Horizon Gold Limited Annual Report 2019

← All annual reports

FY2019 Annual Report · Horizon Gold Limited

Loading PDF…

9
1
0
2

S
T
N
U
O
C
C
A

D
N
A

T
R
O
P
E
R

L
A
U
N
N
A

Hornby PLC

The Group’s principal business is the development, production
and supply of toy and hobby products for a global market,
through a series of heritage brands. The Group distributes
its products through a network of hobby specialists, multiple
retailers and its own website in the UK and overseas.

CONTENTS

01 Highlights 2019

02 Non-Executive Chairman’s Report

04 CEO’s Statement

08 Operating and Financial Review

of the Year

10 Our Key Performance Indicators (‘KPIs’)

12 Corporate Governance Report

17 Audit Committee Report

19 Remuneration and Nomination

33 Group and Company Statements

Committee Report

of Financial Position

21 Directors and Corporate Information

34 Group and Company Statements

22 Directors’ Report

26 Independent Auditors’ Report to
the Members of Hornby PLC

32 Group and Company Statements

of Changes in Equity

35 Group and Company Cash

Flow Statements

36 Notes to the Financial Statements

of Comprehensive Income

68 Shareholders’ Information Service

Hornby PLC Annual Report and Accounts 2019

Highlights 2019

“ The turnaround at Hornby has begun and we have built the foundations for our
future success. The new products are in the pipeline and we are now thinking
much further ahead. There is a great team at Hornby with a fusion of experience
and creativity. It is a team that understands our products, understands our brands
and most importantly are proud to be part of this business. The last few years
have been difficult for everyone, but the new energy that exists makes it an
exciting time to be at Hornby.”

Lyndon Davies, Chief Executive Officer

Revenue
(2018: £35.7m)

Operating loss
(2018: £(9.9)m loss)

Reported loss before taxation
(2018: £(10.1)m loss)

£32.8m

£(5.2)m

£(5.3)m

Underlying1 loss before taxation
(2018: £(7.6)m loss)

Reported loss after taxation
(2018: £(9.9)m loss)

Reported loss per share
(2018: (10.13)p loss)

£(4.4)m

£(5.3)m

(4.24)p

Underlying basic loss per share
(2018: (8.05)p basic loss)

Net (debt)/cash
(2018: £3.9m)

(3.65)p

£(1.8)m

Underlying figures are before amortisation of intangibles (brand names and customer lists), and net unrealised foreign exchange movements on intercompany loans and
exceptional items.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportNon-Executive Chairman’s Report

The Strategic Report comprises the Non-Executive Chairman’s Report, the
CEO Report and the Operating and Financial Review of the Year and our
Key Performance Indicators (‘KPIs’).

I am pleased to report to our shareholders
in an exciting but challenging period for
our Company. Many will be aware that
although I was appointed a Non-Executive
in January last year I first joined Hornby
in 1982 and enjoyed a 31 year executive
career in the Group through many ups and
downs over the years and I have a good
understanding of the Group.

Revenue in the year of £32.8 million (2018:
£35.7 million) was 8% below the previous
year. Nevertheless reported loss before tax
reduced significantly to £(5.3) million (2018:
£(10.1) million) as our new strategy started
to unfold.

In our first full year of the new management
team we have made considerable progress
but this year was one of transition. We
spent the first part of the year negotiating
the finance facilities which I am pleased to
say are expected to fund our plans all the
way out to 2023. Discounting has been
curtailed and the benefit is evident in the
improved gross margin. The new product
development cycle is being progressively
pulled forward. New product investment
has been increased and made more
targeted so that we have more new and
exciting releases – the lifeblood of any
model company. A major new licence
agreement with Warner Bros. signed
in September 2018 will strengthen new
products across our ranges featuring the
iconic Harry Potter, DC’s Super Heroes
and many other timeless favourites.

Overheads have been streamlined and
reinvested into more productive uses. Cost
savings have been achieved in many areas
including rationalising logistics to suit our
business and returning to our ancestral home
at the Margate site. Hornby has occupied
the Westwood site since 1954 and we feel
like we have returned home. In addition to
re-uniting with the Hornby Visitor Centre we
have recovered and refurbished our old
showrooms to enable customers to view
our ranges in a permanent setting on site.

Hornby PLC Annual Report and Accounts 2019

In August 2018 I was appointed Non-
Executive Chairman to allow Lyndon Davies
to concentrate on executive duties as Chief
Executive Officer.

In November 2018 Martin George
stepped down from the Board to focus
on other executive roles and we wish
him every success.

SHAREHOLDERS

We will hold our Annual General Meeting
in September in our offices in Margate.
I hope many shareholders will be able to
attend to celebrate our return to Margate, to
hear more about the business and take the
opportunity to visit the refurbished Hornby
Visitor Centre and product showrooms.

BREXIT

We have assessed the effect of various
Brexit outcomes across the business.
The major concerns are the importation
of stock and export of sales in a ‘no deal’
scenario. We are confident importation
issues can be overcome although we may
experience delays in the short term whilst
customs procedures and potentially tariffs
bed down.

John Stansfield

Non-Executive Chairman

12 June 2019

In the next year we will start to see some
of the benefits of work we have done shine
through. Lyndon has written about this in
more detail below, but in particular I think
the work we have done on development
cycles and the speed and efficiency with
which we convert ideas into product and
sales is quite powerful. It is something we
will keep improving.

This has been a tough year due to the
amount of change in every root and branch
of the business. The relocation was quite
a difficult task to take on amongst all this
structural change and the team did a great
job in managing this without the slightest
mishap. I would like to thank all the staff
in working so hard to achieve so much in
such a short time. In particular, I thank
those enduring frequent trips to the Far East
to re-establish the confidence of existing
suppliers and source new suppliers.

GOVERNANCE AND BOARD CHANGES

Good corporate governance provides a
framework for delivering the objectives of
the Company and is fundamental to a
sound decision making process. It supports
the executive management to control and
achieve the optimal result for shareholders.
I am pleased to report that the Board
applies the ten principles of the Quoted
Companies Alliance (QCA) Code. In the
current uncertain economic and political
period, management of risks 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 polices to manage those risks.
The Board reviews those risks on an annual
basis carrying out regular reviews and
annual updates on our compliance with
the QCA Code.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportChief Executive Officer’s Statement

Dear Shareholders,

In its most simple terms, I described the
turnaround plan as having three stages
in the last Annual Report:

1. understanding what is broken and

how to fix it;

2. getting to work and actually fixing the
issues with long term solutions; and

3. getting the Group back to sustainable

profitability and beyond.

Stages one and two were really about
doing the basics in a competent and
cost-effective way so that we had the right
foundation from which to reach up and pull
ourselves back into profitability.

The main fixes I have talked about for
stages one and two are:

a) Ending the discounting that destroyed

trust and brand integrity.

b) Adding directly relevant knowledge

and experience.

c) Re-engaging with key licensing partners.

d) Getting our design schedule and supply
chain humming so the right products
were ordered in the right quantities,
arriving at the right time and at the
right cost.

e) Frugality. This means doing more with
less and thinking about every penny of
spend with respect to how it benefits
our stakeholders.

Point a) regarding the discounting was a
simple thing to stop, but very painful from a
short-term financial perspective. When you
become addicted, it’s not easy to change
your habits. The long-term benefits are
crystal clear but that doesn’t make the
cold-turkey process any more pleasant.
You can see the effect it has had on our
sales over the last two years and this has
been exacerbated by a poorly functioning
supply chain. We have held the line on
discounting and our customers are starting
to finally trust that the discounting era is over.

Points b) to e) are things we have now
returned to competence. However, we will
continue to optimise these basic building
blocks of our business forever. You can
always add to and improve talent. You can
always get better licensing deals. You can
always make your supply chain slicker and
more cost effective. There are always ways
to save money and do more with less. We
will be relentless in our pursuit of perfection.

So, this then leads us on to stage three of
the turnaround. We need to make as much
profit as possible and put as much distance
between us and our competition so that the

Hornby PLC Annual Report and Accounts 2019

profits are sustainable. We intend to do
this by delighting our customers and we
have lots of plans on how to keep doing
this better each year.

Let me make this clear. This is not just a
turnaround plan to get back to break even
and potentially make the business look like
it did a few years ago. The strategy we
have chosen has the luxury of being long
term and is aimed at fundamentally
re-engineering the business to be more
profitable and future proof than it has
ever been before.

I would love to detail the next few years
of game changing innovation we have in
development and the exciting new models,
licenses, marketing plans and routes to
market that we are building. However, our
competitors would be equally excited to
copy them, so it is in the best interests of
shareholders for me to discuss the strategic
moves after we have made them.

What I would like to focus on in this
statement is accountability. This is something
that has been lacking in the past. As I read
through the historical communications to
shareholders, it is difficult to match up the
explanations to the results.

I stand by the people in our business, the
strategy and the pipeline of ideas we are
working on. As a result, I want to give you
some simple and easy ways to measure
how we are performing.

The profits won’t flow back in overnight
and we won’t get there in a straight line.
Therefore, it is important that you are able
to check whether what we are doing is
working. I want to be as transparent as I
can and bring you along on this exciting
journey back to profitability (and beyond)
for these heritage brands.

The management lingo for these things is key
performance indicators or ‘KPIs’. You can
call them what you want, but basically, these
numbers will tell you whether what we are
doing is working or not. I want to treat you
how I would want to be treated myself, and
this brutal transparency and accountability is
what I would want myself, so; here we go…

So, for this year we did not generate enough gross profit to cover our fixed costs although we
did better than the previous year:

Sales

Variable Costs

Gross Profit

Fixed Costs

Operating Loss

2019
£’000

32,759

(19,348)

13,411

(18,041)

(4,630)

2018
£’000

35,651

(21,900)

13,751

(21,329)

(7,578)

When you take our fixed costs away from
the gross profit you get the Operating Profit
(or Loss). We were £4.63m short of
covering our costs. This is a very large loss
but it is 39% lower than last year. These
losses were necessary to pull the business
out of the death spiral in which it was
locked two years ago.

I anticipate that those fixed costs won’t
materially change over the next few years.
They may go up a little if we find some
more talented people to help us with the
job, and/or put wages up for our staff
so they can keep pace with inflation.

However, you should think of them as
the minimum cost base required to run this
business in its current format. Furthermore,
you should also know that this cost base
can handle a much larger sales figure.
It’s always difficult to precisely forecast
these things out into the future, but I think
our broad cost base could handle up to
£45–£50 million of sales at a push.

So, we have the foundation. The challenge
is to utilise these foundations better by
selling more products to generate the
necessary gross profit that exceeds our
fixed costs.

KEY PERFORMANCE INDICATORS

I wanted to start with a little introduction to
the basic economics of our business. I like
to think of how I would explain this to my
grandfather who was smart and numerate
but didn’t have any formal business
experience or training. Apologies if you
are a highly sophisticated business person,
but I need to cater to a wide audience of
shareholders here who are all just as
important as each other, large or small.

The best way to think about our business
is in terms of fixed costs and variable
costs. You will find these in the Statement
of Comprehensive Income (SOCI) on
page 32.

When we sell our products there are costs
directly attached to the products themselves.
These are things like the materials used
to make the products and the cost our
manufacturers charge us to turn the
materials into an exciting model, a tub
of paint, a diecast car or any number
of fascinating things.

These costs are variable because they vary
with how many products we sell. You will
see these called ‘Cost of Sales’ in the SOCI.

When we add up all our sales and take
away the variable costs, the resulting
number is called ‘Gross Profit’. The Gross
Profit we have needs to be larger than our
fixed costs in order to have some profit left
over for shareholders.

Our fixed costs are not completely fixed in
the academic definition, but I think of them as
all the overheads we need to get our product
to market in the right way. For example,
contained within here is the cost of sending
samples out to key trade publications. We
could stop doing this. In fact, when I arrived,
the business had decided to stop sending
samples out to save money. It isn’t a strictly
fixed cost, but if we want people to buy our
products we need to do things like this to get
people excited about our products. A great
way of doing this is by sending samples to
the magazines and forums that our customers
regularly peruse. In the SOCI you will find
these fixed costs under the headings;
Distribution costs, Selling & Marketing,
Administrative and Other.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportChief Executive Officer’s Statement continued

KPI NO. 1: CAPEX PRODUCTIVITY

In order to do this, we need to invest
in tooling to produce new and exciting
models. You will find the money we put
into these endeavours in the Cash Flow
Statement on page 35. This is called
Capital Expenditure or Capex for short.
The two lines to add together to figure
out our Capex are:

• purchase of Property Plant & Equipment

(PPE); and

• purchase of Intangible Assets.

As you will see, this year, we spent
£2,144,000 on PPE (including Product
Tooling). Now, the important thing to
remember about this capital expenditure
is that the money we spend in a given
year is, roughly speaking, used to

manufacture tooling for models and
products that are sold in the following
year. We have this lag between spending
and revenue.

So, I am proposing to you that a good
measure of how good of a job we are doing
can be found by looking at the Capex we are
incurring and comparing it to the gross profit
we are generating in the following year. If you
divide the gross profit generated in a year
by the Capex in the year before, it will tell
you how many pounds of gross profit we
generated per pound of capital expenditure.
The aim is to get this number as high as
possible. Let’s call it ‘Capex Productivity’.

This is the first Key Performance Indicator
(KPI) I would recommend you use to
evaluate our performance on our journey
back to profitability.

Here is a graph to show the Capex Productivity back to 2004:

Gross Profit Per £ of Capital Expenditure

£18
£16
£14
£12
£10
£8
£6
£4
£2
£0

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

Hornby PLC Annual Report and Accounts 2019

As you can see, our Capex Productivity
has been getting worse for a long time,
but an improvement has already begun.

The last couple of years have been based
on inherited products and line plans as
well as dramatically reduced new capital
expenditure. It has been far from ideal,
but we did the best with what we had.

The coming year will be our first full year
where all the products are designed and
produced by the current management
team. We expect an improvement in
Capex productivity and will continually
obsess about doing more with less to
improve this measure.

The aim here is not to revert to how we
have performed historically. To reiterate
a point I made above, it is to be better
than we have ever been before and
keep improving beyond that.

I will report to you on this measure at the
end of every year and discuss the products
and the strategies that have fed into the
performance (without giving too much
away to competitors, of course).

KPI NO. 2: INVENTORY

In an idealised situation if we are producing
the right products then we should start the
year with very little inventory, sell out of
everything as it arrives in the UK and then
leave a small inventory balance at the end
of the year.

Of course, this rarely happens in reality.
Despite having even more passionate and
experienced product developers now, we
will still produce a few products that won’t sell
out immediately. This is part and parcel of our
business. Even when the business is firing on
all cylinders, there will likely be some inventory
left at the end of the year which will be sold
in the following year. The key is to keep this
balance as low as possible.

The best way to think about that inventory
balance at the end of the year is as a
percentage of our sales for the year. This
puts the inventory balance in context against
the size of the business. If our inventory
doubled, you might think this is bad.
However, if the sales were 10x higher
with a doubled inventory balance, this
would be a great result.

Year End Inventory as a Percentage of Sales

40%

35%

30%

25%

20%

15%

10%

4
0
0
2

5
0
0
2

6
0
0
2

7
0
0
2

8
0
0
2

9
0
0
2

0
1
0
2

1
1
0
2

2
1
0
2

3
1
0
2

4
1
0
2

5
1
0
2

6
1
0
2

7
1
0
2

8
1
0
2

9
1
0
2

As you can see in the graph, our inventory
balance relative to our sales is higher than
it was in previous years. Whilst we are
prepared for all these valuable and sought
after models in our warehouse to sell down
at their natural rates, there is a lot to be
gained from being even more clever in the
way we manage our inventory balance.

Just to be absolutely crystal clear to all our
stakeholders reading this Annual Report –
we do not need to discount stock to
optimise this position. We have the support
of our shareholders and the luxury of a
strong balance sheet now. Discounting
is truly a thing of the past and we are
already seeing trust return as a result of
this clear message.

As this trust returns to the brands, our
marketing efforts become more efficient
and focused, and our Group sales
grow then you should see our year end
inventory balances as a percentage
of sales tick down.

Year end inventory as a percentage of sales
is the second KPI that I intend to state and
explain to you in each Annual Report going
forwards. The aim is to have as low a
percentage of sales tied up in inventory
as possible.

OUTLOOK

There are lots of things we track and monitor
in the business, but these two simple measures
will allow you to triangulate the progress of
our pilgrimage back to profitability and
beyond. I intend to report and explain
additional KPIs as they become relevant.

We outlined the new staff bonus scheme
in the last interim report. This scheme
only pays a bonus if the business reaches
profitability. The Board is now looking to
put in place a similar Long Term Incentive
Plan (LTIP) for the Executive Management
Team. The message will be the same. If the
business doesn’t make profits, we don’t get
paid bonuses. We want to align all staff
at all levels with shareholders’ interests.
We think the bonus schemes will do this.

It is my privilege to be running this
business and to be the custodian of your
capital as shareholders. I take all aspects
of the job very seriously including the
opportunity to communicate with you
in these financial reports.

As the next few years unfold, I am
hoping that shareholders come to expect
alignment, accountability, transparency
and sustainable profits.

We have really got to grips with the
business now. As we focus on the future
and leave the excuses and mistakes of the
past behind, we are excited about the new
start for the business and the passion that
is reverberating round the corridors once
again at our ancestral home in Margate.

Lyndon Davies

Chief Executive Officer

12 June 2019

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportOperating and Financial Review of the Year

FINANCIAL REVIEW

Revenue

Gross profit

Gross profit margin

Overheads

Exceptionals

Reported loss before tax

Underlying loss before tax1

Reported loss after tax

Basic loss per share

Underlying basic loss per share1

Net (debt)/cash

Undrawn Facilities

2019

2018

£32.8m

£13.4m

41%

£18.0m

£0.6m

£(5.3)m

£(4.4)m

£(5.3)m

(4.24)p

(3.65)p

£(1.8)m

£5.5m

£35.7m

£13.8m

39%

£21.3m

£2.3m

£(10.1)m

£(7.6)m

£(9.9)m

(10.13)p

(8.05)p

£3.9m

£6.0m

Stated before amortisation of intangibles (brands and customer lists), net unrealised foreign exchange movements
on intercompany loans, goodwill impairments and exceptional items.

Hornby PLC Annual Report and Accounts 2019

PERFORMANCE ON A
STATUTORY BASIS

Consolidated revenue for the year ended
31 March 2019 was £32.8 million, a
decrease of 8% compared to the previous
year’s £35.7 million due to lack of product
arrival in the beginning of the year. The
revenue in the second half of the year of
£19.0 million was ahead of previous year
which was £18.6 million. Gross profit
margin was slightly higher, at 41% (2018:
39%) due to cessation of stock discounting
and more desirable product lines.

Overheads reduced year-on-year by 15%
from £21.3 million to £18.0 million as a result
of measures taken by the new Management
team. UK distribution costs reduced by £1.0
million due to the smaller volume of products
and sales volume being handled through
Hersden. Sales and marketing costs reduced
by £0.8 million year-on-year due to more
focused expenditure. Administration costs
were £1.2 million lower due to contract
renegotiations and frugal expenditure.
Other operating expenses in the year of
£0.2 million (2018: £0.4 million expense)
include foreign exchange costs and the
amortisation of brand names.

Exceptional costs totalling £0.6 million
(2018: £2.3 million) include £0.4 million
relating to the relocation of the UK business
and £0.2 million relating to the refinance
of the Group away from Barclays to PNC
Credit Limited (‘PNC’) and Phoenix UK
Fund Limited (‘Phoenix’).

PERFORMANCE ON AN
UNDERLYING BASIS

The underlying loss before taxation is shown
to present a clearer view of the trading
performance of the business. Management
identified the following items, whose inclusion
in performance distorts underlying trading
performance: net foreign exchange (gains)/
losses on intercompany loans which are
dependent on exchange rate fluctuations
and can be volatile, and the amortisation
of intangibles which result from historical
acquisitions. Additionally, exceptional
items including relocation, refinance and
restructuring costs are one off items and
therefore have also been added back in
calculating underlying loss before taxation.

Group

2019
£’000

2018
£’000

(5,312)

(10,066)

DIVIDEND

The Group is still in the Turnaround phase
and there will not be a dividend payment
this year (2018: £nil). The Board continues
to keep the dividend policy under review.

FINANCING AND CAPITAL STRUCTURE

At 31 March 2019 the UK had a £12
million Asset Based Lending facility with
PNC Credit Limited (‘PNC’) and a £6
million loan facility with Phoenix Asset
Management Partners.

The £12 million facility with PNC extends
for five years ending June 2023 and carries
a margin of 2.5‐3% over LIBOR. The PNC
Facility has a fixed and floating charge on
the assets of the Group. The Company
will be expected to provide customary
operational and financial covenants to
PNC on a monthly basis.

The Phoenix Facility is a £6 million facility
with a rolling three year term and attracts
interest at a margin of 5% over LIBOR on
funds drawn. Undrawn funds attract a non‐
utilisation fee of the higher of 1% or LIBOR.

Borrowings in the year ended 31 March
2019 peaked in November 2018 at
£3.5 million.

Net debt at 31 March 2019 was £1.8 million
compared with net cash of £3.9 million at
31 March 2018.

Statutory Loss before taxation

Adjustments:

Net foreign exchange impact on intercompany loans

Amortisation of intangibles – brands and customer lists

Exceptional items:

Restructuring costs

EGM and Mandatory offer

Refinancing costs

Relocation costs

227

–

172

373

(114)

314

1,823

399

–

Underlying loss before taxation

(4,401)

(7,574)

STATEMENT OF FINANCIAL POSITION

Property plant and equipment decreased year-
on-year by £0.7 million from £4.5 million as
depreciation of £2.8 million outweighed
capital additions of £2.1 million. Group
inventories increased slightly due to earlier
arrival to support Q1 sales than in previous
years from £10.0 million to £10.9 million.
Trade and other receivables increased by
16% largely due to a 15% increase on sales
in March compared to the previous March.
Trade and other payables increased by £0.7
million due to the increase in inventories at
year end. The net effect of these factors was
an increase in working capital of £0.3 million
(an increase of 14%). Overall investment
in new tooling, new intangible computer
software and other capital expenditure
was £2.7 million (2018: £1.8 million).

The underlying loss before taxation above
was £4.4 million (2018: loss of £7.6 million).

The basic loss per share calculated on
underlying loss before taxation (hereafter
referred to as underlying basic loss per
share) was (3.65)p (2018: (8.05)p).

The income tax credit for the year is £nil
(2018: £0.2 million credit).

Reported pre-tax loss was £5.3 million
(2018: loss of £10.1 million) and reported
basic loss per share was (4.24)p (2018:
(10.13)p loss per share).

SEGMENTAL ANALYSIS

Third party sales by the UK business of
£25.9 million fell by 9% in the year as a
result of late placement of purchase orders
by previous management leading to delays
in product supply. The loss before taxation
of £3.9 million compared to £9.0 million
loss last year reflects the continued reduction
in overheads during the year.

Sales by the European businesses of £4.0m
fell by 14% in the year reflecting the year’s
reduced product range and previous lack
of investment in new product for the
European market. The loss before tax
was £0.5 million.

Sales in the US business of £2.9 million
increased by 16%. The trading loss of £0.9
million in the US was a result of investment
in promotion and repositioning of brands
resulting in increased spend in Sales and
Marketing. We expect sales to increase
in this key market in the longer term.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportOur Key Performance Indicators (‘KPIs’)

The Directors are of the opinion that the financial KPIs are revenues, gross margins, underlying (loss)/profit before tax and (loss)/earnings per
share. The information for which is available in these financial statements and summarised on the financial highlights section earlier in this report.
We additionally think that moving forward Capex Productivity and Inventory as percentage of Sales should be monitored. We provide current
and historical analysis in the CEO’s Statement on pages 4 to 7 and will continue to report in future Annual Reports. 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 completes an annual 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 New Business Plan of the Group.

PRINCIPAL RISKS AND UNCERTAINTIES

Risk

Description

Impact/Sensitivity

Mitigation/Comment

Market
competition

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 or alternative
hobbies would have a negative
impact on the Group’s results. Failure
to evolve and innovate products
may lead to brands becoming
less relevant in the marketplace.

The Group performance is impacted by
the actions of competitors and changes
in the wider retail landscape.

In many of our markets the Group still enjoys
a strong market position due to the continued
development of our brands. We will strive
to further improve the strength of our brands.
Production of high-quality products which
customers want is a key mitigating factor.

The New
Business
Plan

The New Business Plan may not fully
achieve the aims of returning the
Group to positive cash generation
in 2020/21.

The increase in business scale and
reduction of costs and the re-conversion
of concession sales currently anticipated
is not achieved and the Group does
not achieve sustainable profit and
cash generation.

The Group has developed clear targets and
has cost saving contingencies in the plan
being actioned to put the necessary resources
in place to deliver the aims of the plan.

Hobby
market

Overall decline in the hobby market
could lead to greater levels of
competition in the medium term,
which could have a negative
impact on the Group’s results.

Failing interest in traditional hobbies
may impact our core Independent
and National retailers and have
a consequent impact upon the
Group’s performance.

Exchange
rates

The Group purchases goods in
US dollars and sells in pounds
sterling, euros and US dollars
and is therefore exposed to
exchange rate fluctuations.

Supply
chain

The Group’s products are
manufactured by specialist
labour in China, India
and Vietnam.

Significant fluctuations in exchange
rates to which the Group is exposed
could have a material adverse effect on
the Group’s future results. In particular
the negative impact on sterling of Brexit
and the continuing uncertainties will
make the US dollar purchase of its
goods more expensive.

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.

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. In the short-term there is an opportunity
to regain market share lost through previous
underperformance.

The Group continues to hedge short-term
exposures by establishing forward currency
purchases using fixed rate and participating
forward contracts up to 12 months ahead.
It is deemed impractical to hedge exchange
rate movements beyond that period.

The Group is continuing to develop and review its
vendor portfolio and has started diversifying the
supplier base. A 26-step critical path analysis
tool has been developed to monitor the whole
manufacturing process in order to identify and
deal with issues as they arise. The Group has its
own facilities in China where its tooling is secured
and managed.

Hornby PLC Annual Report and Accounts 2019

Risk

Description

Impact/Sensitivity

Mitigation/Comment

Capital
allocation

New tooling is important to support
the production of new products.

The risk is that the Group has insufficient
capital to fund new tooling or invests
ineffectively in the wrong products.

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.

System and
cyber risk

The Group continues to invest in
the development of its website
and implemented a new Enterprise
Resource Planning (ERP) system
in 2015.

This exposes the business to greater risk
of financial loss, disruption or damage
to the reputation of an organisation
from a failure of its information
technology systems.

Talent
and skills

Recruitment, development and
retention of talented people are the
key to the success of any business.

The Group fails to retain the necessary
skills and talent to deliver the Group’s
plans.

Brexit

Leaving the EU without suitable
trade deals in place.

As the UK government continues its
negotiations, uncertainty remains as to
the extent to which our operations and
financial performance will be affected
in the longer term.

The New Business Plan includes significant capital
expenditure to fund suitable products to underpin
the implementation of the New Business Plan
strategy of the Group. This process will be
underpinned by a robust capital allocation
process aligned to brand strategies and brand
delivery targets.

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 £12.0 million ABL facility and a
£6.0m revolving loan facility with Phoenix Asset
Management Partners. The Group’s policy on
liquidity risk is to maintain adequate facilities
to meet the future needs of the business.

The Group has invested significant time and cost
in the new website and ERP system in the last
three years. The Group has dedicated web and
ERP teams to monitor and maintain the Group’s
systems and holds appropriate insurance policies
to minimise material risk. A new website is
currently being developed which will have even
higher security than the existing system.

New Management team to encourage and
empower employees. Key lost talent has been
reacquired and brought back into the Company.
An all employee scheme was announced during
the year where all employees will participate in
profits of the Group.

At a Group and business level, we have
continued to prepare for changes in legislation,
trade agreements and working practices in order
to mitigate risk. We have contributed to
government led consultations on the potential
changes and their likely impact on businesses
and markets to help inform the exit strategy.

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.

On behalf of the Board

Kirstie Gould

Chief Finance Officer

12 June 2019

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportCorporate Governance Report

June 2019

CORPORATE GOVERNANCE

Following the recent change to AIM Rule 26, the Board has committed to apply the principles of the Quoted Companies Alliance (QCA)
Corporate Governance Code.

For the year ended 31 March 2019, and up to the date of this report, the Company has applied the main principles of the Code and
complied with its detailed provisions throughout the period under review. Full details of our approach to governance are set out below and,
as a Board, we continue to be committed to good standards in governance practices and will continue to review the governance structures
in place, to ensure that the current practices are appropriate for our current shareholder base and that, where necessary, changes are made.

The key governance principles and practices are described in the statement below, together with the Audit Committee and Nomination and
Remuneration Committee reports on pages 17 to 20 and the Directors’ Report on pages 22 to 25.

BOARD OF DIRECTORS

JOHN STANSFIELD

LYNDON DAVIES

KIRSTIE GOULD

Independent Non-
Executive Chairman

Aged 64

Chief Executive Officer

Chief Finance Officer &
Company Secretary

Aged 58

Aged 46

JAMES WILSON

Independent Non-
Executive Director

Aged 32

Lyndon joined the Board
as Chief Executive in
October 2017.

He is a highly-experienced
model and hobby
professional with 40 years
experience in the industry.
He has built Oxford Diecast
into a successful international
business over the past two
decades, focusing on
Diecast vehicles, aircraft
and, more recently,
rail-based products.

Lyndon is also Chairman of
Oxford Diecast (‘Oxford’),
a business founded in
1993. He remains the
majority shareholder of
LCD Enterprises Limited, the
ultimate owner of the
Oxford Diecast brands.

Kirstie Gould replaced
David Mulligan as Chief
Finance Officer of the
Company in January 2018
after spending over two
years with Hornby as a
consultant in the finance
department. Kirstie also acts
as Company Secretary.

Kirstie is a Fellow of the
Institute of Chartered
Accountants in England
and Wales, qualifying with
PricewaterhouseCoopers in
1997 and has since held
senior management and
directorship roles across
a number of high growth
SME firms including Affini
Technology Limited (part
of the TTG Group) and
Gamma Communications
plc.

James Wilson was
appointed as a Non-
Executive Director in
August 2017.

James is a partner at
Phoenix Asset Management
which controls the funds that
own 74.7% of the ordinary
shares of Hornby Plc.

James has a Master’s
degree in Engineering from
Durham University and is a
Chartered Financial Analyst.

James is Chair of the
Remuneration and
Nomination Committee
and a member of the
Audit Committee.

John Stansfield was
appointed Non-Executive
Chairman in August 2018.
Prior to that, he had been a
Non-Executive Director of
the company, having been
appointed in January 2018.

John is a Fellow of the
Chartered Institute of
Management Accountants
and spent 31 years with t
he Group, 12 years of
which he was Group
Finance Director.

He re-joined the Company,
after having left in 2013.

John helped to deliver
some of the Group’s most
profitable years and has a
wealth of experience in the
toy and hobby sectors.

John is also Chair of the
Audit Committee and
a member of the
Remuneration and
Nomination Committee.

Our Board and Committees Membership

Board

Audit

Remuneration and Nomination

Chair

Hornby PLC Annual Report and Accounts 2019

COMPOSITION AND INDEPENDENCE OF THE BOARD

The Board is comprised of two Executive Directors and two
Non-Executive Directors, (including the independent Non-Executive
Chairman). During the year, Martin George stepped down from his
position as Non-Executive Director to focus on his role as Customer
Director at Waitrose. The Board is of the opinion that the resulting
composition of the Board continues to represent an appropriate
balance between Executive and Non-Executive Directors, given our
size and our operations. John Stansfield is considered independent
due to the time elapsed since his employment with the Group
originally. James Wilson is considered independent as he has
no control over the voting shares of Phoenix Asset Management.

The Board members collectively have skills and expertise embracing
a range of areas including finance, auditing, engineering,
manufacturing, design, general management and innovation. The
Chairman and Chief Executive in particular, have extensive, directly
applicable experience of working within the toy and hobby products
industry. That said, we intend to carry out periodic reviews of the
composition of the Board to ensure that its skillset and experience are
appropriate for the effective leadership and long-term success of the
business as it develops. These reviews will give due consideration to
having more diversity on the Board, as well as to other priorities.

Details of each Directors’ background and experience are set out
in their biographies on page 12.

APPOINTMENTS TO THE BOARD AND RE-ELECTION

The Board takes decisions regarding the appointment of new
Directors as a whole following the recommendations of its
Remuneration and Nomination Committee. The task of searching
for appropriate candidates and assessing potential candidates’ skills
and suitability for the role has been delegated to the Remuneration
and Nomination Committee. Further information on the roles of the
Remuneration and Nomination Committee and also the Audit
Committee of the Board can be found on pages 17 to 20.

During the year, John Stansfield was appointed independent
Non-Executive Chairman from his role as Non-Executive Director as
Lyndon Davies stepped down from the Interim Chairman position.
Martin George resigned as Non-Executive Director to focus on
other executive roles.

The Company’s Articles of Association require that one-third of
Directors (excluding any Directors who have been appointed since
the last Annual General Meeting (AGM)), retire by rotation at each
AGM. In accordance with best practice in corporate governance,
all the Directors will offer themselves for re-election.

DIVISION OF RESPONSIBILITIES

There is a formal schedule of matters reserved for the Board
which is set out in detail on the Hornby Plc corporate website
at http://www.hornby.plc.uk/ and summarised further on in
this report.

The Board is responsible for the formulating of the overall business
strategy and the Executive team is responsible for managing of the
business to realise this strategy. Following Lyndon Davies stepping
down as Interim Chairman, the roles of Chairman and Chief
Executive Officer are now separate and clearly-defined, in line
with the recommendations of the QCA Corporate Governance
Code. Responsibility for overseeing the Board is the responsibility
of the Chairman and the Chief Executive Officer is responsible for
overseeing the implementation of the Company’s strategy and its
operational performance.

EXECUTIVE DIRECTORS

The Executive Directors, as with the Non-Executive Directors, are
encouraged to use their independent judgement in the discharging
of their duties. They are responsible for the day-to-day management
of the business, including its trading, financial and operational
performance. Issues and progress made are reported to the
Board by the Chief Executive Officer.

Executive Directors are full-time employees of the Company and
have entered into service agreements with the Company. Directors’
contracts are available for inspection at the Company’s registered
office and at the Annual General Meeting.

NON-EXECUTIVE DIRECTORS

The Board considers the Non-Executive Directors to be sufficiently
competent. They provide objectivity and substantial input to the
activities of the Board, from their various areas of expertise.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportCorporate Governance Report continued

June 2019

SUCCESSION PLANNING

During the year, the Remuneration and Nomination Committee
was delegated with the task of formulating succession plans for
the business, identifying areas where there is a skills shortage,
extending the area of focus to senior management level and
ensuring that the plans cover several years. This work is
on-going and details of the plans will be communicated
in our next Annual Report.

The Board also recognises that diversity is a key element in
strengthening the contribution made to Board deliberations and
in the course of our search for suitable candidates, due regard is
given to this, in addition to the skills and experience a potential
candidate brings.

HOW THE BOARD OPERATES

The Board retains control of certain key decisions through the
Schedule of Matters reserved for the Board. Other matters,
responsibilities and authorities have been delegated to its Audit
Committee and Remuneration and Nomination Committee and
these are documented in the terms of reference of each of those
Committees, which can be found on the Company’s corporate
website at http://www.hornby.plc.uk/.

The Board is responsible for:

• overall management of the business;

• developing the Company’s strategy, business planning,

budgeting and risk management;

• monitoring performance against agreed objectives;

• setting the business’ values, standards and culture;

• internal control and risk management;

• remuneration;

• membership and chairmanship of Board and Board Committees;

• relationships with shareholders and other stakeholders;

• determining the financial and corporate structure of the business;

• major investment and divestment decisions, for example the

strategic global partnership with Warner Bros;

• the Company’s compliance with relevant legislations and

regulations; and

• other ad hoc matters such as the approval of the Company’s

principal advisors.

The Board met eight times during the year. In addition, the Board
attended certain strategy meetings where the Executive leadership
team and senior managers presented operational strategies.

THE MAIN ACTIVITIES OF THE BOARD DURING THE YEAR

Key Board activities this year included:

• appointment of John Stansfield as new independent

Non-Executive Chairman;

• approval of new borrowing and credit facilities;

• discussing strategic priorities;

• reviewing feedback from our institutional shareholders following

our full and half year results; and

• input into implementing the next phase of the Turnaround Plan.

THE BOARD COMMITTEES

The Board delegates authority to two committees: the Audit
Committee and the Remuneration and Nomination Committee,
to assist in meeting its business objectives. The Committees meet
independently of Board meetings.

Each Committee has terms of reference setting out their responsibilities,
which were reviewed and approved by the Board during the year.
These are available on the Company’s corporate website
http://www.hornby.plc.uk/.

We have made some improvements in our governance
arrangements including introducing reporting by the Remuneration
and Nomination Committee as well as the Audit Committee in
our Annual Report and Accounts. These reports can be found
on pages 17 to 20.

The Audit Committee comprises the independent Non-Executive
Directors of the Company and met three times during the year.
The Chief Executive Officer, Chief Finance Officer and other
managers attend by invitation. The external auditors attend
meetings and have direct access to the Committee.

The Remuneration and Nomination Committee meet at least once
a year with all members being present. The members are all
Non-Executive Directors, including the Chairman. The Committee
is responsible for establishing and reporting to the Board,
procedures for determining policy on executive remuneration
and also the performance-related elements of remuneration,
which align the interest of the Directors with those of
the shareholders.

Hornby PLC Annual Report and Accounts 2019

Its remit also includes matters of nomination and succession planning
for Directors and senior key executives, with the final approval for
appointments resting with the Board. Directors excuse themselves
from meetings where the matter under discussion is their own
succession, when appropriate.

EXTERNAL ADVISORS

The Board makes use of the expertise of external advisors where
necessary, to enhance knowledge or gain access to particular skills
or capabilities. Areas where external advisors are used include and
are not limited to: diligence work on major contracts; recruitment;
and Company secretarial and corporate governance. The list of
external advisors is set out on page 21.

DIRECTORS’ INDUCTION, DEVELOPMENT, INFORMATION
AND SUPPORT

The Board considers all Directors to be effective and committed
to their roles.

All Directors receive regular and timely information on the business’
operational and financial performance. Ahead of the Board and
Committee meetings, papers are circulated to all Directors to ensure
that they are fully informed and can participate fully in discussions.

Directors keep their skillset up to date through a combination of
attendance at industry events, individual professional development
and experience gained from other board roles. The Company
Secretary ensures that the Board is aware of any applicable
regulatory changes and updates as and when relevant. The Board
is also given an annual refresher in AIM Rules and this was last
provided in January 2019 by its Nominated Advisors, Liberum
Capital Limited. This refresher is designed to enable Directors
tokeep abreast of corporate governance developments.

Directors are also able to take independent professional advice
in the furtherance of their duties, if necessary, at the Company’s
expense. Directors also have direct access to the advice and
services of the Company Secretary. The Company Secretary
supports the Chairman in ensuring that the Board receives the
information and support it needs to carry out its roles.

CONFLICTS OF INTEREST

Outside interests and commitments of Directors, and changes to
these commitments are reported to and agreed by the Board.
Lyndon Davies’ potential conflict of interest as a majority shareholder
in LCD Enterprises Limited is mitigated by the fact that he is one of
four Directors on the Hornby Plc Board and also by the fact that the
Board has effective procedures in place to monitor and manage
conflicts of interests. In addition, no one member of the Board
has unfettered powers to make decisions.

LCD Enterprises Limited owns Oxford Diecast Limited and Oxford
Diecast (HK) Limited. Both companies provide service and/or goods
to the Group at arms-length pricing. Details can be found in note 28.

PERFORMANCE EVALUATION

The Chairman considers the operation of the Board and performance
of the Directors on an ongoing basis as part of his duties and will
bring any areas of improvement he considers are needed to the
attention of the Board. However, the Board recognises the need to
put in place an annual formal evaluation process for the Board, its
Committees and individual Directors. Therefore with effect from 2019,
the Board intends to carry out a formal evaluation in respect of its
performance over the previous year.

The effectiveness of the Board, its Committees and Directors will
be reviewed on an annual basis.

ACCOUNTABILITY

Although the Board delegates authority to its committees and also
the day-to-day management of the business to the Executive
Directors, it is accountable for the overall leadership, strategy and
control of the business in order to achieve its strategic aims in
accordance with good corporate governance principles.

RISK MANAGEMENT AND INTERNAL CONTROL

Mitigating the risks that a company faces as it seeks to create
long-term value for its shareholders, is the positive by-product of
applying good corporate governance. At Hornby, all employees
are responsible for identifying and monitoring risks across their
areas. However, the Board sets the overall risk strategy for the
business. The business maintains a Risk Register and a Fraud
Register, which are presented and considered at the Audit
Committee meetings.

FINANCIAL AND BUSINESS REPORTING

In our half-year, final and any other ad hoc reports and other
information provided by the Company, the Board seeks to present
a fair, balanced and understandable assessment of the business’
position and prospects. The Board receives a number of reports,
including those from the Audit Committee, to enable it to monitor
and clearly understand the business’ financial position.

The Board considers that this Annual Report and financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company’s performance, business model and strategy.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportCorporate Governance Report continued

June 2019

BUSINESS ETHICS

Our commitment to our customers and having a people-oriented
ethos is central to the success of achieving our strategy. We value
the skills of our employees and it is through the efforts of these
dedicated people that we are able to grow our customer base.

We endeavour to conduct our business affairs in a way that reflects
our values. Our suppliers are audited to ensure that their policies
and procedures comply with the Modern Slavery and Human
Trafficking Act, which ensures that workplace and conditions of
employment for their employees are of an acceptable standard.
We reinforce our expectations to achieve and maintain these
standards. Our Statement on Modern Slavery and Human
Trafficking can be found on our corporate website
http://www.hornby.plc.uk/.

WHISTLEBLOWING

The business has procedures in place for detecting fraud and for
whistleblowing to ensure that arrangements are in place for all
employees to raise concerns in confidence, about possible
irregularities and non-compliance in matters of financial reporting
or other matters. These procedures and policies are reviewed
by the Audit Committee.

SHAREHOLDERS

The Board values the views of our shareholders and recognises their
interest in our strategy and performance. We endeavour to update
shareholders on the Board’s expectations for the outlook of the
business and as and when this changes. As much as possible,
we try to provide information that is relevant to our shareholders
on our corporate website; in our Annual Report and Accounts;
and through regulatory news announcements throughout the year.

We also believe in knowing and understanding our shareholders.
We encourage our shareholders to attend our Annual General
Meetings (AGMs) and we welcome questions from them. At our
AGMs, we provide the platform for robust discussions with our
shareholders, during which the participants, both Directors and
shareholders alike, are engaged with the proceedings, so much
so that last year’s meeting had to be extended. We believe this
reflects the connection to the business which we have cultivated
and continue to cultivate in our shareholders. In addition, the review
of investor relations activity and analysis of our shareholder register
is a standing item at each board meeting. Our corporate website
http://www.hornby.plc.uk/ also includes the outcomes of
shareholder votes cast at the AGMs, as well as Annual and
Interim Reports from previous years.

Hornby PLC Annual Report and Accounts 2019

Audit Committee Report

As Chair of the Audit Committee (‘the Committee’), I am pleased to present our
Audit Committee Report for the year ended 31 March 2019.

MEMBERSHIP

The Audit Committee comprises two members, James Wilson and
myself. Both of us are independent Non-Executive Directors of the
Company. Martin George, also an independent Non-Executive
Director, was a member of the Committee until his resignation in
November 2018. I am the member of the Committee, who with the
background as a chartered management accountant has significant,
recent and relevant financial experience. Our biographies are set
out on page 12.

MEETINGS AND ATTENDANCE

The Committee met three times during the year ended 31 March
2019. All members of the Committee at the time of each meeting
were present at the meetings, with the exception of one meeting
where Martin George was unable to attend. At least one of these
meetings was with the external auditor, without the executive Board
members present. Lyndon Davies and Kirstie Gould also attended
meetings by invitation.

DUTIES:

The full list of the Committee’s responsibilities is set out in its terms
of reference, which is available on the Company’s website at
http://www.hornby.plc.uk/ and is summarised below as follows:

• External Audit;

• Financial Reporting;

• Internal Control and Risk Management;

• Internal Audit; and

• Reporting on activities of the Committee.

The terms of reference for the Committee are reviewed annually
and approved by the Board.

The main items of business considered by the Committee during
the year included:

• a review of the year-end audit plan, consideration of the scope
of the audit, the consistency in the application of accounting
policies and the external auditor’s fees;

• consideration and approval of the external audit report and

management representation letter;

• a review of the Annual Report and financial statements, including
consideration of the significant accounting issues relating to the
financial statements, and the going concern review;

• a review and approval of the internal financial statement; and

• approving revised borrowing and credit facilities.

EXTERNAL AUDITOR

The Committee has the primary responsibility for recommending
the appointment of the external auditor and reviewing the findings
of the auditor’s work. The Company’s external auditor is
PricewaterhouseCoopers LLP. There is ongoing dialogue between
the Committee and the auditor on actions to improve the
effectiveness of the external audit process.

Having reviewed the auditor’s independence and performance
to date, the Committee has recommended to the Board that they
be reappointed for the 2020 audit. A resolution to reappoint
PricewaterhouseCoopers LLP as the Company’s auditor is to be
proposed at the forthcoming Annual General Meeting (AGM)
on 25 September 2019.

POLICIES FOR NON-AUDIT SERVICES

In addition to the audit services they provide, PricewaterhouseCoopers
LLP may also be engaged to carry out non-audit services for the
business however no such engagement has happened in the year.

AUDIT PROCESS

The external auditor prepares an audit plan setting out how the
auditor will review the interim and audit the full-year financial
statements. The audit plan is reviewed, agreed in advance and
overseen by the Committee. The plan includes the proposed
scope of the work, the approach to be taken with the audit
and also describes the auditor’s assessment of the principal
risks facing the business.

Prior to approval of the financial statements, the external auditor
presents its findings to the Committee, highlighting areas of
significant financial judgement for discussion.

INTERNAL AUDIT

The Audit Committee has considered the need for an internal audit
function during the year and is of the view that, given the size and
nature of the Company’s operations and finance team, there is no
current requirement to establish a separate internal audit function.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportAudit Committee Report continued

RISK MANAGEMENT AND INTERNAL CONTROLS

Through the work of the Committee, the Board carries out an annual
risk assessment programme to identify the principal risks to the
business and these include:

• UK market dependence and conditions;

• the New Business Plan;

• the status of the model/hobby market;

• exchange rates;

• the supply chain function;

• capital allocation;

• product compliance;

• liquidity;

• systems and cyber risks;

• talent and skills; and

• Brexit.

The Committee also reviews the effectiveness of control policies
and procedures in place to deal with the risks mentioned. Further
details on the business risks identified and the actions being taken
are set out on pages 08 to 09 of the Operating and Financial
Review Report.

The process of risk management in the business is continually reviewed.

WHISTLEBLOWING

John Stansfield

Chairman of the Audit Committee

12 June 2019

Hornby PLC Annual Report and Accounts 2019

Remuneration and Nomination Committee Report

As Chairman of the Remuneration and Nomination Committee (‘the Committee’),
I am pleased to present our report for the year ended 31 March 2019 which
sets out details of the composition, structure and activities of the Committee
and remuneration paid to Directors during the year.

The Board has taken the decision to expand the schedule of matters
it has delegated to its Remuneration Committee, to include matters
which are typically within the remit of a nomination committee.
Its terms of reference were revised accordingly and the Committee
was renamed the Remuneration and Nomination Committee.

MEMBERSHIP

The Committee currently comprises two independent Non-Executive
Directors, John Stansfield and myself, James Wilson, whose
biographies are set out on page 12. Martin George, a Non-
Executive Director, was a member of the Committee until his
resignation in November 2018.

MEETINGS AND ATTENDANCE

The Committee meets at least once a year and at such other times
during the year as is necessary to discharge its duties. During the
year, the Committee met once. Only members of the Committee
have the right to attend meetings, although other individuals, such
as the Chief Executive Officer and external advisers, may be
invited to attend for all or part of any meeting.

DUTIES

The Committee works closely with the Board to formulate
remuneration policy and consider succession plans and possible
internal candidates for future Board roles, having regard to the
views of shareholders. The main duties of the Committee are set
out in its Terms of Reference, which are available on the Company’s
website (http://www.hornby.plc.uk/) and include the following
key responsibilities:

REMUNERATION

• set remuneration policy for all Executive Directors (including
pension rights and any compensation payments), and in the
process, review and give due consideration to pay and
employment conditions throughout the Company, especially
when determining annual salary increases;

• approve the design of, and determine targets for any

performance-related pay schemes operated by the Company;

• recommend and monitor the level and structure of remuneration

for senior management; and

• review the design of all share incentive plans for approval by

the Board and shareholders.

NOMINATION

• regularly review the structure, size and composition, (including the

skills, experience, knowledge and diversity) of the Board and make
recommendations to the Board as to any changes necessary;

• give full consideration to succession planning for Directors and
other Senior Executives in the course of its work, taking into
account the challenges and opportunities facing the Company
and the skills and expertise needed on the Board in the future;

• lead the process for all potential appointments to the Board and
making recommendations to the Board in relation to them; and

• evaluate the balance of skills, experience, independence and

knowledge on the Board; and following any evaluation, identify
and nominate for approval by the Board, potential candidates to
fill Board vacancies as and when they arise.

PRINCIPAL ACTIVITIES DURING THE YEAR

The Committee undertook a search for a new independent
Non-Executive Chairman to lead the Board, taking into account
Board balance and diversity. We were pleased to welcome John
Stansfield to this role in August 2018. His fee on appointment was
agreed by Committee and approved by the Board.

The Committee also considered:

• Executive Directors’ bonuses and salaries;

• performance criteria for the new LTIP and future awards

under the LTIP;

• succession planning and the search for an additional

Non-Executive Director;

• election and re-election of Directors at the AGM; and

• a review of the Committee’s terms of reference.

The Committee considers business strategy when recommending the
appointment of Directors and setting and reviewing remuneration.

DIVERSITY

It is the Board’s view and commitment that recruitment, promotion
and any other selection exercises are conducted on the basis of
merit against objective criteria that avoid discrimination. No
individual should be discriminated against on the ground of race,
colour, ethnicity, religious belief, political affiliation, gender, age or
disability, and this extends to Board appointments.

The Board recognises the benefits of diversity, including gender
diversity, on the Board, although it believes that all appointments
should be made on merit, while ensuring there is an appropriate
balance of skills and experience within the Board. The Board
currently consists of 25% (one) female and 75% (three) male
Board members. The Board’s age demographic ranges from 32
to 64. The business consists of 66% male employees and 34%
female employees.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportRemuneration and Nomination Committee Report continued

REMUNERATION POLICY

The objective of the remuneration policy is to promote the long-term
success of the Company, giving due regard to the views of
shareholders and stakeholders. In formulating remuneration policy
for the Executive Directors, the Committee:

• considers Directors’ experience and the nature and complexity
of their work in order to pay a competitive salary, (in line with
comparable companies), that attracts and retains Directors of
the highest quality;

• considers pay and employment conditions within the Company

and salary levels within listed companies of a similar size;

• considers Directors’ personal performance; and

• links individual remuneration packages to the business’ long-term
performance and continued success of the business through the
award of annual bonuses and share-based incentive schemes.

EXECUTIVE DIRECTORS

Base salary

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 the salary levels within listed companies
of a similar size.

Annual bonus

Service agreements and termination payments

Details of the Executive Directors’ service agreements are set
out below.

Director

Date of Contract

Lyndon
Davies

Kirstie
Gould

5 October 2017

21 December 2017

Unexpired
Term

Rolling
contract

Notice
period by
Company

Notice
period by
Director

9 months 6 months

Compensation for loss of office is based on the base salary of
the Director.

Employees’ pay

Employees’ pay and conditions throughout the business are considered
when reviewing remuneration policy for Executive Directors.

The Board approved a profit share scheme for all employees
(excluding Executive Directors), whereby a one-off bonus of 5%
of salary is paid out when the Company breaks even and 15%
of operating profit is shared among employees proportionately
thereafter. This is a mechanism aimed at addressing issues of
motivation of employees below Board level. It is also to ensure
that the Company attracts and retains the best talent and that
their interests align with that of shareholders.

Executive Directors do not receive annual bonuses.

NON-EXECUTIVE DIRECTORS

Long Term Incentive Plan

A new Long Term Incentive Plan, (‘LTIP’) award is currently
being created.

Other benefits

Policies concerning benefits are reviewed periodically. Currently
taxable benefits comprise company car allowance or a travel
allowance and private health cover. The Committee also retains
the discretion to offer additional benefits as appropriate.

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 remuneration payable to Non-Executive Directors (other than
the Non-Executive Chairman) is decided by the Chairman and
Executive Directors. The remuneration payable to the Non-Executive
Chairman is decided by the other Board members.

Fees are designed to ensure the Company attracts and retains high
calibre individuals. They are reviewed on an annual basis and account
is taken of the level of fees paid by other companies of a similar size
and complexity. Non-Executive Directors do not participate in any
annual bonus, share options or pension arrangements. The Company
repays the reasonable expenses that Non-Executive Directors incur in
carrying out their duties as Directors.

Terms of appointment

Each of the Non-Executive Directors signed a letter of appointment
for a period of two years which can be terminated by either
party giving to the other prior written notice of three month(s).
John Stansfield signed a letter on 2 January 2018 and
James Wilson signed his on 1 August 2017.

James Wilson

Chairman of the Remuneration and Nomination Committee

12 June 2019

Hornby PLC Annual Report and Accounts 2019

Directors and Corporate Information

DIRECTORS

John Stansfield

Non-Executive Chairman

Lyndon Davies

Chief Executive Officer

Kirstie Gould

Chief Finance Officer

James Wilson

Non-Executive Director

Kirstie Gould

Company Secretary

The full details of all Directors who served in the year ended
31 March 2019 can be found on page 24.

REGISTERED OFFICE

Enterprise Road
Westwood Industrial Estate
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

Taylor Wessing LLP
5 New Street Square
London EC4A 3TW

PRINCIPAL BANKERS

Barclays Bank PLC
9 St George’s Street
Canterbury
Kent CT1 2JX

FINANCIAL ADVISORS AND BROKERS

Liberum Capital Limited
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY

REGISTRARS AND TRANSFER AGENTS

Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportDirectors’ Report

The Directors present their Annual Report together with the audited consolidated
and Company financial statements for the year ended 31 March 2019.

The Group’s business review along with future developments and the
principal risks and uncertainties facing the Group are included in the
Strategic Report.

PRINCIPAL ACTIVITIES

The Company is a holding company, limited by shares, registered
(and domiciled) in England Reg. 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 España 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 Alternative Investment Market
(‘AIM’) and incorporated and operating in the United Kingdom.

The Group is principally engaged in the development, design,
sourcing and distribution of hobby and interactive products.

RESULTS AND DIVIDENDS

The results for the year ended 31 March 2019 are set out in the
Group Statement of Comprehensive Income. Revenue for the year
was £32.8 million compared to £35.7 million last year. The loss
for the year attributable to equity holders amounted to £5.3 million
(2018: £9.9 million loss). The position of the Group and Company
is set out in the Group and Company Statements of Financial
Position. Future developments are set out within the CEO Statement.

No interim dividend was declared in the year (2018: £nil) and
the Directors do not recommend a final dividend (2018: £nil).

GOING CONCERN

On 5 June 2018 the Group entered a £12.0 million Asset Based
Lending (ABL) facility with PNC Credit Limited through to June 2023.
The PNC Covenants are customary operational covenants applied
on a monthly basis. In addition, the Group entered a committed
£6.0 million loan facility with Phoenix Asset Management Partners
Limited (the Group’s largest shareholder) if it should be required
which is a three-year rolling facility.

The Group has prepared trading and cash flow forecasts for a
period of three years, which have been reviewed and approved
by the Board. On the basis of these forecasts, the facilities with
PNC and Phoenix and after a detailed review of trading, financial
position and cash flow models, the Directors have a reasonable
expectation that the Group and Company have adequate resources
to continue in operational existence for the foreseeable future.
For these reasons, they continue to adopt the going concern
basis of accounting in preparing the annual financial statements.

RESEARCH AND DEVELOPMENT

The Board considers that research and development into products
continues to play an important role in the Group’s success. R&D
costs of £1.0 million (see note 4) incurred in the year have been
charged to the Statement of Comprehensive Income as these costs
all relate to research activities.

Hornby PLC Annual Report and Accounts 2019

DIRECTORS’ INDEMNITIES

The Company maintained liability insurance for its Directors and
officers during the financial year and up to the date of approval of
the Annual Report and Accounts. The Company has also provided
an indemnity for its Directors and the secretary, which is a qualifying
third party indemnity provision for the purposes of the Companies
Act 2006.

SUBSTANTIAL SHAREHOLDINGS

The Company has been notified that at close of business on
12 June 2019 the following parties were interested in 3% or
more of the Company’s ordinary share capital.

Shareholder

Phoenix Asset Management

Artemis Fund Managers Limited

Number of
ordinary shares

Percentage
held

93,524,498

18,242,460

74.66

14.56

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors have prepared
the Group and 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
Company and of the profit or loss of the Group and Company for
that period. In preparing the financial statements, the Directors are
required to:

• select suitable accounting policies and then apply them consistently;

• 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;

• make judgements and accounting estimates that are reasonable

and prudent; and

• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and
Company will continue in business.

The Directors are also responsible for safeguarding the assets of the
Group and Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company's transactions and disclose with reasonable accuracy
at any time the financial position of the Group and Company and
enable them to ensure that the financial statements comply with the
Companies Act 2006.

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.

DIRECTORS' CONFIRMATIONS

The Directors consider that the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s position and performance, business model and strategy.

In the case of each Director in office at the date the Directors’ Report
is approved:

All employees, whether part time, full time or temporary, are
treated fairly and with respect. Selection for employment, promotion,
training or any other benefit is on the basis of aptitude and ability.
All employees are helped and encouraged to develop their full
potential and the talents and resources of the workforce are fully
utilised to maximise the efficiency of the organisation.

Our commitments are:

• to create an environment in which individual differences and
the contributions of all our staff are recognised and valued;

• every employee is entitled to a working environment that

promotes dignity and respect to all. No form of intimidation,
bullying or harassment is tolerated;

• so far as the Director is aware, there is no relevant audit

• training, development and progression opportunities are

information of which the Group and Company’s auditors are
unaware; and

available to all staff;

• equality in the workplace is good management practice and

• they have taken all the steps that they ought to have taken as a

makes sound business sense;

Director in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s
auditors are aware of that information.

FINANCIAL INSTRUMENTS

The Group’s financial instruments, other than derivatives, comprise
borrowings, cash and liquid resources, and various items, such as
trade receivables, trade payables, etc. that arise directly from its
operations. The Group’s financial liabilities comprise borrowings,
trade payables, other payables and finance leases. The main
purpose of the Group’s borrowings is to provide finance for the
Group’s operations. The Group has financial assets comprising
cash and trade and other receivables.

The Group also enters into derivatives transactions (principally
forward foreign currency contracts). The purpose of such transactions
is to manage the currency risks arising from the Group’s operations.
It is, and has been throughout the period under review, the Group’s
policy that no speculative trading in financial instruments shall
be undertaken.

FINANCIAL RISK MANAGEMENT

The financial risk is managed by the Group and more information
on this can be found within the Notes to the financial statements.

PERSONNEL POLICIES

Hornby is committed to eliminating discrimination and encouraging
diversity amongst our workforce. Our aim is that our workforce will
be truly representative of all sections of society and each employee
feels respected and able to give of their best.

To that end the purpose of personnel policies are to provide equality
and fairness for all in our employment and not to discriminate
on grounds of gender, marital status, race, ethnic origin, colour,
nationality, national origin, disability, sexual orientation, religion
or age. We oppose all forms of unlawful and unfair discrimination.

• to regularly review all our employment practices and procedures

to ensure fairness;

• breaches of our equality policy are regarded as misconduct

and may lead to disciplinary proceedings; and

• these policies will be monitored and reviewed on a regular basis.

The Group places importance on the contributions made by all
employees to the progress of the Group and aims to keep them
informed via formal and informal meetings.

ARTICLES OF ASSOCIATION

The rules governing the appointment and replacement of Directors
are set out in the Company’s Articles of Association. The Articles
of Association may be amended by a special resolution of the
Company’s shareholders.

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 19. Ordinary shareholders are entitled to receive notice and to
attend and speak at general meetings.

Each shareholder present in person or by proxy (or by duly
authorised corporate representatives) has, on a show of hands,
one vote. On a poll, each shareholder present in person or by
proxy has one vote for each share held.

Other than the general provisions of the Articles (and prevailing
legislation) there are no specific restrictions of the size of a holding
or on the transfer of the ordinary shares.

The Directors are not aware of any agreements between holders of
the Company’s shares that may result in the restriction of the transfer of
securities or on voting rights. No shareholder holds securities carrying
any special rights or control over the Company’s share capital.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportDirectors’ Report continued

AUTHORITY TO PURCHASE OWN SHARES

INDEPENDENT AUDITORS

The Company was authorised by shareholder resolution at the 2018
Annual General Meeting to purchase up to 10% of its issued share
capital. A resolution will be proposed at the forthcoming Annual
General Meeting and authority sought to purchase up to 10% of
its issued share capital. Under this authority, any shares purchased
must be held as treasury shares or, otherwise, cancelled resulting
in a reduction of the Company’s issued share capital.

No shares were purchased by the Company during the year.

A resolution to reappoint the auditors, PricewaterhouseCoopers LLP,
will be proposed at the forthcoming Annual General Meeting.

ANNUAL GENERAL MEETING

The Annual General Meeting is to be scheduled for late September
2019 at the Company’s head office in Margate, Kent. A notice of
the Annual General Meeting will be sent out to shareholders
separately to this Annual Report and Accounts.

CHANGE OF CONTROL – SIGNIFICANT AGREEMENTS

DIRECTORS’ REMUNERATION

There are a number of agreements that may take effect, alter or
terminate on a change of control of the Company. None of
these are considered to be significant in their likely impact on
the business as a whole.

POLITICAL DONATIONS

The Company has made no political donations during the year.

Executive Directors’ base salaries are reviewed annually by the
Remuneration and Nomination Committee taking into account the
responsibilities, skills and experience of each individual, pay and
employment conditions within the Company and salary levels
within listed companies of a similar size.

The following table summarises the total salary and pension
contributions received by Directors for 2018–19 and 2017–18
in line with the Companies Act 2006 requirement:

AUDITED

Year ended 31 March 2019

Year ended 31 March 2018 (restated)1

Basic salary,
allowances
and fees
£’000

Pension
contributions
£'000

Total salary
and pension
contributions
£'000

Basic salary,
allowances
and fees
£’000

Pension
contributions
£'000

Total salary
and pension
contributions
£'000

L Davies (Appointed 5 October 2017)

K Gould (Appointed 4 January 2018)

J Wilson (Appointed 1 August 2017)

J Stansfield (Appointed 4 January 2018)

S Cooke (Resigned 3 October 2017)

D Mulligan (Resigned 31 December 2017)

M George2 (Resigned 9 November 2018)

R Canham (Resigned 21 June 2017)

D Adams (Resigned 31 December 2017)

226

136

–

226

161

–

Total

450

475

100

–

153

572

–

100

–

178

179

629

The prior period is restated due to an error as a result of bonuses paid in the year ended 31 March 2018 being included in the disclosure for the year ended 31 March 2018,
however these related to the year ended 31 March 2017, and a misclassification between compensation for loss of office and basic salary.

2 Excluded from within this amount is compensation for loss of office totalling £26,000.

Hornby PLC Annual Report and Accounts 2019

Performance Share Plan awards outstanding (Audited)

DIRECTORS’ INTERESTS

At 31 March 2019, there are no schemes in place.

Interests in shares (Audited)

Future incentive schemes are currently being formalised for
the new management team.

Interests of the Directors in the shares of the Company at
31 March 2019 and 31 March 2018 were:

Benefits and Pension (Unaudited)

Policies concerning benefits, including the Group’s company car
policy, are reviewed periodically. Currently, benefits in kind comprise
motor cars or a travel allowance and private health cover, both of
which are non-performance related. The Executive Directors and
senior managers are members of defined contribution pension
schemes and annual contributions are calculated by reference
to base salaries, with neither annual bonuses nor awards under
the share incentive schemes taken into account in calculating
the amounts due.

Executive Directors’ service contracts (Unaudited)

Executive Directors do not have fixed period contracts.

Payments to past Directors, policy on payment of loss of
office and termination payments (Audited)

Payments to past Directors totalled £26,000 to Martin George for
payment in lieu of notice. There were no other payments to past
Directors made during the year. Notice periods are set under
individual service contracts but the Company has a policy for
Executive Directors of a notice period of nine months to be given
by the Company and of six months to be given by the individual.
The compensation for loss of office is based upon the respective
service contracts and the components are based on the base
salary of the Director.

Executive Directors

L Davies

K Gould

Non-Executive Directors

M George

J Wilson

J Stansfield

At 31 March
2019

number

At 31 March
2018

number

596,670

41,276

–

31,000

64,052

–

64,052

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.
James Wilson is also a partner at Phoenix Asset Management
Partners Limited who hold a substantial shareholding in Hornby PLC.

On behalf of the Board

Kirstie Gould

Chief Finance Officer

Westwood
Margate
CT9 4JX

12 June 2019

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportIndependent Auditors’ Report to the Members of Hornby PLC

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

In our opinion, Hornby PLC’s Group financial statements and Company financial statements (the ‘financial statements’):

• give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 March 2019 and of the Group’s and the

Company’s loss and cash flows for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Annual Report and Accounts 2019 (the ‘Annual Report’), which comprise: the
Group and Company statements of financial position as at 31 March 2019; the Group and Company Statements of Comprehensive Income,
the Group and Company statements of changes in equity, and the Group and Company cash flow statements for the year then ended; and the
notes to the financial statements, which include a description of the significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.

Our audit approach
Overview

• Overall Group materiality: £310,000 (2018: £400,000), based on 5% of three year average

underlying loss before tax.

• Overall Company materiality: £243,500 (2018: £320,000), based on 1% of total assets, restricted so

that it does not exceed Group overall materiality.

• We performed an audit of the complete financial information of two full scope components, being

Hornby PLC and Hornby Hobbies Limited. We also performed review procedures over the European
sales offices and US trading subsidiary, and audited consolidation entries.

• Our full scope components provided coverage of 92% of Group revenue (2018: 93%), and 74% of
Group underlying loss before tax (2018: 85%), increasing to 100% coverage for both revenue and
underlying loss before tax when review and consolidation procedures are included.

• All entities are managed from one central location in the UK. All audit work was undertaken by the

UK engagement team.

• Going concern (Group and Company).

• Impairment of goodwill, investments and intangibles (Group and Company).

• Recording of revenue (Group).

• Royalty accrual (Group).

• Inventory provisioning (Group).

• Classification of exceptional items (Group and Company).

The scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular,
we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management
override of internal controls, including evaluating whether there was evidence of bias by the Directors that represented a risk of material
misstatement due to fraud.

Hornby PLC Annual Report and Accounts 2019

Key audit matters

Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.

Key audit matter

Going concern

Refer to Note 1 within the Notes to the Financial
Statements for further information.

Due to the recent trading performance of the Group, there is
a risk of the Group and Company being unable to continue
as a going concern.

The Group completed a refinancing with a £12m asset
based facility and £6m drawdown facility in June 2018.

The Directors have prepared a cash flow model to 31
March 2022 which incorporates the strategy of the new
CEO, and the expected impact of the strategy on trading
results including revenue growth, margin improvement, and
cost savings. This model shows that there is cash headroom
throughout the forecast period, that covenants associated
with the new financing agreements will not be breached,
and indicates that the Group will be able to continue as
a going concern.

Group and Company

Impairment of goodwill, investments
and intangibles

Refer to Note 8, Note 9 and Note 11 within the Notes
to the Financial Statements for further information.

The Group has £4.6m of goodwill (31 March 2018: £4.6m)
and £1.9m of intangible assets (31 March 2018: £2.2m)
relating to brand names. Hornby PLC also holds an investment
in subsidiaries of £23.4m (31 March 2018: £23.3m) in the
Company financial statements.

Recovery of these amounts is dependent on future cash
flows associated with the respective asset and there is
risk that if these cash flows do not meet the Group’s
expectations then assets might be impaired.

Group and Company

How our audit addressed the key audit matter

We have tested the cash flow model for mathematical accuracy. We have discussed
the key assumptions in the cash flow model with the Directors and assessed the
reasonableness of key assumptions, noting that forecast improvements in revenue
and gross margin are important factors in delivering the plan. We have performed
sensitivity analysis to assess whether a reasonably possible change in key assumptions
would result in a need for further financing. We have reviewed the covenants within
the financing agreements and ensured that these are not breached based on the cash
flow model. We have also reviewed the post-year end performance of the Group,
and considered the adequacy of the related disclosures in the financial statements
and found them to be appropriate.

Please see our conclusion within the ‘Conclusions relating to going concern’ section.

We have reviewed the Directors’ impairment assessments for goodwill, investments and
intangibles for reasonableness.

We have considered the Directors’ assessments, which contain a number of judgements
and estimates including growth in revenue and gross margins, and use assumptions for
long-term growth rates and discount rates.

We assessed the mathematical accuracy of the Directors’ cash flow model and agreed
the underlying forecasts to Board approved budgets and assessed how these budgets
were compiled. With the support of our valuations experts, we assessed the terminal
growth rates and discount rates applied by the Directors to third party information and
applied our independent view of more appropriate rates to the Directors’ forecast.

We challenged the Directors’ assessment by recalculation of the Enterprise Value (EV) of
the Group at year end which provides an indication of the fair value at 31 March 2019.
EV equals Market capitalisation less cash and cash equivalents plus total borrowings less
anticipated transaction costs.

Market capitalisation at 31 March 2019 was £46.35 million. Using an assumed
transaction cost at the higher end of the 3–5% of EV range results in an EV of £45.7m.
Allocation of the EV across each CGU based on the percentage of contribution to
Group Revenue or Gross Margin indicates comparable headroom to the Directors’
assessment using the future cash flow model.

As a result of our work, we determined that it was appropriate that no impairment charge
was recognised for goodwill, or intangible assets in the Group financial statements and
that appropriate disclosures had been made. Similarly, we determined that it was
appropriate that no impairment charge was recognised for investments in the Company
financial statements.

We considered the related disclosures provided in the financial statements and found
them to be appropriate.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportIndependent Auditors’ Report to the Members
of Hornby PLC continued

Key audit matter

Recording of revenue

Refer to Note 1 within the Notes to the Financial
Statements for further information.

The Group has recorded £32.8m of revenue
(2018: £35.7m). There is a risk that revenue may
be fraudulently recorded and may not exist.

Group

Royalty accrual

Refer to Note 1 within the Notes to the Financial
Statements for further information.

The Group has recorded a liability of £0.6m as at
31 March 2019 (31 March 2018: £0.7m) in relation
to royalties for the sale of licensed goods. We focussed
on this area as it is a material provision and there is
judgement in assessing the amount of the provision.

Group

Inventory provisioning

Refer to Note 12 within the Notes to the Financial
Statements for further information.

The Group held £10.9m of inventory as at
31 March 2019 (31 March 2018: £10.0m).
There is a risk that aged inventory may be
difficult to sell.

Group

Classification of exceptional items

Refer to Note 4 within the Notes to the Financial
Statements for further information.

The Group has recorded exceptional items of £0.6m
(31 March 2018: £2.3m) and the Company has
recorded exceptional items of £0.1m (31 March 2018:
£1.9m). These items are considered to be one-off and
exceptional in nature. We focused on this area
because the classification of items as exceptional
requires judgement.

Group and Company

How our audit addressed the key audit matter

We reviewed the revenue recognition policy and found the policy to be appropriate and
consistent with the prior year. For Hornby Hobbies Limited, representing 92% of revenue,
we performed a walkthrough of the revenue process to understand how revenue is
recognised. We performed detailed testing by selecting a sample of transactions and
agreed them to despatch notes and cash receipts to gain assurance over the occurrence
of revenue. This test was performed at a high level of assurance to address the risk of
fraud and gain comfort over the occurrence of the recorded sales transactions. This was
supported by testing a sample of items to price lists and discount agreements to gain
evidence over the accuracy of amounts recorded. We tested sales close to the year end
to shipping documentation to confirm cut off was appropriate. We tested a sample of
manual journals with unusual account combinations to supporting documentation at a
high level of assurance to address the risk of fraud through journals. We performed
analytical procedures on sales for the other territories. Our work did not identify
any exceptions.

We obtained an understanding of the methodology used by the Group for determining
the accrual for royalties in relation to the sale of licensed goods. We agreed the
royalty rate used in the calculations to royalty agreements and agreed the quantities
of goods to which the royalty rate was applied to sales data. We tested payments
made during the year to bank statements. We assessed the appropriateness of the
methodology applied by assessing the prior year accrual against royalty payments
and outcomes from royalty audits during the current year. No issues arose from our
work to suggest that the provision was materially misstated.

We obtained an understanding of the methodology used in the inventory provision
and agreed the values used in the calculation to the aged inventory listing reconciled
to the general ledger. For a sample of stock lines, we tested the aging and that they
had been appropriately categorised for the purposes of calculating the provision.
We then recomputed the inventory provision based on the provisioning methodology,
and reviewed the completeness of the provision by assessing a sample of inventory
aged over one year and un-provided inventory stock lines balances against the sales
plan for those lines. We found that, although some unprovided product lines
were slow-moving, in each case sales plans had been developed and were
being implemented.

In view of the evidence of the execution of sales plans against the aged inventory,
we concluded that the established provisions are appropriate.

We discussed with the Directors and understood the events in the year which gave rise
to items being classified as exceptional. We considered whether the classification of
items was consistent with the Group’s accounting policy and treatment in prior years.
We tested a sample of items to third party support, and based on the nature of the
item, considered whether it might be more appropriate to reflect the costs in the
underlying results. We considered whether the Group has taken a balanced approach
to this area, and reviewed for potential one-off items of income which would require
treatment consistent with one-off items of cost. We also considered the adequacy of
disclosures relating to exceptional items in the financial statements and found them to
be appropriate.

Our testing did not identify any costs that had been inappropriately classified.

Hornby PLC Annual Report and Accounts 2019

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which
they operate.

The Group’s business model is to supply toy and hobby products to the global market through a series of brands. The majority of operations
are performed within the UK trading subsidiary, Hornby Hobbies Limited. There is also a trading Company in the US and sales offices in
France, Germany, Italy and Spain. All entities are managed from one central location in the UK. The scope of our audit includes a full scope
audit of the financial information of Hornby PLC and Hornby Hobbies Limited. Analytical review procedures have been performed on the US
Company and European sales offices. We have also audited consolidation entries. All audit work was performed by the UK audit team.

Materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating 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 financial statements as a whole as follows:

Overall materiality

£310,000 (2018: £400,000).

Group financial statements

How we determined it

5% of three year average underlying loss before tax.

Rationale for
benchmark applied

Based on the benchmarks used in the Annual Report, underlying loss before tax is
the primary measure used by the shareholders in assessing the performance of the
Group, and is a generally accepted auditing benchmark on the basis that the
exceptional items are non-recurring and do not reflect the underlying performance
of the business. This amount has been volatile in recent years with the level of
losses decreasing as management look to improve business performance. We
consider that using a materiality based on an average of underlying loss before
tax is appropriate for users of the accounts, as they are interested in trends in
underlying performance.

Company financial statements

£243,500 (2018: £320,000).

1% of total assets, restricted so
that it does not exceed Group
overall materiality.

The Company is primarily a holding
Company and we believe that total
assets is the primary measure used
by the shareholders in assessing the
performance of the entity.

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £294,500 and £243,500.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £15,000 (Group audit)
(2018: £12,500) and £15,000 (Company audit) (2018: £12,500) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.

Conclusions relating to going concern

ISAs (UK) require us to report to you when:

• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about
the Group’s and Company’s ability to continue to adopt the going concern basis of accounting for a period of at least 12 months
from the date when the financial statements are authorised for issue.

We have nothing to report in respect of the above matters.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group’s and Company’s
ability to continue as a going concern. For example, the terms on which the United Kingdom may withdraw from the European Union are
not clear, and it is difficult to evaluate all of the potential implications on the Group’s trade, customers, suppliers and the wider economy.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportIndependent Auditors’ Report to the Members
of Hornby PLC continued

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on
the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK) require us also to report certain
opinions and matters as described below.

Strategic Report and Directors’ Report

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 March 2019 is consistent with the financial statements and has been prepared in accordance with applicable
legal requirements.

In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report.

Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements

As explained more fully in the Statement of Directors’ Responsibilities set out on page 22, the Directors are responsible for the preparation of
the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors
are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.

Hornby PLC Annual Report and Accounts 2019

Use of this report

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.

OTHER REQUIRED REPORTING

Companies Act 2006 exception reporting

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

• certain disclosures of Directors’ remuneration specified by law are not made; or

• the Company financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Graham Lambert (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors
Gatwick

12 June 2019

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic ReportGroup and Company Statements of Comprehensive Income

for the Year Ended 31 March 2019

Group

Company

Revenue

Cost of sales

Gross profit

Distribution costs

Selling and marketing costs

Administrative expenses

Other operating expenses

Operating (loss)/profit before Exceptional items

Exceptional items

Operating loss

Finance income

Finance costs

Net finance expense

Share of profit of investments accounted for using the equity method

Loss before taxation

Income tax credit

Loss for the year after taxation

Other comprehensive income

Items that may be subsequently reclassified to profit or loss:

Cash flow hedges, net of tax

Currency translation (losses)/gains

Other comprehensive income/(loss) 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 36 to 67 form part of these accounts.

Note

2019
£’000

32,759

(19,348)

13,411

(6,177)

(6,826)

(4,812)

(226)

(4,630)

(593)

(5,223)

(177)

(170)

2018
£’000

35,651

(21,900)

13,751

(7,224)

(7,647)

(6,021)

(437)

(7,578)

(2,292)

(9,870)

(218)

(211)

(5,312)

(10,066)

–

212

(5,312)

(9,854)

292

(45)

247

(353)

(54)

(407)

(5,065)

(10,261)

(4.24)p

(10.13)p

2019
£’000

1,104

–

1,104

–

2018
£’000

1,493

–

1,493

–

(1,078)

(1,416)

–

(103)

(77)

175

(217)

(42)

(38)

–

(38)

–

(1,889)

(1,812)

175

(216)

(41)

(1,838)

–

(1,838)

–

(76)

(1,914)

Hornby PLC Annual Report and Accounts 2019

Group and Company Statements of Financial Position

as at 31 March 2019

Assets

Non-current assets

Goodwill

Intangible assets

Property, plant and equipment

Investments

Deferred tax assets

Current assets

Inventories

Trade and other receivables

Derivative financial instruments

Cash and cash equivalents

Liabilities

Current liabilities

Borrowings

Trade and other payables

Derivative financial instruments

Net current assets

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

Accumulated losses

Total equity

Group

2019
£’000

2018
£’000

Company

2019
£’000

2018
£’000

Note

4,563

3,190

3,783

1,696

2,030

4,564

3,368

4,489

1,615

2,030

–

23,381

23,300

–

15,262

16,066

23,381

23,300

10,860

7,180

704

18,769

(1,893)

(5,472)

(156)

(7,521)

11,248

(561)

(150)

(711)

10,030

5,949

–

3,878

19,857

–

(4,486)

(423)

(4,909)

14,948

–

(150)

25,799

30,864

1,253

38,587

(1,470)

(131)

1,688

(14,183)

25,799

1,253

38,587

(1,425)

(423)

1,688

(8,871)

30,864

–

33,506

33,529

–

33,507

33,533

–

(265)

–

(265)

–

(159)

–

(159)

33,242

33,374

(5,759)

(5,849)

–

(5,759)

50,864

1,253

38,587

(1,143)

–

19,145

(7,033)

50,864

–

(5,849)

50,825

1,253

38,587

(1,220)

–

19,145

(6,995)

50,825

The Company made a total comprehensive profit for the year of £39,000 (2018: £1,914,000 loss).

The notes on page 36 to 67 form part of these accounts. The financial statements on pages 34 to 67 were approved by the Board of
Directors on 12 June and were signed on its behalf by:

Kirstie Gould

Director

Registered Company Number: 01547390

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic Report

Group and Company Statements of Changes in Equity

for the Year Ended 31 March 2019

Group

Share
capital
£’000

Share
premium
£’000

Capital
redemption
reserve
£’000

Translation
reserve
£’000

Hedging
reserve
£’000

Other
reserves
£’000

Retained
earnings/
(accumulated
losses)
£’000

Total
equity
£’000

Balance at 31 March 2017 and 1 April 2017

846

27,445

(1,371)

(70)

1,688

1,070 29,663

Loss for the year

Other comprehensive expense for the year

Total comprehensive expense for the year

Transactions with owners

–

Net proceeds from issue of ordinary shares

407

11,142

Share-based payments (note 20)

Total transactions with owners

–

407

11,142

–

(54)

–

(353)

–

(9,854)

–

(407)

(9,854)

(10,261)

– 11,549

(87)

(87) 11,462

Balance at 31 March and 1 April 2018

1,253

38,587

(1,425)

(423)

1,688

(8,871) 30,864

Loss for the year

Other comprehensive (expense)/income for the year

Total comprehensive (expense)/income for the year

–

(45)

–

292

–

(5,312)

–

247

(5,312)

(5,065)

Balance at 31 March 2019

1,253

38,587

(1,470)

(131)

1,688

(14,183) 25,799

Company

Share
capital
£’000

Share
premium
£’000

Capital
redemption
reserve
£’000

Translation
reserve
£’000

Other
reserves
£’000

Retained
earnings/
(accumulated
losses)
£’000

Total
equity
£’000

Balance at 31 March 2017 and 1 April 2017

846

27,445

(1,144) 19,145

(5,070) 41,277

Loss for the year

Other comprehensive expense for the year

Total comprehensive expense for the year

Transactions with owners

Net proceeds from issue of ordinary shares

Share-based payments

Total transactions with owners

–

407

11,142

–

407

11,142

–

(76)

–

(1,838)

–

(76)

(1,838)

(1,914)

– 11,549

(87)

(87) 11,462

Balance at 31 March and 1 April 2018

1,253

38,587

(1,220) 19,145

(6,995) 50,825

Loss for the year

Other comprehensive income for the year

Total comprehensive income/(expense) for the year

–

(38)

–

(38)

Balance at 31 March 2019

1,253

38,587

(1,143) 19,145

(7,033) 50,864

The notes on page 36 to 67 form part of these accounts.

Hornby PLC Annual Report and Accounts 2019

Group and Company Cash Flow Statements

for the Year Ended 31 March 2019

Cash flows from operating activities

Cash (used in)/generated from operations

Interest paid

Tax received

Repayments of loans and cash settled Share Based Payments

Note

Group

2019
£’000

Company

2018
£’000

2019
£’000

(2,805)

(116)

–

(5,489)

(218)

(136)

(217)

–

Net cash (used in)/generated from operating activities

(2,921)

(5,793)

(165)

Cash flows from investing activities

Acquisition of associate

Proceeds from sale of property, plant and equipment

Purchase of property, plant and equipment

Purchase of intangible assets

Interest received

Net cash (used in)/generated from investing activities

Cash flows from financing activities

Proceeds from issuance of ordinary shares

Share issue costs

Advances to subsidiary undertakings

Net proceeds from ABL facility

Proceeds from shareholder loan

Net cash generated from/(used in) financing activities

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Effect of exchange rate movements

Cash and cash equivalents

Cash and cash equivalents consist of:

Cash and cash equivalents

Cash and cash equivalents at the end of the year

–

(1,600)

(2,144)

(1,648)

(512)

(146)

(2,649)

(3,383)

–

1,893

500

2,393

(3,177)

3,878

704

12,000

(451)

–

11,549

2,373

1,498

3,878

–

175

–

(13)

–

(13)

(3)

–

2018
£’000

(640)

(198)

(136)

(924)

(1,600)

–

175

(1,425)

12,000

(451)

(9,202)

–

2,347

(2)

–

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic Report

Notes to the Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES

Accounting policies for the year ended 31 March 2019

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 2019 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.

Going concern

The Group has in place a £12 million asset based lending facility with PNC through June 2023 and a rolling three year £6 million loan
facility available with its main shareholder Phoenix Asset Management Partners Limited.

The Group has prepared trading and cash flow forecasts for a period of three years, which have been reviewed and approved by the
Board. On the basis of these forecasts, the facilities described above and after detailed review of trading, financial position and cash flow
models, the Directors have a reasonable expectation that the Group and Company have adequate resources to continue in operational
existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis of accounting in preparing the
annual financial statements.

Basis of consolidation

Subsidiaries are all entities over which the Group has control. The Group controls an entity where the Group is exposed to, or has the rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the
entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date
that control ceases.

The acquisition 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, liabilities incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition. Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination
are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost
of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are
also eliminated but considered an impairment indicator of the asset concerned. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the Group.

Adoption of new and revised standards

The Group applies for the first time IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’.

IFRS 9 ‘Financial Instruments’

IFRS 9 ‘Financial Instruments’ was issued in July 2014 to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’ and has been
endorsed by the EU. The standard is effective for accounting periods beginning on or after 1 January 2018 and has been adopted by the
Group. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting.

In adopting IFRS 9, the only changes made from the previous reporting period is in relation to the impairment of financial assets. The Group
now reviews the amount of credit loss associated with its trade receivables, intercompany receivables and other receivables based on forward
looking estimates that consider current and forecast credit conditions as opposed to relying on past historical default rates. The standard was
adopted retrospectively however there was no quantitative impact arising from adoption as at 31 March 2018 or 31 March 2019.

Hornby PLC Annual Report and Accounts 2019

IFRS 15 ‘Revenue from Contracts with Customers’

IFRS 15 is effective for periods commencing on or after 1 January 2018. The standard was endorsed by the EU during 2016. IFRS 15 changes
how and when revenue is recognised from contracts with customers. The Group has adopted IFRS 15 in accounting for sales returns and records
a refund liability and a returns asset. The resulted in a reclass of £165,000 (2018: £174,000) from Provisions to Trade and other payables.

IFRS 16 ‘Leases’

The new leasing standard will be adopted with effect from 1 April 2019. IFRS 16 replaces IAS 17 ‘Leases’, with the key change being that
lessee accounting will eliminate the IAS 17 distinction between operating leases and finance leases, treating most leases in the same manner
as finance leases under IAS 17.

Where an arrangement meets the IFRS 16 definition of a lease and we act as a lessee, at commencement a loan obligation for future lease
payables will be recognised together with an equal value non-current asset representing the right to use the leased item. This will have no
impact on net assets at the commencement date on 1 April 2019, but due to the different methods of unwinding the asset and liability,
over time, a difference will arise.

Lease costs will be recognised in the form of depreciation of the right-of-use asset and interest on the lease liability, which may impact the
phasing of operating profit and profit before tax, compared to the cost profiles and presentation in the income statement under IAS 17.
This will also impact the classification of associated cash flows in the Consolidated Cash Flow Statement.

We intend to apply the modified retrospective basis when adopting the standard, meaning that the carrying amount of the initial right-of-use
assets will equal the respective lease liabilities for all leases entered into before 1 April 2019; therefore, no restatement of prior years is
required. The impact of the change in accounting standard on each line item in the financial statements will be provided.

If we had implemented IFRS 16 on 1 April 2018, using estimated discount rates based on lease specific incremental borrowing rates,
the impact of applying the modified retrospective basis would be as follows:

Income statement

Administrative expenses would be broadly consistent, as a result of the lease expense of £810,000 being replaced by depreciation on the
right-of-use asset of £733,000. Finance costs would increase by £141,000 to reflect the current year unwind of the discounted lease liability.

Balance sheet

At 31 March 2019, a right-of-use asset of £2.9 million would be recognised as a non-current asset, along with a lease liability of the
same amount.

Cash flow statement

The lease payments would be reclassified from operating activities to financing activities.

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or
future reporting periods.

Revenue recognition

IFRS 15 establishes a new comprehensive framework that will apply to revenue arising from contracts with customers. Under IFRS 15,
revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring
goods or services to a customer. The Group’s revenue is mostly from product sales. Revenue recognition has not been impacted by the
adoption of IFRS 15 and method of recognition is detailed as follows:

(a) Sale of goods

Sales of goods are recognised when a Group entity has delivered products to the customer. The customer is either a trade customer or the
consumer when sold through Hornby concessions in various retail outlets, or via the internet.

(b) Royalty income

Royalty income is recognised at the later of when the performance obligation is satisfied and when the sales or usage occurs.

Hornby PLC Annual Report and Accounts 2019

OverviewFinancial StatementsGovernanceStrategic Report1. SIGNIFICANT ACCOUNTING POLICIES continued

The Group establishes a refund liability (included in trade and other payables) at the period end that reduces revenue in anticipation of
customer returns of goods sold in the period. The Group also recognises a right to the returned goods (included in other current assets)
for the products expected to be returned. Accumulated experience is used to estimate such returns at the time of sale at a portfolio level
(expected value method).

(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. Revenue from management services are recognised in the accounting period
in which the services are rendered.

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.

Associate with equity accounting

The investment in December 2017 in 49% of LCD Enterprises Limited is included in these accounts using the Equity Method.

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity
method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor’s share of
the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously
recognised in other comprehensive income is reclassified to profit and loss where appropriate.

The Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share of post-acquisition movements in
other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the
investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured
receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf
of the associate.

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is
the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying
value and recognises the amount adjacent to ‘share of profit/(loss) of associates’ in the income statement.

Gains resulting from upstream and downstream transactions between the Group and its associate are recognised in the Group’s financial
statements only to the extent of unrelated investor’s interests in the associates. Unrealised losses are eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Any dilution gains and losses arising in investments in associates are recognised in the
income statement.

38
38

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continuedGoodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired subsidiary at the date of acquisition.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are
not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill
is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups
of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to
operating segment. Goodwill is recorded in the currency of the cash generating unit to which it is allocated.

Intangibles

Other intangibles include brands, customer lists and computer software. They are recognised initially at fair value determined in accordance
with appropriate valuation methodologies and subjected to amortisation and annual impairment reviews, as follows:

(a) Brand names

Brand names, acquired as part of a business combination, are capitalised at fair value as at the date of acquisition. They are carried at their
fair value less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to
allocate the fair value of brand names over their estimated economic life of 15 to 20 years. Brand names have been valued on a ‘relief from
royalty’ basis.

(b) Customer lists

Customer lists, acquired as part of a business combination, are capitalised at fair value as at the date of acquisition. They are carried at their
fair value less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line method to
allocate the fair value of customer relationships over their estimated economic life of ten years. Customer lists have been valued according to
discounted incremental operating profit expected to be generated from each of them over their useful lives.

Computer software expenditure is capitalised at the value at the date of acquisition and depreciated over a useful economic life of four to six
years.

Property, plant and equipment

Land and buildings are shown at cost less accumulated depreciation. Assets revalued prior to the transition to IFRS use this valuation as
deemed cost at this date. Other property, plant and equipment are shown at historical cost less accumulated depreciation. Cost includes
the original purchase price of the asset and the costs attributable to bringing the asset to its working condition for its intended use.

Depreciation is provided at rates calculated to write off the cost or valuation of each asset, on a straight-line basis (with the exception of
tools and moulds) over its expected useful life to its residual value, as follows:

Plant and equipment
Motor vehicles

– five to ten years
– four years

Tools and moulds are depreciated at varying rates in line with the related product production on an item-by-item basis up to a maximum
of four years.

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 in associates
are recognised using the equity method of accounting, where the investments are initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the profits or losses of the investee. Dividend income is shown separately in the Statement of Comprehensive Income.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

39
39

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report
1. SIGNIFICANT ACCOUNTING POLICIES continued

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 statements of financial position when the Group or
Company becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
To establish the provision for impairment, the Group applies IFRS 9 simplified approach to measuring expected credit losses which
uses a lifetime expected loss allowance for all trade receivable.

To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days
past due. The expected loss rates are based on the payment profiles of sales over a period of 12 months before 31 March 2019 and
the corresponding historical credit losses experienced within this period.

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.

Refund liability

Provisions for sales returns are recognised for the products expected to be returned. Accumulated experience is used to estimate such returns
at the time of sale at a portfolio level (expected value method).

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.

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.

40
40

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continuedTrade payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

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.

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 23.

The Group also announced a profit share scheme for all employees below Executive level. This scheme commences with a 5% bonus for
all when the Group breaks even. Thereafter, 15% of all Group operating profit will be shared between the employees every year.

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.

Leases

The Group enters into operating leases only. Leases classed as operating leases are expensed on a straight-line basis to the Statement of
Comprehensive Income over the lease term.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

41
41

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report1. SIGNIFICANT ACCOUNTING POLICIES continued

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 US dollars. It enters into forward currency
contracts to hedge the cash flows of its product sourcing operation (i.e. it buys US dollars forwards 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 US dollars. The Company 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, 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. The
loan to the branch in Spain is classified as a long-term loan however repayable on a shorter timescale than those of the other subsidiaries
and therefore the exchange gains or losses are taken to Statement of Comprehensive Income.

(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 a revolving credit facility,
bank overdrafts and a fixed-term loan agreement.

The Group manages its credit risk through a combination of internal credit management policies and procedures.

(d) Liquidity risk

At 31 March 2019 the UK had a £12 million Asset Based Lending facility with PNC Credit Limited and a £6 million loan facility with
Phoenix Asset Management Partners. The funding 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, 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 at the end of each reporting period. 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 accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument and,
if so the nature of the item being hedged.

(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 the
hedging reserve within equity and through the Statement of Comprehensive Income. The gain or loss relating to the ineffective portion is
recognised immediately in the Statement of Comprehensive Income within operating expenses.

Amounts accumulated in Other Comprehensive Income 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 Other Comprehensive Income are transferred from Other Comprehensive Income 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 in income 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 is immediately
transferred to the Statement of Comprehensive Income.

42
42

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued(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 approximate to their book values.

The fair values of the derivative financial instruments used for hedging purposes are disclosed in note 17.

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 and disclosed in Other Comprehensive Income 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 recognised in the Statement of Comprehensive Income relating to foreign currency loans and other foreign
exchange adjustments are included within operating profit.

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 Other
Comprehensive Income.

Dividend distribution

Final dividends are recorded in the Statement 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.

Critical estimates and judgements in applying the accounting policies

The Group’s estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions:

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 have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are addressed below.

(a) Impairment of goodwill, intangibles and investments

The Group tests annually whether any goodwill, investment or intangible asset has suffered any impairment. The recoverable amounts of
cash-generating units (CGUs) have been determined based on value-in-use calculations. The critical areas of estimation 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 forecast margin growth rate, the growth rate in perpetuity of the cash flows and the forecast operating profits of the cash generating units.
The judgements used within this assessment are set out within note 8.

Other estimates and assumptions:

(a) Inventory provision

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.

(b) Debtors provision

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

43
43

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report1. SIGNIFICANT ACCOUNTING POLICIES continued

The fair value of the financial derivatives is determined by the mark to market value at the year end date with any movement in fair value
going through Other Comprehensive Income.

(d) Refund liability and refund asset

The refund liability is based on accumulated experience of returns at the time of sale at a portfolio level (expected value method). Because the
number of products returned has been steady for years, it is highly probable that a significant reversal in the cumulative revenue recognised will
not occur. The validity of this assumption and the estimated amount of returns are reassessed at each reporting date. The right to the returned
goods is measured by reference to the carrying amount of the goods.

(e) Provisions for royalty payments

The provision for royalty payments is based on an estimate of royalty payments due as a percentage of total sales. This estimate is checked
on a regular basis for accuracy against the ERP system which calculates royalties due on actual sales of licensed product at the point of sale.

Critical judgements in applying the Group’s accounting policies:

(a) Recognition of deferred tax on losses

Deferred tax assets are recognised for deductible temporary differences, carry-forward of unused tax assets and unused tax losses,
to the extent that it is probable that the 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 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.

(b) Going concern

The Directors apply judgement to assess whether it is appropriate for the Group to be reported as a going concern by considering
the business activities and the Group’s principal risks and uncertainties. Details of the consideration made are included within the
Directors’ Report (page 22) and the basis of preparation (page 36).

A number of assumptions and estimates are involved in arriving at this judgement including management’s projections of future trading
performance and expectations of the external economic environment.

Other judgements in applying the Group’s accounting policies:

(a) Equity accounting for LCD Enterprises Limited

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the Group’s
share of the change in net assets of LCD Enterprises Limited since the date of the acquisition.

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, USA,
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
32 and its assets and liabilities given in the Company Statement of Financial Position on page 33. Other Company information is provided
in the other notes to the accounts.

44
44

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continuedYear ended 31 March 2019

UK
£’000

USA
£’000

Revenue

– External

25,867

2,867

– Other segments

Operating (loss)/profit

Finance income

– External

– Other segments

Finance costs

– External

– Other segments

Share of profit of investments accounted for
using the equity method

2,753

(4,142)

–

(883)

620

(177)

(316)

–

Rest of
Europe
£’000

Total
Reportable
Segments
£’000

Italy
£’000

Intra
Group
£’000

Group
£’000

872

2,250

32,759

–

32,759

–

2,753

(2,753)

–

Spain
£’000

903

–

(138)

–

141

–

(98)

(5,223)

–

761

(177)

(761)

(217)

(154)

(74)

–

(Loss) before taxation

(3,927)

(883)

(179)

(151)

(172)

(5,312)

Taxation

(Loss) for the year

Segment assets

–

(3,927)

(883)

(179)

(151)

(172)

(5,312)

47,871

1,973

5,925

3,357

4,419

63,545

Less intercompany receivables

(18,721)

(60)

(5,808)

(3,567)

(3,644)

(31,800)

Add tax assets

Total assets

Segment liabilities

2,060

31,210

20,022

–

1,913

4,321

–

117

(64)

(274)

2,030

809

33,775

4,778

4,214

6,588

39,923

Less intercompany payables

(12,344)

(4,236)

(4,716)

(4,019)

(6,482)

(31,797)

Add tax liabilities

Total liabilities

Other segment items

Capital expenditure

Depreciation

Net foreign exchange on intercompany loans

Amortisation of intangible assets

(150)

7,528

2,620

2,857

(90)

690

–

(20)

–

195

–

106

(150)

7,976

–

2,656

2,855

(90)

690

All transactions between Group companies are on normal commercial terms.

–

(761)

–

761

–

(5,223)

–

(177)

–

(5,312)

–

(5,312)

63,545

(31,800)

2,030

33,775

39,923

(31,797)

(150)

7,976

2,656

2,855

(90)

690

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

45
45

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report

Rest of
Europe
£’000

Total
Reportable
Segments
£’000

Intra
Group
£’000

Group
£’000

2,635

35,651

–

35,651

–

1,326

(1,326)

–

(746)

–

746

–

(9,870)

–

(218)

–

(10,066)

212

(9,854)

63,799

(30,086)

2,210

35,923

34,818

(30,085)

326

5,059

1,794

2,821

114

992

(87)

2. SEGMENTAL REPORTING continued

Year ended 31 March 2018

Revenue

– External

28,497

2,461

UK
£’000

USA
£’000

– Other segments

Operating loss

Finance cost

– External

– Other segments

Finance income

– External

– Other segments

Share of profit of investments accounted for
using the equity method

(Loss) before taxation

Taxation

(Loss) for the year

Segment assets

Less intercompany receivables

Add tax assets

Total assets

Segment liabilities

Spain
£’000

940

–

(124)

–

(216)

–

(340)

(1)

(341)

Italy
£’000

1,118

–

(1)

–

128

–

(153)

–

(26)

–

(26)

1,326

(9,084)

–

(538)

618

(218)

(303)

–

(8,965)

(538)

400

–

(8,565)

(538)

(123)

(9,870)

–

(74)

–

(197)

(187)

(384)

746

(218)

(746)

(10,066)

212

(9,854)

48,573

1,072

6,066

3,433

4,655

63,799

(16,691)

2,230

34,112

17,145

(55)

–

1,017

2,080

(5,901)

(3,640)

(3,799)

(30,086)

–

165

(65)

(272)

901

2,210

35,923

4,743

4,148

6,702

34,818

Less intercompany payables

(12,769)

(2,017)

(4,655)

(4,066)

(6,578)

(30,085)

Add tax liabilities

Total liabilities

Other segment items

Capital expenditure

Depreciation

Net foreign exchange on intercompany loans

Amortisation of intangible assets

Share-based payment

326

4,702

1,765

2,767

114

992

(87)

–

124

326

5,059

–

1,794

2,821

114

992

(87)

All transactions between Group companies are on normal commercial terms.

46
46

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued

3. NET FINANCE EXPENSE

Finance costs:

Interest expense on borrowings

Interest expense on shareholder loan

Interest expense on intercompany borrowings

Finance income:

Bank interest

Interest income on intercompany loans

Group

2019
£’000

(116)

(61)

–

(177)

–

2018
£’000

(218)

–

(218)

–

Net finance expense

(170)

(211)

4. LOSS BEFORE TAXATION

Company

2019
£’000

2018
£’000

–

(217)

–

175

(42)

–

(216)

–

175

(41)

The following items have been included in arriving at loss before taxation:

Staff costs (note 24)

Inventories:

Group

2019
£’000

Company

2018
£’000

2019
£’000

2018
£’000

7,042

8,994

519

1,366

– Cost of inventories recognised as an expense (included in cost of sales)

15,464

17,252

– Stock provision

Depreciation of property, plant and equipment:

– Owned assets

Profit/(loss) on disposal of fixed assets

Other operating lease rentals payable:

– Plant and machinery

– Property

Repairs and maintenance expenditure on property, plant and equipment

Research and development expenditure

Impairment of trade receivables

Share-based payment (credit)/charge

Other operating expenses/(income):

– Foreign exchange on trading transactions

– Net impact of foreign exchange on intercompany loans

– Amortisation of intangible assets – brands and customer lists

(44)

2,855

2,821

(9)

773

1,011

(290)

–

(120)

227

717

114

994

432

(87)

221

(114)

314

–

202

–

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

47
47

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report

4. LOSS BEFORE TAXATION continued

Exceptional items comprise:

– Restructuring costs

– Refinancing

– Relocation

– Costs of EGM and Mandatory Offer

– Impairment of investment

Group

2019
£’000

Company

2018
£’000

2019
£’000

2018
£’000

172

372

–

1,823

–

399

–

536

–

381

972

593

2,292

103

1,889

The exceptional items totalling £593,000 (2018: £2,292,000) include restructuring costs relating to redundancy costs and exit of Non-
Executive Director, professional fees relating to refinance of the Group and relocation costs relating to the move back to the Margate site.

Services provided by the Company’s auditors 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

Group

2019
£’000

Company

2018
£’000

2019
£’000

2018
£’000

104

–

In the current financial year the level of non-audit fees was within the 1:1 ratio to audit fees as per Audit Committee policy.

5. INCOME TAX (CREDIT)/CHARGE

Analysis of tax (credit)/charge in the year

Current tax

Adjustments in respect of prior years

Deferred tax (note 18)

Total tax credit to the loss before tax

48
48

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Group

2019
£’000

Company

2018
£’000

2019
£’000

2018
£’000

–

(212)

–

(212)

–

Notes to the Financial Statements continuedThe tax for the year differs to the standard rate of corporation tax in the UK of 19%. Any differences are explained below:

Loss before taxation

Loss on ordinary activities multiplied by rate of
Corporation tax in UK of 19% (2018: 19%)

Effects of:

Adjustments to tax in respect of prior years

Permanent differences

Non taxable income

Difference on overseas rates of tax

Deferred tax not recognised

Remeasurement of deferred tax

Total taxation

Group

2019
£’000

2018
£’000

(5,312)

(10,066)

(1,009)

(1,913)

–

(3)

(15)

(49)

(212)

(19)

–

(131)

1,069

2,063

–

(212)

Company

2019
£’000

(38)

(7)

–

(15)

–

2018
£’000

(1,838)

(349)

–

205

–

144

–

The Company’s profits for this accounting year are taxed at an effective rate of 19%. The UK corporation tax rate is due to decrease further
to 17% on 1 April 2020.

UK deferred tax balances have been restated in these accounts and carried forward at a rate of 17%, being the current rate substantively
enacted for periods from 1 April 2020 onwards.

Unrecognised deferred tax relates to UK and overseas subsidiaries and is not recognised due the Directors taking the view that it would be
inappropriate to recognise further deferred tax assets relating to losses until taxable profits are being delivered by the Group. More detail
can be found in Note 18.

6. DIVIDENDS

No interim or final dividends were paid in relation to the year ended 31 March 2018 and no interim dividend has been paid in relation to
the year ended 31 March 2019. The Directors are not proposing a final dividend in respect of the financial year ended 31 March 2019.

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.

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 2019. For the year ended 31 March 2019, there
was no difference in the weighted average number of shares used for basic and diluted net loss per ordinary because their inclusion
would be anti-dilutive.

The underlying loss per share is shown to present a clearer view of the trading performance of the business. Management identified
the following items, whose inclusion in performance distorts underlying trading performance: net foreign exchange (gains)/losses on
intercompany loans which are dependent on exchange rate fluctuations and can be volatile, and the amortisation of intangibles which
result from historical acquisitions. Additionally, exceptional items including relocation, refinance and restructuring costs are one off items
and therefore have also been added back in calculating underlying loss per share.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

49
49

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report7. LOSS PER SHARE continued

Reconciliations of the loss and weighted average number of shares used in the calculations are set out below.

2019

(Loss)/
earnings
£’000

Weighted
average number
of shares
’000s

Per-share
amount
pence

(Loss)/
earnings
£’000

2018

Weighted
average number
of shares
’000s

Per-share
amount
pence

Reported

Basic loss per share

Loss attributable to ordinary shareholders

(5,312)

125,261

(4.24)

(9,854)

97,288

(10.13)

Effect of dilutive securities

Diluted loss per share

Underlying

(5,312)

125,261

(4.24)

(9,854)

97,288

(10.13)

Loss attributable to ordinary shareholders

(5,312)

125,261

(4.24)

(9,854)

97,288

(10.13)

Amortisation of intangibles

Restructuring costs

Extraordinary General Meeting and Mandatory Offer

Refinancing

Relocation

Net foreign exchange translation adjustments

Underlying basic loss/EPS

Underlying diluted loss/EPS

184

–

140

302

–

(4,573)

125,261

0.15

0.03

–

0.11

0.24

0.06

(3.65)

254

1,477

323

–

(93)

(7,836)

–

97,288

0.26

1.52

0.33

0.06

–

(0.10)

(8.05)

The above numbers used to calculate the EPS for the year ended 31 March 2019 and 31 March 2018 have been tax effected at the rate
of 19%.

8. GOODWILL

Group

Cost

At 1 April 2018

Exchange adjustments

At 31 March 2019

Aggregate impairment

At 1 April 2018 and 31 March 2019

Net book amount at 31 March 2019

Cost

At 1 April 2017

Exchange adjustments

At 31 March 2018

Aggregate impairment

At 1 April 2017 and 31 March 2018

Net book amount at 31 March 2018

Net book amount at 31 March 2017

The Company has no goodwill.

50
50

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

£’000

13,055

(1)

13,054

8,491

4,563

13,045

13,055

8,491

4,564

4,554

Notes to the Financial Statements continued

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 2019 and 31 March 2018 is as follows:

Group

At 31 March 2019

At 31 March 2018

£’000

3,992

USA

£’000

France
£’000

364

365

Germany
£’000

198

Total

£’000

4,563

4,564

Goodwill allocated to the above cash-generating units of the Group has been measured based on benefits 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 was based on expected levels of activity given
results to date, together with expected economic and market conditions. Budgeted operating profit was calculated based upon
management’s expectation of operating costs appropriate to the business as reflected in the New Business Plan.

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 2020/three
year business plan for the year ending 31 March 2022. Cash flows beyond the three-year period are extrapolated using an estimated 2%
year on year growth rate. The cash flows were discounted using a pre-tax discount rate of 12.3% (2018: 10.9%) which management believes
is appropriate for all territories.

The key assumptions used for value-in-use calculations for the year ended 31 March 2019 are as follows:

Group

Gross Margin1

Growth rate to perpetuity2

UK
(Corgi)

61.3%

2.0%

UK
(Airfix &
Humbrol)

62.8%

2.0%

France

62.6%

2.0%

Spain

n/a

1 Average of the variable yearly gross margins used over the period 19’20 to 25’26.

2 Weighted average growth rate used to extrapolate cash flows beyond the budget period.

The key assumptions used for value-in-use calculations for the year ended 31 March 2018 are as follows:

Group

Gross Margin1

Growth rate to perpetuity2

(Corgi)

61.1%

2.0%

UK
(Airfix &
Humbrol)

63.3%

2.0%

France

62.2%

2.0%

Spain

n/a

1 Average of the variable yearly gross margins used over the period 18’19 to 22’23.

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.

Italy

n/a

Italy

n/a

Germany

57.2%

2.0%

Germany

56.9%

2.0%

For the UK CGU, the recoverable amount calculated based on value in use exceeded carrying value by £16.4 million. A reduction of the
average gross margin to respectively 55.6% for Corgi and 51.0% for Airfix/Humbrol, or a rise in discount rate to respectively 19.7% for
Corgi and 58.0% for Airfix/Humbrol would remove the remaining headroom.

For the France CGU, the recoverable amount calculated based on value in use exceeded carrying value by £9.5 million. A reduction of
the average gross margin to 13.9%, or a rise in discount rate to 200.2% would remove the remaining headroom.

For the Germany CGU, the recoverable amount calculated based on value in use exceeded carrying value by £7.5 million. A reduction
of the average gross margin to 16.2%, or a rise in discount rate to 263.7% would remove the remaining headroom.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

51
51

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report9. INTANGIBLE ASSETS

Group

Intangible assets

Cost

At 1 April 2018

Additions

At 31 March 2019

Accumulated amortisation

At 1 April 2018

Charge for the year

At 31 March 2019

Net book amount at 31 March 2019

Group

Intangible assets

Cost

At 1 April 2017

Additions

At 31 March 2018

Accumulated amortisation

At 1 April 2017

Charge for the year

At 31 March 2018

Net book amount at 31 March 2018

Brand names
£’000

Customer lists
£’000

Computer
software
£’000

Total

£’000

4,914

1,415

–

4,914

1,415

2,758

227

2,985

1,929

1,415

–

1,415

–

2,701

512

3,213

1,489

463

1,952

1,261

9,030

512

9,542

5,662

690

6,352

3,190

Brand names
£’000

Customer lists
£’000

Computer
software
£’000

Total

£’000

4,914

1,415

–

4,914

1,415

2,526

232

2,758

2,156

1,333

1,415

–

2,555

146

2,701

811

678

1,489

1,212

8,884

146

9,030

4,670

992

5,662

3,368

All amortisation charges in the year have been charged in other operating expenses. The Company held no intangible assets.

52
52

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued

10. PROPERTY, PLANT AND EQUIPMENT

Group

Cost

At 1 April 2018

Exchange adjustments

Additions at cost

Disposals

At 31 March 2019

Accumulated depreciation

At 1 April 2018

Exchange adjustments

Charge for the year

Disposals

At 31 March 2019

Net book amount at 31 March 2019

Plant and
equipment

£’000

Motor Vehicles
£’000

Tools and moulds

£’000

Total

£’000

1,567

300

(303)

1,575

1,175

168

(303)

1,046

529

–

63,252

64,853

–

1,825

–

2,144

(303)

65,077

66,706

59,155

60,364

–

2,685

–

61,840

3,237

2,855

(303)

62,923

3,783

Depreciation is charged in the Group’s Statement of Comprehensive Income within Administrative expenses.

Group

Cost

At 1 April 2017

Exchange adjustments

Additions at cost

Disposals

At 31 March 2018

Accumulated depreciation

At 1 April 2017

Exchange adjustments

Charge for the year

Disposals

At 31 March 2018

Net book amount at 31 March 2018

Net book amount at 31 March 2017

The Company does not hold any property, plant and equipment.

Plant and
equipment

£’000

Motor Vehicles
£’000

Tools and moulds

£’000

Total

£’000

4,882

198

61,672

66,752

(14)

(3,358)

1,567

4,291

(8)

237

(3,345)

1,175

392

591

(4)

–

(160)

–

1,591

(11)

(18)

1,648

(3,529)

63,252

64,853

196

56,582

61,069

(2)

–

(160)

–

2,584

(11)

59,155

4,097

5,090

(10)

2,821

(3,516)

60,364

4,489

5,683

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

53
53

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report

11. INVESTMENTS

Group

The movements in the net book value of interests in subsidiary undertakings are as follows:

At 1 April 2017

Acquisition of 49% of LCD Enterprises

Share of profit of investments accounted for using the equity method

At 31 March and 1 April 2018

Share of profit of investments accounted for using the equity method

At 31 March 2019

Company

The movements in the net book value of interests in subsidiary undertakings are as follows:

At 1 April 2018

Share of profit of investments accounted for using the equity method

At 31 March 2019

At 1 April 2017

Capital contribution relating to share-based payment

Net increase in loans to subsidiary undertaking

Impairment of investment in subsidiary undertakings

At 31 March 2018

Interest was charged on loans to subsidiary undertakings at sterling three-month Libor + 3.6%.

Loans are unsecured and exceed five years’ maturity.

Interests in
subsidiary
undertakings
at valuation

£’000

–

1,600

1,615

1,696

Interests in
subsidiary
undertakings
at valuation

£’000

Loans to
subsidiary
undertakings
at cost
£’000

Total

£’000

18,466

4,834

23,300

18,547

17,823

1,600

(972)

–

4,834

–

23,381

22,657

1,600

(972)

18,466

4,834

23,300

54
54

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continuedGroup subsidiary undertakings

Details of the subsidiaries of the Group are set out below. Hornby Hobbies Limited. is engaged in the development, design, sourcing and
distribution of models. Hornby America Inc., Hornby Italia s.r.l., Hornby France S.A.S., Hornby España S.A. and Hornby Deutschland
GmbH are distributors of models. Hornby Industries Limited and H&M (Systems) Limited are dormant companies. All subsidiaries are held
directly by Hornby PLC.

Country of incorporation, registration and business

Hornby Hobbies Limited

Westwood, Margate, Kent CT9 4JX, UK

Hornby America Inc.

3900 Industry Dr E, Fife, WA 98424, USA

Description of
shares held

Ordinary shares

Hornby España S.A

C/Federico Chueca, S/N, E28806 ALCALA DE HENARES Spain

Ordinary shares

Hornby Italia s.r.l.

Viale dei Caduti, 52/A6 25030 Castel Mella (Brescia), Italy

Ordinary shares

Hornby France S.A.S.

31 Bis rue des Longs Pres, 92100 Boulogne, Billancourt, France

Ordinary shares

Hornby Deutschland GmbH Oeslauer StraBe 36, 96472, Rodental, Germany

Hornby Industries Limited

Westwood, Margate, Kent CT9 4JX, UK

H&M (Systems) Limited

Westwood, Margate, Kent CT9 4JX, UK

Ordinary shares

Proportion of nominal value
of issued shares held

Group % Company %

100

The Group also holds a direct investment in LCD Enterprises Limited, holding 49% of ordinary shares. This investment is accounted for as
an associate and is a trading company registered at Unit 6 119 Ystrad Road, Fforestfach, Swansea, Wales, SA5 4JB.

12. INVENTORIES

Finished goods

Group

2019
£’000

10,860

2018
£’000

10,030

Movements on the Group provision for impairment of inventory is as follows:

At 1 April

Provision for inventory impairment

Inventory written off during the year

Exchange adjustments

At 31 March

Company

2019
£’000

–

2019
£’000

958

(60)

(1)

993

2018
£’000

–

2018
£’000

796

505

(340)

(3)

958

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

55
55

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report13. TRADE AND OTHER RECEIVABLES

Current:

Trade receivables

Less: loss allowance for receivables

Trade receivables – net

Other receivables

Prepayments

Amounts owed by subsidiary undertaking

Group

2019
£’000

5,740

(1,168)

4,572

1,565

1,043

–

7,180

2018
£’000

5,931

(1,458)

4,473

358

1,118

–

5,949

Company

2019
£’000

2018
£’000

–

33,482

33,506

–

33,520

33,529

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 loss allowance for trade receivables is deemed adequate. Other receivables include deposits paid to suppliers for tooling.

Gross trade receivables can be analysed as follows:

Fully performing

Past due

Fully impaired

Trade receivables

2019
£’000

3,077

1,495

1,168

5,740

2018
£’000

3,131

1,342

1,458

5,931

As of 31 March 2019, trade receivables of £1,495,000 (2018: £1,342,000) 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

2019
£’000

1,364

131

1,495

As of 31 March 2019, trade receivables of £1,168,000 (2018: £1,458,000) were impaired and provided for in full.

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, based on due date, is as follows:

1 – 120 days

> 120 days

56
56

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

2019
£’000

1,111

1,168

2018
£’000

1,077

265

1,342

2018
£’000

356

1,102

1,458

Notes to the Financial Statements continued

Movements on the Group loss allowance for trade receivables is as follows:

At 1 April

(Decrease)/increase in loss allowance

Receivables written-off during the year as uncollectible

Exchange adjustments

At 31 March

2019
£’000

1,458

(279)

(8)

(3)

2018
£’000

1,026

473

(31)

(10)

1,168

1,458

The decrease in loss allowance has been included in ‘administrative expenses’ in the Statement of Comprehensive Income.

Amounts owed to the Company by subsidiary undertakings are repayable on demand, unsecured and interest bearing.

The carrying amounts of the Group and Company trade and other receivables except prepayments and amounts owed by subsidiary
undertaking are denominated in the following currencies:

Sterling Intercompany

Sterling

Euro

US dollar

14. CASH AND CASH EQUIVALENTS

Cash at bank and in hand

Group

2019
£’000

–

3,180

1,452

1,249

5,881

Group

2019
£’000

704

2018
£’000

–

3,764

934

133

4,831

2018
£’000

3,878

Company

2019
£’000

2018
£’000

33,482

33,520

–

33,482

33,520

Company

2019
£’000

Cash at bank of £704,000 (2018: £3,878,000) is with financial institutions with a credit rating of A3 per Moody’s rating agency.

15. TRADE AND OTHER PAYABLES

Current:

Trade payables

Other taxes and social security

Other payables

Refund liability

Accruals and deferred revenue

Group

2019
£’000

2,763

336

101

165

2,107

5,472

2018
£’000

2,245

226

225

–

1,790

4,486

Company

2019
£’000

–

150

–

265

2018
£’000

–

147

159

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

57
57

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report

16. BORROWINGS

Secured borrowing at amortised cost

Asset Based Lending facility

Shareholder Loan

Loan from subsidiary undertakings

Total borrowings

Amount due for settlement within 12 months

Amount due for settlement after 12 months

Group

2019
£’000

2018
£’000

Company

2019
£’000

1,893

561

–

2,454

1,893

561

2,454

–

5,759

–

5,759

2018
£’000

–

5,849

–

5,849

The Company borrowings are denominated in sterling. All intercompany borrowings are formalised by way of 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 12 months.

Analysis of borrowings by currency:

Group

31 March 2019

Asset Based Lending facility

Shareholder Loan

Sterling
£’000

USD

£’000

Euros
£’000

Total

£’000

1,525

561

2086

–

330

–

330

1,893

561

2,454

There were no bank borrowings at 31 March 2018.

The principal features of the Group’s borrowings are as follows:

At 31 March 2019 the UK had a £12 million Asset Based Lending facility with PNC Credit Limited and a £6 million loan facility with
Phoenix Asset Management Partners.

The £12 million facility with PNC extends for five years and carries a margin of 2.5‐3% over LIBOR. The PNC Facility has a fixed
and floating charge on the assets of the Group. The Company is expected to provide customary operational covenants to PNC on
a monthly basis.

The Phoenix Facility is a £6 million facility with a rolling three year term and attracts interest at a margin of 5% over LIBOR on funds drawn.
Undrawn funds attract a non‐utilisation fee of the higher of 1% or LIBOR.

Undrawn borrowing facilities

At 31 March 2019, the Group had available £5,500,000 (2018: £6,000,000) of undrawn committed borrowing facilities in respect of
which all conditions precedent had been met. The facility from PNC Credit Limited has limits based on the Group’s asset position, including
a £3,000,000 minimum headroom against the facility until March 2021.

58
58

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued

17. 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

Assets

2019
£’000

2018
£’000

Liabilities

2019
£’000

2018
£’000

Forward foreign currency contracts – cash flow hedges

–

(156)

(423)

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 2019 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 12 months from the balance sheet date.

At 31 March 2019 and 31 March 2018, the gross value of forward currency contracts was as follows:

US dollar

2019
’000s

20,791

2018
’000s

13,916

The net fair value for the forward foreign currency contracts is a liability of £131,000 (2018: £423,000 liability) of which £131,000 net
liability (2018: £423,000 net liability) represents an effective hedge at 31 March 2019 and has therefore been debited to Other
Comprehensive Income.

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.

The Company has no derivative financial instruments.

Fair values of non-derivative financial assets and liabilities

For the Group and the Company, as at 31 March 2019 and 31 March 2018, 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.

Maturity of financial liabilities

Group

Less than one year

Between one and two years

Between two and five years

More than five years

Company

More than five years (note 16)

2019
£’000

2,864

2,454

–

2018
£’000

2,296

–

5,318

2,296

2019
Intercompany
Debt

£’000

5,759

2018
Intercompany
Debt

£’000

5,849

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

59
59

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report

17. FINANCIAL INSTRUMENTS continued

Hierarchy of financial instruments

The following tables present the Group’s assets and liabilities that are measured at fair value at 31 March 2019 and 31 March 2018.
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 year. Level 2 hedging derivatives comprise forward foreign exchange
contracts 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 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.

Financial Instruments

Assets

Derivatives used for hedging

Total assets as at 31 March 2019

Liabilities

Derivatives used for hedging

Total liabilities at 31 March 2019

Assets

Derivatives used for hedging

Total assets as at 31 March 2018

Liabilities

Derivatives used for hedging

Total liabilities at 31 March 2018

Interest rate sensitivity

Level 1
£’000

Level 2
£’000

Level 3
£’000

–

(156)

–

Level 1
£’000

Level 2
£’000

Level 3
£’000

–

(423)

–

Total

£’000

(156)

Total

£’000

–

(423)

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% increase in interest rates is
£17,000 (2018: £3,000) 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 in respect of financial instruments

The Group is primarily exposed to fluctuations in US 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.

60
60

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued

US dollars

Euros

Capital risk management

Comprehensive Income
and Equity Sensitivity

2019
£’000

823

1,143

1,966

2018
£’000

1,356

964

2,320

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 (cash)/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.

Total borrowings (note 16)

Less:

Total cash and cash equivalents (note 14)

Net debt/(cash)

Total equity

Total capital

Gearing

18. DEFERRED TAX

2019
£’000

2,454

(704)

1,750

25,799

27,549

2018
£’000

–

(3,878)

30,864

26,986

(14%)

Deferred tax is calculated in full on temporary differences under the liability method.

The movement on the deferred tax account is as shown below:

At 1 April

At 31 March

Group

Company

2019
£’000

(1,880)

2018
£’000

(1,880)

2019
£’000

–

2018
£’000

–

Deferred tax assets have been recognised in respect of certain UK timing differences only. Temporary differences giving rise to deferred tax
assets have been recognised in the UK 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.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

61
61

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report

18. DEFERRED TAX continued

Deferred tax liabilities

At 1 April 2018

Charge to Statement of Comprehensive Income

At 31 March 2019

At 1 April 2017

Credit to Statement of Comprehensive Income

At 31 March 2018

Deferred tax assets

At 1 April 2018

Credit to Statement of Comprehensive Income

At 31 March 2019

At 1 April 2017

Charge to Statement of Comprehensive Income

At 31 March 2018

Net deferred tax (liability)/asset

At 31 March 2019

At 31 March 2018

Group

Deferred tax comprises:

Depreciation in excess of capital allowances

Other temporary differences – UK

Other temporary differences – overseas

Deferred tax asset

Acquisition
intangibles

£’000

150

–

150

Group

Company

Acquisition
intangibles

£’000

Other
£’000

Total

£’000

Short-term
incentive plan

£’000

–

(150)

2,030

–

2,030

1,974

2,030

–

2,030

1,974

2,030

1,880

–

Total

£’000

150

–

150

Total

£’000

–

2019

2018

Recognised

Not recognised

Recognised

Not recognised

£’000

1,891

(11)

–

1,880

217

3,463

2,938

6,618

1,891

(11)

–

1,880

514

2,539

2,797

5,850

The UK deferred tax asset not recognised of £3,680,000 primarily relates to unrecognised losses in Hornby Hobbies Limited of
£18,780,000 (potential deferred tax asset of £3,193,000) and Hornby PLC of £1,223,000 (potential deferred tax asset of £208,000).
It also relates to a potential deferred tax asset in respect of accelerated capital allowances of £217,000 and unrecognised temporary
difference of £62,000.

The deferred tax asset not recognised in respect of overseas losses carried forward of £2,938,000 relates to losses carried forward of
£1,561,000 in respect of Hornby España SA (potential deferred tax asset of £390,000), £2,450,000 in respect of Hornby France S.A.S.
(potential deferred tax asset of £817,000), £1,924,000 in respect of Hornby Deutschland GmbH (potential deferred tax asset of £614,000),
£3,885,000 in respect of Hornby Italia s.r.l. (potential deferred tax asset of £932,000) and £883,000 in respect of Hornby America Inc.
(potential deferred tax asset of £185,000).

No deferred tax assets will be recognised on these losses incurred until the business is profit making.

62
62

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continuedCompany

Deferred tax comprises:

Other timing differences

Deferred tax (asset)/liability

2019

2018

Recognised

Not recognised

Recognised

Not recognised

£’000

–

(208)

–

(202)

These unrecognised assets relate to tax losses carried forward in Hornby PLC.

19. SHARE CAPITAL

Group and Company

Allotted, issued and fully paid:

Ordinary shares of 1p each:

At 1 April

Issue of ordinary shares

At 31 March

2019

2018

Number of shares

£’000

Number of shares

£’000

125,261,172

1,253

84,583,204

–

40,677,968

846

407

125,261,172

1,253

125,261,172

1,253

20. SHARE-BASED PAYMENTS (‘PSP’)

There were no share-based performance plans in place at 31 March 2019 (2018: There were no awards outstanding at 31 March 2018
where awards either vested or lapsed during the year).

21. RESERVES

Capital Redemption Reserve

This reserve records the nominal value of shares repurchased by the Company.

Translation Reserve

The translation reserve represents the foreign exchange movements arising from the translation of financial statements in foreign currencies.

Hedging Reserve

The hedging reserve comprises the effective portion of changes in the fair value of forward foreign exchange contracts that have not
yet occurred.

Other Reserves

This reserve represents historical negative goodwill arising prior to the transition to IFRS.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

63
63

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report22. EMPLOYEES AND DIRECTORS

Staff costs for the year:

Wages and salaries

Share-based payments (note 20)

Social security costs

Other pension costs (note 23)

Redundancy and compensation for loss of office

Group

2019
£’000

2018
£’000

Company

2019
£’000

6,049

6,935

–

654

300

7,042

(87)

707

357

1,082

8,994

431

–

514

2018
£’000

615

202

388

1,366

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

2019

Number

172

Company

2018

Number

2019

Number

2018

Number

163

–

Group

Company

2019
£’000

910

–

943

2018
£’000

1,423

(87)

683

2,116

2019
£’000

362

–

387

–

2018
£’000

720

202

330

1,323

Key management comprise the individuals involved in major strategic decision making and includes all Group and subsidiary Directors.

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, is included in the Directors’ Report on pages 24 and 25 and forms part
of these financial statements.

64
64

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued23. 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 Group.

The level of contributions to the Group Personal Pension Plan for current members is fixed by the Group.

The Group pension cost for the year was £300,000 (2018: £357,000) representing the actual contributions payable in the year and
certain scheme administration costs. The Company pension cost for the year was £25,000 (2018: £71,000). No contributions were
outstanding at the year end of 31 March 2019.

24. 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.

Contingent Liabilities

2019
£’000

2018
£’000

1,155

921

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.

25. 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

Land & Buildings

Other

Total

2019
£’000

732

2018
£’000

681

1,408

1,175

1,423

107

2019
£’000

2018
£’000

–

2019
£’000

811

2018
£’000

768

1,458

1,255

1,423

107

3,563

1,963

129

167

3,692

2,130

In addition to the above the distribution activities of the business are outsourced to a third party company, Global Freight Management & Logistics
(‘GFM’). The initial agreement with GFM was for five years to August 2019, this was later extended to August 2021. The approximate costs under
the contract are approximately £2.2million a year (2018: £2.4 million).

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

65
65

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report
26. CASH (USED IN)/GENERATED FROM OPERATIONS

Loss before taxation

Interest payable

Interest receivable

Share of profit of associate

Amortisation of intangible assets

Impairment of Investment

Depreciation

Loss on disposal of property, plant and equipment

Share-based payments credit (non cash)

Share-based payments (cash)

Decrease in provisions

(Increase)/decrease in inventories

(Increase)/decrease in trade and other receivables

Increase/(decrease) in trade and other payables

Cash (used in)/generated from Operating activities

27. NET DEBT RECONCILIATION

Cash and cash equivalents

Borrowings – repayable within one year

Borrowings – repayable after one year

Net Debt

Cash and liquid investments

Gross debt – variable interest rates

Net Debt

Group

2019
£’000

(5,312)

177

(7)

(81)

690

–

2018
£’000

(10,066)

218

(7)

(15)

992

–

2,855

2,821

–

(9)

(750)

(1,163)

794

(2,805)

(87)

136

(21)

(490)

3,396

(2,375)

(5,489)

Company

2019
£’000

(38)

217

(175)

(81)

–

106

2019
£’000

704

(1,893)

(561)

(1,750)

704

(2,454)

(1,750)

2018
£’000

(1,838)

198

(175)

(15)

–

972

–

(87)

136

–

132

(640)

2018
£’000

3,898

–

3,898

–

3,898

66
66

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Notes to the Financial Statements continued28. RELATED PARTY DISCLOSURES

Hornby Hobbies Limited purchased various items of stock for resale plus services from two companies that are part of the LCD Enterprises Limited
group, a company in which Lyndon Davies, a Director of the Company, owns a controlling 51% share and Hornby PLC the remaining 49%.

Therefore transactions between the parties are related party transactions and disclosed below:

Company

Oxford Diecast Limited

Oxford Diecast (HK) Limited

Transactions

47,114

3,744

50,858

Balance at
year end

24,402

–

24,402

Phoenix Asset Management Partners who own the majority shareholding in Hornby PLC have also provided a funding facility to the Group
(see note 16).

There were no other contracts with the Company or any of its subsidiaries existing during or at the end of the financial year in which
a Director of the Company or any of its subsidiaries was interested. There are no other related-party transactions.

The Company received management fees from subsidiaries of £1,104,000 (2018: £1,493,000), interest of £175,000 (2018: £175,000)
and incurred interest of £217,000 (2018: £216,000) on intercompany borrowings.

29. ULTIMATE PARENT UNDERTAKING AND CONTROLLING PARTY

The Group is 74.66% owned by Phoenix Asset Management. Artemis Fund Managers Limited hold 14.56%. The remaining 10.78% of
the shares are widely held. As a result of these arrangements, there is no ultimate parent undertaking, and the funds managed by
Phoenix Asset Management are therefore the controlling party.

30. EVENTS AFTER THE END OF THE REPORTING PERIOD

No other significant events have occurred between the end of the reporting period and the date of signature of the Annual Report
and Accounts.

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

67
67

OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic ReportShareholders’ Information Service

Hornby welcomes contact with its shareholders.

If you have questions or enquiries about the Group or its products, please contact:

Kirstie Gould

Chief Finance Officer

Hornby PLC
Westwood
Margate
Kent CT9 4JX
www.hornby.com

68
68

Hornby PLC Annual Report and Accounts 2019
Hornby PLC Annual Report and Accounts 2019

Hornby PLC Annual Report and Accounts 2019

Hornby PLC
Westwood, Margate, Kent, CT9 4JX
www.hornby.com