TIDMHRN
RNS Number : 3572U
Hornby PLC
23 November 2023
23 November 2023
HORNBY ANNOUNCES INTERIM RESULTS
Hornby Plc ("Hornby"), the international hobby products Group,
today announces its unaudited interim results for the six months
ended 30 September 2023.
Interim Results Highlights
Financial
- Group revenue of GBP23.8 million (2022: GBP22.4 million) an increase of 6% on prior year
- Underlying Operating Group loss before tax* of GBP4.2 million (2022: loss of GBP1.5 million)
- Statutory loss before taxation for the period of GBP5.1
million (2022: loss of GBP2.9 million)
- Net debt GBP14.6 million (September 2022: Net debt GBP4.9 million)
* Stated before exceptional items, FX, share based payment and
amortisation of intangibles.
Operational
- New senior team in place, including a Chief Marketing Officer
(ex Lego) and a Group Sales Director (ex Mattel)
- Launch of our first retail experience under the name The
WonderWorks ( www.wonderworksmargate.co.uk )
- Continued revenue growth in the digital channel, up +30% YOY
- Further progress made on driving price down on select products, through further supply chain diversification into India.
Olly Raeburn, Hornby Chief Executive, commented:
"In a year of structural, strategic and operational change, we
are starting to see critical improvements in many areas of the
business. Whilst topline revenue is growing, and remains in line
with management guidance for the full year, there is a cost
increase associated with what's being implemented. We head into the
key Christmas trading period with a strong order book, a full
calendar of promotional activity and a strong team in place. Whilst
we do not expect the full benefits of this year's initiatives to
take effect until the next financial year, I remain excited about
the progress being made and look forward to seeing the impact of
these changes over the next 12 months."
-ends-
23 November 2023
Enquiries:
Hornby plc
Olly Raeburn, CEO 01843 233 500
Kirstie Gould, CFO
Liberum
Andrew Godber 020 3100 2222
Edward Thomas
Miquela Bezuidenhoudt
Hornby Plc ("Hornby" or "the Group")
INTERIM REPORT FOR THE SIX MONTHSED 30 SEPTEMBER 2023
CEO Statement
In my letter to shareholders as part of the Annual Report that
was released in June, I highlighted a number of key areas of focus
for the remainder of this financial year. To accompany these half
year results, I shall talk to progress made in some of those areas,
as well as referencing the changes we have made from a key
personnel perspective.
Brand and Strategy
I shared details of the Brand Positioning work we had undertaken
in the early part of the year, identifying 'Building Happiness' as
the core proposition for Hornby, with our Mission being 'To build a
happier world for all of us'. These two organising thoughts have
become integrated into our product and communications planning this
year and, more importantly, are a fundamental component of the FY24
strategy and planning process.
Beyond the proposition work, a key part of my vision for the
future sees the Group being organised to give greater individuality
to the brands, and that process is already underway. It's an
evolutionary transformation that should see the brands, which have
different audiences, develop in different ways and at different
rates.
Ultimately, we will see the structure of the Group evolve from a
traditional corporate hierarchy, towards a confederation of
semi-autonomous, brand-focused, business units. This approach will
give those at the coal face greater autonomy, accountability and
capacity to obsess about the brands and how to drive growth in
distinctive ways.
Significant progress has been made during the last quarter, and
we expect to start implementing change before the end of the
current financial year, allowing us to see the associated benefits
come through from the start of the next one.
Product Development and Merchandising
One of the challenges we were facing as we exited the last
financial year was a significant stock holding on account of a
combination of over-commitment and under performance in the second
half of last year. We committed to improving our analysis of stock
performance and inventory management, and to reduce the volume of
aged stock in the business, whilst protecting brand value by
avoiding aggressive discounting.
Our approach to inventory management is evolving, but we will
not see the impact and benefit of that until the second half of the
next financial year when the decisions made in the last 6 months
flow through.
Whilst we materially reduced forward inventory orders at the
start of the year, the lead times in our supply chain mean we are
still receiving product from the orders placed between 12 and 18
months ago. This unavoidable reality, combined with the normal
stock build for forthcoming peak trading, means that our overall
stock holding in the business at the half year, remains at similar
levels to the start of the year. That said, we have reduced the
amount of stock aged more than 12 months, that we held at 31(st)
March, by 18%, through effective promotional activity and close
management of key existing retailer relationships.
Additionally, we have opened up new channels through rekindling
some lapsed relationships with valuable National retailers, and
adding additional, sector specific, independent retailers to our
portfolio. That said, as we hit the half year, our inventory
position still remains high on account of the natural stock build
ahead of peak trading.
Entry Level Product and Pricing
Having identified a clear opportunity to present some of our
product at more accessible prices, we have undertaken a number of
workstreams in this area. We have developed some prototype
entry-level priced Hornby train sets and Scalextric sets that were
well received when presented to potential buyers at the New York
Toy Fair at the end of September. We are continuing to develop this
initiative through gleaning end-consumer feedback and further buyer
input.
Additionally, we have now moved production of the majority of
our Quickbuild product from the UK to India where we will see
significant savings, enabling us to present this high-potential
range at a much more attractive price point from the end of the
current financial year.
Data, Loyalty and CRM
In the Annual Report I talked about our desire to use
pre-existing data to start to build better relationships with our
customers, based on their preferences and their behaviours. Since
then, through our Customer Loyalty Lead, we have been able to build
a view of previous browsing and transaction history to create a
series of automated CRM / email journeys to drive consideration and
purchase.
Launched in August, these programmes are running in the
background and created cGBP100K of incremental revenue in their
first six weeks. This is just the beginning and we are increasing
the number of 'live' journeys to ensure this revenue stream
continues to grow, adding value and contribution on an ongoing
basis.
As our understanding of customer behaviour deepens, so too will
the volume and impact of the automated CRM journeys that will
continue to run in the background, supporting our BAU customer
development activities.
Customer Experience and Retail
One of the first outward manifestations of the new strategy at
Hornby is the opening of The
WonderWorks in Margate ( www.wonderworksmargate.co.uk ) on the
site of the old Hornby Visitors' Centre. Our first experiential
site is set over 11,000 sq ft of engaging and immersive space,
comprising an exhibit, a large retail space and a café.
This is our first experiential site that hosts all the hobbies
and products of the Group, including Warlord Games. Many new
concepts are being trialled for the first time, and once we have
learned lessons from this site, and assuming it is successful, we
aim to develop more sites in the future.
We opened the doors to The WonderWorks in Margate on 30(th)
October and, whilst it's early days, we have
consistently seen close to 100% increases in revenues from the
site, versus the same period last year through the Hornby Visitors'
Centre.
As evidenced in the progress we're making with Data, Loyalty and
CRM, we want to develop deeper, more
insight driven, direct relationships with our existing and
potential customers; The WonderWorks is another way in which we can
begin do that, and early reactions give us high hopes for its
success.
People Changes
Much of what I have described above represents a new direction
for Hornby, and a critical contributing factor to our future
success relies on us having the right people in key roles. With the
departures of Simon Kohler (Marketing and Development Director) and
Tim Mulhall (COO) earlier in the year, we have invested in a
handful of high calibre, senior, individuals to help drive the new
strategy forward, including;
-- Chief Marketing Officer (ex Lego)
-- Group Sales Director (ex Mattel)
-- Head of Export Sales (ex WHSmith)
-- Head of Research and Insight (ex Lego)
With a stronger and more diverse senior team in place we are
already starting to see the impact of new strategies for improving
performance, albeit the benefits will accelerate and truly start to
flow through into the next financial year.
Digital Update
Direct sales via our website continue to increase, with a
year-on-year uplift of more than 30% in the first two quarters of
2023/24. I expect this increase to continue to accelerate into the
second half of our financial year.
Q1 Q2 Q3 Q4
2018/19 GBP301,100 GBP479,767 GBP582,434 GBP362,688
------------------- ------------------- ------------------- -------------------
2019/20 GBP426,382 GBP497,494 GBP731,252 GBP638,260
------------------- ------------------- ------------------- -------------------
2020/21 GBP1,222,578 GBP1,169,936 GBP1,574,834 GBP976,711
------------------- ------------------- ------------------- -------------------
2021/22 GBP849,782 GBP1,038,172 GBP2,128,918 GBP1,687,916
------------------- ------------------- ------------------- -------------------
2022/23 GBP1,389,736 GBP1,519,917 GBP2,834,467 GBP2,863,283
------------------- ------------------- ------------------- -------------------
2023/24 GBP1,787,510 GBP1,981,956
------------------- ------------------- ------------------- -------------------
In addition to a general improvement in performance, we are also
seeing the benefits of bringing more digital capability in-house
and relying less on external agency support. This not only allows
us to be more agile and responsive but also upskills the
organisation, making us better fit for future growth.
Outlook
As with the 2022/2023 financial year, we expect profitability to
be depressed in 2023/2024 as we restructure the business and make
necessary investments in people and processes. We certainly expect
2023/2024 to show improvement at the topline, and our guidance of
'high single digit / low double digit revenue growth' remains
unchanged. It is from next year onwards that we are targeting a
return to profitability as the restructuring improves efficiencies
and margins on continued increasing revenues.
As far as current trading and the outlook for the second half of
the year are concerned, our order book is strong and although, like
everyone, we are seeing the ramp up into Christmas trade coming
later than in previous years, we are starting to see some
encouraging increases in performance. We have a stronger calendar
of seasonal promotional activities than in previous years and are
operating in a far more joined up way in execution, so remain
positive about the potential for the coming months.
A more comprehensive analysis of the year will be given in the
January 2024 trading update.
Financial review
Performance
Group revenue for the six months to September 2023 of GBP23.8
million was 6% higher than the prior year (2022: GBP22.4 million).
The gross margin for the period was 44% (2022: 48%), a slight
decrease reflecting the product/channel mix in the first half of
2023 compared to prior year and increased tooling amortisation
costs.
Underlying overheads increased year-on-year from GBP12.5 million
to GBP14.6 million, or by 17%, reflecting an increase in minimum
wages, general inflationary increases and increased focus on direct
selling routes and e-commerce costs including personnel.
The operating loss before exceptional costs (including IFRS 16)
for the six months to September 2023 was GBP4.3 million compared to
a loss of GBP2.6 million for the same period last year. This is due
to the increased overheads as mentioned above and changes to senior
staff within sales and marketing and associated costs.
Exceptional costs during the first half year were GBP0.05
million (2022: GBP0.2 million) and these comprised of one-off costs
relating to the departure of 2 senior executives.
Group loss before tax was GBP5.1 million (2022: loss of GBP2.9
million). The basic loss per share was 3.00p (2022: loss per share
of 1.29p).
Segmental analysis
Third party revenue for the UK business increased by 4% in the
period and generated a loss before taxation of GBP5.0 million
compared to GBP2.3 million loss last year. Revenue for the first
half of 2023 has increased slightly compared with the same period
last year due to the increase in sales direct to consumers.
The International segment revenue decreased by 17% in the period
and generated an underlying loss of GBP0.1 million (2022: GBP0.6
million loss). The decrease in revenue is a result of the global
cost of living crisis impacting European markets..
Balance sheet
Group inventories increased during the period by 13% from
GBP21.3 million at March 2023 to GBP24.1 million at September 2023,
due to a seasonal build-up of stocks in the lead-up to the busy
Christmas trading period.
Trade & other receivables and Trade & other payables are
higher than the start of the year due to seasonality of the
business.
Investment in new tooling, new computer software and other
capital expenditure was GBP2.9 million (2022: GBP1.9 million).
Capital structure
There was an increase in net debt compared to 31 March 2023. The
September period end net debt balance stood at GBP14.8 million,
from GBP5.5 million of net debt at the end of the last financial
year. This is due to the operational cash outflow in the business,
purchase of 25% stake in Warlord Games Limited which was announced
on 7 July 2023, spending on stocks and tooling ahead of Christmas
trading as budgeted and increased overheads as we continue to
invest in people and technology. Headroom at 30 September 2023 was
GBP5 million.
Going concern
The Group has in place a GBP12.0 million Asset Based Lending
(ABL) facility with Secure Trust Bank Limited (STB) through to
October 2024. The STB Covenants are customary operational covenants
applied on a monthly basis. In addition, the Group has a committed
GBP11.25 million loan facility with Phoenix Asset Management
Partners Limited (the Group's largest shareholder) which runs
through to December 2024. The Group also carries a Covid Business
Interruption Loan (CBIL) liability as a result of the acquisition
of LCD Enterprises Limited on 30 July 2021. Balance at 30 September
2023 is GBP142,000.
The Group has prepared trading and cash flow forecasts for a
period of three years, which have been reviewed and approved by the
Board. On the basis of these forecasts, and after a detailed review
of trading, financial position and cash flow models the Directors
have a reasonable expectation that the Group and Company have
adequate resources to continue in operational existence for the
foreseeable future. For these reasons, they continue to adopt the
going concern basis of accounting in preparing the financial
statements.
STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 September 2023
Six months Six months Year
to to to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
REVENUE 4 23,794 22,410 55,105
Cost of Sales (13,368) (11,683) (28,166)
------------- ------------- ------------
GROSS PROFIT 10,426 10,727 26,939
Distribution costs (3,988) (3,833) (8,196)
Selling and marketing
costs (6,487) (5,003) (11,448)
Administrative expenses (4,109) (4,183) (7,712)
Other operating expenses (157) (328) (653)
------------- ------------- ------------
OPERATING PROFIT/(LOSS)
BEFORE EXCEPTIONAL (4,315) (2,620) (1,070)
Exceptional Items 5 (47) (148) (3,974)
------------- ------------- ------------
OPERATING PROFIT/(LOSS) (4,362) (2,768) (5,044)
Finance income 11 4 11
Finance costs (725) (122) (843)
------------- ------------- ------------
Net finance costs (714) (118) (832)
Share of profit of investments (2) - -
accounted for using the
equity method
PROFIT/(LOSS) BEFORE
TAXATION 4 (5,078) (2,886) (5,876)
Taxation 13 (14) 87 (46)
------------- ------------- ------------
PROFIT/(LOSS) FOR THE
PERIOD AFTER TAXATION (5,092) (2,799) (5,922)
OTHER COMPREHENSIVE INCOME/(LOSS)
(Items that may be classified
subsequently to profit
and loss)
Cash flow hedges 794 793 (932)
Currency translation
differences 48 441 161
------------- ------------- ------------
OTHER COMPREHENSIVE INCOME/(LOSS)
FOR THE PERIOD, NET OF
TAX 842 1,234 (771)
------------- ------------- ------------
TOTAL COMPREHENSIVE LOSS
FOR THE PERIOD (4,250) (1,565) (6,693)
============= ============= ============
Comprehensive income
attributable to:
Equity holders of the
Company (4,234) (1,544) (6,676)
Non-controlling interests (16) (21) (17)
(LOSS)/PROFIT PER ORDINARY
SHARE
Basic (3.00)p (1.29)p (3.50)p
Diluted (3.00)p (1.29)p (3.50)p
============= ============== ============
All of the activities of the Group are continuing. The notes
form an integral part of this condensed consolidated half-yearly
financial information.
BALANCE SHEET
As at 30 September 2023
Six months Six months Year to
to to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Goodwill 6 1,731 4,647 1,732
Intangible assets 6 2,724 3,097 2,986
Investment 7 1,437 - -
Property, plant and equipment 6 13,786 10,477 12,041
Right of Use Lease Asset 8 2,144 2,484 2,087
Deferred income tax assets 3,571 3,423 3,571
------------- ------------- ----------
25,393 24,128 22,417
CURRENT ASSETS
Inventories 24,112 22,548 21,282
Trade and other receivables 9,115 9,154 9,181
Derivative financial instruments 12 256 1,808 2
Cash and cash equivalents 1,014 1,874 1,337
------------- ------------- ----------
34,497 35,384 31,802
------------- ------------- ----------
LIABILITIES
CURRENT LIABILITIES
Borrowings 11 (6,219) (5,558) (6,750)
Derivative financial instruments 12 (17) - (557)
Trade and other payables (9,509) (8,454) (8,067)
Lease liabilities (403) (450) (409)
------------- ------------- ----------
(16,148) (14,462) (15,783)
------------- ------------- ----------
NET CURRENT ASSETS 18,349 20,922 16,019
------------- ------------- ----------
NON-CURRENT LIABILITIES
Borrowings 11 (9,595) (1,252) (117)
Lease liabilities 9 (2,125) (2,213) (2,047)
Deferred tax liabilities (233) (233) (233)
------------- ------------- ----------
(11,953) (3,698) (2,397)
------------- ------------- ----------
. .
NET ASSETS 31,789 41,352 36,039
------------- ------------- ----------
SHAREHOLDERS' EQUITY
Share capital 10 1,699 1,698 1,699
Share premium 52,857 52,857 52,857
Capital redemption reserve 55 55 55
Translation reserve (1,605) (1,373) (1,653)
Hedging reserve 239 1,356 (555)
Other reserves 1,688 1,688 1,688
Retained earnings (23,123) (14,920) (18,047)
------------- ------------- ----------
Equity attibutable to PLC
shareholders 31,810 41,361 36,044
Non-controlling interests (21) (9) (5)
Total equity 31,789 41,352 36,039
------------- ------------- ----------
STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 September 2023
Capital
Share Share redemption Translation Hedging Other Non-controlling Retained Total
capital premium reserve reserve reserve reserves interests earnings equity
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 April 2023 1,699 52,857 55 (1,653) (555) 1,688 (5) (18,047) 36,039
Profit for the
period - - - - - - (16) (5,076) (5,092)
Other
comprehensive
income/(loss)
for the
period - - - 48 794 - - - 842
------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------ ------------
Total
comprehensive
loss for the
period - - - 48 794 - (16) (5,076) (4,250)
------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------ ------------
Balance at
30 September
2023 1,699 52,857 55 (1,605) 239 1,688 (21) (23,123) 31,789
============ ============ ============ ============ ============ ============ ================ ============ ============
Balance at
1 April 2022 1,669 52,857 55 (1,814) 377 1,688 12 (11,734) 43,110
Profit for the
period - - - - - - (21) (2,778) (2,799)
Other
comprehensive
income/(loss)
for the
period - - - 441 979 - - - 1,420
------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------ ------------
Total
comprehensive
loss for the
period - - - 441 979 - (21) (2,778) (1,379)
------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------ ------------
Transactions -
with owners
Share based
payments 29 - - - - - - (408) (379)
------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------ ------------
Total
transactions
with owners 29 (408) (379)
------------ ------------ ------------ ------------ ------------ ------------ ---------------- ------------ ------------
Balance at
30 September
2022 1,698 52,857 55 (1,373) 1,356 1,688 (9) (14,920) 41,352
============ ============ ============ ============ ============ ============ ================ ============ ============
The notes form an integral part of this condensed consolidated
half-yearly financial information.
STATEMENT OF CASH FLOWS
for the six months ended 30 September 2023
Six months Six months Year to
to to
30 September 30 September 31 March
Note 2023 2022 2023
-------------------------------------------- -----
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----- ------------- ------------- ---------
Loss before taxation (5,078) (2,886) (5,875)
-------------------------------------------- ----- ------------- ------------- ---------
Interest payable 653 43 322
-------------------------------------------- ----- ------------- ------------- ---------
Interest paid on Lease liabilities 9 72 79 153
-------------------------------------------- ----- ------------- ------------- ---------
Interest receivable (11) (4) (11)
-------------------------------------------- ----- ------------- ------------- ---------
Share of profit of Minority Interest 2 - -
-------------------------------------------- ----- ------------- ------------- ---------
Amortisation of intangible assets 288 259 553
-------------------------------------------- ----- ------------- ------------- ---------
Impairment of Goodwill - - 2,915
-------------------------------------------- ----- ------------- ------------- ---------
Depreciation 1,819 1,311 2,762
-------------------------------------------- ----- ------------- ------------- ---------
Depreciation on right of use assets 8 243 267 528
-------------------------------------------- ----- ------------- ------------- ---------
Share-based payments (non cash) - 532 532
-------------------------------------------- ----- ------------- ------------- ---------
Share-based payments (cash) - (919) (940)
-------------------------------------------- ----- ------------- ------------- ---------
Decrease / (increase) in inventories (2,799) (5,700) (4,680)
-------------------------------------------- ----- ------------- ------------- ---------
Decrease / (increase) in trade and
other receivables 225 (199) (373)
-------------------------------------------- ----- ------------- ------------- ---------
(Decrease) / increase in trade and
other payables 1,301 634 733
-------------------------------------------- ----- ------------- ------------- ---------
Cash flows from operating activities (3,285) (6,583) (3,381)
-------------------------------------------- ----- ------------- ------------- ---------
Interest paid (653) (43) (322)
-------------------------------------------- ----- ------------- ------------- ---------
Interest element of ROU lease payments (72) (79) (153)
-------------------------------------------- ----- ------------- ------------- ---------
Net cash (used in)/generated from
operating activities (4,010) (6,705) (3,856)
-------------------------------------------- ----- ------------- ------------- ---------
Cash flows from investing activities
-------------------------------------------- ----- ------------- ------------- ---------
Purchase of business 7 (1,439) - -
-------------------------------------------- ----- ------------- ------------- ---------
Purchase of property, plant and equipment 6 (3,562) (1,720) (4,744)
-------------------------------------------- ----- ------------- ------------- ---------
Purchase of intangible assets 6 (25) (168) (351)
-------------------------------------------- ----- ------------- ------------- ---------
Interest received 11 4 11
-------------------------------------------- ----- ------------- ------------- ---------
Net cash (used in)/generated from
investing activities (5,015) (1,884) (5,084)
-------------------------------------------- ----- ------------- ------------- ---------
Cash flows from financing activities
-------------------------------------------- ----- ------------- ------------- ---------
Proceeds from issuance of ordinary
shares - 30 30
-------------------------------------------- ----- ------------- ------------- ---------
Repayment of CBIL loan (50) (25) (50)
-------------------------------------------- ----- ------------- ------------- ---------
Proceeds from Asset Based Lending
Facility 1,579 5,508 4,590
-------------------------------------------- ----- ------------- ------------- ---------
Shareholder Loan 7,418 1,000 2,000
-------------------------------------------- ----- ------------- ------------- ---------
Payment of lease liabilities (228) (248) (460)
-------------------------------------------- ----- ------------- ------------- ---------
Net cash generated from/(used in)
financing activities 8,719 6,265 6,110
-------------------------------------------- ----- ------------- ------------- ---------
Net (decrease)/increase in cash
and cash equivalents (306) (2,324) (2,830)
-------------------------------------------- ----- ------------- ------------- ---------
Cash, cash equivalents and bank overdrafts
at beginning of the year 1,337 4,139 4,139
-------------------------------------------- ----- ------------- ------------- ---------
Effect of exchange rate movements (17) 59 28
-------------------------------------------- ----- ------------- ------------- ---------
Cash, cash equivalents and bank
overdrafts at end of year 1,014 1,874 1,337
-------------------------------------------- ----- ------------- ------------- ---------
Cash, cash equivalents and bank
overdrafts consist of:
-------------------------------------------- ----- ------------- ------------- ---------
Cash and cash equivalents 1,014 1,874 1,337
-------------------------------------------- ----- ------------- ------------- ---------
Cash, cash equivalents and bank
overdrafts at end of year 1,014 1,874 1,337
-------------------------------------------- ----- ------------- ------------- ---------
The notes form an integral part of this condensed consolidated
half-yearly financial information.
NOTES TO CONDENSED CONSOLIDATED HALF-YEARLY FINANCIAL REPORT
1. 1. GENERAL INFORMATION
The Company is a public limited liability company incorporated
and domiciled in the UK. The address of the registered office is
Enterprise Road, Westwood Industrial Estate, Margate, CT9 4JX. The
Group is principally engaged in the development, design, sourcing
and distribution of hobby and interactive home entertainment
products.
The Company has its primary listing on the Alternative
Investment Market and is registered in England No. 01547390.
This condensed consolidated half-yearly financial information
was approved for issue on 22 November 2023.
This condensed consolidated half-yearly financial information
does not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006 and is unaudited. Statutory accounts
for the year ended 31 March 2023 were approved by the Board of
Directors on 21 June 2023 and delivered to the Registrar of
Companies. The Report of the Auditors on those accounts was
unqualified and did not contain any statement under Section 498 of
the Companies Act 2006.
Forward Looking Statements
Certain statements in this half-yearly report are
forward-looking. Although the Group believes that the expectations
reflected in these forward-looking statements are reasonable, we
can give no assurance that these expectations will prove to be
correct. Because these statements involve risks and uncertainties,
actual results may differ materially from those expressed or
implied by these forward-looking statements.
We undertake no obligation to update any forward-looking
statements whether as a result of new information, future events or
otherwise.
2. BASIS OF PREPARATION
The financial statements are presented in sterling, which is the
Parent's functional currency and the Group's presentation currency.
The figures shown in the financial statements are rounded to the
nearest thousand pounds.
This condensed consolidated half-yearly financial information
for the half-year ended 30 September 2023 has been prepared in
accordance with IAS 34 'Interim Financial Reporting'. The
half-yearly condensed consolidated financial report should be read
in conjunction with the annual financial statements for the year
ended 31 March 2023 which have been prepared in accordance with
UK-adopted international accounting standards. The consolidated
Group financial statements have been prepared on a going concern
basis and under the historical cost convention, as modified by the
revaluation of certain financial assets and liabilities (including
derivative instruments) at fair value through profit or loss.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
3. ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 March 2023, as
described in those annual financial statements with the exception
of tax which is accrued using the tax rate that would be applicable
to expected total annual earnings.
Judgements and Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing this condensed consolidated half-yearly financial
report, the significant judgements made by management in applying
the Group's accounting policies and the key sources of estimation
uncertainty were the same as those that applied to the consolidated
financial statements for the year ended 31 March 2023.
Financial Instruments
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk.
The condensed consolidated half-yearly financial report does not
include all financial risk management information and disclosures
required in the annual financial statements and should be read in
conjunction with the Group's annual financial statements as at 31
March 2023.
There have been no changes in the risk management policies since
year end.
The Group's financial instruments, measured at fair value, are
all classed as level 2 in the fair value hierarchy, which is
unchanged from 31 March 2023. Further details of the Group's
financial instruments are set out within note 12 of this
half-yearly report as required by IFRS 13.
4. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of the Company that
makes strategic decisions.
Operating profit of each reporting segment includes revenue and
expenses directly attributable to or able to be allocated on a
reasonable basis. Segment assets and liabilities are those
operating assets and liabilities directly attributable to or that
can be allocated on a reasonable basis.
Management has determined the operating segments based on the
reports reviewed by the Board (chief operating decision-maker) that
are used to make strategic decisions.
The Board considers the business from a geographic perspective.
Geographically, management considers the performance in the UK,
USA, Spain, Italy and rest of Europe. Although these segments do
not meet the quantitative thresholds required by IFRS 8, management
has concluded that these segments should be reported, as it is
closely monitored by the chief operating decision-maker.
Total
UK USA Spain Italy Rest Intra Reportable
of Europe Group Segments
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Six months ended 30 September
2023 (unaudited)
Revenue - External 16,932 1,788 978 1,504 2,592 - 23,794
Inter-segment revenue 1,502 - - - - (1,502) -
Operating (Loss)/Profit (4,441) (248) 36 130 161 - (4,362)
Finance income - external 11 - - - - - 11
Finance income - other segments 230 - - - - - 230
Finance costs - external (719) (4) (1) (1) - - (725)
Finance costs - other segments (87) 0 (107) 0 (36) - (230)
Share of profit of investments
accounted for using the equity
method (2) - - - - - ( 2)
(Loss)/Profit before taxation (5,008) (252) (72) 129 125 - (5,078)
Taxation - - - - (14) - (14)
Profit/(Loss) after taxation (5,008) (252) (72) 129 111 - (5,092)
-------- -------- -------- -------- ----------- -------- -----------
5. EXCEPTIONAL ITEMS
Six months Six months Year to
to to
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Exceptional items - - -
comprise:
- Refinancing costs - 149 149
- Hornby World Experience - - 910
- Goodwill impairment - - 2,915
- Restructuring costs 47 - -
47 149 3,974
------------- ------------- ----------
The exceptional items totalling GBP47,000 (2022: GBP148,000)
include restructuring costs within senior management within sales
and marketing.
6. TANGIBLE AND INTANGIBLE ASSETS AND GOODWILL
The additions comprise new product tooling (GBP2,783,000), property,
plant and equipment (GBP60,000) and intangible assets - computer
software (GBP25,000).
The Group has again performed impairment reviews as at 30 September
2023 and consider the carrying value of the assets held to be recoverable.
The discount rates and key assumptions used within the updated models
at 30 September 2023 have remained constant with the impairment reviews
conducted in March 2023.
====================================================================================
Tangible and intangible assets and goodwill Six months Six months
(unaudited) ended ended
30 September 30 September
2023 2022
GBP'000 GBP'000
Opening net book amount 1 April 2023 and
1 April 2023 16,759 17,888
Exchange adjustment 2 14
Additions 2,868 1,888
Depreciation, amortisation and impairment (2,107) (1,569)
--------------- ---------------
Closing net book amount 30 September 2023
and 30 September 2022 17,522 18,221
=============== ===============
2023 2022
CAPITAL COMMITMENTS (unaudited) (unaudited)
GBP'000 GBP'000
At 30 September commitments were:
Contracted for but not provided for 2,175 3,033
============ ============
The commitments relate to the acquisition of tooling as part of
property, plant and equipment.
7. INVESTMENTS
Interests
in associate
undertakings
at cost
GBP'000
-------------------------------------------------------- --------------
At 1 April 2023 -
Acquisition of 25% of Warlord Games Limited including
costs 1,439
Share of profit of investments accounted for using the
equity method (2)
-------------------------------------------------------- --------------
At 30 September 2023 1,437
-------------------------------------------------------- --------------
On 7 July 2023 Hornby Plc acquired a 25% share in Warlord Games
Limited for cash consideration of GBP1.25 million. Hornby has the
option to acquire a majority stake in Warlord on or around the
second anniversary of this initial acquisition and then to acquire
any remaining shares in Warlord on future anniversaries.
Warlord will continue to be managed by its existing Directors
and the Company believes that this transaction creates a number of
opportunities to accelerate growth of the business further
still.
8. RIGHT OF USE ASSETS
GROUP Property Motor Fixtures, Total
Vehicles Fittings
and Equipment
GBP'000
--------------------------------- ---------
GBP'000 GBP'000 GBP'000
--------------------------------- --------- ---------- --------------- --------
COST
--------------------------------- --------- ---------- --------------- --------
At 1 April 2023 3,757 310 22 4,089
---------------------------------- --------- ---------- --------------- --------
Additions at cost 297 3 - 300
---------------------------------- --------- ---------- --------------- --------
At 30 September 2023 4,054 313 22 4,389
---------------------------------- --------- ---------- --------------- --------
ACCUMULATED DEPRECIATION
--------------------------------- --------- ---------- --------------- --------
At 1 April 2023 1,697 287 18 2,002
---------------------------------- --------- ---------- --------------- --------
Charge 220 23 - 243
---------------------------------- --------- ---------- --------------- --------
At 30 September 2023 1 ,917 310 18 2,245
---------------------------------- --------- ---------- --------------- --------
Net book amount at 30 September
2023 2,137 3 4 2,144
---------------------------------- --------- ---------- --------------- --------
9. RIGHT OF USE LEASE LIABILITIES
The movement in the right of use lease liabilities over the
period was as follows:
2023 2022
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
As at 1 April 2023 2,456 2,746
--------------------------------------------------------- -------- --------
New leases 300 166
--------------------------------------------------------- -------- --------
Interest payable 72 79
--------------------------------------------------------- -------- --------
Repayment of lease liabilities (300) (328)
--------------------------------------------------------- -------- --------
As at 30 September 2023 2,528 2,663
--------------------------------------------------------- -------- --------
Lease liability less than one year 403 450
--------------------------------------------------------- -------- --------
Lease liability greater than one year and less than five
years 677 613
--------------------------------------------------------- -------- --------
Lease liability greater than five years 1,448 1,600
--------------------------------------------------------- -------- --------
Total Liability 2,528 2,663
--------------------------------------------------------- -------- --------
Maturity analysis of contracted undiscounted cashflows is as
follows:
30 September 30 September
2023 2022
GBP'000 GBP'000
--------------------------------------------------------- ------------ ------------
Lease liability less than one year 549 601
--------------------------------------------------------- ------------ ------------
Lease liability greater than one year and less than five
years 1,143 1,048
--------------------------------------------------------- ------------ ------------
Lease liability greater than five years 1,911 2,200
--------------------------------------------------------- ------------ ------------
Total Liability 3,603 3,849
--------------------------------------------------------- ------------ ------------
Finance charges included above (1,075) (1,186)
--------------------------------------------------------- ------------ ------------
2,528 2,663
--------------------------------------------------------- ------------ ------------
10. SHARE CAPITAL
At 30 September 2023 the Group had 169,853,770 ordinary 1p
shares in issue with nominal value GBP1,698,538 (2022:
GBP1,698,538).
11. BORROWINGS
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (unaudited)
GBP'000 GBP'000 GBP'000
SECURED BORROWING AT AMORTISED
COST
CBIL Bank Loan (146) (192) (167)
Shareholder Loan (9,499) (1,110) (2,110)
ABL Facility (6,169) (5,508) (4,590)
============= ============= ============
(15,814) (6,810) (6,867)
============= ============= ============
Total borrowings
Amounts due for settlement within
12 months (6,219) (5,558) (6,750)
Amounts due for settlement after
12 months (9,595) (1,252) (117)
------------- ------------- ------------
(15,814) (6,810) (6,867)
============= ============= ============
At 30 September 2023 t he Group has in place a GBP12.0 million
Asset Based Lending (ABL) facility with Secure Trust Bank PLC
through to October 2024. The Covenants are customary operational
covenants applied on a monthly basis. The Group also has a CBIL
loan with Barclays, acquired as part of the LCD acquisition. The
CBIL payback commenced in August 2021 and finishes July 2026. In
addition, the Group has a committed GBP11.25 million loan facility
with Phoenix Asset Management Partners Limited (the Group's largest
shareholder) if it should be required. The facility currently
expires December 2024.
In the period to 30 September 2023 loan repayments were
GBP25,000 (2022: GBP25,000).
12. FINANCIAL INSTRUMENTS
The following tables present the Group's assets and liabilities
that are measured at fair value at 30 September 2023 and 31 March
2023. The table analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).
- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
There were no transfers or reclassifications between levels
within the period. Level 2 hedging derivatives comprise forward
foreign exchange contracts and an interest rate swap and have been
fair valued using forward exchange rates that are quoted in an
active market. The fair value of the following financial assets and
liabilities approximate their carrying amount: Trade and other
receivables, other current financial assets, cash and cash
equivalents, trade and other payables and bank overdrafts and
borrowings.
Fair values are determined by a process involving discussions
between the Group finance team and the Audit Committee which occur
at least once every 6 months in line with the Group's reporting
dates.
Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Derivatives used for hedging - 256 - 256
---------- -------- -------- --------
Total assets as at 30
September 2023 - 256 - 256
---------- -------- -------- --------
Liabilities
Derivatives used for hedging - (17) - (17)
---------- -------- -------- --------
Total liabilities at 30
September 2023 - (17) - (17)
---------- -------- -------- --------
Level Level Level Total
1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
Assets
Derivatives used for hedging - 2 - 2
---------- -------- -------- --------
Total assets at 31 March
2023 - 2 - 2
---------- -------- -------- --------
Liabilities
Derivatives used for hedging - (557) - (557)
---------- -------- -------- --------
Total liabilities at 31
March 2023 - (557) - (557)
---------- -------- -------- --------
13. TAXATION
The Group has elected not to recognise a deferred tax movement
on the half year losses at this time and there is no tax credit
associated with this in the profit and loss. There is a small
credit associated with a prior year adjustment on current taxation.
The Group has significant brought forward trading losses which can
be utilised.
14. EARNINGS/(LOSS) PER SHARE
Earnings/(loss) per share attributable to equity holders of the
Company arises from continuing operations as follows:
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
Earnings/(loss) per share from
continuing operations
attributable to the equity of the
Company
- basic (3.00)p (1.29)p (3.50)p
- diluted (3.00)p (1.29)p (3.50)p
============= ============= ==========
15. DIVIDENDS
No interim dividend has been declared for the interim period
ended 30 September 2023 (2022: GBPnil).
16. CONTINGENT LIABILITIES
The Company and its subsidiary undertakings are, from time to
time, parties to legal proceedings and claims, which arise in the
ordinary course of business. The Directors do not anticipate that
the outcome of these proceedings and claims, either individually or
in aggregate, will have a material adverse effect upon the Group's
financial position.
17. PERFORMANCE SHARE PLANS AWARDS
At 30 September 2023, there are no outstanding awards to
Directors under any PSP schemes:
18. RELATED-PARTY TRANSACTIONS
Key management compensation amounted to GBP769,000 for the six
months to 30 September 2023 (2022: GBP1,083,000). Key management
include directors and senior management. For the period to 30
September 2023:
30 September 30 September 31 March
2023 2022 2023
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Salaries and other short-term benefits 692 528 1,022
Other pension costs 32 23 47
Compensation for loss of office 45 - -
Share-based payments - 532 532
-------------------- ---------------------- -----------------
769 1,083 1,601
==================== ====================== =================
Phoenix Asset Management Partners who own the majority
shareholding in Hornby PLC have also provided a funding facility to
the Group. During the period interest fees of GBP396,426 were
accrued and remain unpaid at 30 September 2023.
Hornby Hobbies Limited purchased services totalling GBP471,808
from Rawnet Limited which is 100% owned by Phoenix Asset
Management, the controlling party of the Group. At 30 September
2023 GBP96,790 was owing to Rawnet Limited for services
rendered.
There were no other contracts with the Company or any of its
subsidiaries existing during or at the end of the financial year in
which a Director of the Company or any of its subsidiaries was
interested. There are no other related-party transactions.
19. RISKS AND UNCERTAINTIES
The Board has reviewed the principal risks and uncertainties and
have concluded that the key risks continue to be UK market
dependence, market conditions, exchange rates, supply chain,
product compliance and liquidity. The disclosures on pages 11 and
12 of the Group's Annual report for the year ended 31 March 2023
provide a description of each risk along with the associated impact
and mitigating actions. The Board will continue to focus on risk
mitigation plans to address these areas.
20. SEASONALITY
Sales are subject to seasonal fluctuations, with peak demand in
the October - December quarter. For the six months ended 30
September 2023 sales represented 43 per cent of the annual sales
for the year ended 31 March 2023 (2022: 42 per cent of the annual
sales for the year ended 31 March 2022).
21. SUBSEQUENT EVENTS
No other significant events have occurred between the end of the
reporting period and the date of signature of the Annual Report and
Accounts.
By order of the Board
Oliver Raeburn Kirstie Gould
Chief Executive Chief Finance Officer
22 November 2023
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