ANNUAL REPORT AND ACCOUNTS 2021Hornby PLCWestwood, Margate, Kent, CT9 4JXwww.hornby.comHornby PLC Annual Report and Accounts 202137132 HORN – AR21 01 Cover AW04.indd 1-337132 HORN – AR21 01 Cover AW04.indd 1-315/07/2021 16:4815/07/2021 16:48111347_Cover.indd 1111347_Cover.indd 116/07/2021 08:2116/07/2021 08:21111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - K111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - C111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - M111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - Y−−−−−−−−−−−−−−− 1 −−−−−−−−−−−−−−−2−−−−−−−−−−−−−−− 3 −−−−−−−−−−−−−−−4−−−−−−−−−−−−−−− 5 −−−−−−−−−−−−−−−6−−−−−−−−−−−−−−− 7 −−−−−−−−−−−−−−−8−−−−−−−−−−−−−−− 9 −−−−−−−−−−−−−−−10−−−−−−−−−−−−−−− 11 −−−−−−−−−−−−−−−12−−−−−−−−−−−−−−− 13 −−−−−−−−−−−−−−−14−−−−−−−−−−−−−−− 15 −−−−−−−−−−−−−−−16−−−−−−−−−−−−−−− 17 −−−−−−−−−−−−−−−18−−−−−−−−−−−−−−− 19 −−−−−−−−−−−−−−−20−−−−−−−−−−−−−−− 21 −−−−−−−−−−−−−−−22−−−−−−−−−−−−−−− 23 −−−−−−−−−−−−−−−24−−−−−−−−−−−−−−− 25 −−−−−−−−−−−−−−−26−−−−−−−−−−−−−−− 27 −−−−−−−−−−−−−−−28−−−−−−−−−−−−−−− 29 −−−−−−−−−−−−−−−30−−−−−−−−−−−−−−− 31 −−−−−−−−−−−−−−−32CMYXCMYZCMYXCMYZCMYXCMYZPrinect Micro−6i Format 102/105 Dipco 16.0d (pdf) © 2013 Heidelberger Druckmaschinen AGBCMYXZZBBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZC 20C 40C 80BCMYXZCMBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZYXBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZCMYX 20X 40X 80BCMYXZCMCYMYCMYBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYCMCYMYCMYBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZCMYC 20C 40C 80BCMYXZZBBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZCMBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZX 20X 40X 80BCMYXZYXBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYBCMYXZPlate Control Strip© Heidelberger Druckmaschinen AG 2013V13.0g (pdf)UniversalThermomedium12131415161718192021222324252627280.5 PTimes1 PTimes2 PTimes4 PTimesTimes4PTimes2PTimes1PTimes0.5P0/100%1%2%3%5%10%20%25%30%40%50%60%70%75%80%90%95%97%98%99%Lin+ProcessCalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: 111347 Hornby AR 2021 - Front - COVER$[ScreenRuling] LPI- K$[ScreenRuling] LPI- C$[ScreenRuling] LPI- M$[ScreenRuling] LPI- Y Hornby PLC Annual Report and Accounts 2021 Hornby PLCThe 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.CONTENTS01 Highlights 202102 Non-Executive Chairman’s Report 04 CEO’s Statement09 Section 172 Statement10 Operating and Financial Review of the Year12 Our Key Performance Indicators (‘KPIs’)14 Corporate Governance Report18 Audit Committee Report20 Remuneration and Nomination Committee Report22 Directors and Corporate Information23 Directors’ Report28 Independent Auditors’ Report to the Members of Hornby PLC33 Group and Company Statements of Comprehensive Income34 Group and Company Statements of Financial Position35 Group and Company Statements of Changes in Equity36 Group and Company Cash Flow Statements37 Notes to the Financial Statements71 Shareholders’ Information ServiceHornby PLC Annual Report and Accounts 2021FSC TBC37132 HORN – AR21 01 Cover AW04.indd 4-637132 HORN – AR21 01 Cover AW04.indd 4-615/07/2021 16:4815/07/2021 16:48111347_Cover.indd 2111347_Cover.indd 216/07/2021 08:2116/07/2021 08:21111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - K111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - C111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - M111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - Y111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - Pan308C−−−−−−−−−−−−−−− 1 −−−−−−−−−−−−−−−2−−−−−−−−−−−−−−− 3 −−−−−−−−−−−−−−−4−−−−−−−−−−−−−−− 5 −−−−−−−−−−−−−−−6−−−−−−−−−−−−−−− 7 −−−−−−−−−−−−−−−8−−−−−−−−−−−−−−− 9 −−−−−−−−−−−−−−−10−−−−−−−−−−−−−−− 11 −−−−−−−−−−−−−−−12−−−−−−−−−−−−−−− 13 −−−−−−−−−−−−−−−14−−−−−−−−−−−−−−− 15 −−−−−−−−−−−−−−−16−−−−−−−−−−−−−−− 17 −−−−−−−−−−−−−−−18−−−−−−−−−−−−−−− 19 −−−−−−−−−−−−−−−20−−−−−−−−−−−−−−− 21 −−−−−−−−−−−−−−−22−−−−−−−−−−−−−−− 23 −−−−−−−−−−−−−−−24−−−−−−−−−−−−−−− 25 −−−−−−−−−−−−−−−26−−−−−−−−−−−−−−− 27 −−−−−−−−−−−−−−−28−−−−−−−−−−−−−−− 29 −−−−−−−−−−−−−−−30−−−−−−−−−−−−−−− 31 −−−−−−−−−−−−−−−32CMYXCMYZCMYXCMYZCMYXCMYZPrinect Micro−6i Format 102/105 Dipco 16.0d (pdf) © 2013 Heidelberger Druckmaschinen AGBCMYXZZBBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZC 20C 40C 80BCMYXZCMBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZYXBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZCMYX 20X 40X 80BCMYXZCMCYMYCMYBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYCMCYMYCMYBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZCMYC 20C 40C 80BCMYXZZBBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZCMBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZX 20X 40X 80BCMYXZYXBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYBCMYXZPlate Control Strip© Heidelberger Druckmaschinen AG 2013V13.0g (pdf)UniversalThermomedium12131415161718192021222324252627280.5 PTimes1 PTimes2 PTimes4 PTimesTimes4PTimes2PTimes1PTimes0.5P0/100%1%2%3%5%10%20%25%30%40%50%60%70%75%80%90%95%97%98%99%Lin+ProcessCalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: 111347 Hornby AR 2021 - Back - COVER$[ScreenRuling] LPI- K$[ScreenRuling] LPI- C$[ScreenRuling] LPI- M$[ScreenRuling] LPI- Y$[ScreenRuling] LPI- Pan308C Highlights 2021
“Much of my time at Hornby has been about the turnaround and laying down
the foundations for the future. In this last year we have returned to profit,
the foundations have now been laid and we are excited with the opportunities
that lie ahead. I cannot thank our employees enough for their commitment
and strength as they battled through the last year.”
Lyndon Davies, Chief Executive
Revenue
(2020: £37.8m)
£48.5m
Operating profit
(2020: £(2.8)m loss)
£0.6m
Reported profit before taxation
(2020: £(3.4)m loss)
£0.3m
Underlying1 profit before taxation
(2020: £(3.2)m loss)
Reported profit after taxation
(2020: £(3.4)m loss)
Reported profit per share
(2020: (2.67)p loss)
£1.5m
£1.4m
0.82p
Underlying2 basic profit per share
(2020: (2.57)p basic loss)
Net cash
(2020: 5.9m) (see Note 28)
1.36p
£4.7m
1
2
Underlying profit before taxation is before amortisation of intangibles (brand names and customer lists), and net unrealised foreign exchange movements on intercompany loans,
exceptional items and share-based payments (see page 11).
Underlying basic profit per share is before amortisation of intangibles (brand names and customer lists), and net unrealised foreign exchange movements on intercompany loans,
exceptional items and share-based payments (see Note 7).
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Hornby PLC Annual Report and Accounts 2021
01
OverviewFinancial StatementsGovernanceStrategic Report Non-Executive Chairman’s Report
The Strategic Report comprises the Non-Executive Chairman’s Report, the CEO
Report, the Director’s Section 172 statement and the Operating and Financial
Review of the Year and our Key Performance Indicators (‘KPIs’).
I am pleased report to shareholders that
despite the many challenges, our Company
had a very satisfactory year and returned
to profit.
Revenue in the year of £48.5 million (2020:
£37.8 million) was 28% above the previous
year. Underlying profit before tax increased
significantly to £1.5 million (2020: £3.2
million loss). Reported profit before tax
increased to £0.3 million (2020: £(3.4)
million) as we continue to implement our
turnaround strategy. Despite the many
challenges to the Company caused by
COVID-19 the old adage that people turn
to hobbies in times of recession proved
correct and sales increased across almost
all channels and brands except concessions
that were closed due to lockdowns for the
majority of the year.
In the year we have made further
considerable progress within the Group.
We continue to maintain market prices
and again the gross margin has improved.
Following the review of our customer base,
trading terms have been aligned to the
collaborative support provided. The new
product development cycle is now
established and we have already started
work on the development of 2023 product
ranges. New product investment continues
to increase and we are developing
significantly more new releases and
ranges. We have continued to develop
opportunities in existing ranges to
incorporate technology such as wireless
vehicle control from a smart phone
in both Hornby and Scalextric.
Overheads have increased by 8% mainly
due to sales volume related costs such
as dispatch costs, digital marketing spend
and commissions.
02
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BREXIT
At the eleventh hour a Brexit trade deal was
reached with the EU. Nevertheless countless
importation difficulties to the EU arose
which have taken time to resolve. We have
migrated to a multi-carrier interface which
is now fully implemented and operational
but fourth quarter sales into Europe
were affected.
SHAREHOLDERS
We will hold our Annual General Meeting
on Wednesday 15th September and will
provide further details nearer the time.
John Stansfield
Chairman
9 June 2021
COVID-19
COVID-19 has impacted the Group this
year. Our main priorities are to keep our
employees safe and protect the Group to
survive the crisis. All our offices in Europe,
Hong Kong and America formulated
lockdown plans that were implemented in
line with the relevant government policies.
UK staff vacated the Margate offices almost
immediately after the announcement of the
lockdown on 23 March 2020 and the
majority of staff were able to work from
home. After some false starts staff have
been gradually returning to the office on at
least a part-time basis since January 2021.
I would again like to thank the incredible
efforts of all employees to implement the
change which involved installing significant
I.T. infrastructure to facilitate home working
and subsequently juggling the complications
of combining home and work commitments.
Everyone has continued to work very
efficiently and incredibly hard in this new
environment and maintained their
enthusiasm and good spirits. A limited
number of employees were furloughed
where their function was temporarily
curtailed or not possible to be fulfilled at
home but all have now returned to work.
Our supply partners are mainly located in
the Far East. Whilst manufacturing was
greatly affected by COVID-19 and the,
much publicised, delays caused by shipping
container shortages, they have managed to
satisfy the majority of our requirements.
Fortunately, a proportion of our product
sales were already via e-commerce and
we have been able to strengthen the
channel as our logistic facility has remained
operational under strict distancing
protocols and we continue to dispatch
goods. Similarly, our retail customers have
implemented e-commerce systems and were
better prepared to trade in later lockdowns.
GOVERNANCE
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 maximum performance of the
Company. I am pleased to report that the
Board believes it applies the ten principles
of the Quoted Companies Alliance 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.
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Hornby PLC Annual Report and Accounts 2021
03
OverviewFinancial StatementsGovernanceStrategic Report CEO’s Statement
INTRODUCTION
As we entered the last quarter of the
2019/20 financial year, we expected Brexit
to dominate the landscape. We were
looking forward to the first wave of new
products that we had been working on
over the previous two years. We expected
them to make an impact on our trading
performance. Like everyone else we were
unprepared for the pandemic, and we
found ourselves continually revaluating our
operations, the trading landscape and just
trying to keep the business functioning.
Our new items were well-received and the
changing landscape meant that many found
comfort in our products. We gained a lot of
new customers, and our existing customers
spent more on the hobbies they enjoy.
Hornby returned to profit, following a trend
of improved performance over the last few
years, and the turnaround accelerated.
The points I will cover in my statement are
as follows:
Key Performance Indicators (KPIs)
Variable costs, fixed costs, gross profit and
operating profit.
Key Performance Indicator 1: Costs
How and why our cost levels are what they
are.
Key Performance Indicator 2: Capital
Expenditure Productivity
Gross profit in relation to essential capital
expenditure.
Key Performance Indicator 3: Inventory
The importance of the inventory balance in
relation to sales.
The Global Pandemic
Our actions and responses to COVID-19
over the financial year.
Brexit
How it has impacted our business.
Staff Profit Share Scheme
Return to profit means our employees
benefit.
Our Employees
Current Trading & Outlook
KEY PERFORMANCE INDICATORS (KPIs)
We think about our business in terms of
fixed costs and variable costs, you will find
these in the Statement of Comprehensive
Income (SOCI) on page 33.
When we sell our products there are
variable costs, which are directly related to
individual items. This includes such elements
as the materials used to make the products
and the costs which our manufacturers
charge us to turn the raw materials into
a railway locomotive, a plastic kit, a tub
of paint, a diecast car or any number of
other complex end products. These costs
are variable because they vary with how
many products we sell and how we get
our products to our end customers. You will
see these described in “Cost of Sales” in
the SOCI.
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. As well
as the normal things like wages for the
finance team or the electricity bill for the
headquarters, these fixed costs include such
items as the cost of sending samples to
magazines and influencers. In the SOCI
you will find these fixed costs under the
headings “Distribution costs, Selling &
Marketing, Administrative and Other”.
04
Hornby PLC Annual Report and Accounts 2021
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In 2021, we generated enough gross profit to cover our fixed costs for the first time in many years.
Sales
Variable Costs
Gross Profit
Fixed Costs
Operating Profit/(Loss)
2021
(£’000)
48,549
(26,795)
21,754
2020
(£’000)
37,842
(21,140)
16,702
(20,976)
(19,444)
778
(2,742)
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 subtract our fixed costs away
from the Gross Profit, you get the Operating
Profit (or Loss). Our shareholders have for
many years had to pay for losses, but in the
financial year ending 2021 we made a
profit of £778,000. We must now ensure
that this is sustainable and growing. We will
achieve this by improving our KPIs.
KPI NO. 1: COSTS
An important element of the turnaround was
to reduce both the fixed costs and variable
costs as a percentage of our sales.
We obsess about our customers and we
want to do more of the things that delight
them. Therefore, we will rely less on
channels that don’t bring value to them or
the hobby. There will be a reluctance from
some to accept this change, but we must
adapt for the turnaround to prove successful.
This will cause a disruption to a small
number of our retailers, but not those that
support the hobby, our brands, and the end
customers of our products. The result of this
change (including a new tier system that has
been implemented for retailers) is that
Hornby can better serve our customers and
the business can move to a more
sustainable footing that clearly benefits the
whole industry.
Selling direct has different economics to
selling to trade. Selling direct will result in
higher revenue from the same volume of
goods sold. Therefore, a shift to this channel
will positively impact the denominator in
both the variable cost ratio and the fixed
cost ratio reported below. However, certain
costs are higher when fulfilling direct
orders from our websites. We have
higher expenditures on logistics, fulfillment,
marketing, customer services and
technology. These will negatively impact
the numerator in the ratios reported below.
Variable Costs
These have reduced further, but I would
have liked to have seen a few more
percentage point drops, but difficult trading
conditions meant that we incurred more
costs than I had anticipated, particularly
related to the importation of our products.
In late 2020 we benefited when the
automated packing machines went live
in our warehouse, further automation is
planned in 2021/22.
Here is a graph which shows our variable costs as a percentage of sales since 2001:
Variable Costs as a Percentage of Sales
65%
60%
55%
50%
45%
40%
1
0
0
2
2
0
0
2
3
0
0
2
4
0
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2
5
0
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6
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7
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2
2
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1
0
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9
1
0
2
0
2
0
2
1
2
0
2
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Hornby PLC Annual Report and Accounts 2021
05
OverviewFinancial StatementsGovernanceStrategic Report CEO’s Statement continued
Fixed Costs
In the last Annual Report, I reported that our current fixed cost base could service a business bringing in £45m to £50m of sales. I am now of the
belief that the service base we currently have could support £50m to £55m. We need to get the fixed costs as a percentage of sales below 40%.
Here is a graph to show how our fixed costs have varied as a percentage of sales since 2001:
Fixed Costs as a Percentage of Sales
65%
60%
55%
50%
45%
40%
35%
30%
25%
20%
59%
55%
51%
54%
52%
46%
44%
43%
44%
32%
33%
30%
34%
34%
36%
39%
38%
38%
39%
25%
24%
1
0
0
2
2
0
0
2
3
0
0
2
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
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7
1
0
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8
1
0
2
9
1
0
2
0
2
0
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1
2
0
2
Our aim is to keep increasing revenues so
that the fixed cost percentage will be lower
with each subsequent report.
KPI NO. 2: CAPITAL EXPENDITURE
PRODUCTIVITY
We need to invest in tooling to produce
new, innovative and exciting models. You
will find the money we put into these
endeavours in Note 10 of the financial
statements. Over the last three years we
have invested in engineering talent and
that means we can design more products.
This year, we spent £4,124,000 on Product
Tooling, the highest level for over 10 years.
The important thing to remember about this
capital expenditure is that the money we
spend in any given year is, roughly
speaking, used to manufacture tooling for
models and products that will be sold firstly
in the following year and then for several
more years. We thus have a time lag
between expenditure and revenue. The
increased expenditure now will have
positive impacts on the results for many
years to come.
A good measure of how good a job we
are doing is to check the amount of Capex
we are incurring in one year 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
previous year, 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.
We call it “Capex Productivity”.
Gross Profit Per £ of Capital Expenditure
f
o
£
r
e
p
t
fi
o
r
P
s
s
o
r
G
e
r
u
t
i
d
n
e
p
x
E
l
a
t
i
p
a
C
£14.00
£12.00
£10.00
£8.00
£6.00
£4.00
£2.00
£0.00
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
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0
0
2
8
0
0
2
9
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1
1
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0
2
9
1
0
2
0
2
0
2
1
2
0
2
35
30
25
20
15
10
5
0
M
£
t
fi
o
r
P
s
s
o
r
G
Gross Profit per £ of Capital Expenditure
Gross Profit
We expect the trend to keep improving for many years to come. Next year I will now start reporting on the Group return on investment KPI.
06
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KPI NO. 3: INVENTORY
Holding inventory in the market we serve is not a bad thing, without stocks in this last year we would have been unable to support the sales
growth. Furthermore, for our websites to become the go-to destination for our customers we need to make sure we maintain stock availability.
Our systems for how we hold our stocks and the channels they support have changed in order to better balance how our products reach
our customers.
Year End Inventory as a Percentage of Sales
40%
35%
30%
25%
20%
15%
10%
5%
0%
1
0
0
2
2
0
0
2
3
0
0
2
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
0
2
0
2
1
2
0
2
Our year-end inventory balance relative
to our sales ended up lower than the
previous year.
It is very important that cash is not tied up
unnecessarily in inventory, but on the other
hand recent events have shown us that stock
support is important to cushion us in times
of crisis. Most of the products we produce,
with the exception of a few licensed
products, are not ‘fashion accessories’ that
go out of style. With cautious commitments
to production volumes slower moving items
will always sell through eventually.
The Global Pandemic
The last year has been incredibly stressful
for many of our employees. As we entered
April 2020, we had all adapted to new
ways of working, which turned out to
be easier for some employees, but more
difficult for others. Throughout the year
my deep concern was about our employees
and the personal challenges that they
were facing. Equally it was essential to
navigate through and ensure that the
business survived to support our employees
and shareholders.
Our online sales increased as much
of the population returned to hobbies
they had enjoyed in the past, where they
found comfort. We also found new people
who discovered what we had to offer.
Despite the easing of lockdowns the
demand continues.
There are still shipping delays from our
supply chain with container shortages.
Shipping costs from our factories are three
times what they were previously. It would
appear that the shipping companies favour
these higher prices; they are in no rush for a
return to past pricing levels. We anticipate
that some normality will return in 2022.
Brexit
In late 2020 Hornby took a decision to stop
shipments to EU countries. This was in
anticipation of uncertainties in regard to
paperwork, interface concerns with our
logistic partners and a lack of information
about how each EU country would respond
at the point of entry. In recent weeks
shipments have resumed, but there are still
delays in certain countries whose
procedures are unnecessarily rigid.
Staff Profit Share Scheme
Our loyal employees believe in our business
and there are some wonderful products in
the pipeline. In November 2018 we
highlighted the issue that our staff below
Board level in the past had not received a
fair share of the rewards. We announced a
profit share scheme for all of our employees
who contribute to the success of our
business. I am delighted to announce that
our return to profit means the first part of this
scheme now kicks in, with a one-off 5%
bonus given to each employee, for getting
to us back into profit. The second part of the
scheme shares 15% of the operating profit
with them as we move forward.
We want to attract the best talent, keep that
talent and ensure that they are aligned with
our shareholders’ interests.
Our Employees
In this last year Hornby has lost some
incredible employees; our employees have
also lost family members in the most tragic
of ways. I will never forget them, Hornby
will never forget them.
Business is about great people, great
products and great relationships – the rest is
mist. I thank all of our wonderful employees
for their enthusiasm and backing over the last
year, they have supported me throughout.
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Hornby PLC Annual Report and Accounts 2021
07
OverviewFinancial StatementsGovernanceStrategic Report CEO’s Statement continued
Current Trading & Outlook
It seems that the UK is emerging from the
worst of COVID-19 due to the vaccination
roll-out but the worldwide issues will
continue for some time. We will remain alert
and flexible to react as necessary. The
fundamentals of the Company are strong
and I remain excited by our proposed
ranges in the coming years as we reap the
benefits of management’s efforts to offer
spectacular new products and technology
throughout the year to continue the
turnaround of the Group.
Since the end of March, our sales have
been in line with expectations. The engine
at the heart of the Company is firing and
we anticipate a stronger demand for our
products, with more online direct sales.
We have a strong balance sheet with net
cash of £4,700,000 and we appreciate
the strong support from our customers
and shareholders.
Lyndon Davies
Chief Executive Officer
9 June 2021
08
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Section 172 Statement and Stakeholder Engagement
As required by Section 172 of the
Companies Act, a director of a company
must act in the way he or she considers, in
good faith, would likely promote the success
of the company for the benefit of the
shareholders. In doing so, the director must
have regard, amongst other matters, to the
following issues:
• likely consequences of any decisions in
the long term;
• interests of the company’s employees;
• need to foster the company’s business
relationships with suppliers/customers
and others;
• impact of the company’s operations on
the community and environment;
• the company’s reputation for high
standards of business conduct; and
• need to act fairly between members of
the company.
CULTURE
Our values and leadership behaviours
are a vital part of our culture to ensure that
through good governance, our conduct
and decision making we do the right thing
for the business and our stakeholders.
The Board acknowledges that every
decision it makes will not necessarily result
in a positive short-term outcome for all
of the Group’s stakeholders. We believe
in creating solid foundations for the future,
so there is a balance between short term
success and longer-term prosperity.
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. 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.
The primary mechanism for engaging with
our shareholders is through the Company’s
AGM and also through the publication of the
Group’s financial results for the half year and
full year. Further information is disclosed in
the Corporate Governance Report on pages
14 to 17. The Board reviews feedback
received from institutional investors following
publication of our financial results. At the
AGM we encourage our shareholders to ask
questions and participate in debate about our
performance and products. Last year, as we
held a closed meeting due to COVID-19
restrictions, we asked for questions to be
submitted prior to the AGM and these
together with the Company’s responses were
published on the Company’s website.
CUSTOMERS
Understanding our customers and what
matters to them is key to the success of
Hornby. We listen and talk to them using all
of the tools at our disposal. Our customers
operate in a global, but niche market, we
interact with them either directly, or via our
retailers, wholesalers and distributors.
SUPPLIERS
We have long-standing close relationships
with our suppliers overseas, who we would
normally visit on a regular basis. During
the pandemic we have communicated via
video conferencing, working together
with a common goal, giving them visibility,
sharing our plans and allowing them to plan
their factories capacity well into the future.
EMPLOYEES
A key to the Group’s renewed success has
been its engaged workforce. The Group’s
Directors, alongside our executive management
teams, work hard to provide a positive working
environment. As a well-respected local
employer within each of the communities
we operate, it is important for us to provide
opportunities for all of our staff to allow them to
grow and achieve their potential. More detail
can be found in Note 24.
COMMUNITY AND ENVIRONMENT
We are proud to employ people in the
communities that we operate. The strength
of our brands allows us to promote both local
and national charitable causes. We have
product standards, policies and guidance
covering the products we make to help ensure
that they are manufactured safely, legally
and to the required quality standards.
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Hornby PLC Annual Report and Accounts 2021
09
OverviewFinancial StatementsGovernanceStrategic Report Operating and Financial Review of the Year
FINANCIAL REVIEW
Revenue
Gross profit
Gross profit margin
Overheads
Exceptionals
Reported profit/(loss) before tax
Underlying profit/(loss) before tax*
Reported profit/(loss) after tax
Basic profit/(loss) per share
Underlying basic profit/(loss) per share*
Net cash
Undrawn facilities
2021
£48.5m
£21.8m
44.9%
£21.0m
£0.2m
£0.3m
£1.5m
£1.4m
0.82p
1.36p
£4.7m
2020
£37.8m
£16.7m
44.1%
£19.4m
£0.1m
£(3.4)m
£(3.2)m
£(3.4)m
(2.67)p
(2.56)p
£5.9m
£14.4m
£14.2m
*
Stated before amortisation of intangibles (brands and customer lists), net unrealised foreign exchange movements
on intercompany loans, goodwill impairments and exceptional items.
PERFORMANCE ON
A STATUTORY BASIS
Consolidated revenue for the year ended 31
March 2021 was £48.5 million, an increase
of 28% compared to the previous year’s
£37.8 million due to improved efficiency in
product development and supply chain. The
revenue in the second half of the year of
£27.4 million was ahead of previous year
which was £21.7 million. Gross profit margin
was slightly higher, at 44.9% (2020: 44.1%).
Overheads increased year-on-year by 8%
from £19.4 million to £21.0 million
predominantly as a result of planned
recruitment of additional heads and selling
related costs linked to higher revenues,
especially direct sales. UK distribution costs
increased by £1.0 million due to continued
increased delivery costs in line with increased
parcel volumes. Sales and marketing costs
decreased by £0.3 million year-on-year due
to cost savings related to non-participation in
trade shows due to COVID-19. Administration
costs were £0.4 million higher due to
increased ERP system costs in line with
bringing the system back from Europe and
hosted in the UK. Other operating expense in
the year of £0.2 million (2020: £0.2 million
income) include foreign exchange losses and
amortisation of brand names.
Exceptional costs totalling £0.2 million (2020:
£0.1 million) are predominantly restructuring
costs in Europe and dilapidation costs incurred
in the UK.
PERFORMANCE ON AN
UNDERLYING BASIS
The underlying profit 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: share-based payments and
the amortisation of intangibles which result
from historical acquisitions. Additionally,
exceptional items including refinance,
relocation and restructuring costs are one off
items and therefore have also been added
back in calculating the underlying profit
before taxation.
10
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FINANCING
2020
£’000
(3,395)
At 31 March 2021 the UK had a £12 million
Asset Based Lending facility with PNC Credit
Limited (‘PNC’) and a £9 million loan facility
with Phoenix Asset Management Partners.
The facility with PNC is a floating facility
based on the current asset position capped
at £12 million ends 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
provides customary operational and financial
covenants to PNC on a monthly basis.
The Phoenix Facility is a £9 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
2021 were zero. (2020: £10.2 million
peak borrowings).
Net cash at 31 March 2021 was
£4.7 million compared with net cash
of £5.9 million at 31 March 2020.
Statutory Profit/(Loss) before taxation
Adjustments:
Net foreign exchange impact on intercompany loans
Amortisation of intangibles – brands and customer lists
Share-based payments
Exceptional items:
Restructuring costs
COVID-19 support
Refinancing costs
Relocation costs
Group
2021
£’000
345
–
227
673
136
–
–
75
(148)
227
–
71
(3)
7
–
Underlying profit/(loss) before taxation
1,456
(3,241)
SEGMENTAL ANALYSIS
STATEMENT OF FINANCIAL POSITION
Third party sales by the UK business of
£37.4 million increased by 31% in the year
as a result of improvements in the choice of
products on offer and a significant increase
in direct sales via the website. The profit
before taxation of £1.0 million compared
to £2.0 million loss last year reflects the
continued focus on getting products released
to end customers and improvements within
the direct sales channel.
Sales by the European businesses of
£5.9 million decreased by 1% in the year
reflecting the difficulties the Group faced
shipping into Europe post Brexit. The loss
before tax was £0.5 million compares to
£0.3 million loss last year.
Sales in the US business of £5.2 million
increased by 60%. The trading loss of
£0.3 million compares to £1.0 million loss
in last year. We expect sales to increase in
this key market in the longer term and
overheads to reduce.
Property, plant and equipment increased
year-on-year by £2.5 million to £6.7 million
as a result of increased expenditure in
tooling for new products and technologies.
Group inventories increased from
£14.2 million to £15.1 million due to earlier
arrival of stock to ensure we had sufficient
stocks ahead of Chinese New Year and
growing coronavirus reports in the far east.
Trade and other receivables increased by
£0.7 million or 11% largely due the increase
in sales compared to prior year. Trade and
other payables increased by £2.2 million
due to the increased tooling spend and the
change in timing of import VAT since Brexit.
Overall investment in new tooling, new
intangible computer software and other
capital expenditure was £5.0 million
(2020: £2.7 million).
DIVIDEND
The Group is still in the turnaround phase
and there will not be a dividend payment this
year (2020: £nil). The Board continues to
keep the dividend policy under review.
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Hornby PLC Annual Report and Accounts 2021
11
OverviewFinancial StatementsGovernanceStrategic Report Our 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, Inventory and Fixed Costs as percentage of Sales should
be monitored. We provide current and historical analysis in the CEO’s Statement on pages 4 to 8 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 to identify the major risks and has reviewed and determined any
mitigating actions required as set out below. The risk assessment has been completed in the context of the overall strategic objectives and
the Business Plan of the Group.
PRINCIPAL RISKS AND UNCERTAINTIES
Risk
Description
Impact/Sensitivity
Mitigation/Comment
Market
competition
The
Business
Plan
Hobby
market
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 Business Plan may not fully
achieve the aims of returning the
Group to positive cash generation
in 2021/22.
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 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.
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 and India.
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 could
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 to identify and deal with
issues as they arise. The Group has its own
storage facilities in China where its tooling is
secured and managed.
12
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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.
System and
cyber risk
The Group continues to invest in
the development of its website
and ERP systems.
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.
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.
The business plan includes significant capital
expenditure to fund suitable products to underpin
the implementation of the 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 with PNC
and a £9.0 million 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 went live
in January 2021 which has even higher security
than the existing system. We are also working
on upgrading the current ERP system.
Management team to encourage and empower
employees. Key lost talent has been reacquired
and brought back into the Company. An employee
scheme was announced last year where all
employees will participate in profits of the Group.
COVID-19
Further outbreaks in the UK, US and
Europe and within our supply chain.
The Government may issue instructions
that result in our warehouses being
unable to transport goods in or out.
The ongoing situation is being monitored and
direction is taken from the Department of Business
and Central Government as the situation evolves.
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. Performance against
budget is monitored and where any significant deviations are identified appropriate action is taken.
The Strategic Report has been signed on behalf of the Board.
Kirstie Gould
Chief Finance Officer
9 June 2021
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Hornby PLC Annual Report and Accounts 2021
13
OverviewFinancial StatementsGovernanceStrategic Report Corporate Governance Report
CORPORATE GOVERNANCE
For the year ended 31 March 2021, and up to the date of this report, the Company has applied the main principles of the QCA Corporate
Governance Code (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 and Nomination and
Remuneration Committees’ reports on pages 18 to 21 and the Directors’ Report on pages 23 to 27.
BOARD OF DIRECTORS
JOHN STANSFIELD
LYNDON DAVIES
KIRSTIE GOULD
DANIEL CARTER
Independent
Non-Executive Chairman
Chief Executive Officer
Chief Finance Officer &
Company Secretary
Independent
Non-Executive Director
Aged 66
Aged 60
Aged 48
Aged 26
Lyndon joined the Board
as Chief Executive in
October 2017.
He is a highly-experienced
model and hobby
professional with 45 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 was appointed
as Chief Finance Officer of
the Company in January
2018 after spending over
2 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.
Daniel Carter was
appointed as a Non-
Executive Director in
July 2020.
Daniel is an Investment
Analyst at Phoenix Asset
Management which
controls the funds that own
74.7% of the ordinary
shares of Hornby PLC.
Daniel studied Economics
at The University of Bath.
Daniel 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
the 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
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COMPOSITION AND INDEPENDENCE OF THE BOARD
DIVISION OF RESPONSIBILITIES
The Board is comprised of two executive directors and two
non-executive directors, (including the independent Non-Executive
Chairman). During the year, the Board is of the opinion that the
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. Daniel Carter 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, sales and innovation.
The Chairman and Chief Executive in particular, have extensive,
directly applicable experience of working within the toy and hobby
products industry. We do however 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 Director’s background and experience are set out in
the table opposite.
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 18 to 21.
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.
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 the managing of
the business to realise this strategy. The roles of Chairman and Chief
Executive Officer are 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.
Non-Executive Directors are contracted to work no less
than 15 days per year.
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15
OverviewFinancial StatementsGovernanceStrategic Report Corporate Governance Report continued
SUCCESSION PLANNING
THE MAIN ACTIVITIES OF THE BOARD DURING THE YEAR
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. We have identified a number of
employees that have the potential to succeed the Executive Team.
Key Board activities this year included:
• dealing with the impact of COVID-19;
• dealing with the impact of Brexit;
• discussing strategic priorities;
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
and Remuneration and Nomination Committees 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;
• 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 twelve times during the year. All Directors attended
all twelve meetings.
• 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
and the Remuneration and Nomination Committees, 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
20 to 27.
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.
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 22.
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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 2021 by its Nominated Advisors, Liberum
Capital Limited. This refresher is designed to enable Directors to
keep 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 29.
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.
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.
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.
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Hornby PLC Annual Report and Accounts 2021
17
OverviewFinancial StatementsGovernanceStrategic Report 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 2021.
MEMBERSHIP
The Audit Committee comprises two members, Daniel Carter and
myself, John Stansfield. Both of us are independent Non-Executive
Directors of the Company. 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 14.
MEETINGS AND ATTENDANCE
The Committee met three times during the year ended 31 March
2021. All members of the Committee at the time of each meeting
were present at the meetings. 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 Crowe U.K.
LLP. There will be 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 2022 audit. A resolution to reappoint Crowe
U.K LLP as the Company’s auditor is to be proposed at the
forthcoming Annual General Meeting (AGM) in September 2021.
POLICIES FOR NON-AUDIT SERVICES
In addition to the audit services they provide, Crowe U.K. LLP will
prepare and submit our tax computations but will only commence
work on this assignment after the financial statements have
been signed.
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.
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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.
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 12 to 13 of the Operating and Financial Review
Report.
The process of risk management in the business is continually
reviewed.
John Stansfield
Chairman of the Audit Committee
9 June 2021
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Hornby PLC Annual Report and Accounts 2021
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OverviewFinancial StatementsGovernanceStrategic Report 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 2021 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, Daniel Carter, whose
biographies are set out on page 14.
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 twice. 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
make 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 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-Exec
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 26 to 66. The business
consists of 66% male employees and 34% female employees.
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REMUNERATION POLICY
Service agreements and termination payments
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;
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
Rolling
contract
Notice
period by
Company
Notice
period by
Director
9 months 6 months
9 months 6 months
• considers pay and employment conditions within the Company
Compensation for loss of office is based on the base salary of the Director.
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
Executive Directors do not receive annual bonuses.
Long-term Incentive Plan
A new Long Term Incentive Plan, (‘LTIP’) was awarded during
the year.
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.
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.
NON-EXECUTIVE DIRECTORS
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 an initial 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 Daniel Carter signed
his on 16 July 2020. The contract continues as long as the Non-
Executive Directors are re-elected at the AGM. Both John Stansfield and
myself will stand for re-election at the next AGM in September 2021.
Daniel Carter
Chairman of the Remuneration and Nomination Committee
9 June 2021
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OverviewFinancial StatementsGovernanceStrategic Report Directors and Corporate Information
DIRECTORS
INDEPENDENT AUDITORS
The full details of all directors who served in the year ended
31 March 2021 can be found below.
John Stansfield
Non-Executive Chairman
Lyndon Davies
Chief Executive
Kirstie Gould
Chief Finance Officer
Daniel Carter
Non-Executive Director
Kirstie Gould
Company Secretary
REGISTERED OFFICE
Enterprise Road
Westwood Industrial Estate
Margate
Kent CT9 4JX
COMPANY REGISTERED NUMBER
Registered in England Number: 01547390
Independent Auditors
Crowe U.K. LLP
Riverside House
40–46 High Street
Maidstone
Kent ME14 1JH
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
NOMINATED ADVISOR 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
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Directors’ Report
The Directors present their Annual Report together with the audited consolidated
and Company financial statements for the year ended 31 March 2021.
STATUTORY INFORMATION CONTAINED ELSEWHERE IN THE
ANNUAL REPORT
Information required to be part of the Directors’ Report can be found
elsewhere in this document, as indicated, and is incorporated into
this report by reference:
The Group’s business review is set out in the Strategic Report on
pages 10 to 11.
The Corporate Governance Report on page 14 to 17.
Details of the salaries, bonuses, benefits and share interests of
Directors on pages 26 to 27.
Section 172 statement, the key issues and stakeholder
considerations discussed by the Board during the year and how the
Company engages with its stakeholders are set out on page 9 of
the Strategic Report.
Directors’ responsibility statements on page 24.
Likely future events are disclosed within the CEO’s Statement
on page 8.
Post balance sheet events are set out in Note 31.
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 a member of 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 2021 are set out in the
Group Statement of Comprehensive Income. Revenue for the year
was £48.5 million compared to £37.8 million last year. The profit
for the year attributable to equity holders amounted to £0.3 million
(2020: £3.4 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 (2020: £nil) and the
Directors do not recommend a final dividend (2020: £nil).
GOING CONCERN
The Group has in place 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 £9.0
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 (taking COVID-19 into account), 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 £1.3 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.
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.
STREAMLINED ENERGY AND CARBON REPORTING (SECR)
Streamlined Energy and Carbon Reporting (SECR) is the UK
Government’s name for energy and carbon reporting and taxation.
SECR came into force on 1 April 2019.
As a largely office-based business, the Group has a relatively low
carbon presence. Under the SECR requirements we are reporting
energy use and business mileage for all our UK operations. As this is
the first reporting period where SECR requirements apply there is no
comparative information.
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OverviewFinancial StatementsGovernanceStrategic Report Directors’ Report continued
Scope
Activity
Scope 1
Scope 2
Business Mileage
Purchased Electricity
Purchased Gas
2021
Consumption
kWh
2021
Consumption
(tCO2e)
2020
Consumption
kWh
2020
Consumption
(tCO2e)
38,263
446,069
493,767
978,099
9.3
104.0
100.6
213.9
–
–
–
–
–
–
–
–
Intensity metric
An intensity metric of tCO2e per £m revenue has been applied for
the annual total consumption.
tCO2e/£m Revenue
2021
4.22
2020
–
During the reporting year, the Group has started a transition for the
car fleet to hybrid cars. A pre-COVID strategic investment in video
conferencing and other computer system developments enabled staff
to effectively work from home during the pandemic, and further
facilitated in a reduction in business miles travelled.
SUBSTANTIAL SHAREHOLDINGS
The Company has been notified that at close of business on 28
May 2021 the following parties were interested in 3% or more of
the Company’s ordinary share capital.
Shareholder
Number of
ordinary shares
Percentage held
• state whether applicable international accounting standards in
conformity with the Companies Act 2006 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.
Phoenix Asset Management
124,634,330
Artemis Fund Managers Limited
27,551,350
74.66
16.50
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.
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 accounting standards in conformity with the
requirements of the Companies Act 2006. 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;
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:
• so far as the Director is aware, there is no relevant audit
information of which the Group and Company’s auditors are
unaware; and
• they have taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit
information and to establish that the Group and Company’s
auditors are aware of that information.
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FINANCIAL INSTRUMENTS
• to regularly review all our employment practices and procedures
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.
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.
FINANCIAL RISK MANAGEMENT
SHARE CAPITAL
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.
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;
• training, development and progression opportunities are
The share capital of the Company comprises ordinary shares of 1p
each. Each share carries the right to one vote at general meetings of
the Company. The issued share capital of the Company, together
with movements in the Company’s issued share capital is shown in
Note 21. 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.
AUTHORITY TO PURCHASE OWN SHARES
The Company was authorised by shareholder resolution at the
2020 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.
available to all staff;
No shares were purchased by the Company during the year.
• equality in the workplace is good management practice and
makes sound business sense;
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OverviewFinancial StatementsGovernanceStrategic Report Directors’ Report continued
CHANGE OF CONTROL – SIGNIFICANT AGREEMENTS
ANNUAL GENERAL MEETING
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.
The Annual General Meeting is to be scheduled for 15 September
2021. A notice of the Annual General Meeting will be sent out to
shareholders separately to this Annual Report and Accounts.
POLITICAL DONATIONS
The Company has made no political donations during the year.
INDEPENDENT AUDITOR
A resolution to reappoint the auditor Crowe U.K. LLP, will be
proposed at the forthcoming Annual General Meeting.
AUDITED
DIRECTORS’ REMUNERATION
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 2020–21 and 2019–20
in line with the Companies Act 2006 requirement:
Year ended 31 March 2021
Year ended 31 March 2020
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 (Resigned 16 July 2020)
D Carter (Appointed 16 July 2020)
J Stansfield (Appointed 4 January 2018)
Total
222
151
–
–
71
444
–
28
–
–
–
28
222
179
–
–
71
472
222
136
–
–
70
428
–
25
–
–
–
25
222
161
–
–
70
453
Performance Share Plan awards outstanding (Audited)
At 31 March 2021, outstanding awards to Directors under the PSP were as follows:
Director
Lyndon Davies
Kirstie Gould
Award
date
Vesting
date
Nov 2020
June 2022
Nov 2020
June 2022
Market
price at
award date
54p
54p
At 1 April 2020
Awarded during
the year
As at
31 March
2021
–
–
2,670,846
2,670,846
2,670,846
2,670,846
Under the terms of the LTIP, awards are subject to strict vesting
criteria. These are linked to the Company’s performance over
pre-established dates.
The potential level of vesting will be determined by the level of
Operating Profit announced in the 2021/22 Group results,
expected on or around June 2022, the maximum aggregate number
of 10,683,384 options vesting if the maximum Operating Profit
hurdle is achieved by the Company and a pro-rata per cent of the
maximum level of options vesting if certain reduced Operating Profit
hurdles are achieved.
Under the terms of the LTIP, the total equity pool under option
in a cumulative ten-year period (including shares already issued
in relation to previous option exercises), shall not exceed 15%.
Following implementation of the LTIP, 6.4% of the Company’s total
issued share capital will be held under option.
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Hornby PLC Annual Report and Accounts 2021
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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).
There were no 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.
DIRECTORS’ INTERESTS
Interests in shares
Interests of the Directors in the shares of the Company at 31 March
2021 and 31 March 2020 were:
Executive Directors
L Davies
K Gould
Non-Executive Directors
J Wilson
D Carter
J Stansfield
At
31 March
2021
number
At
31 March
2020
number
795,144
795,144
55,006
55,006
–
–
41,311
–
85,358
85,358
All the interests detailed above are beneficial. Two of the Directors
also have share options as detailed in Note 22. 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. Daniel
Carter is also an employee 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
9 June 2021
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Hornby PLC Annual Report and Accounts 2021
27
OverviewFinancial StatementsGovernanceStrategic Report Independent Auditors’ Report to the Members
of Hornby PLC
OPINION
We have audited the financial statements of Hornby PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 March 2021 which comprise:
• the Group and Parent Company statements of comprehensive income for the year ended 31 March 2021;
• the Group and Parent Company statements of financial position as at 31 March 2021;
• the Group and Parent Company statements of cash flows for the year then ended;
• the Group and Parent Company statements of changes in equity for the year then ended; and
• the notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and in accordance
with international accounting standards in conformity with the requirements of the Companies Act 2006.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2021 and of the Group’s profit
and Parent Company’s loss for the period then ended;
• have been properly prepared in accordance with international accounting standards; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in
the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the entity’s ability to continue to adopt the going
concern basis of accounting included:
• reviewing the cash flow model provided by management and challenging the assumptions made;
• reviewing management’s forecasts which show continued growth in both revenue and profitability. Our assessment therefore considered
if this will be feasible in light of past losses and recent economic conditions;
• considering the accuracy of past budgeting since the new management team took over, as well as a review of the April management
accounts compared to forecast; and
• considering the cash position of the business along with current facilities available for drawdown.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the entity’s ability to continue as a going concern for a period of at least twelve months from when
the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
OVERVIEW OF OUR AUDIT APPROACH
Materiality
In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be
expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our
testing and to evaluate the impact of misstatements identified.
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Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £215,000
(FY20 £215,000), based on turnover and the profitability of the business.
Overall Company materiality was set at £200,000 based on net assets, restricted so as not to exceed Group materiality.
We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements.
Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of
the specific risk of each audit area having regard to the internal control environment.
Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and
Directors’ remuneration.
We agreed with the Audit Committee to report to it all identified errors in excess of £10,000 (2020: £10,000). Errors below that threshold
would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
OVERVIEW OF THE SCOPE OF OUR AUDIT
We performed an audit of the complete financial information of two full scope components, Hornby PLC and Hornby Hobbies Limited. The
European sales offices and US trading subsidiary were audited using a component materiality level of £180,000 for the purposes of the
consolidation only.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our 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) that we identified.
These matters included 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 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.
We considered going concern to be a key audit matter. Our observations on this area are set out in the Conclusions relating to Going
Concern section of the audit report.
This is not a complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit matter
Carrying value of goodwill and intangibles
The Group holds goodwill at a carrying value of £4.5m
and brand relations at a carrying value of £1.5m.
The Parent Company also holds significant investments and
debtor balances with Group companies.
Recovery of these assets is dependent upon future cash
flows which are required to be discounted. There is a risk
that forecasts for these future cash flows are not met or that
the cash flows have not been discounted at an
appropriate rate. If the cash flows do not meet
expectations the assets may become impaired.
Inventory provisioning
The Group was holding £15.1m of inventory at the year
end. There was considered to be a risk that old inventory
may become difficult to sell and thereby become
impaired.
We reviewed management’s impairment review which includes impairment reviews for
investments, goodwill and intangible assets.
The reviews relied on forecasts of future cash flows based on Board approved
forecasts. We challenged management on the assumptions made, including the
forecast growth rate, profitability, terminal growth rates applied and discount rate
applied. This review was conducted with the support of our valuations team. As part of
our review we benchmarked assumptions such as the terminal growth rate and inputs
into the calculation of the cost of capital (discount rate).
We also considered the recoverability of intercompany debt in the Parent Company
financial statements.
We obtained the aged inventory reports and recalculated the provision.
We reviewed assumptions made in comparison to the prior year and challenged
management where assumptions had either changed or no longer appeared
appropriate.
We compared the aging of stock year on year to consider if stock was getting older
and questioned management on the increase in stock from the prior year.
For a sample of inventory items we reviewed sales post year end to consider if any
items were being valued below cost.
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OverviewFinancial StatementsGovernanceStrategic Report Independent Auditors’ Report to the Members
of Hornby PLC continued
Key audit matter
How the scope of our audit addressed the key audit matter
Long Term Incentive Plan
The Company introduced a Long Term Incentive Plan (LTIP)
for certain employees during the year. The options are
linked to the profitability of the Company for the year
ended 31 May 2022. We considered there to be a risk
that the assumptions used in calculating the charge for the
year were incorrect.
Revenue recognition
Revenue is recognised in accordance with the accounting
policy set out in the financial statements. We focus on the
risk of material misstatement in the recognition of revenue,
as a result of both fraud and error, because revenue is
material and is an important determinant of the Group’s
profitability.
We reviewed the share option calculations provided by management and checked the
inputs and assumptions into the model.
The number of options that vest depends on meeting certain profit targets and therefore
we ensured that the options expected to vest were consistent with the forecast profit for
the year ended 31 May 2022.
We reviewed the revenue recognition process and found the policy to be in
accordance with IFRS 15.
We performed detailed testing by selecting a sample of sales made in the year and
agreeing these through to invoices, despatch records and ultimately cash received.
We tested a sample of sales around the year end to ensure that cut off was
working appropriately.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to
enable us to express an opinion on these matters individually and we express no such opinion.
OTHER INFORMATION
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion 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 such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in 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 in this regard.
OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion based on the work undertaken in the course of our audit:
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
• the Strategic Report and Directors’ Report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit,
we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
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RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the Directors’ Responsibilities Statement set out on page 24 the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors 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 Parent 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 Parent Company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S 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 auditor’s 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 Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
EXTENT TO WHICH THE AUDIT IS CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We identified and assessed the risks of material
misstatement of the financial statements from irregularities, whether due to fraud or error, and discussed these between our audit team
members. We then designed and performed audit procedures responsive to those risks, including obtaining audit evidence sufficient and
appropriate to provide a basis for our opinion.
We obtained an understanding of the legal and regulatory frameworks within which the Company operates, focusing on those laws and
regulations that have a direct effect on the determination of material amounts and disclosures in the financial statements. The laws and
regulations we considered in this context were the Companies Act 2006 and Taxation legislation.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors
and other management and inspection of regulatory and legal correspondence, if any.
We identified the greatest risk of material impact on the financial statements from irregularities, including fraud, to be the override of controls
by management and the recognition of revenue. Our audit procedures to respond to these risks included:
• enquiry of management about the Group’s policies, procedures and related controls regarding compliance with laws and regulations and
if there are any known instances of non-compliance;
• examining supporting documents for all material balances, transactions and disclosures;
• review of the Board meeting minutes;
• enquiry of management and review and inspection of relevant correspondence with any legal firms;
• evaluation of the selection and application of accounting policies related to subjective measurements and complex transactions;
• detailed testing of a sample of sales made during the year and around the year and agreeing these through to invoices and
despatch records;
• testing the appropriateness of a sample of significant journal entries recorded in the general ledger and other adjustments made in the
preparation of the financial statements; and
• review of accounting estimates for biases.
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the
financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. We are not
responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
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31
OverviewFinancial StatementsGovernanceStrategic Report Independent Auditors’ Report to the Members
of Hornby PLC continued
USE OF OUR REPORT
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Mark Sisson (Senior Statutory Auditor)
for and on behalf of Crowe U.K. LLP
Riverside House
40-46 High Street
Maidstone
Kent ME14 1JH
9 June 2021
32
Hornby PLC Annual Report and Accounts 2021
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Group and Company Statements of Comprehensive Income
for the Year Ended 31 March 2021
Group
Company
Revenue
Cost of sales
Gross profit
Distribution costs
Selling and marketing costs
Administrative expenses
Other operating (expenses)/income
Operating profit/(loss) before Exceptional items
Exceptional items
Operating profit/(loss)
Finance income
Finance costs
Net finance expense
Share of profit of investments accounted for using the equity
method
Profit/(Loss) before taxation
Income tax credit
Profit/(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 (loss)/income for the year, net of tax
Total comprehensive (loss)/income for the year
Profit/(loss) per ordinary share
Note
2
4
4
4
2
3
3
3
11
4
5
2021
£’000
48,549
(26,795)
21,754
(6,798)
(7,804)
(6,133)
(241)
778
(211)
567
3
(334)
(331)
109
345
1,018
1,363
(597)
(187)
(784)
579
Basic
Diluted
7
7
0.82p
0.80p
All results relate to continuing operations.
The notes on pages 37 to 70 form part of these accounts.
2021
£’000
933
–
933
–
–
2020
£’000
1,065
–
1,065
–
–
(1,315)
(1,069)
–
(382)
–
(382)
175
(220)
(45)
109
(318)
–
(318)
–
246
246
(72)
–
(4)
(6,051)
(6,055)
175
(217)
(42)
34
(6,063)
–
(6,063)
–
(119)
(119)
(6,182)
2020
£’000
37,842
(21,140)
16,702
(5,787)
(8,153)
(5,685)
181
(2,742)
(75)
(2,817)
3
(615)
(612)
34
(3,395)
–
(3,395)
247
(332)
(85)
(3,480)
(2.67)p
(2.67)p
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Hornby PLC Annual Report and Accounts 2021
33
OverviewFinancial StatementsGovernanceStrategic Report
Group and Company Statements of Financial Position
as at 31 March 2021
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investments
Right of Use Assets
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
Lease liabilities
Derivative financial instruments
Net current assets
Non-current liabilities
Borrowings
Lease liabilities
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
2021
£’000
Note
Company
2020
£’000
2021
£’000
2020
£’000
8
9
10
11
12
20
13
14
19
15
18
16
17
19
18
17
20
21
23
23
23
23
4,561
3,017
6,680
1,839
2,690
2,956
4,564
2,824
4,165
1,730
2,573
2,030
–
–
–
–
–
–
23,860
23,415
–
–
–
–
21,743
17,886
23,860
23,415
15,152
7,247
32
4,685
27,116
–
(7,131)
(365)
(513)
(8,009)
19,107
–
(2,443)
(150)
(2,593)
38,257
1,669
52,857
55
(1,989)
(481)
1,688
(15,542)
38,257
14,235
6,525
116
5,921
–
–
48,518
48,454
–
2
–
2
26,797
48,520
48,456
–
(4,889)
(384)
–
(5,273)
21,524
–
–
(6,722)
(6,596)
–
–
(6,722)
41,798
–
–
(6,596)
41,860
–
(5,689)
(5,907)
(2,255)
(150)
(2,405)
37,005
1,669
52,857
55
(1,802)
116
1,688
(17,578)
37,005
–
–
(5,689)
59,969
1,669
52,857
55
(1,016)
–
19,145
(12,741)
59,969
–
–
(5,907)
59,368
1,669
52,857
55
(1,262)
–
19,145
(13,096)
59,368
The notes on pages 37 to 70 form part of these accounts. The financial statements on pages 33 to 70 were approved by the Board of
Directors on 9 June 2021 and were signed on its behalf by:
K Gould
Director
Registered Company Number: 01547390
34
Hornby PLC Annual Report and Accounts 2021
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Group and Company Statements of Changes in Equity
for the Year Ended 31 March 2021
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 2019 and 1 April 2019
1,253
38,587
55
(1,470)
(131)
1,688
(14,183)
25,799
Loss for the year
Other comprehensive (expense)/income for the year
Total comprehensive (expense)/income for the year
Transactions with owners
–
–
–
–
–
–
Net proceeds from issue of ordinary shares
Total transactions with owners
416
416
14,270
14,270
–
–
–
–
–
–
(332)
(332)
–
–
–
247
247
–
–
–
–
–
–
–
(3,395)
(3,395)
–
(85)
(3,395)
(3,480)
–
–
14,686
14,686
Balance at 31 March and 1 April 2020
1,669
52,857
55
(1,802)
116
1,688
(17,578)
37,005
Profit for the year
Other comprehensive expense for the year
Share-based payments (Note 22)
Total comprehensive (expense)/income for the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(187)
(597)
–
–
(187)
(597)
–
–
–
–
1,363
1,363
–
673
(784)
673
2,036
1,252
Balance at 31 March 2021
1,669
52,857
55
(1,989)
(481)
1,688
(15,542)
38,257
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 2019 and 1 April 2019
1,253
38,587
55
(1,143)
19,145
(7,033)
50,864
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
Total transactions with owners
–
–
–
–
–
–
416
416
14,270
14,270
–
–
–
–
–
–
(119)
(119)
–
–
–
–
–
–
–
(6,063)
(6,063)
–
(119)
(6,063)
(6,182)
–
–
14,686
14,686
Balance at 31 March and 1 April 2020
1,669
52,857
55
(1,262)
19,145
(13,096)
59,368
Loss for the year
Other comprehensive income for the year
Share-based payments (Note 22)
Total comprehensive income/(expense) for the year
–
–
–
–
–
–
–
–
–
–
–
–
–
246
–
246
–
–
–
–
(318)
(318)
–
673
355
246
673
601
Balance at 31 March 2021
1,669
52,857
55
(1,016)
19,145
(12,741)
59,969
The notes on pages 37 to 70 form part of these accounts.
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Hornby PLC Annual Report and Accounts 2021
35
OverviewFinancial StatementsGovernanceStrategic Report Group and Company Cash Flow Statements
for the Year Ended 31 March 2021
Group
2021
£’000
2020
£’000
Note
Cash flows from operating activities
Cash generated from/(used in) operations
27
4,372
(3,241)
Interest paid
Interest element of lease payments
Tax received/(paid)
(75)
(165)
90
(446)
(169)
–
Company
2021
£’000
45
(220)
–
–
2020
£’000
(14,672)
(217)
–
–
Net cash generated from/(used in) operating activities
4,222
(3,856)
(174)
(14,889)
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Interest received
10
9
(4,249)
(726)
3
(2,481)
(237)
3
Net cash (used in)/generated from investing activities
(4,972)
(2,715)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Share issue costs
Net (repayments to)/proceeds from ABL facility
Proceeds from shareholder loan
Repayment of shareholder loan
Payment of lease liability
Advances to subsidiary undertakings
Net cash (used in)/generated from 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
–
–
–
–
–
(462)
–
(462)
(1,212)
5,921
(24)
4,685
4,685
4,685
15,000
(314)
(1,893)
7,776
(8,337)
(462)
–
11,770
5,199
704
18
5,921
5,921
5,921
15
–
–
175
175
–
–
–
–
–
–
–
–
1
1
–
2
2
2
–
–
175
175
15,000
(314)
–
–
–
29
14,715
1
1
–
2
2
2
36
Hornby PLC Annual Report and Accounts 2021
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Notes to the Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES
Accounting policies for the year ended 31 March 2021
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 statements are presented in Sterling, which is the Parent’s functional currency and the Group’s presentation currency. The figures
shown in the financial statements are rounded to the nearest thousand pounds.
The financial information for the year ended 31 March 2021 has been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. 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 an Asset Based Lending (ABL) facility with PNC Credit Limited which is a floating facility based on the current asset
position capped at £12 million through to June 2023. The PNC Covenants are customary operational covenants applied on a monthly basis.
In addition, the Group entered a committed £9.0 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 (taking COVID-19 into account), 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.
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Hornby PLC Annual Report and Accounts 2021
37
OverviewFinancial StatementsGovernanceStrategic Report 1. SIGNIFICANT ACCOUNTING POLICIES continued
Adoption of new and revised standards
The following standards and interpretations relevant to the Group are in issue but are not yet effective and have not been applied in the
historical financial information. In some cases these standards and guidance have not been endorsed for use.
• IAS 1 Presentation of liabilities as current or non-current
• IAS 1 Disclosure of accounting policies
• IAS 8 definition of accounting estimates
Revenue recognition
The Group’s revenue is mostly from product sales and is recognised as follows:
(a) Sale of goods
Sales of goods are recognised when a Group entity has delivered products to the customer. The customer is either a trade customer
or the consumer when sold through Hornby concessions in various retail outlets, or via the internet.
(b) Royalty income
Royalty income is recognised at the later of when the performance obligation is satisfied and when the sales or usage occurs.
(c) Sales returns
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. 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.
38
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Hornby PLC Annual Report and Accounts 2021
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Notes to the Financial Statements continued
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.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired subsidiary at the date of acquisition.
Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not
reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is
allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or Groups
of cash-generating units that are expected to benefit from the business combination in which the goodwill arose identified according to
operating segment. Goodwill is recorded in the currency of the cash generating unit to which it is allocated.
Intangibles
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 15–20 years.
(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 of 10 years.
(c) Computer software and website costs
Computer software expenditure is capitalised at the value at the date of acquisition and depreciated over a useful economic life
of 4–6 years.
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Hornby PLC Annual Report and Accounts 2021
39
39
OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report 1. SIGNIFICANT ACCOUNTING POLICIES continued
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
– 5 to 10 years
Motor vehicles
– 4 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. Tools and moulds purchased but not ready for production are not depreciated.
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.
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 comprise item cost, freight and
any product specific development costs.
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 twelve months before 31 March 2021 and the
corresponding historical credit losses experienced within this period.
40
40
Hornby PLC Annual Report and Accounts 2021
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Notes to the Financial Statements continued
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.
Trade 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.
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report 1. SIGNIFICANT ACCOUNTING POLICIES continued
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 25.
The Group has a profit share scheme for all employees below Executive level. This scheme commences in 2020/21 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.
Share-based payments
The Group has issued share options to Executive Directors. The fair value of the award granted is recognised as an employee expense within
the Income Statement with a corresponding increase in equity. The fair value is measured at the grant date and allocated over the vesting
period based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is
any indication that the number of share options expected to vest differs from previous estimates. The fair value of the grants is measured using
the Black-Scholes model.
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.
(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 to 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, Asset Based lending facilities and shareholder loans. 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
were zero.
(c) Credit risk
The Group manages its credit risk through a combination of internal credit management policies and procedures.
(d) Liquidity risk
At 31 March 2021 the UK had a £12 million Asset Based Lending facility with PNC Credit Limited and a £9 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.
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Notes to the Financial Statements continued
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.
(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 19.
Foreign currency
Transactions denominated in foreign currencies are recorded in the relevant functional currency at the exchange rates ruling at the date of the
transaction. Foreign exchange gains and losses resulting from such transactions are recognised in the Statement of Comprehensive Income,
except when deferred 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.
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report
1. SIGNIFICANT ACCOUNTING POLICIES continued
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.
Furlough scheme
Hornby PLC has accounted for government furlough grant receivables under IAS 20 and recognised a credit to match the related employee
costs as and when they are received. Under IAS 20, it is permissible to present the grant and the expenses on either a gross or net basis.
However, any related balance sheet items (i.e. grant receivable and amounts payable to employees) cannot be netted off. Any decision to
top up the furlough payments to employees (e.g. by choosing to pay more than the government guaranteed 80% of salary up to a maximum
of £2,500 per month) is a voluntary decision and should not be provided for in advance. This is because there is no obligation to make
these additional payments and to do so would constitute providing for future operating costs. At year end all furlough payments have been
received and no staff are on furlough.
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.
(b) Share-based payment arrangements
Equity-settled share-based payments to Directors and executives measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of
each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to other reserves.
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) Receivables provision
The Group 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.
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Notes to the Financial Statements continued
(c) Fair value of derivatives
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
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) IFRS 16 Estimates
The Group makes judgement to estimate the incremental borrowing rate used to measure lease liabilities based on expected third party
financing costs when the interest rate implicit in the lease cannot be readily determined. This is explained further in the Leases accounting
policy. Where leases include break dates the management have made a judgement these will not be exercised.
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 23) and the basis of preparation (page 37).
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.
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report
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
33 and its assets and liabilities given in the Company Statement of Financial Position on page 34. Other Company information is provided
in the other notes to the accounts.
Year ended 31 March 2021
Revenue
– External
37,428
5,233
1,012
1,719
3,157
48,549
–
48,549
UK
£’000
USA
£’000
Spain
£’000
Italy
£’000
Rest of
Europe
£’000
Total
Reportable
Segments
£’000
Intra
Group
£’000
Group
£’000
– Other segments
2,603
–
2,603
(2,603)
Operating (loss)/profit
Finance income
– External
– Other segments
Finance costs
– External
– Other segments
Share of profit of investments accounted for
using the equity method
Profit/(Loss) before taxation
Taxation
Profit/(Loss) for the year
Segment assets
Less intercompany receivables
Add tax assets
Total assets
Segment liabilities
969
3
486
(308)
(176)
109
1,083
1,018
2,101
–
(279)
–
–
–
–
–
–
(56)
–
–
(3)
(220)
–
(279)
(279)
–
–
(279)
(279)
59,490
2,245
5,827
(16,442)
3,019
–
–
46,067
2,245
(5,738)
–
89
–
10
–
–
(21)
(17)
–
(28)
–
(28)
(116)
(106)
(63)
(285)
(77)
–
–
(2)
(73)
–
(152)
567
3
486
(334)
(486)
109
345
–
1,018
(152)
1,363
4,199
71,645
(3,456)
(25,742)
2,956
743
48,859
(17,628)
(6,235)
(5,213)
(811)
(6,607)
(36,494)
Less intercompany payables
8,098
5,687
5,103
503
6,351
25,742
Add tax liabilities
Total liabilities
Other segment items
Capital expenditure
Depreciation
Net foreign exchange on intercompany loans
Amortisation of intangible assets
150
–
–
–
–
150
(9,380)
(548)
(110)
(308)
(256)
(10,602)
4,953
1,701
(148)
533
18
17
–
–
–
5
–
–
2
(2)
–
–
2
–
–
–
4,975
1,721
(148)
533
All transactions between Group companies are on normal commercial terms.
–
567
3
–
(334)
–
109
345
1,018
1,363
71,645
(25,742)
2,956
48,859
(36,494)
25,742
150
(10,602)
4,975
1,721
(148)
533
–
–
(486)
–
486
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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Notes to the Financial Statements continued
Year ended 31 March 2020
Revenue
– External
28,622
3,263
1,199
1,469
3,289
37,842
–
37,842
UK
£’000
USA
£’000
Spain
£’000
Italy
£’000
Rest of
Europe
£’000
Total
Reportable
Segments
£’000
Intra
Group
£’000
Group
£’000
– Other segments
3,088
–
Operating (loss)/profit
(1,794)
(1,015)
Finance cost
– External
– Other segments
Finance income
– External
– Other segments
Share of profit of investments accounted for
using the equity method
3
605
(579)
(303)
34
–
–
(29)
–
–
–
(18)
–
–
(2)
(217)
–
(Loss) before taxation
(2,034)
(1,044)
(237)
3,088
(3,088)
–
–
(1)
–
–
(2)
(73)
(2,817)
3
735
(615)
(735)
–
–
(735)
–
735
–
11
–
130
(3)
(142)
–
(4)
–
(4)
–
34
(76)
(3,395)
–
–
(76)
(3,395)
(29)
(65)
(222)
(744)
524
–
(3,579)
(27,123)
2,030
795
44,683
(6,651)
(34,951)
6,533
27,123
–
150
(220)
(118)
(7,678)
(2,817)
3
–
(615)
–
34
(3,395)
–
(3,395)
69,776
(27,123)
2,030
44,683
(34,951)
27,123
150
(7,678)
2,718
2,100
(148)
603
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Taxation
(Loss) for the year
Segment assets
–
–
–
(2,034)
(1,044)
(237)
56,516
2,913
6,101
(128)
4,374
69,776
Less intercompany receivables
(17,484)
(63)
(5,968)
Add tax assets
Total assets
Segment liabilities
2,095
–
41,127
2,850
–
133
(15,552)
(6,841)
(5,163)
Less intercompany payables
8,655
6,347
5,064
150
–
(6,747)
(494)
–
(99)
Add tax liabilities
Total liabilities
Other segment items
Capital expenditure
Depreciation
Net foreign exchange on intercompany loans
Amortisation of intangible assets
2,698
2,076
(148)
603
16
15
–
–
1
6
–
–
3
3
–
–
–
–
–
–
2,718
2,100
(148)
603
All transactions between Group companies are on normal commercial terms.
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Hornby PLC Annual Report and Accounts 2021
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report
3. NET FINANCE EXPENSE
Finance costs:
Interest expense on borrowings
Interest expense on shareholder loan
Interest element of leases
Interest expense on intercompany borrowings
Finance income:
Bank interest
Interest income on intercompany loans
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
(85)
(84)
(165)
–
(334)
3
–
3
(165)
(281)
(169)
–
(615)
3
–
3
–
–
–
(220)
(220)
–
175
175
(45)
–
–
–
(217)
(217)
–
175
175
(42)
Net finance expense
(331)
(612)
4. PROFIT/(LOSS) BEFORE TAXATION
The following items have been included in arriving at loss before taxation:
Staff costs (Note 24)
Inventories:
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
9,257
8,014
834
513
– Cost of inventories recognised as an expense (included in cost of sales)
22,429
18,240
– Increase in stock provision
Depreciation of property, plant and equipment:
– Owned assets
– Leased assets
Repairs and maintenance expenditure on property, plant and equipment
Research and development expenditure
Increase in impairment of trade receivables
Other operating expenses/(income):
– Foreign exchange on trading transactions
– Net impact of foreign exchange on intercompany loans
– Amortisation of intangible assets
27
186
1,721
492
81
1,320
–
14
(25)
533
2,100
528
75
1,244
(118)
(260)
(148)
603
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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Notes to the Financial Statements continued
Exceptional items comprise:
– Restructuring costs
– Refinancing
– Relocation
– Coronavirus impact
– Impairment of receivable
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
136
–
75
–
–
211
71
7
–
(3)
–
75
–
–
–
–
–
–
24
7
–
–
6,020
6,051
The exceptional items totalling £211,000 (2020: £75,000) include restructuring costs relating to redundancy costs and dilapidation costs on
movement of Headquarters from Sandwich to Margate. These are classified as exceptional as they are one off, non-recurring costs.
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
– Tax services
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
31
39
–
6
76
30
36
–
–
66
11
–
–
–
11
10
–
–
–
10
Current year subsidiary fees relate to Hornby Italia (£6,000) and Hornby Hobbies Limited (£33,000).
In the current financial year the level of non-audit fees are £6k and related to tax services and 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
UK Taxation:
– Adjustments in respect of prior years
Deferred tax (Note 20)
Origination and reversal of temporary differences
Effect of tax rate change on opening balance
Total tax credit to the loss before tax
Group
Company
2021
£’000
–
(92)
–
(926)
–
(1,018)
2020
£’000
2021
£’000
2020
£’000
–
–
221
(221)
–
–
–
–
–
–
–
–
–
–
–
Hornby PLC Annual Report and Accounts 2021
49
49
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report 5. INCOME TAX (CREDIT)/CHARGE continued
The 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% (2020: 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
Company
2021
£’000
345
2020
£’000
(3,395)
2021
£’000
(318)
2020
£’000
(43)
65
(645)
(60)
(8)
(92)
(138)
(21)
(40)
(792)
–
(1,018)
20
(6)
(33)
885
(221)
–
8
(21)
–
73
–
–
–
(6)
–
14
–
–
The Company’s profits for this accounting year are taxed at an effective rate of 19%. The UK corporation tax rate was due to decrease to
17% from 1 April 2020 however the rate has been kept at 19%, being substantively enacted on 17 March 2020.
UK deferred tax balances have been restated in these accounts and carried forward at a rate of 19% from 1 April 2020.
The latest corporation tax rate change to 23% announced on the 3 March 2021 Budget has yet to be substantively enacted as at 31 March
2021 and therefore is not reflected in these notes. This rate change, once substantively enacted, does not come into effect until 1 April 2023
and therefore only timing differences expected to reverse after this date will be recognised for Deferred Tax purposes at 23%, those expected
to reverse before this date will continue to be recognised at 19%.
Unrecognised deferred tax relates to UK and overseas subsidiaries and is not recognised, except to the extent of the prior year movement in
the change in tax rate noted above. This is due to the Directors taking the view that deferred tax should only be recognised to the extent
taxable profits are likely to be achieved. More detail can be found in Note 20.
6. DIVIDENDS
No interim or final dividends were paid in relation to the year ended 31 March 2020 and no interim dividend has been paid in relation to
the year ended 31 March 2021. The Directors are not proposing a final dividend in respect of the financial year ended 31 March 2021.
7. PROFIT/(LOSS) PER SHARE
Basic profit/(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 profit/(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 2021.
The underlying profit/(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 results
from historical acquisitions. Additionally, share-based payments and exceptional items including relocation, refinance and restructuring costs
are one off items and therefore have also been added back in calculating underlying profit/(loss) per share.
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Notes to the Financial Statements continued Reconciliations of the loss and weighted average number of shares used in the calculations are set out below.
2021
Weighted
average
number of
shares
’000s
(Loss)/
earnings
£’000
Per-share
amount
pence
(Loss)/
earnings
£’000
2020
Weighted
average
number of
shares
’000s
REPORTED
Basic profit per share
Profit attributable to ordinary shareholders
1,363
166,929
Effect of dilutive share options
Diluted profit per share
UNDERLYING
–
4,127
1,363
171,056
Profit attributable to ordinary shareholders
1,363
166,929
Share-based payments
Amortisation of intangibles
Restructuring costs
Refinancing
Relocation
Net foreign exchange translation adjustments
Underlying basic profit/EPS
Underlying diluted profit/EPS
545
432
110
–
61
–
2,511
2,511
–
–
–
–
–
166,929
171,056
0.82
–
0.80
0.82
0.33
0.26
0.07
–
0.04
–
1.50
1.47
Per-share
amount
pence
(2.67)
–
(2.67)
(3,395)
127,196
–
–
(3,395)
127,196
(3,395)
127,196
(2.67)
184
58
6
–
(123)
(3,270)
(3,270)
–
–
–
–
–
127,196
127,196
0.14
0.05
0.00
–
(0.10)
(2.57)
(2.57)
The above numbers used to calculate the EPS for the year ended 31 March 2021 and 31 March 2020 have been tax effected at the rate of 19%.
8. GOODWILL
GROUP
COST
At 1 April 2020
Exchange adjustments
At 31 March 2021
AGGREGATE IMPAIRMENT
At 1 April 2020 and 31 March 2021
Net book amount at 31 March 2021
COST
At 1 April 2019
Exchange adjustments
At 31 March 2020
AGGREGATE IMPAIRMENT
At 1 April 2019 and 31 March 2020
Net book amount at 31 March 2020
Net book amount at 31 March 2019
The Company has no goodwill.
£’000
13,055
(3)
13,052
8,491
4,561
13,054
1
13,055
8,491
4,564
4,563
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8. GOODWILL 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 2021 and 31 March 2020 is as follows:
GROUP
At 31 March 2021
At 31 March 2020
UK
£’000
3,992
3,992
USA
£’000
9
10
France
£’000
364
364
Germany
£’000
196
198
Total
£’000
4,561
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 business plan.
The relative risk adjusted (or ‘beta’) discount rate applied reflects the risk inherent in hobby based product companies. The 31 March 2021
forecasts are based on a 4 year business plan for the years ending 31 March 2022 to 31 March 2025. The 31 March 2020 forecasts are
based on a 4 year business plan for the years ending 31 March 2021 to 31 March 2024. Cash flows beyond these years are extrapolated
using an estimated 2.0% year on year growth rate. The cash flows were discounted using a pre-tax discount rate of 9.9% (2020: 9.9%) which
management believes is appropriate for all territories.
The key assumptions used for value-in-use calculations for the year ended 31 March 2021 are as follows:
GROUP
Gross Margin1
Growth rate to perpetuity2
UK
(Corgi)
63.7%
2.0%
UK
(Airfix &
Humbrol)
64.5%
2.0%
France
57.0%
2.0%
Germany
56.7%
2.0%
1. Average of the variable yearly gross margins used over the period 21’22 to 28’29.
2. Weighted average growth rate used to extrapolate cash flows beyond the budget period reflecting the long term future growth rate of the economy.
GROUP
Gross Margin1
Growth rate to perpetuity2
UK
(Corgi)
61.0%
2.0%
UK
(Airfix &
Humbrol)
61.1%
2.0%
France
58.7%
2.0%
Germany
54.6%
2.0%
1. Average of the variable yearly gross margins used over the period 20’21 to 27’28.
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.
For the UK CGU, the recoverable amount calculated based on value in use exceeded carrying value by £25.6 million. A reduction of the
average gross margin to respectively 53.8% for Corgi and 50.2% for Airfix/Humbrol, or a rise in discount rate to respectively 22.8% for
Corgi and 54.9% 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 £18.3 million. A reduction of the
average gross margin to 6.2%, or a rise in discount rate to 290.2% would remove the remaining headroom.
For the Germany CGU, the recoverable amount calculated based on value in use exceeded carrying value by £20.7million. A reduction of
the average gross margin to 11.8%, or a rise in discount rate to 328.0% would remove the remaining headroom.
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Notes to the Financial Statements continued 9. INTANGIBLE ASSETS
GROUP
INTANGIBLE ASSETS
COST
At 1 April 2020
Additions
At 31 March 2021
ACCUMULATED AMORTISATION
At 1 April 2020
Charge for the year
At 31 March 2021
Net book amount at 31 March 2021
GROUP
INTANGIBLE ASSETS
COST
At 1 April 2019
Additions
At 31 March 2020
ACCUMULATED AMORTISATION
At 1 April 2019
Charge for the year
At 31 March 2020
Net book amount at 31 March 2020
Brand names
£’000
Customer lists
£’000
Computer
Software and
Website
£’000
4,914
–
4,914
3,212
227
3,439
1,475
1,415
–
1,415
1,415
–
1,415
–
3,450
726
4,176
2,328
306
2,634
1,542
Brand names
£’000
Customer lists
£’000
Computer
Software and
Website
£’000
4,914
–
4,914
2,985
227
3,212
1,702
1,415
–
1,415
1,415
–
1,415
–
3,213
237
3,450
1,952
376
2,328
1,122
Total
£’000
9,779
726
10,505
6,955
533
7,488
3,017
Total
£’000
9,542
237
9,779
6,352
603
6,955
2,824
All amortisation charges in the year have been charged in other operating expenses. The Company held no intangible assets.
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10. PROPERTY, PLANT AND EQUIPMENT
GROUP
COST
At 1 April 2020
Exchange adjustments
Additions at cost
Disposals
At 31 March 2021
ACCUMULATED DEPRECIATION
At 1 April 2020
Exchange adjustments
Charge for the year
Disposals
At 31 March 2021
Net book amount at 31 March 2021
Plant and
equipment
£’000
Motor
Vehicles
£’000
Tools and
moulds
£’000
Total
£’000
1,529
(53)
125
(76)
1,525
55
(1)
–
–
54
67,477
69,061
–
4,124
–
(54)
4,249
(76)
71,601
73,180
1,237
42
63,617
64,896
(41)
130
(76)
1,251
274
(1)
4
–
45
9
–
1,587
–
(41)
1,721
(76)
65,204
66,500
6,397
6,680
Depreciation is charged in the Group’s statement of comprehensive income within Administrative expenses.
GROUP
COST
At 1 April 2019
Exchange adjustments
Additions at cost
Disposals
At 31 March 2020
ACCUMULATED DEPRECIATION
At 1 April 2019
Exchange adjustments
Charge for the year
Disposals
At 31 March 2020
Net book amount at 31 March 2020
Net book amount at 31 March 2019
The Company does not hold any property, plant and equipment.
Plant and
equipment
£’000
Motor
Vehicles
£’000
Tools and
moulds
£’000
Total
£’000
1,575
54
65,077
66,706
26
81
(153)
1,529
1,046
24
319
(152)
1,237
292
529
1
–
–
55
37
1
4
–
42
13
17
–
2,400
–
27
2,481
(153)
67,477
69,061
61,840
62,923
–
1,777
–
25
2,100
(152)
63,617
64,896
3,860
3,237
4,165
3,783
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Notes to the Financial Statements continued
11. INVESTMENTS
The Group holds a direct investment in LCD Enterprises Limited (‘LCD’), holding 49% of ordinary shares. The company is based in South
Wales registered at Unit 6 119 Ystrad Road, Fforestfach, Swansea, Wales, SA5 4JB. This investment is included in the consolidated financial
statements using the equity method. The last accounts were of LCD were drawn up to 31 December 2020. As an associate it does not have
the same accounting year end.
Summarised Financial Information of LCD
As at 31 March 2021
Current Assets
Non-current assets
Current Liabilities
For the period ended 31 March
Revenues
Profit after tax
Group
2021
£’000
2020
£’000
2,702
2,130
(2,268)
2,277
2,244
(2,182)
2,237
223
3,024
70
The movements in the net book value of interests in associated undertakings are as follows:
At 1 April 2019
Share of profit of investments accounted for using the equity method
At 31 March and 1 April 2020
Share of profit of investments accounted for using the equity method
At 31 March 2021
Company
The movements in the net book value of interests in subsidiary and associated undertakings are as follows:
Interests in
subsidiary
undertakings at
valuation £’000
Interests in
associate
undertakings at
valuation £’000
Loans to
subsidiary
undertakings at
cost
£’000
Interests in
associated
undertakings at
valuation
£’000
1,696
34
1,730
109
1,839
Total
£’000
At 1 April 2020
17,336
1,730
4,349
23,415
Share of profit of investments accounted for using the equity method
Capital contribution relating to share-based payment
At 31 March 2021
At 1 April 2019 (restated)
Share of profit of investments accounted for using the equity method
At 31 March 2020
–
336
17,672
17,336
–
17,336
109
–
1,839
1,696
34
1,730
–
–
4,349
4,349
–
109
336
23,860
23,381
34
4,349
23,415
Interest was charged on loans to subsidiary undertakings at Sterling three-month Libor + 3.6%.
Loans are unsecured and exceed five years’ maturity.
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11. INVESTMENTS continued
Group 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.
Proportion of nominal value
of issued shares held
Group % Company %
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
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
Köppelsdorfer Straße 226, D-96515 Sonneberg, Germany
Hornby Industries Limited
Westwood, Margate, Kent CT9 4JX, UK
H&M (Systems) Limited
Westwood, Margate, Kent CT9 4JX, UK
Ordinary shares
Ordinary shares
Ordinary shares
100
100
100
100
100
100
100
100
12. RIGHT OF USE ASSETS
GROUP
COST
At 1 April 2020
Additions at cost
At 31 March 2021
ACCUMULATED DEPRECIATION
At 1 April 2020
Charge for the year
At 31 March 2021
Net book amount at 31 March 2021
Property
£’000
Motor
Vehicles
£’000
Fixtures, Fittings
and Equipment
£’000
2,898
478
3,376
445
406
851
2,525
192
125
317
76
80
156
161
11
6
17
7
6
13
4
100
100
100
100
100
100
100
100
Total
£’000
3,101
609
3,710
528
492
1,020
2,690
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Notes to the Financial Statements continued
GROUP
COST
At 1 April 2019
Additions at cost
At 31 March 2020
ACCUMULATED DEPRECIATION
At 1 April 2019
Charge for the year
At 31 March 2020
Net book amount at 31 March 2020
13. INVENTORIES
Finished goods
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
14. TRADE AND OTHER RECEIVABLES
CURRENT:
Trade receivables
Less: loss allowance for receivables
Trade receivables – net
Other receivables
Prepayments
Amounts owed by subsidiary undertaking
Property
£’000
Motor
Vehicles
£’000
Fixtures, Fittings
and Equipment
£’000
2,893
5
2,898
–
445
445
2,453
105
87
192
–
76
76
117
11
11
–
7
7
4
Group
Company
2021
£’000
15,152
15,152
2020
£’000
14,235
14,235
2021
£’000
–
–
2021
£’000
1,179
207
(160)
(21)
Total
£’000
3,009
92
3,101
–
528
528
2,573
2020
£’000
–
–
2020
£’000
993
180
–
6
1,205
1,179
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
6,863
(853)
6,010
270
967
–
5,194
(1,050)
4,144
997
1,384
–
7,247
6,525
–
–
–
–
–
–
–
–
87
48,431
48,518
28
48,426
48,454
Hornby PLC Annual Report and Accounts 2021
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14. TRADE AND OTHER RECEIVABLES continued
We initially recognise trade and other receivables at fair value, which is usually the original invoices amount. They are subsequently carried
at amortised cost using the effective interest method. The carrying amount of these balances approximates to fair value due to the short
maturity of amounts receivable.
We provide goods to consumer and business customers, mainly on credit terms. We know that certain debts due to us will not be paid
through the default of a small number of customers. Because of this, we recognise an allowance for doubtful debts on initial recognition of
receivables, which is deducted from the gross carrying amount of the receivable. The allowance is calculated by reference to credit losses
expected to be incurred over the lifetime of the receivable. In estimating a loss allowance we consider historical experience and informed
credit assessment alongside other factors such as the current state of the economy and particular industry issues. We consider reasonable
and supportive information that is relevant and available without undue cost.
Once recognised, trade receivables are continuously monitored and updated. Allowances are based on our historical loss experiences for
the relevant aged category as well as forward-looking information and general economic conditions.
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
2021
£’000
5,320
690
853
6,863
2020
£’000
3,500
644
1,050
5,194
As of 31 March 2021, trade receivables of £690,000 (2020: £644,000) were past due but not impaired. These relate to a number of
independent customers for whom there is no recent history of default.
As of 31 March 2021, trade receivables of £853,000 (2020: £1,050,000) were impaired and provided for in full.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all
trade receivables.
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
2021
£’000
1,050
(25)
(140)
(32)
853
2020
£’000
1,168
(5)
(136)
23
1,050
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.
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Notes to the Financial Statements continued 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
15. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Group
Company
2021
£’000
–
4,396
979
905
6,280
2020
£’000
2021
£’000
2020
£’000
–
48,431
48,426
3,143
931
1,067
5,141
–
–
–
–
–
–
48,431
48,426
Group
Company
2021
£’000
4,685
2020
£’000
5,921
2021
£’000
2
2020
£’000
2
Cash at bank of £4,685,000 (2020: £5,921,000) is with financial institutions with a credit rating of A3 per Moody’s rating agency.
16. TRADE AND OTHER PAYABLES
CURRENT:
Trade payables
Other taxes and social security
Other payables
Refund liability
Accruals and contract liabilities
Group receivables guarantee (Note 4)
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
2,833
1,294
603
231
2,170
–
7,131
2,501
394
123
206
1,665
–
4,889
–
30
599
–
73
6,020
6,722
–
32
386
–
158
6,020
6,596
Contract liabilities relate to payments of £438,308 (2020: £61,648) received upfront for products where delivery is yet to take place.
Delivery is expected to take place over the next 3 months. Revenue of £61,648, deferred in 2020, was recognised as income in the year
ended 31 March 2021.
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17. RIGHT OF USE LEASE LIABILITIES
The movement in the right of use lease liability over the year was as follows:
As at 1 April 2020
New leases
Interest payable
Repayment of lease liabilities
As at 31 March 2021
Lease liability less than one year
Lease liability greater than one year and less than five years
Lease liability greater than five years
Total Liability
Maturity analysis of contracted undiscounted cashflows is as follows:
Lease liability less than one year
Lease liability greater than one year and less than five years
Lease liability greater than five years
Total Liability
Finance charges included above
18. 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
Company
2021
£’000
2,639
609
165
(605)
2020
£’000
3,009
93
168
(631)
2,808
2,639
365
791
1,652
2,808
384
799
1,456
2,639
2021
£’000
2020
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Group
Company
2021
£’000
522
1,378
2,304
4,204
(1,396)
2,808
2020
£’000
531
1,222
2,133
3,886
(1,247)
2,639
2021
£’000
2020
£’000
–
–
–
–
–
–
–
–
–
–
–
–
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,689
5,689
–
5,689
5,689
–
–
5,907
5,907
–
5,907
5,907
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.
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Notes to the Financial Statements continued
The principal features of the Group’s borrowings are as follows:
At 31 March 2021 the UK had a £12 million Asset Based Lending facility with PNC Credit Limited and a £9 million loan facility with Phoenix
Asset Management Partners.
The £12 million facility with PNC extends until 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 is expected to provide customary operational covenants to PNC on
a monthly basis.
The Phoenix Facility is a £9 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 2021, the Group had available £14,380,773 (2020: £14,235,284) 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 at any
one time.
19. FINANCIAL INSTRUMENTS
Classification and measurement
Under IFRS 9 the Group classifies and measures its financial instruments as follows:
• Derivative financial instruments: classified and measured at fair value through profit or loss;
• All other financial assets: classified as receivables and measured at amortised cost; and
• All other financial liabilities: classified as other liabilities and measured at amortised cost.
Carrying value and fair value of financial assets and liabilities
At 31 March 2021
Trade and other receivables
Trade and other payables
Derivative financial instruments
Cash and cash equivalents
Lease liabilities
At 31 March 2020
Trade and other receivables
Trade and other payables
Derivative financial instruments
Cash and cash equivalents
Lease liabilities
Amortised Cost
Held at Fair Value
Financial
Assets
£’000
Financial
Liabilities
£’000
Cash flow
hedges
£’000
Carrying
value
£’000
6,279
–
–
4,685
–
(3,342)
–
–
–
(2,808)
–
–
(481)
–
–
6,279
(3,342)
(481)
4,685
(2,808)
Amortised Cost
Held at Fair Value
Financial
Assets
£’000
Financial
Liabilities
£’000
Cash flow
hedges
£’000
Carrying
value
£’000
5,141
–
–
5,921
–
(2,624)
–
–
–
(2,639)
–
–
116
–
–
5,141
(2,624)
116
5,921
(2,639)
(2,639)
Fair
value
£’000
6,279
(3,342)
(481)
4,685
(2,808)
Fair
value
£’000
5,141
(2,624)
116
5,921
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report 19. FINANCIAL INSTRUMENTS continued
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
2021
£’000
Liabilities
2020
£’000
2021
£’000
2020
£’000
Forward foreign currency contracts – cash flow hedges
32
116
(513)
–
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 2021 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 2021 and 31 March 2020, the gross value of forward currency contracts was as follows:
US Dollar
2021
’000s
22,000
2020
’000s
8,750
The net fair value for the forward foreign currency contracts is an asset of £32,000 (2020: £116,000 asset) and a liability of £513,000
(2020: nil) of which £481,000 net liability (2020: £116,000 asset) represents an effective hedge at 31 March 2021 and has therefore
been credited 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.
Maturity of financial liabilities
GROUP
Less than one year
Between one and five years
More than five years
COMPANY
More than five years (Note 18)
2021
£’000s
3,957
1,378
2,304
7,639
2020
£’000
3,008
799
1456
5,263
2021
Intercompany
Debt
£’000
2020
Intercompany
Debt
£’000
5,689
5,907
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Notes to the Financial Statements continued
Hierarchy of financial instruments
The following tables present the Group’s assets and liabilities that are measured at fair value at 31 March 2021 and 31 March 2020. 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 2021
Liabilities
Derivatives used for hedging
Total liabilities at 31 March 2021
Assets
Derivatives used for hedging
Total assets as at 31 March 2020
Liabilities
Derivatives used for hedging
Total liabilities at 31 March 2020
Interest rate sensitivity
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
–
–
–
–
32
32
(513)
(513)
–
–
–
–
Level 1
£’000
Level 2
£’000
Level 3
£’000
–
–
–
–
116
116
–
–
–
–
–
–
32
32
(513)
(513)
Total
£’000
116
116
–
–
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 £nil
(2020: £nil) 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.
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report
19. FINANCIAL INSTRUMENTS continued
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.
US dollars
Euros
Capital risk management
Comprehensive Income and
Equity Sensitivity
2021
£’000
670
655
1,325
2020
£’000
1,252
384
1,636
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 Statement of Financial Position less cash and cash equivalents. Total capital is calculated as
‘equity’ as shown in the Statement of Financial Position plus net debt.
Total borrowings (Note 18)
Less:
Total cash and cash equivalents (Note 15)
Net (cash)
Total equity
Total capital
Gearing
20. DEFERRED TAX
2021
£’000
–
(4,685)
(4,685)
38,257
33,572
(14%)
2020
£’000
–
(5,921)
(5,921)
37,005
31,084
(19%)
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
2021
£’000
(1,880)
(2,806)
2020
£’000
(1,880)
(1,880)
2021
£’000
–
–
2020
£’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.
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Notes to the Financial Statements continued
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.
Deferred tax liabilities
At 1 April 2020
Charge to Statement of Comprehensive Income
At 31 March 2021
At 1 April 2019
Charge to Statement of Comprehensive Income
At 31 March 2020
Deferred tax assets
At 1 April 2020
Credit to Statement of Comprehensive Income
At 31 March 2021
At 1 April 2019
Charge to Statement of Comprehensive Income
At 31 March 2020
Net deferred tax (liability)/asset
At 31 March 2021
At 31 March 2020
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
150
–
150
Group
Company
Acquisition
intangibles
£’000
–
–
–
–
–
Other
£’000
2,030
926
2,956
2,030
–
Total
£’000
2,030
926
2,956
2,030
–
2,030
2,030
(150)
(150)
2,956
2,030
2,806
1,880
Short-term
incentive plan
£’000
–
–
–
–
–
–
–
–
Total
£’000
150
–
150
150
–
150
Total
£’000
–
–
–
–
–
–
–
–
2021
2020
Recognised
£’000
Not recognised
£’000
Recognised
£’000
Not recognised
£’000
2,817
(11)
–
2,806
461
3,360
3,327
7,148
1,891
(11)
–
1,880
1,626
3,032
3,182
7,840
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20. DEFERRED TAX continued
COMPANY
Deferred tax comprises:
Other timing differences
Deferred tax (asset)/liability
2021
2020
Recognised
£’000
Not recognised
£’000
Recognised
£’000
Not recognised
£’000
–
–
(320)
(320)
–
–
(247)
(247)
The UK deferred tax asset not recognised of £3,360,000 primarily relates to unrecognised losses in Hornby Hobbies Limited of
£14,341,000 (potential deferred tax asset of £2,725,000) and Hornby PLC of £1,306,000 (potential deferred tax asset of £268,000). It
also relates to an unrecognised temporary difference of £356,000 related primarily to share options and timing difference on the provision
for unrealised profit.
The deferred tax asset not recognised in respect of overseas losses carried forward of £3,327,000 relates to losses carried forward of
£1,586,000 in respect of Hornby Espana SA (potential deferred tax asset of £397,000), £2,799,000 in respect of Hornby France SAS
(potential deferred tax asset of £933,000), £1,872,000 in respect of Hornby Deutschland GmbH (potential deferred tax asset of
£597,000), £3,913,000 in respect of Hornby Italia srl (potential deferred tax asset of £939,000) and £2,196,000 in respect of Hornby
America Inc (potential deferred tax asset of £461,000).
21. 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
22. SHARE-BASED PAYMENTS (‘PSP’)
2021
2020
Number of
shares
£’000
Number of
shares
166,927,838
1,669
125,261,172
–
–
41,666,666
166,927,838
1,669 166,927,838
£’000
1,253
416
1,669
All Performance Share Plan (‘PSP’) awards outstanding at 31 March 2021 vest only if performance conditions are met. Awards granted under
the PSP must be exercised within one year of the relevant award vesting date.
The Group operates the PSP for Executive Directors and senior executives. Awards under the scheme are granted in the form of a nominal-
priced option, and are satisfied using market-purchased shares. The awards in previous years vest in full or in part dependent on the
satisfaction of specified performance targets.
The 2020 awards vest in full or in part dependent on the satisfaction of specified performance targets.
All plans are subject to continued employment. To the extent that such shares in the above plans are awarded to employees below fair value,
a charge calculated in accordance with IFRS 2 ‘Share-based payment’ is included within other operating expenses in the Statement of
Comprehensive Income. This charge for the Group amounts to £673,000 and the charge for the Company amounted to £337,000 in the
year ended 31 March 2021 (2020: nil charge for the Group and Company).
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Notes to the Financial Statements continued
The following table summarises the key assumptions used for grants during the year.
Fair Value
Options pricing model used
Share price at grant date (p)
Exercise price (p)
Risk-free rate (0.5%)
Expected option term (years)
Expected dividends (per year, %)
2021 PSP
2020 PSP
53.0p
Black-Scholes
(Stochastic)
54.0p
1.0p
0.5%
1.5
0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Assumptions on expected volatility and expected option return have been made on the basis of historical data, wherever available, for the
period corresponding with the vesting of the option. Best estimates have been used where historical data is not available in this respect. No
reasonable change in volatility would impact on the fair value of the options granted.
23. RESERVES
Group
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 historic negative goodwill arising prior to the transition to IFRS.
Share-based payment reserve
The share-based payment reserve arises from the requirement to value share options in existence at the fair value at the date they are
granted.
Company
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.
Other Reserves
This reserve represents the revaluation of investments in subsidiaries as allowable under previous UK GAAP. The reserve was frozen on
transition to IFRS in 2006.
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report 24. EMPLOYEES AND DIRECTORS
Staff costs for the year:
Wages and salaries
Furlough scheme
Share-based payments (Note 22)
Social security costs
Other pension costs (Note 25)
Redundancy and compensation for loss of office
Group
2021
£’000
Company
2020
£’000
2021
£’000
2020
£’000
7,514
(184)
673
823
411
20
6,867
–
–
732
365
50
9,257
8,014
408
–
337
61
28
–
834
430
–
–
58
25
–
513
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:
Group
Company
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
2021
£’000
2020
£’000
2021
£’000
76
83
34
193
2020
£’000
69
88
34
191
–
–
3
3
Group
Company
2021
£’000
853
673
36
–
2020
£’000
981
–
33
39
1,562
1,053
2021
£’000
445
337
28
–
810
–
–
3
3
2020
£’000
358
–
25
–
383
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 23 to 27 and forms part of these financial
statements.
25. 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.
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Notes to the Financial Statements continued The Group pension cost for the year was £411,000 (2020: £365,000) representing the actual contributions payable in the year and certain
scheme administration costs. The Company pension cost for the year was £28,000 (2020: £25,000). No contributions were outstanding at
the year end of 31 March 2021.
26. 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
2021
£’000
2020
£’000
1,847
1,845
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.
27. CASH (USED IN)/GENERATED FROM OPERATIONS
Profit/(loss) before taxation
Interest payable
Interest paid on Lease liabilities
Interest receivable
Share of profit of Minority Interest
Amortisation of intangible assets
Depreciation
Depreciation on right of use assets
Share-base payments (non cash)
Increase/(Decrease) in guarantee
(Increase) in inventories
(Increase)/Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables
Cash generated from/(used in) operations
Group
Company
2021
£’000
345
169
165
(3)
(109)
533
1,721
492
673
–
(1,223)
(764)
2,372
4,372
2020
£’000
(3,395)
446
169
(3)
(34)
603
2,100
528
–
–
(3,277)
680
(1,058)
(3,241)
2021
£’000
(318)
220
–
(175)
(109)
–
–
–
337
–
–
(64)
154
45
2020
£’000
(6,063)
217
–
(175)
(34)
–
–
–
–
6,020
–
(14,948)
311
(14,672)
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report 28. NET FUNDS RECONCILIATION
Cash and cash equivalents
Borrowings – repayable within one year
Borrowings – repayable after one year
Net Funds
Cash and liquid investments
Gross debt – variable interest rates
Net Funds
29. RELATED PARTY DISCLOSURES
2021
£’000
4,685
–
–
4,685
4,685
–
4,685
2020
£’000
5,921
–
–
5,921
5,921
–
5,921
Hornby Hobbies Limited purchased various items of stock for resale plus services from Oxford Diecast Limited which is 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%.
Hornby Hobbies Limited purchased services from a company called Rawnet Limited which is 100% owned by Phoenix Asset Management,
the controlling party of the Group.
Therefore transactions between the parties are related party transactions and disclosed below:
Company
Oxford Diecast Limited
Rawnet Limited
Transactions
£
233,614
Balance at
year end
£
–
722,252
165,038
955,866
165,038
Phoenix Asset Management Partners who own the majority shareholding in Hornby PLC have also provided a funding facility to the Group
(see Note 18).
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 £933,000 (2020: £1,065,000), interest of £175,000 (2020: £175,000)
and incurred interest of £220,000 (2020: £217,000) on intercompany borrowings.
Hornby PLC have provided a guarantee of £6.109m against intercompany receivables in Hornby Hobbies. This guarantee is included in
liabilities.
30. ULTIMATE PARENT UNDERTAKING AND CONTROLLING PARTY
The Group is 74.66% owned by Phoenix Asset Management. Artemis Fund Managers Limited hold 16.5%. The remaining 8.84% 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.
31. 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.
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Hornby PLC Annual Report and Accounts 2021
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37132 HORN – AR21 04 Financials AW03.indd 70
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Notes to the Financial Statements continued Shareholders’ Information Service
Hornby welcomes contact with its shareholders.
If you have questions or enquiries about the Group or its products, please contact:
K Gould
Chief Finance officer
Hornby PLC
Westwood
Margate
Kent CT9 4JX
www.hornby.com
37132 HORN – AR21 04 Financials AW03.indd 71
37132 HORN – AR21 04 Financials AW03.indd 71
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15/07/2021 16:48
Hornby PLC Annual Report and Accounts 2021
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OverviewFinancial StatementsGovernanceStrategic ReportOverviewFinancial StatementsGovernanceStrategic Report Notes
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Hornby PLC Annual Report and Accounts 2021
37132 HORN – AR21 04 Financials AW03.indd 72
37132 HORN – AR21 04 Financials AW03.indd 72
15/07/2021 16:48
15/07/2021 16:48
Hornby PLC Annual Report and Accounts 2021 Hornby PLCThe 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.CONTENTS01 Highlights 202102 Non-Executive Chairman’s Report 04 CEO’s Statement09 Section 172 Statement10 Operating and Financial Review of the Year12 Our Key Performance Indicators (‘KPIs’)14 Corporate Governance Report18 Audit Committee Report20 Remuneration and Nomination Committee Report22 Directors and Corporate Information23 Directors’ Report28 Independent Auditors’ Report to the Members of Hornby PLC33 Group and Company Statements of Comprehensive Income34 Group and Company Statements of Financial Position35 Group and Company Statements of Changes in Equity36 Group and Company Cash Flow Statements37 Notes to the Financial Statements71 Shareholders’ Information ServiceHornby PLC Annual Report and Accounts 2021FSC TBC37132 HORN – AR21 01 Cover AW04.indd 4-637132 HORN – AR21 01 Cover AW04.indd 4-615/07/2021 16:4815/07/2021 16:48111347_Cover.indd 2111347_Cover.indd 216/07/2021 08:2116/07/2021 08:21111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - K111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - C111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - M111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - Y111347_Hornby AR 2021 - Back - COVER - 16/07/2021 09:01:04 - Pan308C−−−−−−−−−−−−−−− 1 −−−−−−−−−−−−−−−2−−−−−−−−−−−−−−− 3 −−−−−−−−−−−−−−−4−−−−−−−−−−−−−−− 5 −−−−−−−−−−−−−−−6−−−−−−−−−−−−−−− 7 −−−−−−−−−−−−−−−8−−−−−−−−−−−−−−− 9 −−−−−−−−−−−−−−−10−−−−−−−−−−−−−−− 11 −−−−−−−−−−−−−−−12−−−−−−−−−−−−−−− 13 −−−−−−−−−−−−−−−14−−−−−−−−−−−−−−− 15 −−−−−−−−−−−−−−−16−−−−−−−−−−−−−−− 17 −−−−−−−−−−−−−−−18−−−−−−−−−−−−−−− 19 −−−−−−−−−−−−−−−20−−−−−−−−−−−−−−− 21 −−−−−−−−−−−−−−−22−−−−−−−−−−−−−−− 23 −−−−−−−−−−−−−−−24−−−−−−−−−−−−−−− 25 −−−−−−−−−−−−−−−26−−−−−−−−−−−−−−− 27 −−−−−−−−−−−−−−−28−−−−−−−−−−−−−−− 29 −−−−−−−−−−−−−−−30−−−−−−−−−−−−−−− 31 −−−−−−−−−−−−−−−32CMYXCMYZCMYXCMYZCMYXCMYZPrinect Micro−6i Format 102/105 Dipco 16.0d (pdf) © 2013 Heidelberger Druckmaschinen AGBCMYXZZBBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZC 20C 40C 80BCMYXZCMBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZYXBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZCMYX 20X 40X 80BCMYXZCMCYMYCMYBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYCMCYMYCMYBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZCMYC 20C 40C 80BCMYXZZBBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZCMBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZX 20X 40X 80BCMYXZYXBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYBCMYXZPlate Control Strip© Heidelberger Druckmaschinen AG 2013V13.0g (pdf)UniversalThermomedium12131415161718192021222324252627280.5 PTimes1 PTimes2 PTimes4 PTimesTimes4PTimes2PTimes1PTimes0.5P0/100%1%2%3%5%10%20%25%30%40%50%60%70%75%80%90%95%97%98%99%Lin+ProcessCalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: 111347 Hornby AR 2021 - Back - COVER$[ScreenRuling] LPI- K$[ScreenRuling] LPI- C$[ScreenRuling] LPI- M$[ScreenRuling] LPI- Y$[ScreenRuling] LPI- Pan308C ANNUAL REPORT AND ACCOUNTS 2021Hornby PLCWestwood, Margate, Kent, CT9 4JXwww.hornby.comHornby PLC Annual Report and Accounts 202137132 HORN – AR21 01 Cover AW04.indd 1-337132 HORN – AR21 01 Cover AW04.indd 1-315/07/2021 16:4815/07/2021 16:48111347_Cover.indd 1111347_Cover.indd 116/07/2021 08:2116/07/2021 08:21111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - K111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - C111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - M111347_Hornby AR 2021 - Front - COVER - 16/07/2021 09:01:04 - Y−−−−−−−−−−−−−−− 1 −−−−−−−−−−−−−−−2−−−−−−−−−−−−−−− 3 −−−−−−−−−−−−−−−4−−−−−−−−−−−−−−− 5 −−−−−−−−−−−−−−−6−−−−−−−−−−−−−−− 7 −−−−−−−−−−−−−−−8−−−−−−−−−−−−−−− 9 −−−−−−−−−−−−−−−10−−−−−−−−−−−−−−− 11 −−−−−−−−−−−−−−−12−−−−−−−−−−−−−−− 13 −−−−−−−−−−−−−−−14−−−−−−−−−−−−−−− 15 −−−−−−−−−−−−−−−16−−−−−−−−−−−−−−− 17 −−−−−−−−−−−−−−−18−−−−−−−−−−−−−−− 19 −−−−−−−−−−−−−−−20−−−−−−−−−−−−−−− 21 −−−−−−−−−−−−−−−22−−−−−−−−−−−−−−− 23 −−−−−−−−−−−−−−−24−−−−−−−−−−−−−−− 25 −−−−−−−−−−−−−−−26−−−−−−−−−−−−−−− 27 −−−−−−−−−−−−−−−28−−−−−−−−−−−−−−− 29 −−−−−−−−−−−−−−−30−−−−−−−−−−−−−−− 31 −−−−−−−−−−−−−−−32CMYXCMYZCMYXCMYZCMYXCMYZPrinect Micro−6i Format 102/105 Dipco 16.0d (pdf) © 2013 Heidelberger Druckmaschinen AGBCMYXZZBBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZC 20C 40C 80BCMYXZCMBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZYXBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZCMYX 20X 40X 80BCMYXZCMCYMYCMYBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYCMCYMYCMYBCMYXZ0B 20B 40B 80BCMYXZCMYCMYCMYCMYBCMYXZCMYC 20C 40C 80BCMYXZZBBCMYXZ0BCMYXZBCMYXZCMYM 20M 40M 80BCMYXZCMBCMYXZ0Y 20Y 40Y 80BCMYXZCMYCMYCMYCMYBCMYXZX 20X 40X 80BCMYXZYXBCMYXZ0Z 20Z 40Z 80BCMYXZCMYCMYCMYCMYBCMYXZPlate Control Strip© Heidelberger Druckmaschinen AG 2013V13.0g (pdf)UniversalThermomedium12131415161718192021222324252627280.5 PTimes1 PTimes2 PTimes4 PTimesTimes4PTimes2PTimes1PTimes0.5P0/100%1%2%3%5%10%20%25%30%40%50%60%70%75%80%90%95%97%98%99%Lin+ProcessCalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: CalCurveName 13.0g (pdf)Process: Lin: 111347 Hornby AR 2021 - Front - COVER$[ScreenRuling] LPI- K$[ScreenRuling] LPI- C$[ScreenRuling] LPI- M$[ScreenRuling] LPI- Y