REG - Hornby PLC - REPLACEMENT: Hornby Announces Interim Results <Origin Href="QuoteRef">HRN.L</Origin> - Part 2
24/11/2016 09:45
- Part 2: For the preceding part double click ID:nRSX9937Pa
expected total annual earnings.
Adoption of new and revised standards
There are no standards, amendments to standards or interpretations that are
both mandatory for the first time for the financial year ending 31 March 2017
and that have a material impact on the Group's results, except for IFRS 16
outlined below.
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 by grossing up assets and liabilities by approximately £1 million.
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 2016.
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 2016.
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 2016.
Further details of the Group's financial instruments are set out within note 8
of this half-yearly report as required by IFRS 13.
4. SEGMENT INFORMATION AND EXCEPTIONAL COSTS
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 the US segment does not meet the
quantitative thresholds required by IFRS 8, management has concluded that this
segment should be reported, as it is closely monitored by the chief operating
decision-maker.
UK USA Spain Italy Rest of Europe Total Reportable Segments
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended 30 September 2016 (unaudited)
Total revenue 20,477 1,406 911 751 2,080 25,625
Inter-segment revenue (3,642) - (77) - - (3,719)
Revenue (from external customers) 16,835 1,406 834 751 2,080 21,906
Underlying (loss)/profit before taxation (2,783) 47 (87) (367) (363) (3,553)
Foreign exchange on intercompany loans 439 - - - - 439
Exceptional costs (1,986) - 588 (37) - (1,435)
Amortisation of intangible assets (128) - - (39) (16) (183)
(Loss)/profit before taxation (4,458) 47 501 (443) (379) (4,732)
Six months ended 30 September 2015 (unaudited)
Total revenue 19,532 1,197 2,391 951 2,031 26,102
Inter-segment revenue (2,406) - (1,318) (82) - (3,806)
Revenue (from external customers) 17,126 1,197 1,073 869 2,031 22,296
Underlying loss before taxation (2,297) (67) (108) (523) (443) (3,438)
Foreign exchange on intercompany loans 65 - - - - 65
Exceptional costs (912) - - - - (912)
Amortisation of intangible assets (132) - - (35) (13) (180)
Loss before taxation (3,276) (67) (108) (558) (456) (4,465)
Six months to 30 September 2016 (unaudited) Six months to 30 September 2015 (unaudited) Year to 31 March 2016 (audited)
£'000 £'000 £'000
Exceptional items comprise:
Restructuring costs 1,356 475 993
Refinancing 679 334 762
Profit on disposal of property (600) - (223)
Implementation of ERP system - 103 1,174
Impairment of property, plant and equipment - - 1,158
Impairment of goodwill - - 3,990
1,435 912 7,854
5. TANGIBLE AND INTANGIBLE ASSETS AND GOODWILL
Tangible and intangible assets and goodwill (unaudited) Six months ended 30 September 2016 Six months ended 30 September 2016
£'000 £'000
£'000 £'000
Opening net book amount 1 April 2016 and 1 April 2015 16,485 22,795
Exchange adjustment 279 99
Additions 985 2,915
Disposals (51) -
Reclassification to assets held for sale - (1,191)
Depreciation, amortisation and impairment (2,053) (1,948)
Closing net book amount 30 September 2016 and 30 September 2015 15,645 22,670
The additions comprise new product tooling (£890,000), property, plant and
equipment (£55,000) and intangible assets - computer software (£40,000).
The Group has performed impairment reviews for goodwill as at 30 September
2016 and consider the carrying value of the assets held to be recoverable. The
discount rates and key assumptions used within the assessment at 30 September
2016 have remained consistent with the impairment reviews conducted in March
2016.
At 30 September the Group had a clear intention to sell certain land and
buildings held by the Company and remain in a sales process for the site
therefore these assets have been classed as current assets under IFRS 5.
2016 2015
CAPITAL COMMITMENTS (unaudited) (unaudited)
£'000 £'000
At 30 September commitments were:
Contracted for but not provided for 549 1,250
The commitments relate to the acquisition of tooling as part of property,
plant and equipment.
6. SHARE CAPITAL
At 31 March 2016 the Group had 54,953,574 ordinary 1p shares in issue with
nominal value £549,535 and following the new ordinary share issue on 8 July
2016 has, at 30 September 2016, 84,583,204 ordinary 1p shares in issue with a
nominal value of £845,832 (2015 - £549,535).
No employee share options were exercised during the first half to 30 September
2016 (2015 - £nil).
7. BORROWINGS
30 September 2016 (unaudited) 30 September 2015 (unaudited) 31 March 2016 (audited)
£'000 £'000 £'000
CURRENT:
Bank overdrafts 3,026 6,008 7,706
Bank loans - 46 177
3,026 6,054 7,883
NON-CURRENT:
Bank loans - 144 -
- 144 -
At 30 September 2016 the UK had a £10,000,000 revolving credit facility
expiring December 2019 (2015 - £10,000,000) that attracts interest at 3.5%
above Libor. (2015 - 2.9% above Libor).
In the period to 30 September 2016 loan repayments were £188,000 (2015 -
£21,000).
The drawdown amount on the revolving credit facility amounted to £5,500,000
(2015 - £8,000,000) and is included within net bank overdrafts above.
8. FINANCIAL INSTRUMENTS
The following tables present the Group's assets and liabilities that are
measured at fair value at 30 September 2016 and 31 March 2016. 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 - 447 - 447
Total assets as at 30 September 2016 - 447 - 447
Liabilities
Derivatives used for hedging - - - -
Total liabilities at 30 September 2016 - - - -
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets
Derivatives used for hedging - 394 - 394
Total assets at 31 March 2016 - 394 - 394
Liabilities
Derivatives used for hedging - (12) - (12)
Total liabilities at 31 March 2016 - (12) - (12)
9. TAXATION
The tax expense is recognised based on management's latest estimate of the
estimated full year forecast effective tax rate determined for each territory.
Due to the expected incidence of profits in the second half of the year in
each entity, the rate for the full year is expected to be in line with the
interim rate.
10. LOSS PER SHARE
Loss per share attributable to equity holders of the Company arises from
continuing operations as follows:
30 September 2016 (unaudited) 30 September 2015 (unaudited) 31 March 2016 (audited)
Loss per share from continuing operations attributable to the equity of the Company
- basic (6.89)p (6.30)p (27.87)p
- diluted (6.89)p (6.30)p (27.87)p
- underlying (5.17)p (4.81)p (13.02)p
11. DIVIDENDS
No interim dividend has been declared for the interim period ended 30
September 2016 (2015 - £nil).
12. 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.
13. RELATED-PARTY TRANSACTIONS
Key management compensation amounted to £1,266,000 for the six months to 30
September 2016 (2015 - £1,573,000). Key management include directors and
senior management within the organisation. For the period to 30 September 2016
there was a decrease in the salaries compared to the same period last year
because of the changes made to the management of the European businesses in
2015.
30 September 2016 (unaudited) 30 September 2015 (unaudited) 31 March 2016 (audited)
£'000 £'000 £'000
Salaries and other short-term benefits 1,234 1,213 1,780
Other pension costs 61 166 172
Share-based payments (29) 194 18
Redundancy and compensation for loss of office - - 544
_______ _______ _______
1,266======= 1,573======= 2,514=======
Before appointment as Managing Director of Asia and a Director of Hornby
Hobbies Limited, a subsidiary of Hornby Plc, Bharat Ahir provided consultancy
services to the Group. 28One, not to be confused with companies of a similar
name, which is owned by Bharat continues to support the business in relation
to providing ongoing support to manage product delivery and Hornby Hobbies has
been invoiced and paid £99,798 (2015 - £37,000) in relation to these services
to 28One since 1 April 2016. No outstanding payments remained payable to 28One
as at 30 September 2016 (2015 - £ nil). Hornby Hobbies Limited continues to
use these services on an ongoing basis. There are no other related-party
transactions.
14. RISKS AND UNCERTAINTIES
The Board has reviewed the principal risks and uncertainties and have
concluded that the key risks continue to be market conditions, delivery of the
Turnaround Plan, 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 2016 provide a description of each risk along with the
associated impact and mitigating actions. The issues surrounding supply chain,
liquidity, exchange rates and market conditions are covered in more detail
within the interim management report itself. The Board will continue to focus
on risk mitigation plans to address these areas.
15. SEASONALITY
Sales are subject to seasonal fluctuations, with peak demand in the October -
December quarter. For the six months ended 30 September 2016 sales
represented 39% of the annual sales for the year ended 31 March 2016 (2015 -
38% of the annual sales for the year ended 31 March 2015).
By order of the Board
Steve Cooke
David Mulligan
Chief Executive
Group Finance Director
24 November 2016
This information is provided by RNS
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