2016;
· the Group and Company Statement of Comprehensive Income for the year then ended;
· the Group and Company Cash Flow Statement for the year then ended;
· the Group and Company Statement of Changes in Equity for the year then ended; and
· the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted
by the European Union, and applicable law.
In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in
respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future
events.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, the information given in the Strategic Report and the Directors' Report for the financial year for which
the financial statements are prepared is consistent with the financial statements
Other matters on which we are required to report by exception
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006 we are required to report to you if, in our opinion:
· we have not received all the information and explanations we require for our audit; or
· adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been
received from branches not visited by us; or
· the Company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors' remuneration
Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors'
remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors' Responsibilities on page 15, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)"). Those standards require us to comply with the
Auditing Practices Board's Ethical Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company's members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or
assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This includes an assessment of:
· whether the accounting policies are appropriate to the Group's and the Company's circumstances and have been
consistently applied and adequately disclosed;
· the reasonableness of significant accounting estimates made by the directors; and
· the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors' judgements against available evidence, forming our
own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If
we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Rosemary Shapland (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
22 June 2016
Group and Company Statements of Comprehensive Income
for the Year Ended 31 March 2016
Revenue 2 55,757 58,135 1,453 1,346
Cost of sales (33,992) (30,961) - -
Gross profit 21,765 27,174 1,453 1,346
Distribution costs (8,441) (5,937) - -
Selling and marketing costs (12,472) (12,246) - -
Administrative expenses (9,652) (7,367) (969) (888)
Other operating expenses (4,324) (1,303) (9,494) (103)
Operating (loss)/profit 2 (13,124) 321 (9,010) 355
Finance income 3 21 1 174 174
Finance costs 3 (429) (506) (181) (192)
(Loss)/profit before taxation 4 (13,532) (184) (9,017) 337
Analysed as:
Underlying (loss)/profit before taxation 2 (5,683) 1,622 494 337
Net foreign exchange impact on intercompany loans 389 (618) - -
Amortisation of intangible assets - brand names and customer lists (384) (377) - -
Exceptional items 4 (7,854) (811) (9,511) -
(Loss)/profit before taxation (13,532) (184) (9,017) 337
Income tax (charge)/credit 5 (182) 64 (68) (51)
(Loss)/profit for the year after taxation (13,714) (120) (9,085) 286
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Cash flow hedges, net of tax 20 802 - -
Currency translation differences (127) (501) (401) 605
Other comprehensive (expense)/income for the year, net of tax (107) 301 (401) 605
Total comprehensive (loss)/income for the year (13,821) 181 (9,486) 891
Loss per ordinary share
Basic 7 (27.87)p (0.31)p
Diluted 7 (27.87)p (0.31)p
Basic
7
(27.87)p
(0.31)p
Diluted
7
(27.87)p
(0.31)p
All results relate to continuing operations.
The notes on pages 25 to 54 form part of these accounts.
Group and Company Balance Sheets as at 31 March 2016
Group Company
Note 2016 £'000 2015£'000 2016 £'000 2015£'000
Assets
Non-current assets
Goodwill 8 4,516 8,464 - -
Intangible assets 9 4,777 4,071 - -
Property, plant and equipment 10 7,192 10,260 - 1,207
Investments 11 - - 28,398 37,326
Deferred tax assets 20 1,991 2,099 - -
18,476 24,894 28,398 38,533
Current assets
Inventories 12 13,637 12,469 - -
Trade and other receivables 13 13,192 10,444 15,329 983
Derivative financial instruments 19 394 519 - -
Current tax assets 17 213 419 - 81
Cash and cash equivalents 14 677 451 1 1
Property, plant and equipment held for sale 10 1,462 - 1,069 -
29,575 24,302 16,399 1,065
Liabilities
Current liabilities
Borrowings 18 (7,883) (7,747) - (116)
Trade and other payables 15 (7,363) (9,067) (94) (19)
Derivative financial instruments 19 (12) (24) - -
Provisions 16 (446) (255) - -
Current tax liabilities 17 - (53) (39) -
(15,704) (17,146) (133) (135)
Net current assets 13,871 7,156 16,266 930
Non-current liabilities
Borrowings 18 - (163) (4,902) (4,395)
Deferred tax liabilities 20 (211) (131) (100) (121)
(211) (294) (5,002) (4,516)
Net assets 32,136 31,756 39,662 34,947
Equity attributable to owners of the parent
Share capital 21 550 392 550 392
Share premium 20,205 6,180 20,205 6,180
Capital redemption reserve 55 55 55 55
Translation reserve (1,386) (1,259) (754) (353)
Hedging reserve 382 362 - -
Other reserves 1,688 1,688 19,145 19,145
Retained earnings 10,642 24,338 461 9,528
Total equity 32,136 31,756 39,662 34,947
34,947
The notes on page 25 to 54 form part of these accounts. The financial statements on pages 21 to 54 were approved by the
Board of Directors on 22 June and were signed on its behalf by:
D Mulligan, Director, Registered Company Number: 01547390
Group and Company Statements of Changes in Equity
For the Year Ended 31 March 2016
GROUP Sharecapital£'000 Sharepremium £'000 Capital redemption reserve£'000 Translation reserve£'000 Hedging reserve£'000 Otherreserves £'000 Retained earnings £'000 Totalequity£'000
Balance at 1 April 2014 392 6,180 55 (758) (440) 1,688 24,253 31,370
Loss for the year - - - - - - (120) (120)
Other comprehensive (expense)/income for the year - - - (501) 802 - - 301
Total comprehensive income for the year - - - (501) 802 - (120) 181
Transactions with owners
Share-based payments (note 22) - - - - - - 205 205
Total transactions with owners - - - - - - 205 205
Balance at 31 March 2015 and 1 April 2015 392 6,180 55 (1,259) 362 1,688 24,338 31,756
Loss for the year - - - - - - (13,714) (13,714)
Other comprehensive (expense)/ income for the year - - - (127) 20 - - (107)
Total comprehensive (loss)/income for the year - - - (127) 20 - (13,714) (13,821)
Transactions with owners
Net proceeds from issue of ordinary shares 158 14,025 - - - - - 14,183
Share-based payments (note 22) - - - - - - 18 18
Total transactions with owners 158 14,025 - - - - 18 14,201
Balance at 31 March 2016 550 20,205 55 (1,386) 382 1,688 10,642 32,136
Retained earnings includes £553,000 at 31 March 2016 (2015: £570,000) which is not distributable and relates to a 1986
revaluation of land and buildings. Other reserves of £1,688,000 represent historic negative goodwill arising prior to the
transition to IFRS.
COMPANY Sharecapital£'000 Sharepremium £'000 Capital redemption reserve£'000 Translation reserve£'000 Otherreserves £'000 Retained earnings £'000 Totalequity£'000
Balance at 1 April 2014 392 6,180 55 (958) 19,145 9,037 33,851
Profit for the year - - - - - 286 286
Other comprehensive income for the year - - - 605 - - 605
Total comprehensive income for the year - - - 605 - 286 891
Transactions with owners
Share-based payments - - - - - 205 205
Total transactions with owners - - - - - 205 205
Balance at 31 March 2015 and 1 April 2015 392 6,180 55 (353) 19,145 9,528 34,947
Loss for the year - - - - - (9,085) (9,085)
Other comprehensive expense for the year - - - (401) - - (401)
Total comprehensive loss for the year - - - (401) - (9,085) (9,486)
Transactions with owners
Net proceeds from issue of ordinary shares 158 14,025 - - - - 14,183
Share-based payments - - - - - 18 18
Total transactions with owners 158 14,025 - - - 18 14,201
Balance at 31 March 2016 550 20,205 55 (754) 19,145 461 39,662
The notes on page 25 to 54 form part of these accounts.
Group and Company Cash Flow Statement
for the Year Ended 31 March 2016
Group Company
Note 2016 £'000 2015£'000 2016 £'000 2015£'000
Cash flows from operating activities
Cash (used in)/generated from operations 27 (9,632) 5,328 294 (194)
Interest paid (429) (506) (181) (192)
Tax received/(paid) 204 (127) 31 67
Net cash (used in)/generated from operating activities (9,857) 4,695 144 (319)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 349 20 342 -
Purchase of property, plant and equipment 10 (3,221) (4,073) - -
Purchase of intangible assets 9 (1,341) (988) - -
Interest received 21 1 174 174
Net cash (used in)/generated from investing activities (4,192) (5,040) 516 174
Cash flows from financing activities
Proceeds from issuance of ordinary shares 15,000 - 15,000 -
Repayments of loans (35) (1,584) - -
Share issue and refinancing costs (817) - (817) -
Advances to subsidiary undertakings - - (14,843) 116
Repayments to subsidiary undertakings - - - 29
Net cash generated from/(used in) financing activities 14,148 (1,584) (660) 145
Net increase/(decrease) in cash and cash equivalents 99 (1,929) - -
Cash, cash equivalents and bank overdrafts at beginning of the year (7,247) (5,456) 1 1
Effect of exchange rate movements 119 138 - -
Cash, cash equivalents and bank overdrafts at end of year (7,029) (7,247) 1 1
Cash, cash equivalents and bank overdrafts consist of:
Cash and cash equivalents 14 677 451 1 1
Bank overdrafts 18 (7,706) (7,698) - -
Cash, cash equivalents and bank overdrafts at end of year (7,029) (7,247) 1 1
1
Notes to the Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Accounting policies for the year ended 31 March 2016
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
BASIS OF PREPARATION
The financial information for the year ended 31 March 2016 has been prepared in accordance with International Financial
Reporting Standards ('IFRS') as adopted by the European Union ('EU'), IFRS Interpretations Committee ('IFRS-IC')
interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The
consolidated Group and Parent Company financial statements have been prepared on a going concern basis and under the
historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including
derivative instruments) at fair value through profit or loss. However, with regards to the Group, see below for details of
material uncertainty.
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.
GOING CONCERN
The Group's new business plan requires additional investment, so the Group is proposing to raise £8 million additional
equity to enable Management to pursue this plan.
The Directors have approached both existing and potential new investors to raise the additional equity funding of £8
million and have also signed a new facility with the Group's bankers through to December 2019, which is conditional on the
£8 million equity raise. After the discussions with existing investors, the Directors have a high degree of confidence that
the fundraise will be approved by shareholders and therefore the new working capital facility will become available.
However, this equity raise is subject to shareholder approval on 8 July 2016.
The Group has prepared cash flow forecasts on the basis of the additional equity raise and new bank facility and following
a detailed review of these forecasts and cash flow models with external advisors, the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For
these reasons, the Financial Statements continue to adopt the going concern basis of accounting in preparing the annual
financial statements.
However, as the current fundraise has not yet been approved by shareholders prior to approval of these financial statements
there remains a material uncertainty which may cast significant doubt over the Group's ability to continue as a going
concern. In the event that the Group does not raise funds as expected, the Group may be unable to realise its assets and
discharge its liabilities in the normal course of business.
BASIS OF CONSOLIDATION
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated but considered an impairment indicator of the asset concerned. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
ADOPTION OF NEW AND REVISED STANDARDS
The Group applied all applicable new standards, interpretations and amendments published by the IASB and as endorsed by the
European Union for the year beginning 1 January 2015, being IFRS 10, IFRS 11, IFRS 16, IAS 7, IAS 12 and amendments to IAS
1, IAS16, IAS19, IAS 27, IAS 28 and IAS 38. The implementation of these standards and amendments did not have a material
effect on the accounts.
The Group did not early adopt any standard, interpretation, or amendments published by the IASB and endorsed by the
European Union for which the mandatory application date is after 1 January 2014.
The following new standards, interpretations, and amendments to standards and interpretations have been issued, subject to
the EU endorsement, but are not effective for the financial year beginning 1 January 2014 and have not yet been early
adopted by the Group:
Effective date for periods beginning on or after
IFRS 9 "Financial Instruments" 1 January 2018
IFRS 15 "Revenue from Contracts with Customers" 1 January 2017
IFRS 16 "Leases" 1 January 2019
IAS 7 "Statement of cash flows" 1 January 2017
IAS 12 "Income tax" 1 January 2017
Amendments to IFRS 10 and IAS 28 "Sale or Contribution of Assets between an Investor and its Associate or Joint Venture" 1 January 2016
Amendments to IFRS 11 "Accounting for Acquisitions of interests in Joint Operations" 1 January 2016
Amendments to IAS 1 "Presentation of financial statements 1 January 2016
Amendments to IAS 16 and IAS 38 "Clarification of Acceptable Methods of Depreciation and Amortisation" 1 January 2016
Amendments to IAS 19 "Defined Benefit Plans: Employee Contributions" 1 July 2014
Amendments to IAS 27 "Equity Method in Separate Financial Statements" 1 January 2016
With the exception of IFRS 16 "Leases" the Group does not currently expect any of these changes to have a material impact
on the results. IFRS 16 will replace the current guidance under IAS 17 and will have a significant impact on the accounting
by lessees in particular. Under IAS 17, lessees were required to make a distinction between a finance lease (on balance
sheet) and an operating lease (off balance sheet). IFRS 16 will require lessees to recognise a lease liability reflecting
future lease payments and a 'right-of-use asset' for virtually all lease contracts. The adoption of IFRS 16 will have a
material effect on the Hornby plc financial statements.
RECONCILIATION OF STATUTORY TO NON STATUTORY INFORMATION IN THE CHAIRMAN'S STATEMENT AND OPERATING AND FINANCIAL REVIEW
Underlying (loss)/profit before taxation is shown to present a clearer view of the trading performance of the business.
Management has identified the following non-trivial adjustments, whose inclusion in earnings could distort underlying
trading performance: net foreign exchange (gains)/losses on intercompany loans which are dependent on exchange rates from
time to time and can be volatile and amortisation of intangibles which result from historical acquisitions. Additionally,
exceptional items including restructuring costs and impairments to goodwill, add volatility and these are considered to be
one-off items and therefore have also been added back in calculating underlying (loss)/profit before taxation.
Group
2016 £'000 2015£'000
Loss before taxation (13,532) (184)
Net foreign exchange impact on intercompany loans (389) 618
Amortisation of intangibles 384 377
Exceptional items:
Restructuring costs 993 811
Implementation of new ERP system 1,174 -
Refinancing costs 762 -
Profit on disposal of property (223) -
Impairment of property, plant and equipment - tooling 1,158 -
Impairment of goodwill 3,990 -
Underlying (loss)/profit before taxation (5,683) 1,622
The Statement of Comprehensive Income discloses foreign exchange movements, amortisation of intangibles and exceptional
items. Further detail of the exceptional items is included in Note 4.
REVENUE RECOGNITION
Revenue is measured at the fair value of the sale of goods net of value added tax, rebates and discounts, royalty income
and after eliminating sales within the Group.
Revenue is recognised as follows:
(a) Sale of goods
Sales of goods are recognised when a Group entity has delivered products to the customer. The customer is either a trade
customer or the consumer when sold through Hornby concessions in various retail outlets, or via the internet.
(b) Royalty income
Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
(c) Sales returns
The Group establishes a sales returns provision at the period end that reduces revenue in anticipation of customer returns
of goods sold in the period.
(d) Hornby Visitor Centre
Revenue is generated from the ticket and product sales at our Visitor Centre in Margate and recognised at the point of
sale.
Dividend income in the Company is recognised upon receipt. Management fees are recognised in the Company on an accruals
basis in relation to costs incurred on behalf of subsidiary companies.
EXCEPTIONAL ITEMS
Where items of income and expense included in the statement of comprehensive income are considered to be material and
exceptional in nature, separate disclosure of their nature and amount is provided in the financial statements. These items
are classified as exceptional items. The Group considers the size and nature of an item both individually and when
aggregated with similar items when considering whether it is material, for example impairment of intangible assets or
restructuring costs.
OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Board of the Company that makes strategic decisions.
Operating profit of each reporting segment includes revenue and expenses directly attributable to or able to be allocated
on a reasonable basis. Segment assets and liabilities are those operating assets and liabilities directly attributable to
or that can be allocated on a reasonable basis.
BUSINESS COMBINATIONS
Goodwill arising on a business combination before and after 1 April 2004, the date of transition to IFRS, is not subject to
amortisation but tested for impairment on an annual basis. Intangible assets, excluding goodwill, arising on a business
combination subsequent to 1 April 2004, are separately identified and valued, and subject to amortisation over their
estimated economic lives.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the
disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to
cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or
groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose
identified according to operating segment. Goodwill is recorded in the currency of the cash generating unit to which it is
allocated.
INTANGIBLES
(a) Brand names
Brand names, acquired as part of a business combination, are capitalised at fair value as at the date of acquisition. They
are carried at their fair value less accumulated amortisation and any accumulated impairment losses. Amortisation is
calculated using the straight-line method to allocate the fair value of brand names over their estimated economic life of
15-20 years. Brand names have been valued on a 'relief from royalty' basis.
(b) Customer lists
Customer lists, acquired as part of a business combination, are capitalised at fair value as at the date of acquisition.
They are carried at their fair value less accumulated amortisation and any accumulated impairment losses. Amortisation is
calculated using the straight-line method to allocate the fair value of customer relationships over their estimated
economic life of ten years. Customer lists have been valued according to discounted incremental operating profit expected
to be generated from each of them over their useful lives.
(c) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the
design and testing of new products) are recognised as intangible assets when it is probable that the project will be a
success, considering its commercial and technological feasibility, and costs can be measured reliably. Other development
expenditures are recognised as an expense as incurred.
(d) Computer software
Computer software expenditure is capitalised at the value at the date of acquisition and depreciated over a useful economic
life of 4-6 years.
PROPERTY, PLANT AND EQUIPMENT
Land and buildings are shown at cost less accumulated depreciation. Assets revalued prior to the transition to IFRS use
this valuation as deemed cost at this date. Other property, plant and equipment are shown at historical cost less
accumulated depreciation. Cost includes the original purchase price of the asset and the costs attributable to bringing the
asset to its working condition for its intended use.
Depreciation is provided at rates calculated to write off the cost or valuation of each asset, on a straight-line basis
(with the exception of tools and moulds) over its expected useful life to its residual value, as follows:
Freehold buildings - 30 to 50 years
Plant and equipment - 5 to 10 years
Motor vehicles - 4 years
Freehold land is not depreciated.
Tools and moulds are depreciated at varying rates in line with the related estimated product sales on an item-by-item basis
up to a maximum of four years.
IMPAIRMENT OF NON-CURRENT ASSETS
Assets that have an indefinite useful
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