ANNUAL REPORT AND ACCOUNTS
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Hornby Plc
The Group’s principal business is the
development, production and supply
of hobby and toy products. The Group
distributes its products through a network
of specialist and multiple retailers
throughout the UK and overseas.
Strategic Report
01
02
04
06
08
Highlights 2014
Chairman’s Statement
Strategic Review
Business Model and Strategy
Operational and Financial Review
of the Year
Our Key Performance Indicators
(‘KPIs’)
13
Governance
16
Financial Statements
38
Directors and Corporate
Information
Directors’ Report
Corporate Governance
Directors’ Remuneration Report
Statement of Directors’
Responsibilities
Independent Auditors’ Report to the
members of Hornby Plc
Group and Company Statement
of Comprehensive Income
Group and Company
Balance Sheet
Group and Company Statement
of Changes in Equity
Group and Company Cash
Flow Statement
Notes to the Cash Flow Statement
Notes to the Financial Statements
Notice of Annual General Meeting
(Unaudited)
Five Year Summary (Unaudited)
Shareholder’s Information Service
17
20
25
33
34
39
40
42
43
44
76
80
80
Highlights 2014
“ Hornby has been through a difficult period. Whilst I am
under no illusion that there will be challenges ahead,
I am confident that I can lead the group successfully
during this next phase of our development. It is an
important time for Hornby as the business strives to
reach its full potential.”
Revenue
(2013: £57.4m)
Underlying1 operating loss
(2013: £0.7m profit)
Total dividend per share
(2013: 0p)
£51.6m
£(0.7)m
0p
Underlying1 loss before taxation
(2013: £0.15m profit)
Underlying1 loss after taxation
(2013: £1.0m profit)
Underlying basic loss per share
(2013: 0.5p earnings)
£(1.1)m
£(1.0)m
(3.4)p
Reported loss before taxation
(2013: £3.4m loss)
Reported loss after
taxation (2013: £2.5m loss)
Reported loss per share
(2013: 6.4p loss)
£(4.6)m
£(4.4)m
(11.4)p
1 Underlying figures are before amortisation of intangibles and net foreign exchange adjustments on intercompany loans,
restructuring costs and impairment of goodwill.
01
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Chairman’s Statement
Personal perspectives
In April 2013 I took on the role of Executive Chairman
and commenced the search for our next business leader.
Throughout the year, I have been steadfast in my resolve
to find the right person for the role no matter how long
that process might take. This was consistent with the
commitment to build a long-term platform for growth.
The transformation of Hornby is a
challenging, but equally rewarding
proposition and I am delighted that we have
secured Richard Ames to lead the business
through these exciting times. Richard has
plenty of experience of working in consumer
focused businesses. As a result of this
appointment on 28 April 2014, I have now
resumed the role of Non‑Executive Chairman.
We have also appointed two new
Non‑Executive Directors, Charlie Caminada
and David Adams. They have a wealth of
relevant experience and they are already
making a significant contribution as we
manage the Group.
02
Hornby PLC Annual Report and Accounts 2014 • Revenue of £51.6 million (2013: £57.4 million)
• Like for like revenues excluding London 2012 down by 2%
• Underlying loss1 £1.14 million (2013: £0.15 million profit)
• Net debt at 31 March 2014: £7.3 million
(2013: £2.2 million)
• Renegotiation of banking facilities to end of December 2015
• Statutory loss after tax £4.5 million (2013: £2.5 million loss)
1 Stated before amortisation of intangibles, net foreign exchange adjustments on intercompany loans, re‑structuring costs and impairment of goodwill.
I am confident that under Richard’s guidance,
the Group has the potential to build on the
significant progress that has already been
made. With the steps we have taken to
resolve our supply chain issues together with
the passion and energy to support our
brands, I am hopeful that the future of the
business is brighter than it has been for
some time.
Roger Canham
Chairman
26 June 2014
From a trading perspective, this year has
once again been one dominated by the
continued supply chain disruption. During the
year, we eventually agreed the basis for a
managed exit from our principal manufacturer
in China. The process of recognising the true
scale of the issue and then formulating and
executing a risk managed plan to conclude
that relationship has been lengthy and
complex. But I am confident that we are now
on the other side. The corollary of this is the
imperative to develop balanced partnerships
with a portfolio of manufacturers who have
the capacity to support our strategic ambitions
over the long term. This piece of work is well
under way but will take many months to
reach a level of maturity such that the supply
chain no longer constrains but positively
supports the Group’s ambitions to return to
sales growth.
It was clear from the outset that we must focus
on doing the very simple things right before
making any longer‑term strategic plans. There
were some fundamental elements of the
business that needed attention if any future
strategic plans were to stand on solid
foundations. In our interim report we referred
to the three simple key pillars that we felt were
central to this immediate phase of the
transformation process:
• Success through people.
• Success through focused execution.
• Success through passion for our brands.
I am pleased that we are making progress on
all three points, as detailed in Richard’s report.
The role of the Board
Good corporate governance provides a
framework for delivering the objectives of the
Company and is fundamental to a sound‑
decision making process. It supports executive
management in achieving the maximum
performance for the business. Maintaining
good corporate governance is a key priority
and with the exception of a separate CEO
and Chairman until 28 April 2014 when
Richard Ames joined the Group, I am
pleased to say that we were compliant with
the UK Corporate Governance Code issued
by the Financial Reporting Council in
September 2012, throughout the year.
In the current uncertain economic environment,
management of risk remains a key focus for
the Board. The Board has in place a robust
process for identifying the major risks facing
the business and for developing appropriate
policies to manage those risks. The Board
reviews the major risks and any mitigating
actions required on a biannual basis. Through
the Board and the Audit Committee we retain
good visibility of the issues and challenges
faced by management and the work to
address them.
Shareholder engagement
I am delighted that once again this year, we
will be hosting our Annual General Meeting
at the Hornby headquarters in Margate on
10 September 2014. This will be an excellent
opportunity for shareholders to see the new
products for themselves and to understand the
progress that the Company is making.
Personally I am looking forward to welcoming
as many shareholders as possible that are
able to attend.
03
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Strategic Review
Hornby Plc continues to make progress against its vision
to be the most successful model, hobby and collectible
toy company in the world. Pages 1 to 15 set out the
strategic report for the business.
CHIEF EXECUTIVE’S REPORT
May I firstly take this opportunity to say that it
is a privilege and a pleasure to be joining the
Hornby team. I am excited to be arriving at
the Company at this key time in its history
and development.
Having joined Hornby on 28 April 2014,
I have spent the first eight weeks visiting the
various international sales teams in Europe
and spending a week with our Asian sourcing
operation and a selection of manufacturers in
Hong Kong and China. My first impressions
of the Group are that we have teams of
dedicated and talented people who have
been facing significant commercial
challenges. They have already begun taking
difficult decisions and actions to improve the
fortunes of the Company. There is a real
pride in the brands and products that we
make and a strong desire to succeed.
It is early days, but I am convinced that
Hornby can recover and return to profit in
the future.
04
Hornby PLC Annual Report and Accounts 2014 The Company has also started a discovery
project to ascertain the opportunity to be
derived from the creation of a Group‑wide
ERP system. A variety of systems, of differing
age and quality exist within the various
divisions, with a low level of integration and it
is believed that benefits can be gained from
running the business on one system. This
discovery project will make recommendations
in late summer at which point any decision to
proceed with implementation will be made.
A Group‑wide ERP system would facilitate
the creation of an international ecommerce
platform. Again it is believed that this could
present a significant opportunity for the
Company to target new and underdeveloped
markets with the Group’s wide and varied
range of products and brands.
Outlook for 2014–15
As 2014 continues, we will further review
Group performance and capabilities.
Improvements in manufacturing, new product
development processes and sales and
marketing capabilities around the Group are
priorities and will receive immediate attention.
As the stock situation that has held back the
Group over the last few months is resolved,
the opportunity to benefit from improvements
in other areas of the business will rise in
importance and become integral to our plan
to return the Group to profitability. This
process will continue through 2014/15/16
and we are confident that we have the
brands, team and know how to bring the
Company back to past levels of financial
performance and beyond.
Trading in the current year so far is in line with
the Board’s expectations. The focus that is
being given to clearing the older elements of
stock is progressing, with Group stock
currently some £1 million lower than at year
end. Whilst the delivery of the transformation
plan comes with execution risk, the Group
has a portfolio of fantastic brands that if
managed well offer plenty of potential for
long‑term growth. I am looking forward to
updating our shareholders on the progress
that we are making.
Manufacturing supply chain
The challenges that we have faced in our
Asian manufacturing and supply chain have
been well documented. As we have reported
previously, we have increased our number of
manufacturing sites and we are now bringing
the production from these partners to
market. The complex nature of the model
manufacturing process and the length of the
supply chains involved has meant that the
initiatives, started in 2013, have not delivered
results in the financial year. However, they
have created the foundation upon which
improvements in 2014–15 can be built.
The Hornby team in Hong Kong has
undergone significant change, introducing
new processes and taking on a broader
range of operational responsibilities. The
Asian team is now operating a new ‘critical
path monitor’ and a ‘manufacturing tool
database’, both of which are designed to
increase Hornby’s control over product
development. This will lead to greater visibility
of the new design projects and will enable
the Group to communicate more regularly
and accurately with suppliers, customers and
consumers alike. With ongoing investment
in the Hornby Asia team, new supplier
partnerships and better working practises,
we are confident that we approach 2014–15
on a stronger platform to drive profitability.
Serving our customers
The production issues that the Company
has faced have not only restricted financial
performance, but have also risked the
Company’s relationship with our channel
partners and end users. This is an extremely
important issue, as these are the true fans of
the brands. It is key that we do not take these
fans for granted. With my experience of
working in consumer focused businesses, I am
making this one of my first key objectives.
In addition to delivering high quality Hornby
products, we must be able to inform and
communicate with our partners to enable
them to continue to support the brands. This
communication will come in many forms,
including improvements in trade news, social
media and the Company’s website. In recent
weeks we have seen a renewed commitment
to weekly trade announcements via Corgi
News, Hornby News, Airfix News and
Scalextric News. This is all designed to
give retail channels and end users an up to
date view of new product releases, stock
availability and promotional information.
New colleagues, now working in the Social
Media team, are focused on providing
daily updates and interactions with fans
and sharing the information that drives the
passion for collecting, modelling and driving
our products.
The new Hornby UK website, launched in
June 2014, is another tool designed to give
consumers greater access to Company and
product information, as well as new initiatives
such as Simon Says – a regular blog of the
thoughts of industry and Hornby Grandee
Simon Kohler. All of these initiatives are work
in progress, but show a commitment to
improving the dialogue and relationship that
the Company has with its partners and
customers. The initial feedback has been
very encouraging.
At the beginning of 2014, the commercial team
in Hornby UK underwent a restructure. This
reorganisation was designed to provide clearer
lines of commercial responsibility within the
product, sales and marketing teams based
in Margate and to enable greater focus on
the actions necessary to grow the business.
In particular, category management and
a more analytical approach to our customer
relationships will be the drivers of future growth.
New roles and responsibilities are now in place,
and we will see benefits as a result of improved
stock management, sales methods and
marketing and promotional communications,
flowing through during 2014–15.
Improving stock management and
distribution
Stock management within the Group is a
key area of opportunity. In addition to
improvements in manufacturing capabilities,
the Group is also committed to managing
stock in the most effective and efficient way
within the sales organisations of Europe and
the US. The facility in Margate that has
housed the Company’s UK stock since
manufacturing started to move to China in the
late 1990’s, has been an area of concern for
some time. A lack of outside space to allow
transport access, a lack of IT infrastructure
upon which to run modern warehousing
systems and a building with significant repair
and maintenance issues has led to a review
of the site. This has concluded with a decision
to move to a new, third party warehouse,
run by an independent logistics specialist
DS Logistics. This purpose built facility has
modern stock systems and the space to
grow with the Company as the turnaround
materialises. The proximity of the site to
Margate, eleven miles from the current
building, means that we are able to offer
roles to all existing Hornby staff and retain this
wealth of experience within the operation.
This is a key decision for the Company, and
one not taken lightly, given the history and
tradition of the current site. Nevertheless, we
are confident that this move will facilitate a
significant improvement in the handling and
distribution of the Company’s product, not
only in the UK but also, as we progress, for
the broader Group in Europe.
05
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Business Model and
Strategy
The Group’s principal business is the design,
development, production and supply of hobby and toy
products. The Group distributes its products through a
network of specialist and multiple retailers throughout
the UK and overseas.
06
Hornby PLC Annual Report and Accounts 2014 I am delighted to have joined Hornby. Since arriving
at the business eight weeks ago, I am more convinced
than ever that the group can build on a more solid
supply chain and support the demand from our
customers for our products.
Although it is early days, one decision that I have
made is to move our UK warehousing and logistics
operations to a new site. This is the first step to improve
the distribution and stock management, which will
enable us to improve our service to our customers.
The Group markets its products under a
number of strong brands well known in their
respective markets. These brands include
Hornby, Scalextric, Electrotren, Lima, Jouef,
Rivarossi, Arnold, Airfix, Humbrol and Corgi.
The Company’s vision is to be the most
successful model, hobby, and collectable toy
company in the world.
The Group comprises a number of high
quality premium brands spread across
different product categories within the hobby
and collectable toy market. The quality and
heritage of the brands allows us to re‑
introduce product lines to the market that we
have done over the last few years with Airfix
and Pocher. We are also continuing to grow
the European train brands and to explore
opportunities in developing markets.
The Group has the opportunity to develop a
number of new license properties within the
existing brand structure as well as developing
other distribution opportunities. The nature of
the model railway business worldwide is that
products are largely country‑specific. This
requires high levels of knowledge and
expertise in each individual market. This
represents a significant barrier to entry.
However, the Group has this infrastructure in
place and is therefore in a strong competitive
position. Production of model railway items is
a labour intensive process. The Group
sources all of its model railway products from
China. Although labour rates in China are
increasing, the Group continues to operate at
a cost advantage to competitors producing in
higher cost regions such as Europe. Some
other product lines are developed outside
China where cost effective, such as Airfix in
India and we will continue to seek other
opportunities to diversify production capacity
including bringing it back to the UK.
Richard Ames
Chief Executive
26 June 2014
07
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Operational and Financial
Review of the Year
Consolidated revenue for the year ended 31 March
2014 was £51.6 million, a decrease of 10.2% compared
to the previous year’s £57.4 million. 2013 included £4.7
million revenue for London 2012, so excluding this
revenue, the decrease is 2%.
08
Full year gross profit margin was 45% (2013
– 43%). The increase in gross profit margin
was primarily a result of the heavy
discounting on London 2012 stock in the
previous year. As discussed below the
availability and supply of high end model rail
products with higher margins is still well
below planned levels. Therefore the overall
margin is still suppressed when compared to
historic levels. Before the impact of FX losses
and exceptional items overheads decreased
year‑on‑year by 4%. Foreign exchange losses
1%
13%
23%
40%
23%
Sales by product type
for the period ended
31 March 2014:
Model Rail
Scalextric
Airfix/Humbrol
Corgi
Toys
Hornby PLC Annual Report and Accounts 2014
Financial Review
Revenue
Underlying (loss)/profit before tax*
Gross profit margin
Underlying (loss)/profit before tax margin*
Reported loss before tax margin
Underlying basic (loss)/earnings per share*
Statutory basic loss per share
Net debt
Statutory loss after tax
2014
2013
£51.6m
£(1.14m)
45.2%
(2.2%)
(8.8%)
(3.43)p
(11.35)p
£7.3m
£4.5m
£57.4m
£0.15m
42.6%
0.26%
(5.9%)
0.47p
(6.39)p
£2.2m
£2.5m
* Stated before amortisation of intangibles, net foreign exchange adjustments on intercompany loans, restructuring costs
and impairment of goodwill.
in the year totalled £1.0 million compared to
a gain of £0.2 million. Sales and marketing
costs reduced as the level of commissions
paid through our concessions channel
reduced following the collapse of Modelzone
in July 2013.
Pre‑tax loss before net foreign exchange
adjustments on intercompany loans,
amortisation of intangibles, restructuring costs
and impairment of goodwill (hereafter
referred to as underlying pre‑tax (loss)/profits)
was (£1.14) million (2013 – profit of £0.15
million) (see reconciliation in note 2). Basic
earnings per share calculated on underlying
pre‑tax (loss)/profit (hereafter referred to as
underlying basic (loss)/earnings per share)
were (3.43)p (2013 – 0.47p). Statutory
pre‑tax loss was £4.6 million (2013 – loss of
£3.4 million) and statutory basic loss per
share was 11.35p (2013 – 6.39p loss per
share). Taxation at £0.1 million credit (2013
– £0.9 million credit) was 2% of reported loss
before tax (2013 – 26%).
requirements and an increase in net debt at
31 March 2014 to £7.3 million, from £2.2
million in 2013.
Core Group inventories reduced during the
year by 3% from £13.6 million to £13.2
million. Trade and other receivables also
reduced from £9.6 million at the last year end
to £9.0 million at 31 March 2014. Trade and
other payables decreased by £1.2 million as
the management reorganisation provided for
last year was implemented and in addition
net derivative liabilities reduced by £1.7
million due to the settlement of the historic FX
collar arrangement referred to in note 19
offset in part by the reduction in hedged
contracts classed as an asset at 31 March
14. Investment in new tooling and other
capital expenditure was £4.1 million (2013
– £3.5 million). The net effect of these factors
was an increase in working capital
Dividend
This has been another year in which trading
has been challenging and therefore the
decision has been taken not to pay a
dividend (2013 – 0.0p).
Underlying loss
A total of £3.4 million costs in these accounts
have been identified as exceptional in nature
and classified as outside of our measure of
underlying profit as can be seen in note 2.
Of this total £2.5 million (2013 – £2.8 million)
was the write‑off of goodwill in the Italian
business described below, amortisation
of the intangible assets and the revaluation
of intercompany loans, all of which are
non‑cash costs.
09
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Operational and Financial Review of the Year
continued
In the previous year, a restructuring of the
senior team below the Board level was
announced and a provision of £0.7 million
made for the implementation costs which
were carried out in the year just ended.
This work is ongoing and a smaller scale
reorganisation of the marketing resources in
the UK business was implemented recently
at a cost of £0.2 million. The changes will
allow a stronger focus on our brands and
their development as well as being more
streamlined and a reduction in overhead
costs. Restructuring costs also include £0.6
million paid to our long‑standing major
supplier of model railway product for work
in progress, materials and components
when the agreement was reached with
them to end the relationship. As has been
described above this was a necessary step
in the restructuring of our supply chain but
they have little or no immediate value to the
business and therefore have been written‑off.
10
Hornby PLC Annual Report and Accounts 2014 The final element is a £0.1 million charge for
the bad debt and other costs that arose from
the failure of our main concession partner
Modelzone that went into administration in
July 2013.
Impact of supply chain disruptions
Deliveries of model railway product over
the year totalled 59% of our budget for the
Group as a whole. This further deterioration
reflects the time taken to reach an agreement
with our long‑standing major supplier for
an orderly exit from our manufacturing
relationship and the delays in releasing the
tools and moulds that were needed for
production in our other suppliers’ operations.
Model rail sales declined further on the back
of this to £11.4 million from £14.0 million last
year in the UK and decreased from £9.4
million to £9.2 million in continental Europe.
Banking facilities
The Group has recently been successful in
renegotiating its main banking facilities for a
further 18 months. At 31 March 2014 the
Group had a revolving credit facility of £10
million expiring August 2015 and a five‑year
fixed‑term loan agreement of £12 million
with outstanding repayments of £1.5 million
scheduled to be completed by July 2014.
These have now been replaced by a new
revolving credit facility of £13 million expiring
in December 2015 which is expected to
allow sufficient headroom for trading working
capital needs in the current year whilst longer
term plans and funding requirements are
developed. The Group also has additional
facilities of £5 million in place in its European
subsidiaries through bank loans and import
credit line facilities of which £3.5m was
undrawn at year end. Borrowings in the
year ended 31 March 2014 peaked at
£11.8 million.
United Kingdom
Trading conditions in our UK home market
were impacted by the largest single customer
going into administration. Modelzone’s
financial situation was evident, and all
steps were taken to mitigate our risk but the
sales line felt the impact. There was also
considerable operational impact as the
concession stock of Hornby and Scalextric
product had to be uplifted and returned to
our warehouse. Despite our best efforts
and new ventures with WH Smith, Hawkins
Bazaar and other smaller partners we could
not make up the full year budgeted shortfall.
Across all other retail channels there was no
significant up tick to replace these lost sales
with our Independent sector continuing to
decline. National Accounts grew, and our
export sales improved. Our Direct channels
continue to improve but still make up a small
percentage of our total business.
Model railways
Sales of Hornby model railways declined
as we wrestled with getting production
capability out of the incumbent supplier, and
we have renewed optimism now that much
of the tooling is within our control. We have
significant pent up demand so the reduced
actual performance is frustrating to both our
consumers, and our trade customers but when
we fulfil it we anticipate a return to growth.
Our work with the National Railway Museum
(‘NRM’) and the sponsorship of the ‘Great
Gathering’ remains a key highlight with
6,000 replica locomotives sold out within
days of release. Hornby sponsored the
event and our partnership with the NRM
was honoured with the Arts & Business
Sponsorship award and was covered
extensively in the press and on television.
Great efforts have been made by all the
team to put model railways back into the
public domain, and put the hobby back into
public discussion. This gives the team real
encouragement for the future, that when we
position our products well, the demand from
customers is strong.
Slot car product range
Sales of Scalextric were buoyed by our
key set ‘Demolition Derby’, a combination of
the product development around our Quick
Build concept, and the simple pleasure of
‘BASH ’N CRASH’ explosive collisions whilst
racing. TV advertised, and PR supported it
was recognised at the London Toy Fair as the
Editor’s choice, and didn’t disappoint as it
went on to be our biggest selling Scalextric
item. The challenge remains to deliver
a range of product that works for both
newcomers to the hobby, and the ‘racers’.
International performance held up but remains
challenging as markets felt global pressures
on disposable income.
11
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Operational and Financial Review of the Year
continued
Airfix
Sales of Airfix were positive as we continue
to re‑establish Airfix credentials as the lead
brand to a mass audience, and at the same
time deliver real credibility as the modeller’s
model manufacturer. The Javelin was a
particular hero item together with the
celebration of the famous ‘Dambusters
Lancaster bomber’. The introduction of the
Quick Build range exceeded initial retailer
expectation. This further reinforced the right
decision to make this product in the United
Kingdom as the benefit of being able to
increase production to meet significant
demand quickly out‑weighed the marginal
cost increase on this type of product when
compared to our production sources in
China or India.
Corgi models
Corgi sales continued to benefit from our
award winning Corgi Toys range. Notable
support came from Argos, and Tesco in the
United Kingdom which demonstrates our
ability to work with mass merchant retailers.
Our heartland of collectors is under pressure
from cheaper imitations of the quality Corgi
delivers. We still manage to deliver strong
sales when we match up the sub categories
with the right subject matter – best sellers
being the Eddie Stobart lorries, and our
Lancaster bombers within the Aviation
Archive section of the business.
Continental Europe
Our subsidiaries have again sustained the
most detrimental overall impact to sales as a
result of the supply chain disruption as the
relative proportion of model railway sales in
their businesses is higher. This is particularly
the case in Italy where a disproportionate
share of the supply chain disruption as a
whole was borne. Furthermore and despite
the weakening Euro exchange rate, sales in
our European subsidiaries were slightly higher
than last year in Sterling terms at £12.2 million
from £11.5 million in 2013. This was mainly
due to the relaunch of the Pocher brand. Our
subsidiaries in mainland Europe contributed
an underlying loss before tax of £1.3 million
in line with that in the previous year. Reported
loss before tax was £3.4 million (2013 – loss
of £3.9 million) including the goodwill
impairment charge (see below).
The current macro‑economic issues
surrounding the Euro zone continue to be a
cause for concern, especially in Italy and
Spain but also affecting business in France
and Germany to a lesser extent. Our strong
European brands continue to attract
increasing support from the model railway
communities in each of our key territories and
where new product has been available the
response has been encouraging. In Germany
the introduction of new ‘N scale’ railcars and
coaches was very successful and won some
industry awards. The relaunch of the 1:8
scale Pocher diecast car kits by our Spanish
subsidiary succeeded in generating sales in
more than 30 countries. In France the launch
of a new diesel locomotive in five different
liveries was voted model of the year by one
of the train magazines, a fitting award to
mark Jouef’s 70th anniversary.
Goodwill impairment
The previously mentioned supply chain issues
and general economic weakness have
impacted Italy disproportionately, depressing
short‑term cash flow and earnings resulting in
an impairment charge in the year of £2.1
million to goodwill (see note 8) which arose
on the acquisition of assets within the Italian
subsidiary in 2004. This non‑cash one‑off
charge has been made to the Statement of
Comprehensive Income through Other
operating expenses.
America
Sales in Hornby America were least
impacted by the supply chain issues and
increased in the year from £2.7 million to
£3.0 million, producing a profit before tax of
£0.085 million (2013 – profit £0.01 million).
Notable successes included the introduction
of a range of Airfix kits into the Barnes and
Noble chain and sales through the
Independent store channel grew by 15%.
By order of the Board
Nick Stone
Group Finance Director
26 June 2014
12
Hornby PLC Annual Report and Accounts 2014 Our Key Performance Indicators (‘KPIs’)
The Directors are of the opinion that the KPIs
are revenues, gross margins, underlying profit
before tax, earnings per share and cash
generation, the information for which is
available in these financial statements and
summarised on the financial highlights section
at the beginning of this report. In light of the
work currently being performed on the supply
chain and distribution channels, management
are currently constructing additional KPIs to
monitor progress on these key measures
which are considered fundamental to
performance going forward. The Group
maintains a robust planning system with
individual targets for subsidiaries in terms
of growth and profits. The Board monitors
progress against plan on a regular basis
adjusting future objectives annually in line
with current circumstances.
IDENTIFICATION OF PRINCIPAL RISKS
AND UNCERTAINTIES
The Board has the primary responsibility for
identifying the major risks facing the Group
and developing appropriate policies
to manage those risks. The Board has
completed a risk assessment programme
in order to identify the major risks and has
reviewed and determined any mitigating
actions required as set out below. The risk
assessment has been completed in the
context of the overall strategic objectives and
the business model of the Group which has
been set out on pages 6 and 7.
Principal risks and uncertainties
Risk
Description
Impact/Sensitivity
Mitigation/Comment
UK market
dependence
The UK market represents a
significant part of Group revenue;
71% in 2014 (2013 – 75%).
The Group is exposed to a
downturn in the performance of the
brands in the UK as well as to a
downturn in the UK economy.
Market
conditions
Distribution
channels
The Group’s products are sold in
the main to its retail customers.
The performance of the market is
affected by the general economic
climate, overall consumer and
retailer confidence, and the
changing retail landscape.
The retail landscape is changing
with the Group’s traditional high
street independent distribution
network under significant
commercial pressure from online
retailers and discounters.
The Group performance
is impacted by the global
macro‑economic environment
and changes in the wider
retail landscape.
High street failures will reduce
traditional customer base sales
levels and increase credit risk.
Competing
brands
The Group has competition in the
model railway, slot racing, model
kits, die cast and paint markets.
Loss of market share to increased
competitor activity would have
a negative impact on the
Group’s results.
The Board’s strategy continues to be to
expand overseas sales. The acquisitions of
the brands Airfix, Humbrol, Corgi, Electrotren,
Rivarossi, Lima, Arnold and Jouef have
provided the Group with a significant share of
the model railway, model and die‑cast markets
in continental Europe, with the objective of
facilitating further growth.
In reviewing the future forecasts for the
business the Directors consider reasonable
changes in macro‑economic and associated
market conditions recognising the potential
for a negative impact on the Group’s results.
The Group has credit insurance in place
to mitigate against any specific retail
customer default.
The Group formulates its business strategy,
including the website and direct to consumer
channels, based on the changing retail
dynamics. An increased focus on direct web
based selling, selling directly at exhibitions
and other events and expanding own retail
concession network are all being developed
to protect the brand position.
In many of our markets the Group enjoys a
strong market position due to the continued
development of our brands. Brands are
extremely important in the model sector with
market entry costs being prohibitive.
Exchange rates
The Group purchases goods
in Hong Kong Dollars and US
Dollars and sells in Pounds Sterling,
Euros and US Dollars and is
therefore exposed to exchange
rate fluctuations.
Significant fluctuations in exchange
rates to which the Group is
exposed could have a material
adverse effect on the Group’s
future results.
The Group continues to hedge short‑term
exposures by establishing forward currency
purchases using fixed rate and participating
forward contracts up to twelve months ahead.
It is deemed impractical to hedge exchange
rate movements beyond that period.
13
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Our Key Performance Indicators (‘KPIs’) continued
Risk
Description
Impact/Sensitivity
Mitigation/Comment
Supply Chain
The Group purchases goods, in
the main, from third party Chinese
suppliers due to the significant cost
advantage when compared to
products manufactured in Europe.
The principal suppliers to the
Group are Refined, Talent, Zindart
and Micro Plastics (India), all of
whom together are expected to
contribute 71% in 2014.
The Group does not have exclusive
arrangements with its suppliers
and there is a risk that competition
for manufacturing capacity could
lead to delays in introducing
new products or servicing
existing demand.
The Group is continuing to develop and
diversify its supplier portfolio, which includes
a supplier in India and more recently in the
UK, and closely monitors production through
an increased number of locally‑based
employees (who also ensure the maintenance
of quality standards).
Input cost escalation in China
could reduce or remove the
Group’s pricing advantage and
impact margins.
Capital
Allocation
The Group now holds over
5,000 product lines across its
own brand range.
Producing smaller quantities of
more products puts pressure on
gross margins and can lead to
increased stock levels.
An improved capital allocation process is
being developed to deliver a more focused
product range in line with consumer demand
with robust gross margins.
Product
compliance
The Group’s products are subject
to compliance with toy safety
legislation around the world.
Liquidity
Insufficient financing to meet the
needs of the business.
Failure to comply could lead to a
product recall resulting in damage
to Company and brand reputation
along with an adverse impact on
the Group’s results.
Without the appropriate level of
financing it would be increasingly
difficult to execute the Group’s
business plans.
Robust internal processes and procedures,
active monitoring of proposed legislation and
involvement in policy debate and lobbying of
the relevant authorities.
The Group has a fixed‑term loan agreement
expiring in July 2014 of £1.5 million as at 31
March 2014 (£4.5 million at 31 March 2013)
and a revolving credit facility of £10 million
expiring August 2015. The Group’s policy on
liquidity risk is to maintain adequate facilities
to meet the future needs of the business.
Main control procedures
Management establishes control policies and
procedures in response to each of the key
risks identified. Control procedures operate to
ensure the integrity of the Group’s financial
statements, and are designed to meet the
Group’s requirements and both financial and
operational risks identified in each area of the
business. Control procedures are documented
where appropriate and reviewed by
management and the Board on an ongoing
basis to ensure control weaknesses
are mitigated.
The Group operates a comprehensive annual
planning and budgeting system. The annual
plans and budgets are approved by the
Board. The Board reviews the management
accounts at its monthly meetings and financial
forecasts are updated monthly and quarterly.
Performance against budget is monitored and
where any significant deviations are identified
appropriate action is taken.
Corporate social responsibility
The Board considers the social, environmental
and ethical matters pertinent to the Group,
and will review items of significance where
appropriate. The risk assessment procedures
in place are designed to highlight any key
areas of concern including health and safety
considerations, employee recruitment and
retention and environmental issues, with
controls put in place as necessary.
The Group is pro‑active in working with all
suppliers to ensure compliance with the
International Council of Toy Industries (‘ICTI’)
Code of Business Practices to include child
and forced labour, working conditions, hours
of work, pay, non‑discrimination and health
and safety. Compliance is managed through
an annual audit process.
Hornby Plc acknowledges the UN Guiding
Principles on Business and Human Rights and
has many policies and initiatives in place to
identify, prevent, mitigate and account for
how we are addressing key human rights
issues. We continue to work with stakeholders
to understand better and respond to these
issues, however there has never been a
human rights issue that has had a direct
impact on the activities of the business and
accordingly the Group has nothing further
to disclose.
We have a Group employee Code of
Conduct which covers a wide range of
human rights including discrimination and
working conditions. The Company also has
HR policies, Health & Safety policies, an
Anti‑Bribery & Corruption Policy and a
Whistle‑blowing Policy which encompass
key human rights.
It is the Group’s policy to recruit, train,
promote and treat all personnel on grounds
solely based on individual performance. The
principles are applied regardless of gender,
sexual orientation, religion, age, nationality or
ethnic origin.
14
Hornby PLC Annual Report and Accounts 2014 The Group’s split between male and female employees as at 31 March 2014 is shown below:
Directors
Senior managers (including Statutory Directors of subsidiary entities)
Employees
Total
Environmental responsibility
The Group believes that protection of the
environment is an integral part of good
practice and that it should satisfy itself that all
of its operations are conducted with
reasonable proper regard for the
environment. It is committed to maintaining,
and wherever possible improving, the quality
of this environment both for the people who
work in the Group, and for the wider
community now and in the future. The Group
seeks to make the most effective and efficient
use of all resources, encouraging all members
of the Group to develop an ecologically
sound approach to their work.
Carbon emissions data
The Group has implemented the UK
Government’s Guidance on measuring
and reporting greenhouse gas emissions,
in line with DEFRA guidelines We have used
the UK Government Environmental Reporting
Guidelines (2013), supplemented by the
GHG Protocol Corporate Accounting and
Reporting Standard (revised edition) and
emissions factors from UK Government’s
GHG Conversion factors for Company
Reporting 2013.
Female
–
1
109
110
Male
4
7
129
140
Total
4
8
238
250
The GHG Protocol defines direct and indirect
emissions as follows: Direct GHG emissions
are emissions from sources that are owned
or controlled by the reporting entity; Indirect
GHG emissions are emissions that are a
consequence of the activities of the reporting
entity, but occur at sources owned or
controlled by another entity. The GHG
Protocol further categorizes these direct and
indirect emissions to which Hornby has
responsibility to report under scope 1 and
scope 2 as set out in the following table:
• Scope 1: All direct GHG emissions.
• Scope 2: Indirect GHG emissions from
consumption of purchased electricity,
heat or steam.
Year ended 31 March 2014
Year ended 31 March 2013
UK
Europe
Rest of World
Group revenue (2013–14) £’m
Intensity ratio tonnage/£’m of revenue:
Scope 1
tonnes CO2e
641
52
27
Scope 2
tonnes CO2e
469
35
31
52
24
UK
Europe
Rest of World
Group revenue (2012–13) £’m
Intensity ratio tonnage/£’m of revenue:
Scope 1
tonnes CO2e
814
54
19
Scope 2
tonnes CO2e
505
37
33
58
25
By order of the Board
Nick Stone
Group Finance Director
26 June 2014
15
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Directors and Corporate Information
Directors
R Ames
Chief Executive
R Canham
Executive Chairman
N P Stone
Finance Director
D Adams
Non-Executive Director
C Caminada
Non-Executive Director
Company Secretary
A Stacey
Registered office
Westwood
Margate
Kent CT9 4JX
Company Registered Number
Registered in England Number: 01547390
Independent Auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
The Portland Building
25 High Street
Crawley
West Sussex RH10 1BG
Solicitors
Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London EC4R 9HA
Principal Bankers
Barclays Bank PLC
9 St George’s Street
Canterbury
Kent CT1 2JX
Financial Advisers and Brokers
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
Registrars and Transfer Agents
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
16
Hornby PLC Annual Report and Accounts 2014 Directors’ Report
The Directors submit their Annual Report together with the audited
consolidated financial statements for the year ended 31 March 2014.
The Corporate Governance Report on pages 20 to 24 forms part of
the Directors’ Report.
The Group’s business review along with future developments and the
principal risks and uncertainties facing the Group are included in the
Strategic review. The Group’s Corporate Governance Statement is set
out in the Corporate Governance Report on pages 20 to 24.
Ladbrokes PLC, where latterly he was Managing Director of their
Product Division. He joined Ladbrokes in 2005 and had run the UK
and Ireland Retail operations where he was responsible for managing
a successful retail turnaround strategy. Earlier in his career he worked at
Dixons Stores Group Plc as Marketing Director in Essentials and prior
to this he was the Purchasing Director in Domestic Appliances
operations. He also helped to lead the consumer electronics divisions
at Asda Wal-Mart and he started his career at Philips
Consumer Electronics.
PRINCIPAL ACTIVITIES
The Company is a holding company registered in England
No.01547390 with a Spanish branch and has six operating
subsidiaries: Hornby Hobbies Limited in the United Kingdom with a
branch in Hong Kong, Hornby America Inc. in the US, Hornby Espana
S.A. in Spain, Hornby Italia s.r.l in Italy, Hornby France S.A.S in France
and Hornby Deutschland GmbH in Germany. Hornby Plc is a public
limited company which is listed on the London Stock Exchange, and
incorporated and operating in the United Kingdom. Its registered office
is set out on page 16.
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.
The Group is principally engaged in the development, design, sourcing
and distribution of hobby and interactive home entertainment products.
RESULTS AND DIVIDENDS
The results for the year ended 31 March 2014 are set out in the Group
Statement of Comprehensive Income on page 38. Revenue for the
year was £51.6 million compared to £57.4 million last year. The loss
for the year attributable to equity holders amounted to £4.4 million
(2013 – £2.5 million loss). The position of the Group and Company is
set out in the Group and Company Balance Sheets on page 39.
No interim dividend was declared in the year (2013 – £nil) and the
Directors do not recommend a final dividend (2013 – £nil).
POST BALANCE SHEET EVENT
The Group has recently been successful in renegotiating its main
banking facilities for a further 18 months. At 31 March 2014 the
Group had a revolving credit facility of £10 million expiring August
2015 and a five-year fixed-term loan agreement of £12 million with
outstanding repayments of £1.5 million scheduled to be completed
by July 2014. These have now been replaced by a new revolving
credit facility of £13 million expiring in December 2015 which is
expected to allow sufficient headroom for trading working capital
needs in the current year whilst longer term plans and funding
requirements are developed.
RESEARCH AND DEVELOPMENT
The Board considers that research and development into products
continues to play an important role in the Group’s success. All R&D
costs incurred in the year have been charged to the Statement of
Comprehensive Income and are set out in note 4.
DIRECTORS
The persons who were Directors during the year and up to the date of
signing the financial statements are listed below:
Richard Ames, aged 44, was appointed to the Board on 28 April
2014 and has a wealth of experience of leading fast moving
consumer facing businesses. His most recent role was as a Director of
Nick P Stone, aged 50, joined the Group on 14 January 2013 and
was appointed Group Finance Director on 1 February 2013. Nick
was previously the Operations and Finance Director at KBC Advanced
Technologies PLC and earlier in his career was interim Finance Director
at Accidentcare Group PLC, Finance Director at Lambert Fenchurch
Limited and held positions at Mobil Oil Corporation.
David Adams, aged 59, was appointed a Non-Executive Director on
9 January 2014. David is currently a senior Non-Executive Director of
Halfords plc and non-executive Chairman of Conviviality Retail plc and
Park Cameras Ltd. David also chairs Walk the Walk, the breast cancer
charity. Prior to that, he was also Deputy Chairman and Group
Finance Director of House of Fraser and non-executive Chairman
of Musto.
Charlie Caminada, aged 56, was appointed a Non-Executive
Director on 9 January 2014. Charlie was previously Chief Operating
Officer of HIT Entertainment, which is now part of Mattel. His most
recent position was the Founder and Chief Operating Officer of
Ludorum, a media investment company that focuses on managing the
IP franchises for children’s entertainment brands, including Chuggington.
Charlie led the company’s IPO on AIM in 2006.
Frank Martin, aged 62, was appointed Chief Executive on 3 January
2001 and Deputy Chairman on 1 April 2013. Frank formally stepped
down from the Board with effect from 9 January 2014.
Nigel M Carrington, aged 58, was appointed a Non-Executive
Director on 1 December 2007. Nigel resigned from the Board on
31 January 2014.
Mark E Rolfe, aged 55, was appointed a Non-Executive Director on
1 January 2008. Mark resigned from the Board on 31 January 2014
The interests of the Directors in the shares of the Company and in
options granted over such shares are disclosed in the Directors’
Remuneration Report on pages 25 to 32.
17
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Report continued
The number of Board meetings held during the year and attendance
by the Directors is set out on page 20.
DIRECTORS’ INDEMNITIES
The Company maintains 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 21 June
2014 the following parties were interested in 3% or more of the
Company’s ordinary share capital.
Shareholder
New Pistoia Income Limited
Phoenix Asset Management Partners
Limited
Electra Quoted Partners
P J Wood
J J Hosking
Artemis Fund Managers Ltd
Henderson Global Investors
Number of
ordinary shares
Percentage
held
6,215,401
15.87
6,129,323
15.65
2,995,150
2,821,500
1,597,234
1,396,758
1,211,523
7.65
7.20
4.08
3.57
3.09
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.
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 scheme includes share scheme options for
Directors and senior management further detail of which is covered
within the Remuneration Report on pages 25 to 32.
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 scheduled for 10 September 2014.
A separate notice of the notice of Annual General Meeting will
accompany this Annual Report and Accounts when it is sent to
shareholders. 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. The following special
resolutions were passed at the last Annual General Meeting and
remain in force until the next Annual General Meeting:
Resolution 10
Under section 551 of the Companies Act 2006 (the ‘Act’), the
Directors may allot unissued shares or grant rights over such shares
only if authorised to do so by shareholders. This resolution gives the
Directors authority to allot new ordinary shares in the capital of the
Company or grant rights to subscribe for, or convert any security into,
shares in the Company, up to an aggregate nominal amount of
£130,000, which represents approximately 33% of the Company’s
issued ordinary capital as at 6 June 2013 (being the latest practicable
date prior to the publication of this notice). This authority renews that
given at last year’s Annual General Meeting and will expire at 12
noon on 24 July 2018. The Directors did not have any present intention
of exercising the authority granted by this resolution except in
connection with the Company’s share schemes. However, it is
considered prudent to maintain the flexibility that this authority provides.
Under the guidelines of the Association of British Insurers on authority to
allot shares companies may seek basic authority to allot new shares in
an amount of up to one-third of the existing issued share capital and
this request will be regarded as routine under guidelines.
Resolution 11
It was proposed to renew the authority to the Directors to allot equity
securities for cash without first being required to offer such securities to
existing members. This included the sale for cash on a non-pre-emptive
basis of any shares which the Company holds in treasury. The authority
is limited to the issue of shares for cash up to an aggregate nominal
amount of £19,000 representing approximately 5% of the issued
ordinary share capital of the Company as at 6 June 2013 (being the
latest practicable date prior to the publication of last year’s notice).
The authority will expire at the conclusion of the next Annual General
Meeting of the Company.
18
Hornby PLC Annual Report and Accounts 2014 The Directors do not intend to issue more than 7.5% of the issued
ordinary share capital of the Company in any rolling three year period
without prior consultation with the Institutional Investment Committee.
Members will note that this resolution also relates to the sale of
treasury shares.
Resolution 12
The Company obtained authority to purchase up to approximately
10% of the Company’s issued ordinary share capital at, or between,
the minimum and maximum prices specified in this resolution. As at 6
June 2013 (being the latest practicable date prior to the publication of
this notice), the total number of options to subscribe for shares in the
Company was 365,809 (approximately 0.9% of the Company’s
issued ordinary share capital and approximately 2.4% of the
Company’s issued ordinary share capital if the full authority proposed
by resolution 12 was used and the shares purchased were cancelled).
This power would be used only after careful consideration by the
Directors, having taken into account market conditions prevailing at that
time, the investment needs of the Company, its opportunities for
expansion and its overall financial position. The Directors would
exercise the authority to purchase ordinary shares only if they
considered it to be in the best interest of the members and they believe
that the effect of such purchases will be to increase earnings per share.
The Company (Acquisition of Own Shares) (Treasury Shares)
Regulations 2003 came into force on 1 December 2003. These
regulations allow shares repurchased by the Company to be held as
treasury shares rather than being cancelled. Treasury shares may be
cancelled, resold for cash or used for the purpose of employee share
schemes but all rights attaching to them, including voting rights and any
right to receive dividends, are suspended whilst they are held in
treasury. The authority sought by this resolution is intended to apply
equally to shares to be held by the Company as treasury shares. The
Company currently holds no treasury shares.
The authority obtained at the Annual General Meeting will expire at
the earlier of the date which falls 18 months from the date this
resolution is passed and the conclusion of the next Annual General
Meeting of the Company.
Signed on behalf of the Board
N P Stone
Finance Director
Westwood
Margate
Kent CT9 4JX
26 June 2014
19
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate Governance
UK CORPORATE GOVERNANCE CODE
The Company recognises the importance of maintaining high
standards of corporate governance. This report has been structured to
report corporate governance arrangements and practices against the
requirements of the UK Corporate Governance Code issued by the
Financial Reporting Council in September 2012.
Throughout the year ended 31 March 2014, the Company has been
in compliance with the Code provisions except with provision A.2.1 of
the UK Corporate Governance Code. On 1 April 2013 Frank Martin
stood down as Chief Executive and took the role of Deputy Chairman.
The search for a new Chief Executive was started immediately and for
the interim period Roger Canham became Executive Chairman. He
will revert to a non-executive Chairman role from 1 June 2014 after a
transition period with the appointment of the new Chief Executive Mr
Richard Ames who joined the Group on 28 April 2014.
HOW THE BOARD OPERATES
The Board is responsible for the overall conduct of the Group’s business
and has the powers and duties set out in the relevant laws of England
and Wales and our articles of association. The Board: is responsible
for setting the Group strategy and for the management, direction and
performance of our businesses; is accountable to shareholders for the
proper conduct of the business; is responsible for the long-term success
of the Company, having regard for the interests of all stakeholders; and
is responsible for ensuring the effectiveness of and reporting on our
system of corporate governance.
The Board has a formal schedule of matters reserved for its decision
and these include: Group strategy and long-term plans; major capital
projects, acquisitions or divestments; annual budget and operating
plan; Group financial structure, including tax and treasury; annual and
half-year financial results and shareholder communications; and system
of internal control and risk management. The schedule is reviewed
annually. It was last reviewed in March 2014 when it was decided
that no amendments were required.
LEADERSHIP
The Board is responsible for the long-term success of the Company
and is responsible to shareholders for ensuring that the Group is
appropriately managed and achieves its objectives. The Board is also
responsible for the system of corporate governance, strategy, risk
management and financial performance. The Company’s governance
structure is consistent with the leadership principles set out in the Code.
transition period, the two roles are once again separate with a clear
division of responsibility and Roger Canham will return to a Non-
Executive Chairman role.
Senior Independent Director
The Board has appointed David Adams to the role of Senior
Independent Director. This role provides a point of contact to those
shareholders who wish to raise issues with the Board, other than
through the Chairman.
The Board monitors the performance of the Group as a whole by;
• Engaging at Board meetings with, and challenging the Chief
Executive and Group Finance Director, as appropriate, on the
financial and operating performance of the Group and external
issues material to the Group’s prospects
• Evaluating progress towards the achievement of the Group’s
financial and business objectives and plans
• Monitoring the significant risks facing the Group
EFFECTIVENESS
Board composition
The Board contains a range of complementary skills, experience and
knowledge that is considered appropriate for the scale of the business.
The biographical details of all Board members are provided on
page 17.
The Board considers the Non-Executive Directors who served during
the year to be independent of management and free from any
business or other relationship which could interfere with the exercise of
their independent judgement. Code provision B.1.2 requires non-FTSE
350 companies to have at least two independent non-
executive Directors.
This year has been a period of transition for the Board, a year where
Roger Canham stepped into an Executive Chairman role while a new
Chief Executive was recruited. Therefore in line with the UK Corporate
Governance Code the Board has reflected on its performance and
undertaken a rigorous review of the effectiveness of the performance of
the Board based on discussions with other members of the Board, and
has concluded that it operated effectively and executed commitment to
the roles. Following the transition period from 1 June 2014 and in line
with the code the senior independent non-executive will carry out this
function and perform a detailed evaluation of the Board’s ongoing
effectiveness over the next year.
The Board believes its current structure is appropriate for the scale of
the business and to enable the Group to be managed efficiently.
During the year eleven Board meetings were held. All Directors
attended all meetings.
During the year the Board comprised the Executive Chairman, Deputy
Chairman (until 9 January 2014), Finance Director, and two to four
Non-Executive Directors. The third and fourth Non-Executive Directors
were a temporary situation from 9 January 2014 till 31 January 2014
when a handover period occurred between the non-
executive Directors.
Chairman and Chief Executive
In the year to 31 March 2014, the roles of Chairman and Chief
Executive were combined for a temporary interim period while a new
Chief Executive was recruited. With effect from 1 June 2014 after a
The Board has adopted a formal schedule of matters specifically
reserved to it for decisions including the determination of the strategy,
the approval of business plans, budgets, acquisitions and disposals,
major capital purchases, Board appointments, accounting policies and
treasury arrangements.
The Board also delegates specific responsibilities to committees as
described below. The Board meets monthly and monitors progress
against plan at each meeting.
20
Hornby PLC Annual Report and Accounts 2014 The Directors have the authority of the Board to obtain external legal or
other independent professional advice in the furtherance of their duties
at the Company’s expense. All Directors have access to the advice
and services of the Company Secretary, who is responsible for
ensuring Board procedures are followed and applicable rules and
regulations are complied with. The Executive Directors have all
received appropriate training for their appointment to the Board of a
listed company. The Non-Executive Directors bring a broad expertise
to the Board. David Adams and Charlie Caminada are both
experienced company Directors.
Appointments to the Board
Nominations Committee
The Nominations Committee comprises the Executive Chairman as well
as executive and Non-Executive Directors. There were three
appointments to the Board during the year ended 31 March 2014,
David Adams and Charlie Caminada in January 2014 both to replace
existing Directors who were standing down and Richard Ames in
February 2014 – who formally joined the Board on 28 April 2014 as
Chief Executive. Appointments to the Board require the Board’s
authorisation and are conducted by the Nominations Committee.
The duties of the Nominations Committee are available from the terms
of reference and include regularly reviewing the structure, size and
composition required of the Board and making recommendations to
the Board with regard to any changes, giving full consideration to
succession planning for Directors and other senior executives, identifying
and nominating candidates to fill Board vacancies and evaluating the
balance of skills, knowledge and experience on the Board before an
appointment is made. The terms of reference are available on the
Company’s website, covering the authority delegated to it by the Board.
The potential candidates are interviewed by either the Nominations
Committee or a panel appointed by that Committee. An appointment
requires the final approval of the Board prior to an offer
being forwarded.
Information and professional development
The Chief Executive is responsible for ensuring that Directors receive
accurate, timely and clear information. Management has an obligation
to provide such information but Directors should seek clarification or
amplification where necessary.
The Chairman is responsible for ensuring that Directors continually
update their skills and the knowledge and familiarity with the Company
required to fulfil their role. Resources are available on request to
develop and update the Directors’ knowledge and capabilities.
Re-election
The Company’s Articles of Association currently require newly
appointed Directors to offer themselves for election and one third of the
Directors to retire by rotation at each Annual General Meeting.
Therefore, Richard Ames, David Adams and Charlie Caminada offer
themselves for election at the forthcoming Annual General Meeting. In
accordance with the UK Corporate Governance Code, the non-retiring
Directors have conducted a review of their contribution to the Board
and can confirm that they continue to be effective Directors and to
execute commitment to the role.
Audit Committee and Auditors
The Audit Committee comprises David Adams and Charlie Caminada.
David Adams became Chairman of the Audit Committee on
31 January 2014. He is a Fellow of the Institute of Cost and
Management Accountants and is considered by the Board to have
recent and relevant financial experience, as required by the Code.
Charlie Caminada has a wide range of business experience, which is
evidenced by his biography set out in the Directors’ Report.
The Committee meets at least three times a year and the Chairman,
Chief Executive, Finance Director, Company Secretary and other
managers attend by invitation. The Group’s Auditors attend meetings
and have direct access to the Committee. The terms of reference are
available on the Company’s website, covering the authority delegated
to it by the Board.
Control environment
The Board has put in place an organisational structure with clearly
defined and understood lines of responsibility and delegation of
authority. The Board promotes a strong control environment with a
strong ethical climate.
REMUNERATION
The Remuneration Committee comprises Charlie Caminada and David
Adams. Charlie Caminada is the Chairman of the Remuneration
Committee. Before 9 January 2014 when Charlie and David joined
the Board the Remuneration Committee consisted of Nigel Carrington
and Mark Rolfe who stepped down on 31 January after a short
transition period between 9 and 31 January when all for non-
executives were members of the Remuneration Committee.
The Committee met three times in total during the year with all members
being present. The Committee is responsible for establishing formal and
transparent procedures for determining policy on executive remuneration
and advising the Board on executive remuneration and in particular for
ensuring that executive remuneration packages are sufficient to attract,
retain and motivate Executive Directors of the required quality whilst
avoiding paying more than necessary. It also endeavours to establish
performance related elements of remuneration which align the interests of
the Directors with those of the shareholders. No Director is involved in
deciding his own remuneration and the Board itself determines the
remuneration of the Non-Executive Directors. The terms of reference are
available on the Company’s website, covering the authority delegated to
it by the Board. Further detail of Directors’ remuneration is provided in the
Directors’ Remuneration Report.
ACCOUNTABILITY
The Board is committed to providing shareholders with a clear
assessment of the Company’s financial position and prospects. This is
achieved through the Annual Report and Accounts and through other
periodic financial statements and announcements.
Internal Control and Risk Management
The Board is responsible for the operation and effectiveness of the
Group’s system of internal controls and risk management. There is a
continuous process for identifying, evaluating and managing the
significant risks the Group faces. This process has been in place
throughout the year under review and up to the date of approval of the
Annual Report and Accounts, and complies fully with the
Turnbull guidance.
21
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate Governance continued
The Audit Committee considered reports from Group financial
management on the operation of, and issues arising from the Group’s
internal control procedures. The Audit Committee monitored the
effectiveness of the Group’s risk management process, which
considered the key risks, both financial and non-financial, facing the
Group and the effectiveness of the Group’s controls to manage and
reduce the impact of those risks.
The Board regularly reviews the effectiveness of the Group’s system of
internal control. The Board’s monitoring covers all key controls,
including financial, operational and compliance controls and risk
management. It is based principally on reviewing reports from
management to consider whether significant risks are identified,
evaluated, managed and controlled and whether any significant
weaknesses are promptly remedied and indicate a need for more
extensive monitoring.
The Audit Committee reviews and discusses with management and the
external auditor the half-year and annual financial statements focusing
on, amongst other matters; the quality and acceptability of accounting
policies and practices, the clarity of the disclosures and compliance
with financial reporting standards and relevant financial and
governance reporting requirements; and material areas in which
significant judgements have been applied. These are discussed further
within the Audit Committee report on pages 23 and 24.
The internal control systems are designed to meet the Group’s particular
needs and the risks to which it is exposed and by their nature can only
provide reasonable but not absolute assurance against misstatement or
loss. During the year, the Group continued to take action to enhance
these control systems, based upon its own process improvement
initiatives and auditors’ recommendations.
The Audit Committee reviews and reports to the Board on the
effectiveness of the Group’s systems of internal control on an ongoing
basis during the year and no significant weaknesses have been
identified.
RELATIONS WITH SHAREHOLDERS
The Company communicates regularly with its institutional shareholders
and encourages communication with private investors through the
Annual General Meeting.
David Adams is the senior independent Non-Executive Director. The
senior independent Non-Executive Director welcomes direct discussion
with shareholders. The Executive Directors update major shareholders
at institutional visits and analyst presentations immediately after the
interim and final announcements
The Board uses the Annual General Meeting as an occasion for
communication with its shareholders. All proxy votes are counted by
the Company’s registrars and the voting on each resolution is made
available to the meeting. Directors of the Company and the UK
subsidiary attend the meeting to respond to specific questions.
Share Capital
Details of our Share Capital structure can be found on page 18 of the
Directors’ Report and in Note 21.
Going Concern
A review of Group business activities and future outlook are set out on
pages 2 to 3 of the Chairman’s Statement and within pages 4 to 7 of
the Strategic Review. The financial position of the Group, its cash flows
and liquidity position are shown in the balance sheet, cash flow
statement and accompanying notes to the financial statements. The
principal business risks associated with the business are shown on
pages 13 to 14, whilst the risks arising from the Group’s financial
instruments are covered in note 19.
The Directors, in their consideration of going concern, have reviewed
the Group’s future cash flow forecasts and revenue projections, which
they believe are based on a realistic assessment of future
business performance.
The Group’s forecasts and projections, taking account of reasonable
possible changes in trading performance, show that the Group should
be able to operate within the levels of its agreed facilities. Accordingly
the Directors believe it appropriate to prepare the financial statements
of the Group on a going concern basis.
Takeovers Directive
Pursuant to S992 of the Companies Act 2006, which implements the
EU Takeovers Directive, the Company is required to disclose certain
additional information. The following gives those disclosures which are
not covered elsewhere in this Annual Report.
The Company’s Articles of Association (the ‘Articles’) give the Board
power to appoint Directors, but also require Directors to retire and
submit themselves for election at the first Annual General Meeting
following their appointment. A Director who retires in this way is
eligible for election but is not taken into account when deciding how
many Directors should retire by rotation at the Annual General
Meeting. The Articles themselves may be amended by special
resolution of the shareholders.
Pursuant to the Articles, at every Annual General Meeting, one third
of the current Directors must retire by rotation.
The Board of Directors is responsible for the management of the
business of the Company and may exercise all the powers of the
Company subject to the provisions of the Company’s Memorandum
of Association and the Articles.
The Articles contain specific provisions and restrictions regarding the
Company’s power to borrow money. Powers relating to the issuing
and buying back of shares are also included in the Articles and
shareholders are asked to renew such authorities each year at the
AGM. A copy of the Articles is available on request from the
Company Secretary.
There are a number of agreements that take effect, alter or terminate
upon a change of control of the Company following a takeover,
such as commercial contracts, bank agreements, property lease
arrangements and employees’ share plans. None of these are deemed
to be significant in terms of their potential impact on the business of the
Group as a whole.
22
Hornby PLC Annual Report and Accounts 2014 REPORT OF THE AUDIT COMMITTEE
Statement by the Chairman of the Audit Committee
The Committee’s role is to assist the Board by reviewing the Group’s
financial reporting; the need for an internal audit function and the
internal audit reviews conducted; the appropriateness of the Group’s
internal controls; and compliance with governance, financial and other
compliance issues.
This year there are new requirements for the Committee to disclose the
significant accounting judgements it has examined in the course of its
review of the Annual Report; and for the Committee to consider
whether the Annual Report is fair, balanced and understandable and
to disclose its conclusions on these matters.
This report explains how the Audit Committee has discharged its
responsibilities, and takes into account the three specific areas
highlighted in the revised Corporate Governance Code:
• Significant issues considered in relation to the financial statements.
• External Audit effectiveness and appointment.
• External Audit objectivity and independence and the impact of
non-audit work.
David Adams
Chairman of the Audit Committee
26 June 2014
MEMBERSHIP OF THE AUDIT COMMITTEE
The Audit Committee comprises David Adams and Charlie Caminada.
David Adams became Chairman of the Audit Committee on 9 January
2014. He is a Fellow of the Institute of Chartered Accountants in
England and Wales and is considered by the Board to have recent
and relevant financial experience, as required by the Code. Charlie
Caminada has a wide range of business experience, which is
evidenced by his biography set out in the Directors’ Report. The
previous members of the Audit Committee were Mark Rolfe (Chair) and
Nigel Carrington who both stepped down from the Board and Audit
Committee on 31 January 2014 after a short handover period. The
members of the previous Audit Committee also met three times a year.
During the year, three Audit Committee meetings were held in line with
the Committee’s formal timetable. All members attended all meetings.
The Committee also meets privately with representatives of
PricewaterhouseCoopers, the Group’s external auditors. Other
employees of the Group may also be invited to attend meetings as
deemed appropriate.
In two of the meetings held, the approval of announcements for the
Group’s full year and interim results were considered. The Committee
considered the financial reporting judgements made which are
informed by accounting papers and financial reports prepared by
management and reviewed by the Group’s external auditors,
PricewaterhouseCoopers. It also considered whether the
announcements were balanced and fair and that the tone of the
announcement reflected the results of the Group.
SIGNIFICANT ISSUES IN RELATION TO THE FINANCIAL
STATEMENTS
There were two main significant judgements that the Committee has
reviewed this year. These were; assessing the impairment of goodwill
and in particular the weighted average cost of capital used within the
impairment reviews conducted by management, this included a review
of the assumptions used in generating the weighted average cost of
capital, and going concern.
Following the acquisition of Hornby Italia in 2004, the Group held
significant goodwill within the Italian subsidiary. With pressure on its
revenues there is a risk that the business may not meet either the growth
projections anticipated by the business or those necessary to support
the carrying value of the goodwill held. The Audit Committee has
concluded that it is in agreement with management that the remaining
goodwill held in Hornby Italia of £2.046 million should be impaired.
In addition to this the Audit Committee has concluded that the
additional net deferred tax asset position generated locally from the
impairment is not deemed to be fully recoverable and therefore a
significant portion of £1.2 million of this of £1.5 million primarily
associated with losses carried forward has not been recognised.
23
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Corporate Governance continued
The going concern assumption is inherent to the preparation of the
financial statements and the Committee has ensured that the renewal of
the facilities for at least the next 18 months with the Group’s bankers is
complete in concluding on the going concern assumption. The Audit
Committee has received detailed reports from the Hornby finance
team and external advisers addressing this issue and has concluded
that it is satisfied with the going concern assumption.
The Committee also reported to the Board that it considers, when
taken as a whole, the 2014 Annual Report was fair, balanced and
understandable and includes the necessary information to assess the
performance, business model and strategy of the Company.
REMIT OF THE AUDIT COMMITTEE
In addition to its work reviewing the Group’s financial statements
noted above, the Committee has:
• Made recommendations on the appointment and remuneration
of the external auditors and monitored their performance
• Reviewed the nature and scope of the work to be performed by
the external auditors, the results of their audit work and
management’s responses to their recommendations
• Monitored the independence of the external auditors and
recommended policy for any non-audit services they provide to
ensure that their independence is not compromised
• Reviewed and advised the Board on the Company’s interim
financial statements and related announcements, its accounting
policies and on the control and mitigation of its financial and
business risks
• Reviewed and advised the Board on the effectiveness of the
Company’s internal control environment, including its procedures
for detecting fraud and ‘whistle-blowing’ and for the prevention
of bribery
• Monitored the Company’s systems of internal financial control
and risk management systems and ensured that these are
properly reviewed by Group management on an ongoing basis
and in light of changes in the business
• Considered its own effectiveness and made recommendations to
the Board where necessary
• Reported to the Board on how it has discharged its responsibilities
EXTERNAL AUDIT
The Committee has adopted a specific policy on auditor
independence, setting out restrictions on specific non-audit activities
such as bookkeeping, payroll services and advocacy, and procedures
and authority levels for audit and non-audit fees.
The policy specifies:
• The external auditors can be used to provide non-audit services
provided their proposal is formally approved by the Audit
Committee before contractual arrangements are entered into
except for the half year review.
In addition the external auditor follows its own ethical guidelines and
continually reviews its audit team to ensure independence is not
compromised. In the current financial year the audit fee fell within the
1:1 ratio and these are set out within note 4.
Hornby believes that it receives particular benefit from the external
auditors’ advice on potential accounting changes and any tax
consequences thereof, given its auditors’ detailed knowledge of
the Group. The Board considers alternative providers if practical
and seeks confirmation prior to engaging services that independence
will not be compromised.
To assess the effectiveness of the external auditors, the Committee
reviewed their fulfilment of the agreed audit plan; the robustness and
perceptiveness of the auditors in their handling of key accounting and
audit judgements, the content of their letter to the Audit Committee on
control matters and adherence to service standards set out in Hornby’s
Audit Charter policy. There are no contractual restrictions on the choice
of the Committee as to external audit and, having considered the
services provided by the current external auditors,
PricewaterhouseCoopers LLP, their independence and knowledge of
the Group, the Committee has recommended to the Board the
reappointment of the auditors at the Annual General Meeting in
September 2014. In reaching this decision the Committee has taken
into account the tenure of the auditors of greater than ten years and
considered whether there should be a full tender process. The
Committee also had regard to the likelihood of a withdrawal of the
auditor from the market.
INTERNAL AUDIT AND INTERNAL CONTROL
The Committee considered reports from Group financial management
on the operation of, and issues arising from the Group’s internal control
procedures. The Committee monitored the effectiveness of the Group’s
risk management process, which considered the key risks, both
financial and non-financial, facing the Group and the effectiveness of
the Group’s controls to manage and reduce the impact of those risks.
These principal risks are set out on pages 13 to 14.
The Committee considers annually the need for an internal audit
function, but currently believes that this is not justified given the size,
nature of the Group and a programme of visits to Hornby locations
carried out by senior Group financial management.
Arrangements exist for staff of the Group to raise concerns, in
confidence, about possible improprieties in matters of financial
reporting or other matters. The Group has a code of conduct outlining
the business standards to which all Company personnel must adhere
which further reinforces existing whistle-blowing policy and procedures.
The Audit Committee’s terms of reference include all matters indicated
by the UK Corporate Governance Code. The terms of reference are
considered annually by the Audit Committee and are then referred to
the Board for approval. The Audit Committee’s full terms of reference
are available within the investor relations section of the Group’s
website, www.Hornby.com.
24
Hornby PLC Annual Report and Accounts 2014 Directors’ Remuneration Report
for the Year Ended 31 March 2014
ANNUAL REPORT ON REMUNERATION
The Company has established a Remuneration Committee (the
‘Committee’) which is constituted in accordance with the
recommendations of the UK Corporate Governance Code published
in September 2012 and other relevant regulation, including the
Remuneration Regulations. It sets out the Group’s remuneration policy and
details of Directors’ remuneration. A resolution to approve this report will
be proposed at the Annual General Meeting in September 2014.
THE COMMITTEE
The Committee is comprised of independent Non-Executive Directors.
The previous members of the Committee who served until 31 January
2014 were N M Carrington (Committee Chairman) and M E Rolfe.
The current members are C Caminada (Committee Chairman) and D
Adams both of whom served from 9 January 2014 after a handover
period with the previous aforementioned members.
The Committee meets as required. During the year three Remuneration
Committee meetings were held, with both members present at
each meeting.
Neither of the Committee members has any personal financial interest
(other than as shareholders), conflicts of interest arising from cross-
Directorships or day-to-day involvement in running the business. The
Committee makes recommendations to the Board. No Director plays a
part in any discussion about their remuneration. The terms of reference
of the Committee are available on the Company website.
In determining the Directors’ remuneration for 2014–15 the Committee
consulted R Canham (Executive Chairman) and R Ames (Chief Executive)
about its proposals. New Bridge Street (‘NBS’), a trading name of Aon
Corporation, is the Committee’s appointed remuneration adviser and
continues to provide advice to the Committee. Neither NBS nor Aon
Corporation provides any other services to the Company.
This part of the remuneration report has been audited.
GENERAL REMUNERATION POLICY FOR THE EXECUTIVE
DIRECTORS
Executive remuneration packages are designed to attract, motivate and
retain Directors of the high calibre needed to maintain the Group’s
position as a market leader and to reward them for enhancing value to
shareholders. The performance measurement of the Executive Directors
is undertaken by the Committee. The Committee is sensitive to pay and
conditions in the workforce when determining executive remuneration
policy and base salary increases in particular.
The Committee is also aware of the potential risk to the business of
executive pay structures and is satisfied that the current policy is
compatible with risk policies and systems.
There are five main elements of the remuneration package for
Executive Directors and senior management: Base salary, Benefits-in-
kind, Pension arrangements, Performance-related annual bonus,
Performance Share Plan.
REPORT OF THE REMUNERATION COMMITTEE
Statement by the Chairman of the Remuneration Committee:
As a new Chair of the Remuneration Committee, I am pleased to
introduce the Directors’ Remuneration Report for the year ended 31
March 2014.
The Remuneration Committee’s remit is to consider and set policies and
levels of remuneration to encourage actions by management that are in
the long-term interests of the Company and its shareholders.
The objective of the Committee is to ensure that the Company’s
Chairman, Executive Directors and senior management are fairly
rewarded for their contributions to the Company’s performance and to
ensure that their remuneration is commensurate with their duties and
responsibilities. The Committee will ensure that the Company provides
the remuneration packages needed to attract, retain and motivate
Directors of the quality required.
The Company is now subject to new remuneration reporting
requirements (The Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013) (the
‘Remuneration Regulations’), and this report therefore takes a different
form to previous years. In particular, the Remuneration Regulations
require the Company to present a forward-looking remuneration policy
setting out the Company’s future policy on Directors’ remuneration. The
remuneration policy is subject to shareholder approval and a resolution
will be proposed at the Company’s 2014 AGM to approve the policy.
The Remuneration Report, excluding the remuneration policy report,
remains subject to an advisory shareholder approval as previously.
The Committee is responsible for determining:
• The framework for the remuneration of the Executive Directors
and targets for any performance related elements
• The overall remuneration package of each Executive Director
• The terms of termination of each Executive Director
• The policy and scope of pension arrangements for each
Executive Director
During the year the Committee sought to set Executive Directors’
remuneration levels to incentivise performance and align this with the
long-term interests of the shareholders as well as, in line with Company
policy, ensure that a substantial proportion of total remuneration is
performance related.
The Company’s policy is that a substantial proportion of the
remuneration of the Executive Directors should be performance related.
At a target level of performance, approximately 40% – 45% of the
total remuneration package is performance-related.
25
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Remuneration Report continued
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
shows the total remuneration of the Executive Directors for the year:
Executive Director
R T Canham1
N P Stone
F Martin2
Salary
and Fees
£’000
300
180
100
Taxable
benefits7
£’000
Pension
contributions
£’000
Annual
bonus
£’000
Sub-total
2013–14
£’000
Long-term
incentives
£’000
–
8
2
–
36
20
–
–
–
300
224
122
100
180
–
Total
2013–14
£’000
400
404
122
1. Roger Canham, who has been within the role of executive Chairman for the year will remain in an Executive Director role until the handover period with R Ames, who joined the
Board on 28 April 2014 is complete and will then revert back to the non-executive position of Chairman on 1 July 2014.
2. Frank Martin stepped down as Chief Executive on 28 March 2013 and became Deputy Chairman on that date until stepping down from the Board on 9 January 2014.
Executive Director
R T Canham3
A J Morris5
F Martin4
N P Stone5
Salary
and Fees
£’000
Taxable
benefits7
£’000
Pension
contributions
£’000
Annual
bonus
£’000
Sub-total
2012–13
£’000
Long-term
incentives
£’000
Total
2012–13
£’000
26
156
268
39
–
9
15
1
–
32
50
8
–
–
–
–
26
197
333
48
–
1766
267
–
26
373
600
48
3. Roger Canham became Executive Chairman on 1 April 2013.
4. Frank Martin stepped down as Chief Executive on 28 March 2013 and became Deputy Chairman on that date.
5. Andrew Morris left the Group on 15 February 2013 and Nick Stone was appointed on 1 February 2013.
6. The Long term incentives for Andrew Morris granted within the 2012–13 year noted in the above table lapsed when he left the Group.
7. Taxable benefits relate to the provision of a company car, health assurance and F Martin pension supplement.
Benefits
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.
Pension
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 save that Mr Canham is not a member of the
pension scheme and receives no benefits or contributions in respect of pensions. Mr Martin will continue to receive a pension contribution until the
expiry of his service contract on 30 June 2014. For Mr Martin in 2012–13 the balance of £3,582 pension in excess of the HMRC approved limit
was paid by way of a salary supplement included in taxable benefits in the emoluments table.
Performance-related annual bonus
For 2013–14 Mr Stone participated in a performance-related bonus scheme which is capped at 75% of salary, Mr Martin was not entitled to a
performance-related bonus. For 2012-–13 Mr Martin participated in the same scheme.
Performance targets are designed both to stretch and encourage individuals whilst aligning their interests with those of the Group. The performance
conditions are divided 80:20 between Group underlying profit before tax and personal objectives. For the Group underlying profit before tax
condition, a sliding scale range is set around a target level (designed to be stretching but realistically achievable). The personal objectives are set
at the start of the year and are designed to be as objective and measurable as possible. This mix of targets is considered to provide a good link
to the business strategy.
With effect from 2011, a provision was incorporated into the Annual Bonus Plan to enable the Company to claw back overpayments in the event
of financial misstatement or gross misconduct.
26
Hornby PLC Annual Report and Accounts 2014 The table below shows the targets set for 2013–14:
Target
Target at
operating level
Target for
maximum pay-out
% salary awarded for
operating plan achievement
% salary awarded for
maximum achievement
Achieved underlying PBT
Underlying PBT
100%
130%
30%
60%
£1.139 million underlying
loss before tax
% of salary
awarded
0%
In respect of the year ended 31 March 2014 one of the Executive
Directors who served during the year was entitled to a bonus. The
Directors bonus award is based on performance targets. The targets
are based on Group underlying profit before tax (80%) and personal
objectives (20%). Executive Directors achieved nil% (out of a maximum
130%) for the profit before tax element and nil% (out of a maximum
100%) for the personal objectives element. The Remuneration
Committee took the view that profit delivery in 2012–13 also did not
support the payment of bonuses for personal objectives.
Performance Share Plan
The Performance Share Plan (‘PSP’), which was approved by
shareholders at the 2008 AGM, was introduced as the Company’s
primary long-term incentive plan to replace the short-term incentive plan
(‘STIP’). No further awards will be made under the STIP and at 31
March 2014 and 2013 there were no outstanding awards to Directors
under the Short-Term Incentive Plan.
Under the PSP, awards are made to Executive Directors and
selected other executives on the following basis:
• The maximum award level is 150% of base salary per annum
although awards up to 200% of base salary may be granted to
an individual in exceptional circumstances (e.g. recruitment or
retention). The current policy is to grant maximum awards over
shares worth 100% of salary
• Performance conditions are reviewed annually, so as to ensure
they remain appropriately pitched in relation to the strategy and
business cycle, and provide an optimal alignment between the
interests of executives and shareholders
• Awards have historically been subject to a total shareholder
return (‘TSR’) condition and a range of normalised underlying
earnings per share (‘EPS’) growth targets, each of the TSR and
EPS elements apply to a separate 50% of an award, measured
over a period of three financial years
• The TSR condition is based on the Company’s underlying
performance against the constituents of the FTSE Small Cap
(excluding investment trusts) as at the date of grant. 25% of this
part of the award will vest if the Company’s TSR is equal to the
TSR of the median company, with full vesting for top quartile
performance. A sliding scale operates between these points
• In the case of all awards made prior to 2013, 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
• Awards granted during the year to 31 March 2014 have EPS
targets based upon underlying profit before tax of £4 million
for 25% vesting and will increase straight-line to full vesting at
£5 million. The Committee has set these targets appropriate
to the economic outlook prevailing at the time and retains
the discretion to adjust the targets if circumstances make
a consideration of this necessary. The TSR condition will
be unchanged
• The Committee is comfortable that the blend of TSR and EPS
targets continues to provide a good balance between
incentivising and rewarding strong financial performance on the
one hand whilst, on the other hand, providing a strong and direct
alignment with the interests of institutional shareholders by
rewarding stock market outperformance
• Performance conditions are calculated by independent advisers
and verified by the Committee
• Executives benefit, in the form of additional cash or shares, from
the value of dividends paid over the vesting period, to the extent
that awards vest
• It is currently intended that market purchased shares are used to
satisfy awards although there is flexibility to use new issue and
treasury shares within institutional shareholder dilution limits
• Similar to the bonus plan, with effect from 2011 awards,
a provision was incorporated into the PSP to enable the
Company to clawback overpayments in the event of
misstatement or gross misconduct
Shareholding guidelines
A policy for share ownership guidelines is operated for the Executive
Directors and senior executives. For the Executive Directors, the
required threshold of share ownership is 100% of base salary. Until
such time as this level of shareholding is achieved, 50% of the net of
tax value of awards which vest under the PSP are required to be
retained in shares.
DIRECTORS’ INTERESTS
Interests in shares
The interests of the Directors in the shares of the Company at 31
March 2014 were:
At
31 March
2014
number
At
31 March
2013
number
Executive Directors
R Canham
N P Stone
Non-Executive Directors
D Adams
C Caminada
M Rolfe
N Carrington
40,000
10,000
40,000
10,000
–
–
–
–
–
–
10,000
18,000
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. On 3 April 2013 Frank
Martin sold 400,000 shares at 0.82p per share. There have been no
other changes in the interests set out above between 31 March 2014
and 27 June 2014.
27
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Remuneration Report continued
Performance Share Plan
At 31 March 2014, outstanding awards to Directors under the Performance Share Plan were as follows:
Director
R Canham
N Stone
Award date
Vesting date
July 2013 July 2016
July 2013 July 2016
Market
price at
Award date
81.5p
81.5p
At
1 April
2013
Awarded
during year
– 122,699
– 220,859
Lapsed
during
year
–
–
Vested
during
year
At
31 March
2014
–
–
122,699
220,859
For the awards, 50% of an award is subject to a TSR condition and 50% 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 profit related part of the award, 25% vests for underlying profit before tax of £4 million, with full
vesting for underlying profit before tax of £5 million with a sliding scale operating between these points.
Non-Executive Directors
The table below gives the salary and fees of the Non-Executive Directors for 2013–14 and 2012–13:
D Adams (appointed 9 January 2014)
C Caminada (appointed 9 January 2014)
N M Carrington (Resigned 31 January 2014)
M E Rolfe (Resigned 31 January 2014)
N M Carrington
M E Rolfe
Basic salary
and fees
2013–14
£’000
9
9
33
33
Basic salary
and fees
2012–13
£’000
40
40
The following table summarises the total salary and pension contributions received by Directors for 2013–14 and 2012–13 in line with the
Companies Act 2006 requirement:
R Canham
N Stone
F Martin (resigned 9 January 2014)
D Adams (appointed 9 January 2014)
C Caminada (appointed 9 January 2014)
N M Carrington (Resigned 31 January 2014)
M E Rolfe (Resigned 31 January 2014)
A J Morris (Resigned 15 February 2013)
Total
Year ended 31 March 2014
Year ended 31 March 2013
Basic salary
and fees
£’000
Pension
received
£’000
Total salary
and pension
received
£’000
Basic salary
and fees
£’000
Pension
received
£’000
Total salary
and pension
received
£’000
300
180
100
9
9
33
33
–
664
–
36
20
–
–
–
–
–
56
300
216
120
9
9
33
33
–
720
26
39
268
–
–
40
40
156
569
–
8
50
–
–
–
–
32
90
26
47
318
–
–
40
40
188
659
Payments to Directors leaving the Group
No payments (2012–13: £nil) were made during the year ended 31 March 2014, however a payment of £40,000 was made to F Martin on
7 April 2014 in lieu of notice of his service contract to June 2014.
28
Hornby PLC Annual Report and Accounts 2014 PERFORMANCE GRAPH (UNAUDITED INFORMATION)
The following graph shows the Company’s total shareholder return compared to the TSR of the FTSE Small Cap (excluding investment trusts) over
the ten-year period to 31 March 2014. This index has been selected given that the Company is a constituent of the FTSE Small Cap.
Total shareholder return
Source: Thomson reuters (Datastream)
250
200
150
100
50
0
Mar 2004
Mar 2005
Mar 2006
Mar 2007
Mar 2008
Mar 2009
Mar 2010
Mar 2011
Mar 2012
Mar 2013
Mar 2014
This graph shows the value, by 31 March 2014, of £100 invested in Hornby Plc on 31 March 2004 compared with
the value of £100 invested in the FTSE Small Cap Index (excluding investment trusts):
Hornby Plc FTSE Small Cap Index (excluding investment trusts)
The table below shows the total remuneration for the Chief Executive Officer and the percentages of the maximum awards of performance related
pay received over the past five years. The Variable element reflects the actual bonus paid to the CEO and the long-term incentives relate to the
PSP scheme which only pays out when it vests.
Year
2013–14
2012–13
2011–12
2010–11
2009–10
Single
figure total
remuneration
£’000
Annual
variable
element
% of max
Long-term
incentives
% of max
400
333
326
365
455
n/a
0%
0%
12%
31%
–
–
–
–
–
CEO
R T Canham
F Martin
F Martin
F Martin
F Martin
Relative importance of spend on pay (unaudited)
As required by the Remuneration Regulations, the table below compares total staff remuneration with the amounts paid in dividends to shareholders
and the loss after tax of the Group. The measure being used of loss after tax represent the statutory financial performance of the Group and acts
as a comparative benchmark for future years.
2014: Relative importance of spend
on pay (unaudited) (£million)
20
10
0
–10
n Loss after tax n Total staff remuneration n Dividends
29
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Remuneration Report continued
Charlie Caminada Non-Executive Director, was appointed to the
Board on 9 January 2014, and receives fees for his services to the
Company of £40,000 per annum effective 1 January 2014. Charlie’s
service contract dated 9 January 2014 is subject to termination on six
months’ notice to be given by either the Company or himself. In lieu of
giving notice the Company may terminate the agreement on payment
of a lump sum (subject to tax and national insurance) equal to the fee
to which he is entitled under this agreement.
Nigel Carrington, Non-Executive Director, was appointed to the
Board on 1 December 2007, and receives fees for his services to the
Company of £40,000 per annum effective 1 April 2012. Nigel’s
service contract dated 3 November 2007 is subject to termination on
six months’ notice to be given by either the Company or himself. In lieu
of giving notice the Company may terminate the agreement on
payment of a lump sum (subject to tax and national insurance) equal to
the fee to which he is entitled under this agreement. Nigel stepped
down from the Board on 31 January 2014.
Mark Rolfe, Non-Executive Director, was appointed to the Board on
1 January 2008, and receives fees for his services to the Company of
£40,000 per annum effective 1 April 2012. Mark’s service contract
dated 22 November 2007 is subject to termination on six months’
notice to be given by either the Company or himself. In lieu of giving
notice the Company may terminate the agreement on payment of a
lump sum (subject to tax and national insurance) equal to the fee to
which he is entitled under this agreement. Mark stepped down from
the board on 31 January 2014.
None of the Non-Executive Directors receives any pension or
performance-related pay from the Company.
The Committee’s remuneration policy will be subject to a vote at the
Annual General Meeting. The following pages 31 to 32 in this
forward-looking section describe our remuneration policies and
potential future outcomes for each Executive Director. The policy for
rewarding Non-Executive Directors is also described.
These Policies and the individual elements of the reward package are
reviewed each year to ensure that they remain in line with Governance
Code and the Remuneration Regulations.
REMUNERATION POLICY
Executive Directors’ service contracts
The Executive Directors do not have fixed period contracts.
Richard Ames was appointed to the Board as Chief Executive on 28
April 2014. His service contract includes 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 him. In lieu of giving
notice the Company may terminate the agreement on payment of a
lump sum (subject to tax and national insurance) equal to the salary
and other benefits to which he is entitled under this agreement.
Roger Canham Mr Canham was appointed non-executive Chairman
with effect from 1 February 2013 under a contract dated 7 November
2012 for an initial term of three years subject to termination on three
months’ notice, to be given by either the Company or himself at a fee
of £100,000 p.a. In lieu of giving notice the Company may terminate
the agreement on payment of a lump sum (subject to tax and national
insurance) equal to the salary to which he is entitled under the
agreement. He was appointed executive Chairman on 1 April 2013.
Upon becoming executive Chairman, his fees were increased to
£300,000 per annum until such time as a new Chief Executive was
appointed. He will revert to Chairman on 1 July 2014.
Nick Stone’s service contract dated 1 February 2013 includes 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 him. In lieu of giving notice the Company may terminate the
agreement on payment of a lump sum (subject to tax and national
insurance) equal to the salary and other benefits to which he is entitled
under this agreement.
Frank Martin stepped down as Chief Executive on 28 March 2013
and became Deputy Chairman before stepping down from the Board
on 9 January 2014. The Company agreed the payment (subject to tax
and national insurance) equal to the salary and other benefits to which
he is entitled under this agreement between the actual termination date
and 30 June 2014 which will continue to be paid until this date and
includes the £40,000 referred to on the previous page.
Non-Executive Directors’ contracts
The remuneration of the Non-Executive Directors is determined by the
Board (except the Company Chairman’s fee, which is set and
reviewed by the Remuneration Committee) based on the level of fees
paid to Non-Executive Directors of similar companies and by
considering independent external advice.
David Adams Non-Executive Director, was appointed to the Board on
9 January 2014, and receives fees for his services to the Company of
£40,000 per annum effective 1 January 2014. David’s service
contract dated 9 January 2014 is subject to termination on six months’
notice to be given by either the Company or himself. In lieu of giving
notice the Company may terminate the agreement on payment of a
lump sum (subject to tax and national insurance) equal to the fee to
which he is entitled under this agreement.
30
Hornby PLC Annual Report and Accounts 2014 The table below summarises the main components of the existing remuneration package for executive Directors.
Remuneration component
Strategic objective
How the component operates
Performance measures applicable Maximum and minimum payouts
Base salary
To attract and retain
executives of high quality.
Annual bonus
To incentivise Executive
Directors to achieve the
short-term priorities and to
deliver high performance in
the current financial year.
Initial salaries are based
upon the level of skill
and experience of the
individual, the scope of
responsibilities and market
benchmarks of similar sized
quoted businesses.
Performance targets are based
on the strategic objectives
of the Group and bonus
payments are based on the
Group’s ability to meet its
financial targets as a result of
the overarching objectives.
None
None. In recent years
any base salary awards
have been in line with
the rise given to all the
UK employees.
Financial measures set by
the Committee in line with
near-term priorities i.e.
Underlying profit.
The maximum bonus
payable is 130% of salary
based entirely on the
financial measures. The
minimum pay out is nil.
Benefits
Performance
share plan (‘PSP’)
To provide a
competitive package
for Executive Directors.
Benefits comprise a company
car or allowance alongside
medical health cover benefits.
None
n/a
To sustain the Executive
Directors’ performance
over the longer term in line
with shareholder interests.
The awards are normally
made annually under the
Hornby PSP scheme to
Executive Directors.
Criteria set are designed
to challenge the goals
set by the Group in
line with its three-year
strategic plan.
The maximum award level
is 150% of base salary
per annum although
awards up to 200%
of base salary may be
granted to an individual in
exceptional circumstances
(e.g. recruitment or
retention).
20%
Pensions
To provide a
competitive package
for Executive Directors.
The Executive Directors are
provided with a contribution to
their retirement savings plans.
None
Estimate of the total future potential remuneration
The charts below set out estimates of the potential remuneration for each of the Executive Directors based on the current remuneration
packages. The assumptions included in each scenario are described below:
• The share price of Hornby Plc remains constant.
• Consists of base salary, pension and benefits which are all assumed to be in line with 2013–14.
• On plan – the Performance share plan will deliver 50% of maximum.
R Ames
400
300
200
100
0
Fixed
On Plan
Maximum
N P Stone
200
150
100
50
0
Fixed
On Plan
Maximum
Long-term service plan Bonus Salary and benefits
Long-term service plan Bonus Salary and benefits
31
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Directors’ Remuneration Report continued
Policy on Non-Executive Directors
The independent Non-Executive Directors receive letters of appointment
with six month notice terms and are subject to re-election every three
years at the Annual General Meeting. The Executive Directors review
the Non-Executive Director’s fees annually. The fee is a fixed annual
fee, which reflects their time and commitment to the business and
comparatives from similar sized quoted companies. Non-Executive
Directors do not participate in any share scheme, bonus or
pension arrangements.
The current scale of remuneration is:
Chairman
Other Non-Executive Directors
£’000
100
40
Recruitment of Directors
When determining the remuneration package and levels for a new
Director the Committee will take into consideration all relevant factors
including but not limited to; the role, the skills a Director has and the
added value they can bring to the business but without paying more
than is required to recruit and retain a candidate of the required
calibre. The Committee will seek to align the package with the
framework of the remuneration policy outlined in the previous
table above.
On recruitment, the Committee may also grant awards to a new
Director under the Listing Rule 9.4.2 which allows for the granting of
awards, specifically to facilitate, in unusual circumstances, the
recruitment or retention of a Director, without seeking prior shareholder
approval. This discretion will only be used in respect of buyout awards
where a new recruit forfeits awards granted by a previous employer.
Engagement with shareholders
The Committee considers shareholder feedback received during the
AGM and any other shareholder meetings as part of its annual review
of its remuneration policy. Where the Committee proposes to introduce
new long-term incentive plans, the Committee seeks the views of major
shareholders prior to seeking general shareholder approval at a
general meeting. There were no shareholder representations to the
Company in 2013–14 in respect of Directors’ remuneration.
C Caminada
Remuneration Committee Chairman
26 June 2014
32
Hornby PLC Annual Report and Accounts 2014 Statement of Directors’ Responsibilities
So far as the Directors are aware, there is no relevant audit information
of which the Company’s auditors are unaware; and each Director has
taken all the steps that they ought to have taken as a Director in order
to make themselves aware of any relevant audit information and to
establish that the Company’s auditors are aware of that information.
By order of the Board
N Stone
Group Finance Director
26 June 2014
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the financial statements 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 Group and Company 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 and
• 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
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 Group and the Company and enable them to ensure that the
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. They are also responsible
for safeguarding the assets of the Group and the Company 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.
The Directors consider that the Annual Report and Accounts, taken as a
whole, is fair, balanced and understandable and provide the
information necessary for shareholders to assess the Company’s
performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
Directors and Corporate Information section, confirm that, to the best
of their knowledge:
• The Group and Company financial statements, which have been
prepared in accordance with IFRSs as adopted by the EU, give a
true and fair view of the assets, liabilities, financial position and
loss of the Group and profit of the Company
• The Strategic Review and Corporate Governance Statement
includes a fair review of the true development and performance
of the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces
33
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Independent Auditors’ Report
to the members of Hornby Plc
Report on the financial statements
What an audit of financial statements involves
Our opinion
In our opinion the financial statements, defined below:
• give a true and fair view of the state of the group’s and of the
company’s affairs as at 31 March 2014 and of the group’s loss,
the company’s profit and the group’s and the company’s 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 and, as regards the group financial
statements, Article 4 of the IAS Regulation.
This opinion is to be read in the context of what we say in the
remainder of this report.
What we have audited
The group Financial Statements and company Financial Statements (the
“financial statements”), which are prepared by Hornby Plc comprise:
• the group and company balance sheets as at 31 March 2014;
• the group and company statements of comprehensive income
for the year then ended;
• the group and company cash flow statements for the year
then ended;
• the group and company statements of changes in equity for the
year then ended; and
• the notes to the Annual report and Accounts, which include
a summary of significant accounting policies and other
explanatory information.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the
European Union.
Certain disclosures required by the financial reporting framework have
been presented elsewhere in the Annual Report and Accounts (the
“Annual Report”), rather than in the notes to the financial statements.
These are cross-referenced from the financial statements and are
identified as audited.
We conducted our audit in accordance with International Standards
on Auditing (UK and Ireland) (“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.
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.
Overview of our audit approach
Materiality
We set certain thresholds for materiality. These helped us to determine
the nature, timing and extent of our audit procedures and to evaluate
the effect of misstatements, both individually and in aggregate, on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for
the group financial statements as a whole to be £126,000. This
represents approximately 5% of loss before tax before the exceptional
item relating to the impairment of goodwill. We believe this represents
an appropriate measure of the group’s underlying performance.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above £5,000 as well as
misstatements below that amount that, in our view, warranted reporting
for qualitative reasons.
34
Hornby PLC Annual Report and Accounts 2014
Overview of the scope of the audit
Area of focus
The group financial statements are a consolidation of ten reporting
units, comprising the group’s operating businesses and centralised
functions. In establishing the overall approach to the group audit, we
determined the type of work that needed to be performed at the
reporting units by us, as the group engagement team, or component
auditors from other PwC network firms operating under our instruction.
Where the work was performed by component auditors, we
determined the level of involvement we needed to have in the audit
work at those reporting units to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for our
opinion on the group financial statements as a whole.
Accordingly, of the group’s ten reporting units, we identified three
(representing 76% of Group revenue and 65% of the loss before tax
before the exceptional item relating to the impairment of goodwill)
based in the UK and Spain which, in our view, required an audit of
their complete financial information, either due to their size or risk
characteristics. Specific audit procedures were performed on a further
two reporting units in Italy and the US. This, together with additional
procedures performed at the group level, gave us the evidence we
needed for our opinion on the group financial statements as a whole.
Areas of particular audit focus
In preparing the financial statements, the Directors made a number of
subjective judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering future
events that are inherently uncertain. We primarily focused 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.
In our audit, we tested and examined information, using sampling and
other auditing techniques, to the extent we considered necessary to
provide a reasonable basis for us to draw conclusions. We obtained
audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.
We considered the following areas to be those that required particular
focus in the current year. This is not a complete list of all risks or areas
of focus identified by our audit. We discussed these areas of focus
with the Audit Committee. Their report on those matters that they
considered to be significant issues in relation to the financial statements
is set out on page 23 and 24.
Risk of fraud in revenue
recognition
ISAs (UK & Ireland) require
that we consider this. We
focused on the risk that revenue
transactions around the year-
end were included in the
wrong period and that revenue
transactions did not occur.
Going concern
We focused on this because
the Directors’ cash flow
forecasts indicated that the
group would breach its loan
covenants at 31 March 2014
and required the support of its
lenders to continue as a going
concern. An initial waiver of the
covenants at 31 March 2014
was therefore obtained from
the lenders before the year
end. Although this addressed
the immediate issue, there was
still a risk that the group would
not be able to continue as a
going concern for a period of
at least twelve months from the
date the financial statements
were approved. Management
has subsequently agreed a
new facility with its lenders. This
facility has revised covenants.
How the scope of our audit
addressed the area of focus
We used Computer Assisted
Auditing Techniques to test
the occurrence of revenue in
the UK reporting unit, and
performed tests of details
on the occurrence of revenue
in the Spanish reporting
unit, and on the cut off of
transactions in both the UK
and Spain. We also tested
the controls over the recording
of revenue transactions
and checked journal entries
posted to revenue to identify
unusual or irregular items,
obtaining evidence to
determine the rationale for
the adjustments tested.
We obtained confirmation
of the waiver of the loan
covenants breached at 31
March 2014 and considered
whether, with the revised facility
and covenants in place, the
group was in a position to
continue as a going concern.
To do this we considered
the likelihood of a breach
of the revised covenants for
a period of at least twelve
months from the date the
financial statements were
approved. We considered
in detail the approach taken
by management and their
independent advisers in
determining the cash flow
forecasts, and whether there
was appropriate support for
the assumptions used. Our
conclusion on going concern
is below.
35
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Independent Auditors’ Report continued
Area of focus
Goodwill and intangible
assets impairment assessment
In the prior year, the goodwill
relating to the Italian business
was partially written off.
As trading in that business
remained challenging in the
current year, we needed to
consider whether the carrying
value of the remaining goodwill
and other intangibles was
supported by the forecast
performance of the business.
Risk of management override
of internal controls
ISAs (UK & Ireland) require that
we consider this.
How the scope of our audit
addressed the area of focus
We evaluated the cash flow
model used to check that
it was appropriate for the
impairment review.
We challenged management’s
assumptions used in the model
for goodwill and intangible
assets, described in note 8
to the financial statements,
including specifically the cash
flow projections, discount rates,
perpetuity rates and sensitivities
used, particularly in respect
of the Italian operations and
concluded that the assumptions
were reasonable.
We tested key reconciliations
and tested manual journal
entries. We considered
whether there was evidence
of bias by the Directors in the
significant accounting estimates
and judgements relevant to the
financial statements.
We also assessed the
overall control environment
of the group, including the
arrangements for staff to
“whistle-blow” inappropriate
actions, and discussed with
senior management the
possibilities for management
override of controls.
Going concern
Under the Listing Rules we are required to review the Directors’
statement, set out on page 22, in relation to going concern. We have
nothing to report having performed our review.
As noted in the Directors’ statement, the Directors have concluded that
it is appropriate to prepare the financial statements using the going
concern basis of accounting. The going concern basis presumes that
the group and company have adequate resources to remain in
operation, and that the Directors intend them to do so, for at least one
year from the date the financial statements were signed. As part of our
audit we have concluded that the Directors’ use of the going concern
basis is appropriate.
However, because not all future events or conditions can be predicted.
these statements are not a guarantee as to the group’s and company’s
ability to continue as a going concern.
Opinions on other matters 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; and
• the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies
Act 2006.
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 and the part of the Directors’
Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
36
Hornby PLC Annual Report and Accounts 2014
Directors’ remuneration
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 set
out on page 33, 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 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.
Rosemary Shapland (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Gatwick
26 June 2014
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.
Corporate governance statement
Under the Listing Rules we are required to review the part of the
Corporate Governance Statement relating to the company’s
compliance with nine provisions of the UK Corporate Governance
Code (“the Code”). We have nothing to report having performed
our review.
On page 33 of the Annual Report, as required by the Code Provision
C.1.1, the Directors state that they consider the Annual Report taken as
a whole to be fair, balanced and understandable and provides the
information necessary for members to assess the group’s and
company’s performance, business model and strategy. On pages 23
and 24, as required by C.3.8 of the Code, the Audit Committee has
set out the significant issues that it considered in relation to the financial
statements, and how they were addressed. Under ISAs (UK & Ireland)
we are required to report to you if, in our opinion:
• the statement given by the Directors is materially inconsistent with
our knowledge of the group and company acquired in the
course of performing our audit; or
• the section of the Annual Report describing the work of the Audit
Committee does not appropriately address matters
communicated by us to the Audit Committee.
We have no exceptions to report arising from this responsibility.
Other information in the Annual Report
Under ISAs (UK & Ireland) we are required to report to you if, in our
opinion, information in the Annual Report is:
• materially inconsistent with the information in the audited financial
statements; or
• apparently materially incorrect based on, or materially
inconsistent with, our knowledge of the group and company
acquired in the course of performing our audit; or
• is otherwise misleading.
We have no exceptions to report arising from this responsibility.
37
Hornby PLC Annual Report and Accounts 2014STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
Group and Company Statement of
Comprehensive Income
for the Year Ended 31 March 2014
Group
Company
Note
2
2
3
3
4
1
2014
£’000
2013
£’000
51,557
(28,230)
23,327
(2,549)
(11,322)
(9,811)
(3,718)
(4,073)
–
8
(492)
(4,557)
57,395
(32,917)
24,478
(2,408)
(12,768)
(9,415)
(2,726)
(2,839)
–
13
(561)
(3,387)
(1,139)
(108)
(389)
(875)
(2,046)
(4,557)
147
20
(385)
(723)
(2,446)
(3,387)
5
112
(4,445)
886
(2,501)
(714)
(146)
461
(67)
(860)
(5,305)
394
(2,107)
7
7
(11.35)p
(11.35)p
(6.39)p
(6.39)p
2014
£’000
1,456
–
1,456
–
–
(994)
(85)
377
–
174
(208)
343
383
–
–
(40)
–
343
(38)
305
–
101
101
406
2013
£’000
1,316
–
1,316
–
–
(859)
(34)
423
783
174
(213)
1,167
1,216
–
–
(49)
–
1,167
390
1,557
–
(74)
(74)
1,483
Revenue
Cost of sales
Gross profit
Distribution costs
Selling and marketing costs
Administrative expenses
Other operating expenses
Operating (loss)/profit
Income from shares in Group undertakings
Finance income
Finance costs
(Loss)/profit before taxation
Analysed as:
Underlying (loss)/profit before taxation
Net foreign exchange impact on intercompany loans
Amortisation of intangibles
Exceptional items:
Restructuring costs
Impairment of goodwill
(Loss)/profit before taxation
Income tax income/(expense)
(Loss)/profit for the year after taxation
Other comprehensive income
Items that may be subsequently reclassified to Profit and Loss:
Cash flow hedges, net of tax
Currency translation differences
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year
Loss per ordinary share
Basic
Diluted
All results relate to continuing operations.
The notes on pages 44 to 75 form part of these accounts.
38
Hornby PLC Annual Report and Accounts 2014 Group and Company Balance Sheet
at 31 March 2014
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial investments
Current tax assets
Cash and cash equivalents
Liabilities
Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Provisions
Current tax liabilities
Net current assets/(liabilities)
Non-current liabilities
Borrowings
Deferred tax liabilities
Net assets
Equity attributable to owners of the parent
Share capital
Share premium
Capital redemption reserve
Translation reserve
Hedging reserve
Other reserves
Retained earnings
Total equity
Group
Company
Note
2014
£’000
2013
£’000
2014
£’000
2013
£’000
8
9
10
11
20
12
13
19
17
14
18
19
15
16
17
18
20
21
8,530
3,569
10,383
–
1,858
24,340
13,165
9,043
39
601
619
23,467
10,598
3,978
10,048
–
1,714
26,338
13,637
9,603
367
512
3,554
27,673
(7,630)
(445)
(7,618)
(238)
(128)
(16,059)
7,408
(3,907)
(2,194)
(8,834)
(235)
(466)
(15,636)
12,037
(242)
(136)
(378)
31,370
392
6,180
55
(758)
(440)
1,688
24,253
31,370
(1,815)
(159)
(1,974)
36,401
392
6,180
55
(612)
274
1,688
28,424
36,401
–
–
1,241
37,224
–
38,465
–
–
1,275
37,165
–
38,440
–
628
–
29
1
658
–
–
(62)
–
(100)
(162)
496
–
33
–
110
2
145
–
–
(68)
–
(105)
(173)
(28)
(4,984)
(126)
(5,110)
33,851
392
6,180
55
(958)
–
19,145
9,037
33,851
(5,093)
(148)
(5,241)
33,171
392
6,180
55
(1,059)
–
19,145
8,458
33,171
The notes on page 44 to 75 form part of these accounts.
The financial statements on pages 38 to 43 were approved by the Board of Directors on 26 June and were signed on its behalf by:
N P Stone
Director
Registered Company Number: 01547390
39
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Group and Company Statement of Changes
in Equity
Year Ended 31 March 2014 and 31 March 2013
GROUP
Balance at 1 April 2012
Total loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners
Issue of shares
Share-based payments (note 22)
Shares vested from employee benefit trust
Dividends
Total transactions with owners
Balance at 31 March 2013
Total loss for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners
Share-based payments (note 22)
Shares vested from employee benefit trust
Dividends
Total transactions with owners
Balance at 31 March 2014
Share
capital
£’000
392
–
–
–
–
–
–
–
392
–
–
–
–
–
–
–
392
Share
premium
£’000
6,180
–
–
–
–
–
–
–
6,180
–
–
–
–
–
–
–
6,180
Capital
redemption
reserve
£’000
55
–
–
–
–
–
–
–
55
–
–
–
–
–
–
–
55
Translation
reserve
£’000
(545)
–
(67)
(67)
Hedging
reserve
£’000
(187)
–
461
461
Other
reserves
£’000
1,688
–
–
–
Retained
earnings
£’000
31,598
(2,501)
–
(2,501)
Total
equity
£’000
39,181
(2,501)
394
(2,107)
–
–
–
–
(612)
–
(146)
(146)
–
–
–
–
(758)
–
–
–
–
274
–
(714)
(714)
–
–
–
–
(440)
–
–
–
–
1,688
–
–
–
–
–
–
–
1,688
20
90
(783)
(673)
(673)
28,424
(4,445)
–
(4,445)
274
–
–
274
24,253
20
90
(783)
(673)
(673)
36,401
(4,445)
(860)
(5,305)
274
–
–
274
31,370
Retained earnings includes £587,000 at 31 March 2014 (2013 – £604,000) which is not distributable and relates to a 1986 revaluation of
land and buildings.
40
Hornby PLC Annual Report and Accounts 2014 COMPANY
Balance at 1 April 2012
Total income for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners
Share-based payments
Dividends
Total transactions with owners
Balance at 31 March 2013
Total income for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners
Share-based payments
Dividends
Total transactions with owners
Balance at 31 March 2014
The notes on page 44 to 75 form part of these accounts.
Share
capital
£’000
392
–
–
–
–
–
–
–
392
–
–
–
–
–
–
Share
premium
£’000
6,180
–
–
–
–
–
–
–
6,180
–
–
–
–
–
–
–
392
–
6,180
Capital
redemption
reserve
£’000
55
–
–
–
–
–
–
–
55
–
–
–
–
–
–
–
55
Translation
reserve
£’000
(985)
–
(74)
(74)
Other
reserves
£’000
19,145
–
–
–
–
–
–
–
–
–
(74)
(1,059)
–
19,145
–
101
101
–
–
–
–
–
–
–
–
–
Retained
earnings
£’000
7,664
1,557
–
1,557
20
(783)
(763)
794
8,458
305
–
305
274
–
274
Total
equity
£’000
32,451
1,557
(74)
1,483
20
(783)
(763)
720
33,171
305
101
406
274
–
274
101
(958)
–
19,145
579
9,037
680
33,851
41
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Group and Company Cash Flow Statement
for the Year Ended 31 March 2014
Cash flows from operating activities
Cash (used in)/generated from operations
Interest paid
Tax (paid)/received
Net cash (used in)/generated from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Interest received
Dividends received
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Repayments of loans
Finance lease capital payments
Dividends paid to Company’s shareholders
Advances to subsidiary undertakings
Repayments to subsidiary undertakings
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash, cash equivalents and bank overdrafts at beginning of the year
Effect of exchange rate movements
Cash, cash equivalents and bank overdrafts at end of year
Cash, cash equivalents and bank overdrafts consist of:
Cash and cash equivalents
Bank overdrafts
Cash, cash equivalents and bank overdrafts at end of year
The notes on page 44 to 75 form part of these accounts.
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
(76)
(492)
(482)
(1,050)
–
(4,059)
8
–
(4,051)
(3,060)
(3)
–
–
–
(3,063)
(8,164)
2,725
(17)
(5,456)
619
(6,076)
(5,456)
10,407
(561)
(1,394)
8,452
97
(3,457)
13
–
(3,347)
(3,046)
(62)
(783)
–
–
(3,891)
1,214
1,591
(80)
2,725
3,554
(829)
2,725
516
(208)
16
324
–
–
174
–
174
–
–
–
(4,767)
4,268
(499)
(1)
2
–
1
1
–
1
918
(213)
(302)
403
–
–
174
783
957
–
–
(783)
–
(578)
(1,361)
(1)
2
1
2
2
–
2
42
Hornby PLC Annual Report and Accounts 2014 Notes to the Cash Flow Statements
Group and Company Cash Flows from Operating Activities
(Loss)/profit before taxation
Interest payable
Interest receivable
Dividend income
Amortisation of intangible assets
Impairment of Goodwill
Depreciation
Loss on disposal of property, plant and equipment
Share-based payments
(Gain)/loss on financial derivatives
Increase/(decrease) in provisions
Decrease in inventories
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Decrease in derivate financial instruments
Cash (used in)/generated from operations
Group
Company
2014
£’000
(4,557)
492
(8)
–
389
2,046
3,604
22
274
(135)
3
472
560
(1,451)
(1,787)
(76)
2013
£’000
(3,387)
561
(13)
–
385
2,446
3,664
8
20
58
(89)
4,230
3,566
(1,042)
–
10,407
2014
£’000
343
208
(174)
–
–
–
34
–
85
–
–
–
26
(6)
–
516
2013
£’000
1,167
213
(174)
(783)
–
–
34
–
34
–
–
–
–
427
–
918
43
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Accounting policies for the year ended 31 March 2014
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 2014 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.
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.
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 if incurred prior to the adoption of IFRS. 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
minority 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
Adoption of new and revised standards
Interpretations effective in the current year and relevant to the Group
There are no IFRSs or IFRS-IC interpretations that are effective for the first time for the financial year beginning on 1 April 2013 that have a
material impact on the Group.
Amendment to IAS 1, ‘Financial statement presentation’ regarding other comprehensive income, the main change resulting from these
amendments is a requirement for entities to group items presented in other comprehensive income (‘OCI’) on the basis of whether they are
potentially re-classifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are
presented in OCI.
Amendment to IFRS 7 ‘Financial instruments: Disclosures’
Interpretations effective in the current year but not relevant
The following interpretations to published standards are mandatory for accounting periods beginning on or after 1 April 2013 but are not
relevant to the Group’s operations in the current year:
Amendment to IAS 12 ‘Income taxes’, on deferred tax, subject to endorsement by the EU,
IFRS 13 ‘Fair value Measurement’ provides a precise definition of fair value and a single source of fair value measurement and disclosure
requirements for use across IFRS’s,
IAS 19 ‘Employee benefits’ is effective for periods beginning on or after 1 January 2013.
Annual Improvements Project 2011; these annual improvements, address six issues in the 2009–11 reporting cycle, it includes changes to:
IFRS 1, First time adoption’, IAS 1, ‘Financial statement presentation’, IAS 16, ‘Property, plant and equipment’.
44
Hornby PLC Annual Report and Accounts 2014 IAS 32, ‘Financial instruments; Presentation’ and IAS 34, ‘Interim financial reporting’. The Group is yet to assess the full impact of these annual
improvements and intends to adopt them no later than the accounting period beginning on 1 April 2014.
Amendment to IAS 32 ‘Financial instruments: Presentation’, on asset and liability offsetting. The Group is yet to IAS 32 amendment’s full
impact and intends to adopt it no later than the accounting period beginning on 1 April 2014.
Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following standards and amendments to existing standards have been published and are mandatory for the Group’s accounting periods
beginning on or after 1 April 2014 or later periods, but the Group has not early adopted them:
IFRS 7 ‘Financial instruments: Assets and liability offsetting’ issued in December 2011, amended the required disclosures to include information
that will enable users of an entity’s financial statements to evaluate the effect or potential effect of netting arrangements, including rights of
set-off associated with the entity’s recognised financial assets and recognised financial liabilities, on the entity’s financial position.
IFRS 9 ‘Financial Instruments’ addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was
issued in November 2009 and October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial
instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those
measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for
managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains
most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a
fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this
creates an accounting mismatch. The Group is yet to assess IFRS 9’s full impact and intends to adopt IFRS 9 no later than the accounting
period beginning on or after 1 January 2018, subject to endorsement by the EU. The Group will also consider the impact of the remaining
phases of IFRS9 when completed by the Board.
IFRS 10 ‘Consolidated financial statements’ builds on existing principles by identifying the concept of control as the determining factor in
whether an entity should be included within the consolidated financial statements of the Parent Company. The standard provides additional
guidance to assist in the determination of control where this is difficult to assess. The Group is yet to assess IFRS 10’s full impact and intends
to adopt IFRS 10 no later than the accounting period beginning on 1 April 2014.
IFRS 12 ‘Disclosures of interests in other entities’ includes the disclosure requirements for all forms of interests in other entities, including joint
arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The Group is yet to assess IFRS 12’s full impact and
intends to adopt IFRS 12 no later than the accounting period beginning on 1 April 2014.
IFRS 13 ‘Fair value measurement’ aims to improve consistency and reduce complexity by providing a precise definition of fair value and a
single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned
between IFRSs, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already
required or permitted by other standards within IFRSs. The Group is yet to assess IFRS 13’s full impact and intends to adopt IFRS 13 no later
than the accounting period beginning on 1 April 2014.
IAS 36 ‘Impairment of assets’ (amendment) the amendments reverse the unintended requirement in IFRS 13 disclose the recoverable amount of
every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments,
recoverable amount is required to be disclosed only when an impairment loss has been recognised or reversed. The Group is yet to IAS 36
amendment’s full impact and intends to adopt it no later than the accounting period beginning on 1 April 2014.
IFRIC 21 ‘Levies’, IAS 27 (revised 2011) ‘separate financial statements’ and IAS 39, ‘Financial instruments: Recognition and measurement’, on
novation of derivatives. The Group is yet to assess IFRIC 21, IAS 27 (revised 2011) and IAS 39’s full impact and intends to adopt them no
later than the accounting period beginning on 1 April 2014.
IFRS 11 ‘Joint arrangements’ requires joint arrangements to be accounted for as a joint operation or as a joint venture depending on the rights
and obligation of each party to the arrangement. Proportionate consolidation for joint ventures will be eliminated and equity accounting will
be mandatory. The Group does not expect this standard to be relevant to the Group.
IAS 28 (revised 2011) ‘Associates and joint ventures’. The Group does not expect this standard to be relevant to the Group.
There are no other IFRSs or IFRS-IC interpretations that are not yet effective that would be expected to have a material impact on the Group.
45
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
1. SIGNIFICANT ACCOUNTING POLICIES continued
RECONCILIATION OF STATUTORY TO NON STATUTORY INFORMATION IN THE CHAIRMAN’S STATEMENT AND OPERATING AND
FINANCIAL REVIEW
Underlying 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 historic acquisitions. Additionally exceptional items, 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 profit before taxation.
Loss before taxation
Foreign exchange on intercompany loans including impact of foreign exchange collar
Amortisation of intangibles (note 9)
Impairment of goodwill (note 8)
Restructuring costs
Underlying (loss)/profit before taxation
Group
2014
£’000
(4,557)
108
389
2,046
875
(1,139)
2013
£’000
(3,387)
(20)
385
2,446
723
147
The Statement of Comprehensive Income discloses foreign exchange movements, amortisation of intangibles and impairment of goodwill
within other operating expenses. Restructuring costs are disclosed within administrative expenses. Restructuring costs include £555,000
associated with the exit agreement with our principal model rail supplier. It also includes the write-off of bad debt of a £147,000 associated
with one of our largest concessions, Modelzone, which went into administration within the year. The balance of £173,000 is associated with
the restructuring costs in the Hong Kong office and in the UK.
The amount shown above comprises loss (2013 – gain) on translation of intercompany loans of £108,000 (2013 – gain of £199,000), offset
by a loss on marking to market the foreign exchange collar of £nil (2013 – loss of £179,000).
Reconciliation of net debt:
Cash (note 14)
Total borrowings (note 18)
Net debt
Group
2014
£’000
619
(7,872)
(7,253)
2013
£’000
3,554
(5,722)
(2,168)
Cash of £619,000 above includes restricted cash of £348,055 held within an Escrow account that relates to the exit payment to our
previous principal model railway supplier as mentioned within the Financial and Operating Review.
REVENUE RECOGNITION
Revenue comprises 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 despatched 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 income 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.
46
Hornby PLC Annual Report and Accounts 2014
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.
INTANGIBLES
(a) Brand names
Brand names 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 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.
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
Plant and equipment
Motor vehicles
– 30 to 50 years
– 5 to 10 years
– 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.
47
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014
Notes to the Financial Statements continued
1. SIGNIFICANT ACCOUNTING POLICIES continued
IMPAIRMENT OF NON-CURRENT ASSETS
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment when events or changes in circumstances indicate that the carrying value may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount,
which is considered to be the higher of its value in use and fair value less costs to sell. In order to assess impairment, assets are grouped into
the lowest levels for which there are separately identifiable cash flows (cash-generating units). Cash flows used to assess impairment are
discounted using appropriate rates taking into account the cost of equity and any risks relevant to those assets.
INVESTMENTS
In the Company’s financial statements, investments in subsidiary undertakings are stated at cost less any impairment. Investments revalued
using the equity method of valuation prior to the transition to IFRS use this valuation as deemed cost at this date. Dividend income is shown
separately in the Statement of Comprehensive Income.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is predominantly determined using the first-in, first-out (‘FIFO’) method.
Alternative methods may be used when proven to generate no material difference. The cost of finished goods and work in progress
comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity).
Net realisable value is based on anticipated selling price less further costs expected to be incurred to completion and disposal. Provisions
are made against those stocks considered to be obsolete or excess to requirements on an item-by-item basis.
The replacement cost, based upon latest invoice prices before the balance sheet date, is considered to be higher than the balance sheet
value of inventories at the year end due to price rises and exchange fluctuations. It is not considered practicable to provide an accurate
estimate of the difference at the year end date.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the Group and Company’s balance sheet when the Group or Company becomes
a party to the contractual provisions of the instrument.
FINANCIAL LIABILITIES AND EQUITY
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the assets of the Group and Company after deducting all of its
liabilities. Equity instruments issued by the Group and Company are recorded at the proceeds received, net of direct issue costs.
BORROWING COSTS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income
over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs and subsequently amortised over the life of
the facility. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised
as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
SALES RETURNS PROVISIONS
Provisions for sales returns are recognised when the Group has a constructive obligation as a result of a past event. Provisions for sales returns
are measured at the present value of the expenditure expected to be required to settle the obligation.
TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. A provision
for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the
original terms of receivables. The amount of the provision is recognised in the Statement of Comprehensive Income.
TRADE PAYABLES
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
48
Hornby PLC Annual Report and Accounts 2014 TAXATION INCLUDING DEFERRED TAX
Corporation tax, where payable, is provided on taxable profits at the current rate.
The taxation liabilities of certain Group undertakings are reduced wholly or in part by the surrender of losses by fellow Group undertakings.
Deferred tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of
unused tax assets and unused tax losses can be utilised. The carrying amount of deferred income tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the
deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Tax relating
to items recognised directly in equity is recognised in equity and not in the Statement of Comprehensive Income.
CRITICAL JUDGEMENTS IN APPLYING THE ACCOUNTING POLICIES
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that may have an element of risk causing an adjustment to the carrying amounts of
assets and liabilities within the next financial year include provisions for stock obsolescence, customer returns, doubtful debts, impairment
reviews, fair values of share-based payments, fair values of derivatives and recoverability of deferred tax assets. All of the above are
estimated with reference to historical data, expectation of future events and reviewed regularly.
Whenever there is a substantiated risk that an item of stock’s sellable value may be lower than its actual stock value, a provision for the
difference between the two values is made. Management review the stock holdings on a regular basis and consider where a provision for
excess or obsolete stock should be made based on expected demand for the stock and its condition.
The provision for sales returns are based on historic returns data applied to sales for the current year and this provision is reviewed by
management on an ongoing basis.
Specific debtors are provided for when there is significant doubt that a repayment of debt will be fulfilled considering specific knowledge of
the customer and sales terms of the debt outstanding.
The critical areas of judgement applied within the impairment reviews conducted include the weighted average cost of capital used in
discounting the cash flows of the cash generating units, the assessment of the initial growth rate used and the growth rate in perpetuity of the
cash flows. The judgments used within this assessment are set out within note 8.
The critical areas of judgment used in the share based payment charge for the year include the assessment of the fair value of the option
along with the expected volatility and option term. These are based on historical data where this is available and best estimates where
historical data is not available. Further details in relation to share-based payments in note 22.
Liabilities and provisions are recognised when the Group has a present legal or constructive obligation as a result of past events and it is
more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. The
expense relating to any liability or provision is presented in the Statement of Comprehensive Income net of any reimbursement but only if
reimbursement is virtually certain and will be settled simultaneously.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the
balance sheet date. If material, provisions are determined by discounting the expected future cash flows of the Group at rates that reflect
current market assessments of the time value of money.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of the cash flow statement includes cash in hand, deposits at banks, other liquid investments with
original maturities of three months or less and bank overdrafts. Bank overdrafts or loans where there is no right of set off are shown within
borrowings in current or non-current liabilities on the balance sheet as appropriate.
49
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
1. SIGNIFICANT ACCOUNTING POLICIES continued
SHARE-BASED PAYMENT
Hornby Plc operates three share-based payment plans:
• Share Option Scheme.
• Short Term Incentive Plan.
• Performance Share Plan.
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value
(excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-
settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will
eventually vest and adjusted for the effect of non market-based vesting conditions.
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a
capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the
vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.
Share Option Scheme
Fair value is measured by use of the Black-Scholes model. The expected life used in the models has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Short-Term Incentive Plan
The Short Term Incentive Plan (‘STIP’) investment is carried at the cost of the shares held. This investment in own shares is presented as a
deduction from shareholders’ funds.
The matched element of the STIP which has a condition of employment attached to it is recorded at fair value and spread over the vesting
period of the shares and recognised in the Statement of Comprehensive Income over this period. The STIP scheme became dormant as at
31 March 2013.
Performance Share Plan
Awards are granted to Executive Directors in shares worth 100% of salary, with lower levels of grant for less senior executives.
The Performance Share Plan (‘PSP’) incorporates two three-year performance conditions:
• Total Shareholder Return (‘TSR’).
• Earnings per share (‘EPS’) growth targets.
each applying to a separate 50% of the award and vest on the third anniversary of grant as appropriate.
The TSR fair value and the projected EPS award fair value are spread over the vesting period of the shares and recognised in the Statement
of Comprehensive Income in the appropriate year.
EMPLOYEE BENEFIT COSTS
During the year the Group operated a defined contribution money purchase pension scheme under which it pays contributions based upon a
percentage of the members’ basic salary. The scheme is administered by trustees either appointed by the Company or elected by the
members (to constitute one third minimum).
Contributions to defined contribution pension schemes are charged to the Statement of Comprehensive Income according to the year in
which they are payable.
Further information on pension costs and the scheme arrangements is provided in note 24.
SHARE CAPITAL AND SHARE PREMIUM
Ordinary shares issued are shown as share capital at nominal value. The premium received on the sale of shares in excess of the nominal
value is shown as share premium within total equity.
50
Hornby PLC Annual Report and Accounts 2014 LEASES
The Group enters into operating and finance leases.
Assets held under finance leases are initially reported at the fair value of the asset with an equivalent liability categorised as appropriate
under current and non-current payables. The assets are depreciated over the shorter of the lease term and their useful economic lives. Finance
charges are allocated to accounting periods over the period of the lease to produce a constant rate of return on the outstanding balance.
Rentals are apportioned between finance charges and the reduction of the liability and allocated to net interest.
Leases classed as operating leases are expensed on a straight-line basis to the Statement of Comprehensive Income over the lease term.
FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group’s operations expose it to a variety of financial risks that include the effects of changes in foreign currency exchange rates, market
interest rates, credit risk and its liquidity position. The Group has in place a risk management programme that seeks to limit adverse effects on
the financial performance of the Group by using foreign currency financial instruments. In addition, other instruments are used to manage the
Group’s interest rate exposure.
(a) Foreign exchange risk
The Group is exposed to foreign exchange risks against Sterling primarily on transactions in Hong Kong Dollars and US Dollars. It enters
into forward currency contracts to hedge the cash flows of its product sourcing operation (i.e. it buys Hong Kong Dollars forward in
exchange for Sterling) and looks forward six–twelve months on a rolling basis at forecasted purchase volumes. The policy framework
requires hedging between 70% and 100% of anticipated import purchases that are denominated in Hong Kong Dollars. The Group has
granted Euro denominated intercompany loans to subsidiary companies that are translated to Sterling at statutory period ends thereby
creating exchange gains or losses. The loans to the subsidiaries of Hornby Deutschland GmbH, Hornby Italia s.r.l and Hornby France
S.A.S are classified as long-term loans and therefore the exchange gains and losses on consolidation are reclassified to the translation
reserve in other comprehensive income as per IAS 21.
(b) Interest rate risk
The Group finances its operations through a mixture of retained profits and bank borrowings. The Group borrows, principally in Sterling,
at floating rates of interest to meet short-term funding requirements. At the year end the Group’s borrowings comprised finance leases, a
revolving credit facility, bank overdrafts and a fixed-term loan agreement. An interest rate hedge is in place to protect the Group against
future interest rate rises.
(c) Credit risk
The Group manages its credit risk through a combination of internal credit management policies and procedures and external
credit insurance.
(d) Liquidity risk
At 31 March 2014 the Group had a revolving credit facility of £10 million expiring August 2015 and a five-year fixed-term loan
agreement of £12 million with outstanding repayments of £1.5 million scheduled to be completed by July 2014. These have now been
replaced by a new revolving credit facility of £13 million expiring in December 2015 which is expected to allow sufficient headroom
for trading working capital needs in the current year whilst longer-term plans and funding requirements are developed. The Group
also has additional facilities of £5 million in place in its European subsidiaries through bank loans and import credit line facilities of
which £3.5 million was undrawn at year end. Borrowings in the year ended 31 March 2014 peaked at £11.8 million. The needs are
determined by monitoring forecast and actual cash flows. The Group regularly monitors its performance against its banking covenants
to ensure compliance.
DERIVATIVE FINANCIAL INSTRUMENTS
To manage exposure to foreign currency risk, the Group uses foreign currency forward contracts to manage interest rate risk, the Group uses
an interest rate swap, also known as derivative financial instruments.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair
value. The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as
its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at
hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting
changes in fair values of the hedged items.
51
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014
Notes to the Financial Statements continued
1. SIGNIFICANT ACCOUNTING POLICIES continued
(a) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in
equity. The gain or loss relating to the ineffective portion is recognised immediately in the Statement of Comprehensive Income within
operating expenses.
Amounts accumulated in equity are recycled in the Statement of Comprehensive Income in the periods when the hedged item affects
profit or loss (for instance when the forecast purchase that is hedged takes place). The gain or loss relating to the effective portion of
forward foreign exchange contracts hedging import purchases is recognised in the Statement of Comprehensive Income within ‘cost of
sales’. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory) the
gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset.
The deferred amounts are ultimately recognised in cost of goods sold in the case of inventory.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain
or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
Statement of Comprehensive Income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately transferred to the Statement of Comprehensive Income.
(b) Derivatives that do not qualify for hedge accounting
Certain derivative instruments are not considered effective and do not qualify for hedge accounting. Such derivatives are classified at fair
value through the Statement of Comprehensive Income, and changes in the fair value of derivative instruments that do not qualify for
hedge accounting are recognised immediately in the Statement of Comprehensive Income.
FAIR VALUE ESTIMATION
The fair values of short-term deposits, loans and overdrafts with a maturity of less than one year are assumed to be approximate to their
book values.
The fair values of the derivative financial instruments used for hedging purposes are disclosed in note 19.
FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the relevant functional currency at the exchange rates ruling at the date of the
transaction. Foreign exchange gains and losses resulting from such transactions are recognised in the Statement of Comprehensive Income,
except when deferred in equity as qualifying cash flow hedges. Monetary assets and liabilities denominated in foreign currencies are translated
at the exchange rates ruling at the balance sheet date and any exchange differences are taken to the Statement of Comprehensive Income.
Foreign exchange gains/losses relating to foreign currency loans and other foreign exchange adjustments are included within operating profit
and shown separately as part of other operating expenses.
On consolidation, the Statement of Comprehensive Income and cash flows of foreign subsidiaries are translated into Sterling using average
rates that existed during the accounting period. The balance sheets of foreign subsidiaries are translated into Sterling at the rates of exchange
ruling at the balance sheet date. Gains or losses arising on the translation of opening and closing net assets are recognised in the Statement
of Changes in Equity.
DIVIDEND DISTRIBUTION
Final dividends are recorded in the Statements of Changes in Equity in the period in which they are approved by the Company’s
shareholders. Interim dividends are recorded in the period in which they are approved and paid.
2. SEGMENTAL REPORTING
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, US,
Spain, Italy and the rest of Europe.
Although the USA 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 Board as it is outside Europe.
The Company is a holding company operating in the UK with its results given in the Company Statement of Comprehensive Income on page
38 and its assets and liabilities given in the Company Balance Sheet on page 39. Other Company information is provided in the other notes
to the accounts.
52
Hornby PLC Annual Report and Accounts 2014
Year ended 31 March 2014
Revenue
– External
– Other segments
Operating (loss)/profit
Finance cost
– External
– Other segments
Finance income – External
– Other segments
(Loss)/profit before taxation
Analysed as:
Underlying profit/(loss) before taxation
Net foreign exchange impact on
intercompany loans
Amortisation of intangibles
Restructuring costs
Impairment of goodwill
(Loss)/profit before taxation
Taxation
(Loss)/profit for the year
Segment assets
Less intercompany receivables
Add tax assets
Total assets
Segment liabilities
Less intercompany payables
Add tax liabilities
Total liabilities
Other segment items
Capital expenditure
Depreciation
Net foreign exchange on intercompany
loans
Amortisation of intangible assets
Impairment of goodwill
Share-based payment
UK
£’000
36,413
2,877
(1,335)
(375)
(175)
7
672
(1,206)
41
(108)
(264)
(875)
–
(1,206)
338
(868)
USA
£’000
2,966
–
85
–
–
–
–
85
85
–
–
–
–
85
(4)
81
Spain
£’000
2,885
5,238
(115)
(87)
(208)
–
–
(410)
Italy
£’000
2,952
402
(2,431)
(1)
(191)
1
–
(2,622)
Rest of
Europe
£’000
6,341
–
(277)
(29)
(98)
–
–
(404)
Total
Reportable
Segments
£’000
51,557
8,517
(4,073)
(492)
(672)
8
672
(4,557)
Intra
Group
£’000
–
(8,517)
–
–
672
–
(672)
–
(410)
(483)
(372)
(1,139)
–
–
–
–
(410)
13
(397)
–
(32)
–
–
(404)
(108)
(389)
(875)
(2,046)
(4,557)
56
(348)
112
(4,445)
Group
£’000
51,557
–
(4,073)
(492)
–
8
–
(4,557)
(1,139)
(108)
(389)
(875)
(2,046)
(4,557)
112
(4,445)
–
–
–
–
–
–
–
–
40,430
1,329
10,678
(14,052)
1,936
28,314
22,398
(10,220)
226
12,404
(91)
–
1,238
1,259
(1,173)
3
89
(697)
29
10,010
9,635
(7,034)
35
2,636
2,247
2,520
7
22
1,594
966
108
264
–
274
–
–
–
–
–
–
–
–
3,879
60,530
(15,182)
45,348
(38)
176
4,017
3,783
(2,992)
–
791
(15,182)
2,459
47,807
41,436
(25,263)
264
16,437
15,182
–
–
(25,263)
25,263
–
–
19
20
–
33
–
–
4,059
3,604
108
389
2,046
274
–
–
–
–
–
–
–
2,459
47,807
16,173
–
264
16,437
4,059
3,604
108
389
2,046
274
–
(93)
–
(2,046)
(2,622)
(291)
(2,913)
4,214
(304)
318
4,228
4,361
(3,844)
–
517
192
76
–
92
2,046
–
All transactions between Group companies are on normal commercial terms and an arm’s length basis.
53
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014
Notes to the Financial Statements continued
2. SEGMENTAL REPORTING continued
Year ended 31 March 2013
Revenue
– External
– Other segments
Operating (loss)/profit
Finance cost
– External
– Other segments
Finance income – External income
– Other segments
Profit/(loss) before taxation
Analysed as:
Underlying profit before taxation
Net foreign exchange impact on
intercompany loans
Amortisation of intangibles
Reorganisation costs
Impairment of goodwill
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year
Segment assets
Less intercompany receivables
Add tax assets
Total assets
Segment liabilities
Less intercompany payables
Add tax liabilities
Total liabilities
Other segment items
UK
£’000
43,195
2,936
337
(478)
–
11
586
456
1,370
20
(264)
(670)
–
456
(284)
172
48,938
(17,530)
1,315
32,723
13,571
–
539
14,110
USA
£’000
2,696
–
12
–
(2)
–
–
10
10
–
–
–
–
10
–
10
–
–
–
–
(395)
148
(247)
1,482
–
–
1,482
1,449
(1,286)
–
163
10,459
(1,273)
129
9,315
9,439
(7,806)
86
1,719
Capital expenditure
Depreciation
Net foreign exchange on intercompany
loans
Amortisation of intangible assets
Impairment of goodwill
Share-based payment
2,337
2,774
26
20
1,377
713
(20)
264
–
20
–
–
–
–
–
–
–
–
Spain
£’000
2,655
3,617
(132)
(50)
(213)
–
–
(395)
Italy
£’000
3,234
99
(2,754)
(1)
(271)
2
–
(3,024)
Rest of
Europe
£’000
5,615
–
(302)
(32)
(100)
–
–
(434)
Total
Reportable
Segments
£’000
57,395
6,652
(2,839)
(561)
(586)
13
586
(3,387)
Intra
Group
£’000
–
(6,652)
–
–
586
–
(586)
–
(395)
(435)
(403)
147
–
(90)
(53)
(2,446)
(3,024)
936
(2,088)
6,829
(189)
637
7,277
6,823
(6,236)
–
587
31
126
–
90
2,446
–
–
(31)
–
–
(434)
86
(348)
3,069
–
145
3,214
4,695
(3,664)
–
1,031
9
31
–
31
–
–
20
(385)
(723)
(2,446)
(3,387)
886
(2,501)
70,777
(18,992)
2,226
54,011
35,977
(18,992)
625
17,610
3,780
3,664
(20)
385
2,446
20
–
–
–
–
–
–
–
–
(18,992)
18,992
–
–
(18,992)
18,992
–
–
–
–
–
–
–
–
Group
£’000
57,395
–
(2,839)
(561)
–
13
–
(3,387)
147
20
(385)
(723)
(2,446)
(3,387)
886
(2,501)
51,785
–
2,226
54,011
16,985
–
625
17,610
3,780
3,664
(20)
385
2,446
20
All transactions between Group companies are on normal commercial terms and an arm’s length basis.
54
Hornby PLC Annual Report and Accounts 2014
3. FINANCE COSTS
Finance costs:
Interest expense on bank borrowings
Interest expense on intercompany borrowings
Interest expense on finance leases
Finance income:
Bank interest
Interest income on intercompany loans
Net finance costs
4. (LOSS)/PROFIT BEFORE TAXATION
The following items have been included in arriving at (loss)/profit before taxation:
Staff costs (note 23)
Inventories:
– Cost of inventories recognised as an expense (included in cost of sales)
– Stock provision
Depreciation of property, plant and equipment:
– Owned assets
– Under finance leases
Loss on disposal of assets
Other operating lease rentals payable:
– Plant and machinery
– Property
Repairs and maintenance expenditure on property, plant and equipment
Research and development expenditure
Foreign exchange (losses)/gains:
– On trading transactions and ineffective hedges
Impairment of trade receivables
Restructuring costs (excluding £173,000 redundancy costs)
Other operating expenses:
– Foreign exchange on trading transactions
– Net impact of foreign exchange on intercompany loans
– Movement on fair value of ineffective hedge
– Share-based payment charge
– Amortisation of intangible assets
– Impairment of goodwill assets
– Other
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
(492)
–
–
(492)
8
–
8
(484)
(558)
–
(3)
(561)
13
–
13
(548)
–
(208)
–
(208)
–
174
174
(34)
–
(213)
–
(213)
–
174
174
(39)
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
10,463
10,274
1,151
737
25,891
(443)
26,793
762
3,602
2
22
139
433
142
1,713
35
250
702
1,032
108
135
274
389
2,046
(266)
3,718
3,649
15
8
172
444
170
1,507
(105)
260
723
(163)
(20)
58
20
385
2,446
–
2,726
–
–
–
34
–
–
–
–
–
–
–
–
–
–
–
–
85
–
–
–
85
–
–
34
–
–
–
–
–
–
–
–
49
–
–
–
34
–
–
–
34
55
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
4. (LOSS)/PROFIT BEFORE TAXATION continued
Restructuring costs of £875,000 relate to redundancies and compensation for loss of office as well as the associated legal costs, a full
accrual for these costs is made from the point at which employees have been notified. It also includes the payment to our principal model rail
supplier as explained in note 2. These costs are considered to be exceptional in nature. Additionally the goodwill impairment charge of
£2,046,000 is classed as an exceptional item, further analysis of which can be found in note 8 of these financial statements.
Services provided by the Company’s auditor and network firms
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors and network firms
as detailed below:
Fees payable to the Company’s auditors for the audit of Parent Company and consolidated
accounts
Fees payable to the Company’s auditors and its associates for other services:
– The auditing of accounts of the Company’s subsidiaries
– Audit-related assurance services
– Tax advisory services
– Tax compliance services
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
97
42
25
19
14
197
92
38
32
17
12
191
15
–
25
–
5
45
15
–
24
8
5
52
In the current financial year the level of non-audit fees was well within the 1:1 ratio to audit fees as per Audit Committee policy.
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
(248)
(17)
(8)
207
(66)
(75)
29
–
(46)
(112)
286
951
(440)
–
797
(15)
(730)
(938)
(1,683)
(886)
100
–
(42)
2
60
(22)
–
–
(22)
38
106
–
(45)
(447)
(386)
(4)
–
–
(4)
(390)
5. TAXATION
Analysis of tax charge in the year
Current tax
– UK taxation
adjustments in respect of prior years
– overseas taxation
adjustments in respect of prior years
Deferred tax (note 20)
– current year
– overseas taxation
– adjustments in respect of prior years
Total tax (credit)/charge to the profit before tax
56
Hornby PLC Annual Report and Accounts 2014 The tax for the year differs to the standard rate of corporation tax in the UK (23%). Any differences are explained below:
(Loss)/profit before taxation
(Loss)/profit on ordinary activities multiplied by rate of
Corporation tax in UK of 23% (2013 – 24%)
Effects of:
Adjustments to tax in respect of prior years
Income not taxable
Difference on overseas rates of tax
Impact of overseas losses not recognised
Remeasurement of deferred tax
– change in UK tax rate to 20%
Other
Total taxation
Group
Company
2014
£’000
2013
£’000
(4,557)
(3,387)
2014
£’000
343
2013
£’000
1,167
(1,048)
(813)
191
–
(127)
922
(214)
164
(112)
13
–
(198)
21
(51)
142
(886)
79
2
–
14
–
2
(59)
38
280
(447)
(188)
5
–
6
(46)
(390)
During the year, the UK main corporation tax rate was reduced from 24% to 23%. This was substantially enacted on 3 July 2012 and
became effective from 1 April 2013. As a result of this, a rate of 23% has been used to calculate tax payable on taxable income in the year.
In addition to the changes in rates of Corporation tax disclosed above, further changes to the UK Corporation tax rates were substantively
enacted as part of the Finance Bill 2013 on 2 July 2013. These included reductions to the main rate to 21% from 1 April 2014 and to 20%
from 1 April 2015. UK deferred tax is therefore recognised at the reduced rate of 20%.
6. DIVIDENDS
£nil final paid per share in relation to year ended 31 March 2013 (2013 – 2.0p paid
in relation to year ended 31 March 2012)
£nil interim paid per share in relation to year ended 31 March 2014 (2013 – £nil)
Group and Company
2014
£’000
–
–
–
2013
£’000
783
–
783
The Directors are not proposing a final dividend in respect of the financial year ended 31 March 2014.
7. LOSS PER SHARE
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year, excluding those held in the employee share trust (note 22) which are treated as cancelled.
For diluted loss per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential
ordinary shares that have satisfied the appropriate performance criteria at 31 March 2014. For the year ended 31 March 2014, there was
no difference in the weighted average number of shares used for basic and diluted net loss per ordinary share as the effect of all potentially
dilutive ordinary shares was anti-dilutive.
57
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
7. LOSS PER SHARE continued
Reconciliations of the (loss)/earnings and weighted average number of shares used in the calculations are set out below.
REPORTED
Basic loss per share
Loss attributable to ordinary shareholders
Effect of dilutive securities
Options
Diluted loss per share
UNDERLYING
Earnings attributable to ordinary shareholders
Amortisation of intangibles
Impairment of goodwill
Restructuring costs
Net foreign exchange translation adjustments
Underlying basic (loss)/EPS
Underlying diluted (loss)/EPS
2014
Weighted
average
number of
shares
’000s
Loss
£’000
Per-share
amount
pence
(Loss)/
earnings
£’000
2013
Weighted
average
number of
shares
’000s
Per-share
amount
pence
(4,445)
39,152
(11.35)
(2,501)
39,152
(6.39)
–
(4,445)
–
39,152
–
(11.35)
–
(2,501)
–
39,152
(4,445)
300
2,046
674
83
(1,342)
(1,342)
39,152
–
–
–
–
39,152
39,152
(11.35)
0.77
5.22
1.72
0.21
(3.43)
(3.43)
(2,501)
293
1,859
549
(15)
185
185
39,152
–
–
–
–
39,152
39,152
–
(6.39)
(6.39)
0.75
4.75
1.40
(0.04)
0.47
0.47
The above numbers used to calculate the EPS for the year ended 31 March 2014 and 31 March 2013 have been tax effected at the rate
of 23% and 24% respectively with the exception of Hornby Italia where the net deferred tax asset associated with the impairment has not
been recognised.
8. GOODWILL
GROUP
COST
At 1 April 2013
Exchange adjustments
At 31 March 2014
AGGREGATE IMPAIRMENT
At 1 April 2013
Charge for the year
Exchange adjustments
At 31 March 2014
Net book amount at 31 March 2014
COST
At 1 April 2012
Exchange adjustments
At 31 March 2013
At 1 April 2012
Charge for the year
Exchange adjustments
At 31 March 2013
Net book amount at 31 March 2013
Net book amount at 31 March 2012
58
£’000
13,135
(108)
13,027
2,537
2,046
(86)
4,497
8,530
13,059
76
13,135
–
2,446
91
2,537
10,598
13,059
Hornby PLC Annual Report and Accounts 2014 The Company had no goodwill.
The goodwill has been allocated to cash-generating units and a summary of carrying amounts of goodwill by geographical segment
(representing cash-generating units) at 31 March 2014 is as follows:
GROUP
At 31 March 2014
At 31 March 2013
UK
£’000
3,992
3,992
USA
£’000
8
8
Spain
£’000
3,990
3,990
Italy
£’000
0
2,056
Rest of
Europe
£’000
542
552
Total
£’000
8,532
10,598
Goodwill allocated to the above cash-generating units of the Group has been measured based on synergies each geographical segment is
expected to gain from the business combination.
Impairment tests for goodwill
Management reviews the business performance based on geography. Budgeted revenue growth was based on expected levels of activity
given results to date, together with growth based upon internal improvements, marketing initiatives, and expected economic and market
conditions. Budgeted operating profit was calculated based upon management’s expectation of operating costs appropriate to the
growing business.
The relative risk adjusted (or ‘beta’) discount rate applied reflects the risk inherent in hobby based product companies. In determining this
discount rate, management has applied an adjustment for risk of such companies in the industry on average determined using the betas of
comparable hobby based product companies. The forecasts are based on approved budgets for the year ending 31 March 2015.
Subsequent cash flows for the following three years have been increased in line with expectation of 3% growth. Cash flows beyond the
four-year period are extrapolated using the estimated growth rates stated below. The cash flows were discounted using a pre-tax discount
rate of 10% (2013 – 10.8%) which management believes is appropriate for all territories.
The key assumptions used for value-in-use calculations for the year ended 31 March 2014 are as follows:
GROUP
Gross Margin1
Growth rate to perpetuity2
UK
(Corgi)
30.3%
3.0%
UK
(Humbrol)
47.0%
3.0%
France
Spain
Italy
Germany
40.3%
3.0%
31.0%
3.0%
32.4%
3.0%
34.8%
3.0%
The key assumptions used for value-in-use calculations for the year ended 31 March 2013 are as follows:
GROUP
Gross Margin1
Growth rate to perpetuity2
UK
(Corgi)
31.1%
3.0%
UK
(Humbrol)
43.1%
3.0%
France
Spain
Italy
Germany
38.6%
3.0%
33.9%
2.0%
32.6%
1.7%
32.6%
3.0%
1. Budgeted gross margin.
2. Weighted average growth rate used to extrapolate cash flows beyond the budget period.
These assumptions have been used for the analysis of each CGU within the operating segments.
The carrying value of Hornby Italy has been reduced through the recognition of an impairment loss against goodwill of £2,046,000. This
charge has been included within exceptional items in the Statement of Comprehensive Income. During 2013–4 Hornby Italy again
experienced a difficult year of trading with results falling short of management’s expectations, primarily due to the restriction in supply from
the Far East and local economic conditions, and as a consequence forecasts have been revised resulting in an impairment charge arising.
Following this decision, the Group reassessed the depreciation policies of its property, plant and equipment in Italy and estimated that their
useful lives would not be affected. No class of asset other than goodwill was impaired. In France, the recoverable amount calculated based
on value in use exceeded carrying value by £275,000. A reduction in operating margin of 7%, or a rise in discount rate to 10.6% would
remove the remaining headroom.
59
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
9. INTANGIBLE ASSETS
GROUP
ACQUIRED INTANGIBLE ASSETS
COST
At 1 April 2013
Exchange adjustments
At 31 March 2014
ACCUMULATED AMORTISATION
At 1 April 2013
Charge for the year
Exchange adjustments
At 31 March 2014
Net book amount at 31 March 2014
GROUP
ACQUIRED INTANGIBLE ASSETS
COST
At 1 April 2012
Exchange adjustments
Disposals
At 31 March 2013
ACCUMULATED AMORTISATION
At 1 April 2012
Charge for the year
Exchange adjustments
At 31 March 2013
Net book amount at 31 March 2013
Net book amount at 31 March 2012
All amortisation charges in the year have been charged in other operating expenses.
The Company held no intangible assets.
Brand names
£’000
Customer lists
£’000
Total
£’000
4,923
(36)
4,887
1,526
246
(16)
1,756
3,131
1,432
(9)
1,423
851
143
(9)
985
438
Brand names
£’000
Customer lists
£’000
4,899
24
–
4,923
1,271
243
12
1,526
3,397
3,628
1,426
6
–
1,432
704
142
5
851
581
722
6,355
(45)
6,310
2,377
389
(25)
2,741
3,569
Total
£’000
6,325
30
–
6,355
1,975
385
17
2,377
3,978
4,350
60
Hornby PLC Annual Report and Accounts 2014 10. PROPERTY, PLANT AND EQUIPMENT
GROUP
COST
At 1 April 2013
Exchange adjustments
Additions at cost
Disposals
At 31 March 2014
ACCUMULATED DEPRECIATION
At 1 April 2013
Exchange adjustments
Charge for the year
Disposals
At 31 March 2014
Net book amount at 31 March 2014
GROUP
COST
At 1 April 2012
Exchange adjustments
Additions at cost
Disposals
At 31 March 2013
ACCUMULATED DEPRECIATION
At 1 April 2012
Exchange adjustments
Charge for the year
Disposals
At 31 March 2013
Net book amount at 31 March 2013
Net book amount at 31 March 2012
Freehold land
and buildings
£’000
Plant and
equipment
£’000
Motor
vehicles
£’000
Tools and
moulds
£’000
3,039
(13)
–
–
3,026
1,301
(3)
48
–
1,346
1,680
5,908
(38)
364
(62)
6,172
4,327
(28)
482
(62)
4,719
1,453
305
(2)
15
(69)
249
255
(2)
19
(38)
234
15
49,758
(219)
3,680
(41)
53,178
43,079
(175)
3,055
(16)
45,943
7,235
Freehold land
and buildings
£’000
Plant and
equipment
£’000
Motor
vehicles
£’000
Tools and
moulds
£’000
3,030
9
–
–
3,039
1,252
2
47
–
1,301
1,738
1,778
6,008
23
202
(325)
5,908
4,123
21
508
(325)
4,327
1,581
1,885
401
2
–
(98)
305
270
1
37
(53)
255
50
131
46,960
132
3,578
(912)
49,758
40,732
127
3,072
(852)
43,079
6,679
6,228
Total
£’000
59,010
(272)
4,059
(172)
62,625
48,962
(208)
3,604
(116)
52,242
10,383
Total
£’000
56,399
166
3,780
(1,335)
59,010
46,377
151
3,664
(1,230)
48,962
10,048
10,022
Freehold land amounting to £786,000 (2013 – £786,000) has not been depreciated.
Assets held by the Group under finance leases have the following net book amount:
Cost
Aggregate depreciation
Net book amount
2014
£’000
–
–
–
2013
£’000
69
(33)
36
61
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
10. PROPERTY, PLANT AND EQUIPMENT continued
Assets held by the Group under finance leases were motor vehicles.
The Group has taken advantage of the exemption under IFRS 1 to use the valuation of certain land and buildings at the date of transition to
IFRS as deemed cost. All other assets are stated at cost.
COMPANY
COST
At 1 April 2013 and at 31 March 2014
ACCUMULATED DEPRECIATION
At 1 April 2013
Charge for the year
At 31 March 2014
Net book amount at 31 March 2014
COMPANY
COST
At 1 April 2012 and at 31 March 2013
ACCUMULATED DEPRECIATION
At 1 April 2012
Charge for the year
At 31 March 2013
Net book amount at 31 March 2013
Net book amount at 31 March 2012
Freehold land
and buildings
£’000
Plant and
equipment
£’000
2,428
1,153
34
1,187
1,241
4
4
–
4
–
Freehold land
and buildings
£’000
Plant and
equipment
£’000
2,428
1,119
34
1,153
1,275
1,309
4
4
–
4
–
–
Total
£’000
2,432
1,157
34
1,191
1,241
Total
£’000
2,432
1,123
34
1,157
1,275
1,309
The Company does not hold any assets under finance leases.
Freehold land amounting to £786,000 (2013 – £786,000) has not been depreciated.
11. INVESTMENTS
COMPANY
The movements in the net book value of interests in subsidiary undertakings are as follows:
At 1 April 2013
Capital contribution relating to share-based payment
Capitalisation of loans to equity:
Capital contribution to Hornby Italia s.r.l
Capital contribution to Hornby Deutschland GmbH
Repayment of loans by subsidiary undertakings
Reclassification of long-term loan with Hornby Hobbies Limited to short-term receivables
At 31 March 2014
At 1 April 2012
Capital reduction relating to share-based payment
Net increase in loans to subsidiary undertakings
At 31 March 2013
62
Interests in
subsidiary
undertakings
at valuation
£’000
28,097
189
Loans to
subsidiary
undertakings
at cost
£’000
9,068
–
2,586
2,181
–
–
33,053
28,111
(14)
–
28,097
–
–
(4,276)
(621)
4,171
8,490
–
578
9,068
Total
£’000
37,165
189
2,586
2,181
(4,276)
(621)
37,224
36,601
(14)
578
37,165
Hornby PLC Annual Report and Accounts 2014 Interest was charged on loans to subsidiary undertakings at Sterling three-month Libor + 3.6%.
Loans are unsecured and exceed five years maturity.
PRINCIPAL GROUP SUBSIDIARY UNDERTAKINGS
Details of the undertakings whose results or financial position principally affected the figures shown in the Company’s annual accounts, are
set out below. Hornby Hobbies Limited and Hornby España S.A. are engaged in the development, design, sourcing and distribution of
models. Hornby America Inc., Hornby Italia s.r.l., Hornby France S.A.S. and Hornby Deutschland GmbH are distributors of models.
Hornby Hobbies Limited
Hornby America Inc.
Hornby España S.A
Hornby Italia s.r.l.
Hornby France S.A.S.
Hornby Deutschland GmbH
Country of incorporation
Description of shares held
Proportion of nominal value of
issued shares held
Group
%
Company
%
United Kingdom
USA
Spain
Italy
France
Germany
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
100
100
100
100
100
100
100
100
100
100
100
100
A full list of subsidiaries is available from the registered office of Hornby Plc; Westwood, Margate Kent, CT9 4JX.
12. INVENTORIES
Raw materials
Work in progress
Finished goods
13. TRADE AND OTHER RECEIVABLES
CURRENT:
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Other receivables
Prepayments
Amounts owed by subsidiary undertaking
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
301
92
12,772
13,165
299
35
13,303
13,637
–
–
–
–
–
–
–
–
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
8,148
(377)
7,771
722
550
–
9,043
8,518
(401)
8,117
262
1,224
–
9,603
–
–
–
–
7
621
628
–
–
–
–
33
–
33
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s customer base being large and unrelated and
therefore the provision for receivables impairments are deemed adequate. Credit insurance policies are in place in Hornby America Inc.,
Hornby España S.A., Hornby Italia s.r.l., Hornby France S.A.S. and Hornby Deutschland GmbH covering trade receivables at 31 March
2014 to the value of £6 million (2013 – £6.3 million).
63
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
13. TRADE AND OTHER RECEIVABLES continued
Gross trade receivables can be analysed as follows:
Fully performing
Past due
Impaired
Trade receivables
2014
£’000
6,540
1,231
377
8,148
2013
£’000
6,341
1,727
450
8,518
As of 31 March 2014, trade receivables of £1,231,000 (2013 – £1,727,000) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:
1 – 120 days
>120 days
2014
£’000
1,085
146
1,231
2013
£’000
1,583
144
1,727
As of 31 March 2014, trade receivables of £377,000 (2013 – £450,000) were impaired and provided for. The amount of provision was
£377,000 (2013 – £401,000) as of 31 March 2014.
Significant financial difficulties of the customer, probability that the customer will enter bankruptcy or financial reorganisation are considered
indications that the trade receivable is impaired.
The ageing of these receivables is as follows:
1 – 120 days
> 120 days
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 April
Provision for receivables impairment
Receivables written-off during the year as uncollectible
Exchange adjustments
At 31 March
2014
£’000
13
364
377
2014
£’000
401
250
(268)
(6)
377
2013
£’000
56
394
450
2013
£’000
230
260
(101)
12
401
The charge relating to the increase in provision has been included in ‘administrative expenses’ in the Statement of Comprehensive Income.
The carrying amounts of the Group and Company trade and other receivables are denominated in the following currencies:
Sterling Intercompany
Sterling
Euro
US Dollar
HK Dollar
64
Group
Company
2014
£’000
–
4,257
4,281
392
113
9,043
2013
£’000
–
5,503
3,440
530
130
9,603
2014
£’000
621
7
–
–
–
628
2013
£’000
–
33
–
–
–
33
Hornby PLC Annual Report and Accounts 2014 14. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Group
Company
2014
£’000
619
2013
£’000
3,554
2014
£’000
1
2013
£’000
2
Cash of £619,000 above includes restricted cash of £348,055 held within an Escrow account that relates to the exit payment to our
previous principal model railway supplier as mentioned within the Financial and operating review.
15. TRADE AND OTHER PAYABLES
CURRENT:
Trade payables
Other taxes and social security
Other payables
Accruals
16. PROVISIONS
Sales returns
At 1 April
Charge to Statement of Comprehensive Income
Utilised in the year
At 31 March
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
3,980
924
1,768
946
7,618
4,098
854
2,159
1,723
8,834
–
19
–
43
62
1
15
–
52
68
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
235
502
(499)
238
324
580
(669)
235
–
–
–
–
–
–
–
–
Provision is made for future sales returns based on historical trends. The provision is expected to be utilised within one year from the balance
sheet date.
17. CURRENT TAX ASSETS AND LIABILITIES
Current tax assets
UK Corporation tax recoverable
Overseas Corporation tax recoverable
Current tax liabilities
UK Corporation tax liability
Overseas Corporation tax liability
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
569
32
601
100
28
128
–
512
512
391
75
466
–
29
29
100
–
100
–
110
110
105
–
105
65
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
18. BORROWINGS
Secured borrowing at amortised cost
Bank overdrafts
Bank loan
Finance leases
Loan from subsidiary undertakings
Total borrowings
Amount due for settlement within 12 months
Amount due for settlement after 12 months
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
6,076
1,796
–
7,872
7,630
242
7,872
829
4,856
37
–
5,722
3,907
1,815
5,722
–
–
–
4,984
4,984
–
4,984
4,984
–
–
–
5,093
5,093
–
5,093
5,093
The Group obtained waivers in the year for the following covenants:
The Group obtained a waiver in December 2013 for the covenant tested annually of achieving ten consecutive days of no overdraft on the
RCF facility within the UK. Additionally for the quarterly covenant tests at 31 March 2014 the Group obtained a waiver for the covenant of
operating profit remaining three times greater than net financing cost and net borrowing remaining greater than EBITDA by 1.25 times. The
Group complied with all other loan covenants during the year.
The Company borrowings are denominated in Sterling. All intercompany borrowings are secured by way of formal loan agreements. The
loans can be repaid at any time however the Company has received confirmation from its subsidiary that they will not require payment within
the next twelve months.
Analysis of borrowings by currency:
GROUP
31 March 2014
Bank overdrafts
Bank loan
31 March 2013
Bank overdrafts
Bank loan
Finance leases
Sterling
£’000
Euros
£’000
Total
£’000
4,598
1,500
6,098
–
4,500
37
4,537
1,478
296
1,774
829
356
–
1,185
6,076
1,796
7,872
829
4,856
37
5,722
The other principal features of the Group’s borrowings are as follows:
At 31 March 2014 the Group had a revolving credit facility of £10 million expiring August 2015 and a five-year fixed-term loan agreement
of £12 million with repayments scheduled to July 2014 (£1.5 million as at 31 March 2014). The future interest rates of these facilities are Libor
+ 3.6% for the revolving credit facility and Libor + 3.6% for the fixed-term loan.
The average effective interest rate on bank overdrafts approximated to 4.2% (2013 – 3.34%) per annum and is determined based on 3.6%
above three-month Libor from December 2012.
Undrawn borrowing facilities
At 31 March 2014, the Group had available £8.9 million (2013 – £10.8 million) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met. Included within this the European subsidiaries had available £2 million (2013 – £1.7 million) of
undrawn import credit line facilities that could be obtained with security being given against trade receivables. The Group has recently
successfully renegotiated its banking facilities for the next 18 months, details of which can be found within note 28 Post balance sheet events.
66
Hornby PLC Annual Report and Accounts 2014 19. FINANCIAL INSTRUMENTS
The Group’s policies and strategies in relation to risk and financial instruments are detailed in note 1.
GROUP
Carrying values of derivative financial instruments
Foreign exchange collar
Forward foreign currency contracts – cash flow hedges
Interest rate swap – cash flow hedge
Assets
Liabilities
2014
£’000
2013
£’000
2014
£’000
2013
£’000
–
39
–
39
–
367
–
367
–
(432)
(13)
(445)
(2,000)
(105)
(89)
(2,194)
The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during the next 12 months. Gains
and losses recognised in reserves on forward foreign exchange contracts as of 31 March 2014 are recognised in the Statement of
Comprehensive Income first in the period or periods during which the hedged forecast transaction affects the Statement of Comprehensive
Income, which is within twelve months from the balance sheet date.
At 31 March 2014 outstanding forward currency contracts were as follows:
Hong Kong Dollar
US Dollar
Euro
2014
’000s
2013
’000s
115,000 125,926
7,918
897
11,300
–
The notional principal amount of the outstanding interest rate swap contract at 31 March 2014 was £0.6 million (2013 – £1.8 million). At 31
March 2014, the interest rate swap fixes the interest rate on £0.6 million of the bank loan disclosed in note 18 to 6.22%. The loss
recognised in the interest rate swap included in the hedging reserve as of 31 March 2014 will be continuously released to the Statement of
Comprehensive Income until the maturity of the swap. The £1.5 million (2013 – £2.7 million) remainder of the bank loan disclosed in note 18
incurs interest based on three-month Libor established quarterly in advance.
The total net fair value above for forward foreign currency contracts and the interest rate swap comprises £406,000 liability (2013 –
£173,000 asset) of which £440,000 liability (2013 – £274,000 asset) has been effectively hedged at 31 March 2014 and therefore
charged to Other Comprehensive Income in accordance with IAS 39. The liability balance of £5,000 (2013 – £105,000 liability) was the
unhedged portion and was included within operating expenses.
In accordance with IAS 39, the Group has reviewed all contracts for embedded derivatives that are required to be separately accounted for
if they do not meet certain requirements set out in the standard. No embedded derivatives have been identified.
All derivative financial investments are Level 2 in the Fair Value Hierarchy.
Fair values of non-derivative financial assets and liabilities
For the Group and the Company, as at 31 March 2014 and 31 March 2013, there is no difference between the carrying amount and fair
value of each of the following classes of financial assets and liabilities, principally due to their short maturity: trade and other receivables,
cash at bank and in hand, trade and other payables and current borrowings. Bank deposits attract interest within 1.0% of the ruling market
rate. There is no significant difference between the fair value and carrying amount of non-current borrowings as the impact of discounting is
not significant.
The Company has no derivative financial instruments.
67
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
19. FINANCIAL INSTRUMENTS continued
Maturity of financial liabilities
GROUP
Less than one year
Between one and two years
Between two and five years
More than five years
Between one and two years
Between two and five years
More than five years
COMPANY
More than five years (note 18)
The minimum lease payments under finance leases fall due as follows:
GROUP
Not later than one year
Later than one year but not more than five
Future finance charges on finance leases
Present value of finance lease liabilities
Bank loan
£’000
1,500
54
237
5
1,796
Bank loan
£’000
1,556
178
69
1,803
Finance
leases
£’000
–
–
–
–
–
Finance
leases
£’000
12
–
–
12
2014
Total
£’000
1,500
54
237
5
1,796
2013
Total
£’000
1,568
178
69
1,815
2014
Intercompany
Debt
£’000
2013
Intercompany
Debt
£’000
4,984
5,093
2014
£’000
2013
£’000
–
–
–
–
–
26
12
38
(1)
37
HIERARCHY OF FINANCIAL INSTRUMENTS
The following tables present the Group’s assets and liabilities that are measured at fair value at 31 March 2014 and 31 March 2013. 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 effects
of discounting are generally insignificant for Level 2 derivatives. The foreign exchange collar has not been renewed after it expired on 3
October 2013.
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 (excluding bank overdrafts), trade and other payables.
68
Hornby PLC Annual Report and Accounts 2014 Financial Instruments
Assets
Trading derivatives
Derivatives used for hedging
Available-for-sale financial assets
Total assets as at 31 March 2014
Liabilities
Interest rate swap
Derivatives used for hedging
Total liabilities at 31 March 2014
Assets
Trading derivatives
Derivatives used for hedging
Available-for-sale financial assets
Total assets at 31 March 2013
Liabilities
Foreign exchange collar
Interest rate swap
Derivatives used for hedging
Total liabilities at 31 March 2013
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
–
–
–
–
–
–
–
39
–
39
13
432
445
–
–
–
–
–
–
–
Level 1
£’000
Level 2
£’000
Level 3
£’000
–
–
–
–
–
–
–
–
–
367
–
367
2,000
89
105
2,194
–
–
–
–
–
–
–
–
–
39
–
39
13
432
445
Total
£’000
–
367
–
367
2,000
89
105
2,194
Interest rate sensitivity
The Group is exposed to interest rate risk as the Group borrows funds at both fixed and floating interest rates. The exposure to these
borrowings varies during the year due to the seasonal nature of cash flows relating to sales.
In order to measure risk, floating rate borrowings and the expected interest costs are forecast on a monthly basis and compared to budget
using management’s expectations of a reasonably possible change in interest rates.
The effect on both income and equity based on exposure to borrowings at the balance sheet date for a 1.0% increase in interest rates is
£73,000 (2013 – £63,000) before tax. A 1% fall in interest rates gives the same but opposite effect. 1% is considered an appropriate
benchmark given the minimum level of movement in the UK interest rate over recent years and expectation over the next financial year.
Foreign currency sensitivity
The Group is primarily exposed to US Dollars, Hong Kong Dollars and the Euro. The following table details how the Group’s income and
equity would increase on a before tax basis, given a 10% revaluation in the respective currencies against Sterling and in accordance with
IFRS 7 all other variables remaining constant. A 10% devaluation in the value of Sterling would have the opposite effect. The 10% change
represents a reasonably possible change in the specified foreign exchange rates in relation to Sterling.
Comprehensive Income and
Equity Sensitivity
US and Hong Kong dollars
Euros
2014
£’000
418
767
1,185
2013
£’000
109
145
254
69
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
19. FINANCIAL INSTRUMENTS continued
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings as shown in the consolidated balance sheet less cash and cash equivalents. Total capital is calculated as
‘equity’ as shown in the balance sheet plus net debt.
2014
£’000
2013
£’000
Total borrowings (note 18)
Less:
Total cash and cash equivalents (note 14)
Net debt
Total equity
Total capital
Gearing
7,872
5,722
(619)
7,253
31,370
38,623
19%
(3,554)
2,168
36,401
38,569
6%
20. DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the liability method using a UK tax rate of 20% (2013 – 23%).
The movement on the deferred tax account is as shown below:
At 1 April
Credit to Statement of Comprehensive Income (note 5) – origination and reversal of
temporary differences
Exchange adjustments
Reclassification from current to deferred tax in Hornby France S.A.S
Utilisation of trading losses against other tax payable
At 31 March
Group
Company
2014
£’000
(1,555)
(46)
(1)
(120)
–
(1,722)
2013
£’000
35
(1,683)
(23)
–
116
(1,555)
2014
£’000
148
(22)
–
–
–
126
2013
£’000
152
(4)
–
–
–
148
Deferred tax assets have been recognised in respect of tax losses in the Group with the exception of Hornby Deutschland and Hornby Italia.
In Hornby Italia the deferred tax assets recognised have been restricted to the amount expected to be recoverable by profits generated in the
entity over the next three years. Other temporary differences giving rise to deferred tax assets have been recognised where it is probable that
those assets will be recovered.
No deferred tax is provided for tax liabilities which would arise on the distribution of profits retained by overseas subsidiaries because there
is currently no intention that such profits will be remitted.
The movements in deferred tax assets and liabilities during the year are shown below.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset.
70
Hornby PLC Annual Report and Accounts 2014 Deferred tax liabilities
At 1 April 2013
(Credit)/charge to Statement of Comprehensive Income
Foreign exchange
At 31 March 2014
At 1 April 2012
(Credit)/charge to Statement of Comprehensive Income
Foreign exchange
At 31 March 2013
Group
Accelerated
capital
allowances
£’000
Revaluation
£’000
139
(22)
(1)
117
149
(10)
–
139
9
–
–
9
175
(166)
–
9
Other
£’000
11
–
–
11
249
(235)
(3)
11
Total
£’000
159
(22)
(1)
136
573
(411)
(3)
159
Company
Accelerated
capital
allowances
£’000
Revaluation
£’000
139
(22)
–
117
149
(10)
–
139
9
–
–
9
10
(1)
–
9
Total
£’000
148
(22)
–
126
159
(11)
–
148
Of the total deferred tax liability of £137,000, £5,000 was due within one year for the Group (2013 – £5,000) and £5,000 for the
Company (2013 – £5,000).
Group
Company
Deferred tax assets
At 1 April 2013
Charge/(credit) to Statement of Comprehensive Income
Foreign exchange
Reclassification from current tax in Hornby France
At 31 March 2014
At 1 April 2012
Charge/(credit) to Statement of Comprehensive Income
Foreign exchange
Deferred tax losses utilised
At 31 March 2013
Net deferred tax (asset)/liability
At 31 March 2014
At 31 March 2013
Short-term
incentive plan
£’000
Acquisition
intangibles
£’000
–
–
–
–
–
(15)
15
–
–
–
(121)
(21)
–
–
(142)
(99)
(22)
–
–
(121)
Other
£’000
(1,593)
(3)
–
(120)
(1,717)
(424)
(1,265)
(20)
116
(1,593)
Total
£’000
(1,714)
(24)
–
(120)
(1,858)
(538)
(1,272)
(20)
116
(1,714)
(1,722)
(1,555)
Short-term
incentive plan
£’000
–
–
–
–
–
(7)
7
–
–
–
126
148
The deferred tax liability arising on the revaluation of freehold land and buildings in 1986 cannot be offset against deferred tax assets.
Therefore, the deferred tax asset of £1,859,000 (2013 – £1,714,000) and deferred tax liability of £137,000 (2013 – £159,000) at
31 March 2014 and 31 March 2013 have been recognised separately.
2014
2013
GROUP
Deferred tax comprises:
Depreciation in excess of capital allowances
Other temporary differences – UK
Other temporary differences – overseas
Deferred tax (asset)/liability
Recognised
£’000
Not
recognised
£’000
Recognised
£’000
Not
recognised
£’000
(805)
(437)
(480)
(1,722)
–
–
(922)
(922)
(824)
(343)
(388)
(1,555)
–
–
(21)
(21)
The net deferred tax asset not recognised of £922,000 represents the unrecognised losses in Hornby Italia of £867,000 and Hornby
Deutschland of £57,000.
71
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
20. DEFERRED TAX continued
COMPANY
Deferred tax comprises:
Accelerated capital allowances
Other timing differences
Deferred tax liability
21. SHARE CAPITAL
GROUP AND COMPANY
Allotted, issued and fully paid:
Ordinary shares of 1p each
At 1 April
Allotted under share option schemes
At 31 March
2014
2013
Recognised
£’000
Not
recognised
£’000
Recognised
£’000
Not
recognised
£’000
9
117
126
£’000
392
–
392
–
–
–
9
139
148
2013
Number of shares
39,164,100
–
39,164,100
–
–
–
£’000
392
–
392
2014
Number of shares
39,164,100
–
39,164,100
At 31 March 2014 options granted under the Company’s share option schemes were outstanding as follows:
Date granted
9 June 2005
Number of options
Exercise price
Period of option
2014
2013
365,809 365,809
365,809 365,809
201.0p
June 2008 – June 2015
The total number of options outstanding as at the date of this document represent approximately 0.9% (2013 – 0.9%) of the issued share
capital of the Company.
If the respective resolution is passed at the Annual General Meeting and the Company were to exercise the full authority to buy-back
approximately 10% of the issued ordinary shares of the Company, the above options would represent 1.0% (2013 – 1.0%) of the issued
share capital of the Company.
22. SHARE-BASED PAYMENTS
Hornby Plc operates three share-based payment plans – Share Option Scheme (‘SOS’), Short Term Incentive Plan (‘STIP’) and Performance
Share Plan (‘PSP’).
SOS awards
The SOS awards are a reward of share options to Executive Directors and senior management that vest after three years and must be
exercised in a four or seven year exercise window.
The awards issued in previous years were subject to a performance measure of Profits before Interest and Tax (‘PBIT’) or Profit before Tax
(‘PBT’) as disclosed by the Group’s accounts for any of the years ended 31 March 2006, 31 March 2007, 31 March 2008, 31 March
2009 or 31 March 2010 excluding (i) any profit or loss in relation to property transactions, (ii) any restructuring and abortive due diligence
costs and (iii) any profits or losses arising from businesses acquired by the Group after the date of grant of the Option. Some awards are
subject to achieving a PBIT that is equal to or greater than £8 million, or to PBT being equal to or greater than £9 million or aggregate PBT
for three years ending 31 March 2008, 2009 and 2010 being equal to or greater than £32.7 million. The awards are equity settled.
72
Hornby PLC Annual Report and Accounts 2014 Activity relating to share options for the years ended 31 March 2014 and 31 March 2013 was as follows:
Outstanding at 1 April
Exercised
Lapsed
Outstanding at 31 March
No options were exercised within the financial year (2013 – nil).
2014
2013
Weighted
average
exercise price
Number
201.0p 847,500
–
–
– (481,691)
201.0p 365,809
Weighted
average
exercise price
138.9p
–
91.7p
201.0p
Number
365,809
–
–
365,809
The following table summarises information relating to the number of shares under option (SOS awards) and those which were exercisable at
31 March 2014.
Range of exercise prices
£2.00 – £2.10
Total shares
under option
Number
365,809
365,809
Exercisable
weighted
average
exercise price
for options
exercisable
at 31 March
2014
Weighted
average
remaining
contractual life
Months
Options
exercisable
at 31 March
2014
Number
Options
exercisable
at 31 March
2013
Number
27
365,809 365,809
365,809
201.0p
201.0p
Performance Share Plan
All Performance Share Plan (‘PSP’) awards outstanding at 31 March 2014 vest only if performance conditions are met. Awards granted under
the PSP must be exercised within one year of the relevant award vesting date.
The Group operates the PSP for Executive Directors and senior executives. Awards under the scheme are granted in the form of a nil-priced
option, and are satisfied using market-purchased shares. The awards vest in full or in part dependent on the satisfaction of specified
performance targets. 50% of the award vests dependent on TSR performance over a three year performance period, relative to the
constituents of the FTSE Small Cap Index (excluding investment trusts) from the time of grant, and the remaining 50% vests dependent on
performance against earnings per share targets.
All plans are subject to continued employment. To the extent that such shares in the above plans are awarded to employees below fair value,
a charge calculated in accordance with IFRS 2 ‘Share-based payment’ is included within other operating expenses in the Statement of
Comprehensive Income. This charge for the Group and Company amounted to £274,000 in the year ended 31 March 2014 (2013 –
£20,000 charge for the Group and Company).
The following table summarises the key assumptions used for grants during the year:
Fair value (p)
Options pricing model used
Share price at grant date (p)
Exercise price (p)
Expected volatility (%)
Risk-free rate (%)
Expected option term (years)
Expected dividends (per year, %)
1 Assumptions for TSR component only.
SOS
2014
STIP
PSP1
SOS
2013
STIP
PSP1
–
–
–
–
–
–
–
–
–
51.16p
– Stochastic
81.5p
–
–
n/a
39.2%
–
n/a
–
3
–
0%
–
–
–
–
–
–
–
–
–
–
36.68p
– Stochastic
81.0p
–
n/a
–
36.0%
–
n/a
–
3
–
0%
–
Assumptions on expected volatility and expected option term have been made on the basis of historical data, wherever available, for the period
corresponding with the vesting period of the option. Best estimates have been used where historical data is not available in this respect.
73
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notes to the Financial Statements continued
22. SHARE-BASED PAYMENTS continued
STIP awards
The STIP is a reward of shares to Executive Directors and senior management.
Vesting of the awards occurred in equal amounts on the second, third and fourth anniversaries of the award date provided that the
participant remains employed by the Group. These awards are not subject to any performance conditions. The awards are equity settled.
At 1 April
Shares vested
At 31 March
2014
£’000
–
–
–
2013
£’000
90
(90)
–
The Employee Benefit Trust acquired no ordinary shares in the year and currently does not hold any shares.
On 20 June 2012, the final third of the 2008 allocation (57,766 ordinary shares) vested. At 31 March 2014, a total of nil (2013 – nil)
ordinary shares are held by the Trust and allotted to the Directors and senior management under the plan. The costs of the plan were borne
by Hornby Plc.
23. EMPLOYEES AND DIRECTORS
Staff costs for the Group during the year:
Wages and salaries
Share-based payments (note 22)
Social security costs
Other pension costs (note 24)
Redundancy and compensation for loss of office
Group
Company
2014
£’000
2013
£’000
2014
£’000
2013
£’000
8,437
274
1,053
526
173
10,463
7,828
20
1,032
668
726
10,274
848
85
122
56
40
1,151
552
34
86
65
–
737
The redundancy costs form part of the restructuring costs in the year classified as exceptional items.
Average monthly number of people (including Executive Directors) employed by the Group:
Operations
Sales, marketing and distribution
Administration
Key management compensation:
Salaries and short-term employee benefits
Share-based payments
Other pension costs
Redundancy and compensation for loss of office
Group
Company
2014
Number
2013
Number
2014
Number
2013
Number
96
114
40
250
101
107
40
248
2
–
3
5
Group
Company
2014
£’000
1,601
274
156
40
2,071
2013
£’000
1,977
20
249
517
2,763
2014
£’000
674
85
56
40
855
1
1
3
5
2013
£’000
421
34
65
–
520
Key management comprise the individuals involved in major strategic decision making and includes all Group and subsidiary Directors.
74
Hornby PLC Annual Report and Accounts 2014 A detailed numerical analysis of Directors’ remuneration and share options showing the highest paid Director, number of Directors accruing
benefits under money purchase pension schemes and gains realised on the exercise of share options, is included in the Directors’
Remuneration Report on pages 25 to 32 and forms part of these financial statements.
24. PENSION COMMITMENTS
The Group operates a defined contribution pension scheme by way of a Stakeholder Group Personal Pension Plan set up through the Friends
Provident Insurance Group.
Alexander Forbes International is appointed as Independent Financial Adviser to work in liaison with the Company.
The level of contributions to the Group Personal Pension Plan for current members is fixed by the Company.
The Group pension cost for the year was £526,000 (2013 – £668,000) representing the actual contributions payable in the year and
certain scheme administration costs. The Company pension cost for the year was £56,000 (2013 – £65,000). No contributions were
outstanding at the year end of 31 March 2014.
25. FINANCIAL COMMITMENTS
GROUP
At 31 March capital commitments were:
Contracted for but not provided
The commitments relate to the acquisition of property, plant and equipment.
The Company does not have any capital commitments.
2014
£’000
2013
£’000
1,529
2,100
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.
26. OPERATING LEASE COMMITMENTS
The total of future minimum lease payments in respect of non-cancellable property, plant and motor vehicle operating leases falling due are
as follows:
GROUP
Not later than one year
Later than one year but not more than five years
More than five years
2014
£’000
2013
£’000
480
540
–
1,020
499
873
–
1,372
27. RELATED PARTY DISCLOSURES
There were no 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 was materially interested.
The Company received management fees from subsidiaries of £1,456,000 (2013 – £1,316,000), interest of £174,000 (2013 – £174,000) and
dividends from subsidiaries of £nil (2013 – £783,000) and incurred interest of £208,000 (2013 – £213,000) on intercompany borrowings.
28. POST BALANCE SHEET EVENT
The Group has recently been successful in renegotiating its main banking facilities for a further 18 months. At 31 March 2014 the Group had
a revolving credit facility of £10 million expiring August 2015 and a five-year fixed-term loan agreement of £12 million with outstanding
repayments of £1.5 million scheduled to be completed by July 2014. These have now been replaced by a new revolving credit facility of
£13 million expiring in December 2015 which is expected to allow sufficient headroom for trading working capital needs in the current year
whilst longer-term plans and funding requirements are developed.
75
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Notice of Annual General Meeting (Unaudited)
If you have sold or otherwise transferred all of your ordinary shares in Hornby Plc, please forward this document as soon as possible to the
purchaser or transferee, or to the stockbroker, bank or other agent through or to whom the sale or transfer was effected for transmission to the
purchaser or transferee of your ordinary shares.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the thirty-third Annual General Meeting of Hornby Plc (the “Company”) will be held at the offices of Hornby Plc,
Ramsgate Road, Westwood, Margate, Kent CT9 4JX on Wednesday 10 September 2014 at 12.00 noon for the following purposes:
To consider and, if thought fit, to pass the following resolutions, of which numbers 1 to 10 (inclusive) will be proposed as ordinary resolutions
and numbers 11 and 12 as special resolutions.
ORDINARY RESOLUTIONS
1. To receive and adopt the Company’s Annual Report and Accounts for the financial year ended 31 March 2014 together with the Report
of the Directors and Auditors.
2. To approve the Directors’ Remuneration Report, as set out on pages 25 to 32 of the Company’s Annual Report and Accounts, for the
financial year ended 31 March 2014.
3. To re-elect R Ames as a Director.
4. To re-elect D Adams as a Director.
5. To re-elect C Caminada as a Director.
6. To re-elect R Canham, who retires by rotation, as a Director
7. To reappoint PricewaterhouseCoopers LLP, the retiring auditors, as auditors of the Company to hold office from conclusion of the Annual
General Meeting to the conclusion of the next meeting at which accounts are laid before the Company.
8. To authorise the Directors to agree the auditors’ remuneration.
9. That, in accordance with section 366 of the Companies Act 2006 (the “Act”), the Company and all companies that are its subsidiaries
at any time during the period for which this resolution has effect be authorised to:
(a) make political donations to political parties and/or independent election candidates, not exceeding £10,000 in total;
(b) make political donations to political organisations, other than political parties, not exceeding £10,000 in total; and
(c) incur political expenditure, not exceeding £10,000 in total,
provided that the aggregate amount of any such donations and expenditure shall not exceed £15,000 during the period beginning with
the date of the passing of this resolution and ending on the date of the Company’s next Annual General Meeting.
For the purpose of this resolution, the terms ‘political donations’, ‘political expenditure’, ‘independent election candidates’, ‘political parties’
and ‘political organisations’ shall have the meaning given to them by Part 14 of the Act.
10. THAT, in place of the equivalent authority given to the Directors at the last Annual General Meeting (but without prejudice to the
continuing authority of the Directors to allot shares pursuant to an offer or agreement made by the Company before the expiry of the
authority pursuant to which such offer or agreement was made), the Directors be generally and unconditionally authorised in accordance
with section 551 of the Act to allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the
Company up to a maximum aggregate nominal amount of £130,000, provided that this authority shall expire on 9 September 2019
but so that the Company may, before the expiry of such period, make an offer or agreement which would or might require shares to
be allotted or rights to subscribe for or convert securities into shares to be granted after the expiry of such period and the Directors may
allot shares or grant rights to subscribe for or convert securities into shares pursuant to such an offer or agreement as if this authority had
not expired.
76
Hornby PLC Annual Report and Accounts 2014
SPECIAL RESOLUTIONS
11. THAT, subject to and conditional on the passing of resolution 10, the Directors be empowered, pursuant to section 570 of the Act, to
allot equity securities (within the meaning of section 560 of the Act) for cash pursuant to the authority conferred by resolution 10 as if
section 561(1) of the Act did not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities:
(a) in connection with an offer of such securities by way of Rights Issue (defined below); and
(b) otherwise than pursuant to resolution 11 above up to an aggregate nominal amount of £19,000,
and that this authority shall expire at the conclusion of the Company’s next Annual General Meeting following the date of the passing of
the resolution, save that the Company may, before such expiry, make an offer or agreement which would or might require equity
securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement as if
this power had not expired.
This power applies in relation to a sale of treasury shares as if all references in this resolution to an allotment included any such sale and in
the first paragraph of the resolution the words “pursuant to the authority conferred by resolution 10” were omitted in relation to such sale.
In this resolution, “Rights Issue” means an offer of equity securities open for acceptance for a period fixed by the Directors to holders of
ordinary shares in the capital of the Company on the register on a record date fixed by the Directors in proportion as nearly as may be
to the respective numbers of ordinary shares held by them, but subject to such exclusions or other arrangements as the Directors may
deem necessary or expedient to deal with any treasury shares, fractional entitlements or legal or practical issues arising under the laws
of, or the requirements of any recognised regulatory body or any stock exchange in any territory or any other matter.
12. THAT, subject to and in accordance with Article 9 of the Company’s articles of association, the Company be generally and
unconditionally authorised to make market purchases (within the meaning of section 693(4) of the Act) of ordinary shares on such terms
as the Directors think fit, and where such shares are held as treasury shares, the Company may use them for the purposes set out in
section 727 of the Act, including for the purpose of its employee share schemes, provided that:
(a) the maximum number of ordinary shares hereby authorised to be purchased is 3,900,000 being an amount equal to approximately
10% of the ordinary shares in issue as at 25 June 2014 (being the latest practicable date prior to the publication of this notice);
(b) the minimum price, exclusive of any expenses, which may be paid for an ordinary share is 1 pence;
(c) the maximum price, exclusive of any expenses, which may be paid for each ordinary share is an amount equal to the higher of:
(i) 105%, of the average of the middle market quotations for an ordinary share, as derived from the London Stock Exchange
Daily Official List, for the five business days immediately preceding the day on which the ordinary share is contracted to be
purchased; and
(ii) the amount stipulated by Article 5(1) of the Buy-back and Stabilisation Regulation 2003; and
(d) the authority hereby conferred shall, unless previously revoked or varied, expire at the conclusion of the Company’s next Annual
General Meeting following the date of the passing of this resolution, or, if earlier, on the expiry of 18 months from the date of the
passing of this resolution (except in relation to the purchase of ordinary shares, the contract for which was concluded before the
expiry of this authority and which will or may be executed wholly or partly after such expiry).
By order of the Board
A Stacey
Company Secretary
Dated: 26 June 2014
Registered office: Westwood, Margate, Kent CT9 4JX
Registered in England and Wales with number 01547390
77
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014
Notice of Annual General Meeting (Unaudited)
continued
NOTES (UNAUDITED)
1. This notice is being sent to all members and to any person nominated by a member of the Company under section 146 of the
Companies Act 2006 to enjoy information rights.
2. Only holders of ordinary shares, or their duly appointed representatives, are entitled to attend, vote and speak at the AGM. A member
so entitled may appoint (a) proxy/(ies), who need not be (a) member(s), to attend, speak and vote on his/her behalf. A member may
appoint more than one proxy, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by
him/her. A form of proxy is enclosed with this Notice and instructions for its completion are set out on the form.
3. Proxies may only be appointed by completing and returning the form of proxy enclosed with this Notice to the Company’s Registrars,
Capita Registrars Limited PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
4. To be valid a proxy appointment and any power of attorney or other authority, if any, under which it is signed or a duly certified copy of
such power of attorney must reach the office of the Company’s Registrars not less than 48 hours (excluding any part of a day which is
not a working day) before the time fixed for the AGM or any adjournment thereof. Therefore, the form of proxy must be received by the
Company’s Registrars by 12.00 noon on 8 September 2014.
5. Return of the form of proxy will not preclude a member from attending the AGM and voting in person. A vote withheld option is provided
on the form of proxy to enable you to instruct your proxy to abstain on any particular resolution. However, it should be noted that a
‘vote withheld’ is not a vote in law and will not be counted in the calculation of the proportion of votes ‘For’ and ‘Against’ a resolution.
If you select ‘Discretionary’ or fail to select any of the options, your proxy can vote as he or she chooses or can decide not to vote. Your
proxy can also do this on any other resolution that is put to the AGM. A shareholder must inform the Company’s registrars in writing of
any termination of the authority of a proxy.
6. The right to appoint a proxy does not apply to persons whose shares are held on their behalf by another person and who have been
nominated to receive communications from the Company in accordance with section 146 of the Companies Act 2006 (‘Nominated
Persons’). The rights of shareholders in relation to the appointment of proxies can only be exercised by registered shareholders of the
Company. Nominated Persons may have a right under an agreement with the registered shareholder who hold shares on their behalf to
be appointed (or to have someone else appointed) as a proxy. Alternatively, if Nominated Persons do not have such a right, or do not
wish to exercise it, they may have a right under such an agreement to give instructions to the person holding the shares as to the exercise
of voting rights.
7. The Company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only those shareholders on the
register of members of the Company as at 12.00 noon on 8 September 2014 (or, if the AGM is adjourned, shareholders on the register
of members not later than 48 hours (excluding any part of a day which is not a working day) before the time fixed for the adjourned
meeting) are entitled to attend and/or vote at the AGM (or any adjournment thereof) in respect of the number of shares registered in their
name at that time. Subsequent changes to the register of securities shall be disregarded in determining the rights of any person to attend
and vote at the AGM (or any adjournment thereof).
8. Copies of contracts of service and letters of appointment between the Directors and the Company will be available for inspection at the
registered offices of the Company and the offices of Berwin Leighton Paisner LLP at Adelaide House, London Bridge, EC4R 9HA during
normal business hours on any weekday (Saturdays, Sundays and public holidays excluded) from the date of this Notice until the
conclusion of the AGM, and at the place of the AGM for at least 15 minutes prior to the AGM until its conclusion.
9. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers
as a member provided that they do not do so in relation to the same shares.
10. In order to facilitate voting by corporate representatives at the AGM, arrangements will be put in place at the meeting so that (i) if a
corporate member has appointed the Chairman of the meeting as its corporate representative with instructions to vote on a poll in
accordance with the directions of all of the other corporate representatives for that member at the meeting, then on a poll those
corporate representatives will give voting directions to the Chairman and the Chairman will vote (or withhold a vote) as corporate
representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate member
attends the meeting but the corporate member has not appointed the Chairman of the meeting as its corporate representative, a
designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and
the other corporate representatives will give voting directions to that designated corporate representative. Corporate members are
referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives –
http://www.icsa.org.uk/- for further details of this procedure. The guidance includes a sample form of representation letter if the
Chairman is being appointed as described in (i) above.
78
Hornby PLC Annual Report and Accounts 2014 11. Under section 527 Companies Act 2006 members meeting the threshold requirements set out in that section have the right to require the
Company to publish on its website a statement setting out any matter relating to: (i) the audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit) that are to be laid before the AGM; or (ii) any circumstances connected with an auditor of
the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in accordance with
section 437 Companies Act 2006. The Company may not require the members requesting any such website publication to pay its
expenses in complying with sections 527 or 528 Companies Act 2006. Where the Company is required to place a statement on a
website under section 527 Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it
makes the statement available on the website. The business which may be dealt with at the AGM includes any statement that the
Company has been required under section 527 Companies Act 2006 to publish on a website.
12. A copy of this Notice, and other information regarding the meeting, as required by section 311A Companies Act 2006, is available from
www.hornby.com.
13. You may not use any electronic address provided in this Notice or in any related documents (including the form of proxy) to communicate
with the Company for any purposes other than those expressly stated.
14. Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating
to the business being dealt with at the meeting but no such answer need be given if (a) to do so would interfere unduly with the
preparation for the meeting or involve the disclosure of confidential information, (b) the answer has already been given on a website in
the form of an answer to a question, or (c) it is undesirable in the interests of the Company or the good order of the meeting that the
question be answered.
15. As at 25 June 2014 (being the latest practicable date prior to the publication of this Notice), the Company’s issued share capital consists
of 39,164,100 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 26 June 2014 are
39,164,100.
79
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSHornby PLC Annual Report and Accounts 2014 Five Year Summary (Unaudited)
Revenue
(Loss)/Profit on ordinary activities before taxation
Taxation
(Loss)/Profit on ordinary activities after taxation
Assets employed:
Non-current assets
Net current assets
Non-current borrowings
Deferred tax liabilities
Net assets
Total capital employed
Earnings per share
– basic
– diluted
Dividend per share (net)
Net assets per share
2014
£’000
51,557
(4,557)
112
(4,445)
24,340
7,408
(242)
(136)
31,370
31,370
2013
£’000
57,395
(3,387)
886
(2,501)
26,338
12,037
(1,815)
(159)
36,401
36,401
2012
£’000
64,447
3,989
(825)
3,164
27,969
16,673
(4,888)
(573)
39,181
39,181
(11.35)p
(11.35)p
–
80.0p
(6.4)p
(6.4)p
–
92.9p
8.2p
8.1p
3.7p
100.0p
2011
£’000
63,372
4,129
(1,274)
2,855
28,509
16,623
(8,026)
(337)
36,769
36,769
7.5p
7.4p
5.0p
95.7p
2010
£’000
63,863
5,215
(1,530)
3,685
28,803
18,653
(10,547)
(281)
36,628
36,628
9.8p
9.6p
5.0p
96.2p
Shareholders’ Information Service
Hornby welcomes contact with its shareholders.
If you have questions or enquiries about the Group or its products, please contact:
N P Stone, Finance Director
Hornby Plc
Westwood
Margate
Kent CT9 4JX
80
Hornby PLC Annual Report and Accounts 2014 H
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Hornby Plc
Westwood
Margate
Kent
CT9 4JX
www.hornby.com