Last checked at 5 Jun 2009 07:00
HORNBY PLC
PRELIMINARY RESULTS
YEAR TO 31 MARCH 2009
HORNBY CONTINUES GROWTH AS BRANDS GATHER MOMENTUM
Hornby Plc ("Hornby", or "the Group"), the international hobby products group, has today announced its full year results for the year ended 31st March 2009.
Turnover up 11% to £61.6 million (2008: £55.7 million)
Pre-tax profits £6.1 million (2008: £9.0 million)
Underlying pre-tax profits £6.3 million (2008: £8.4 million)*
Earnings per share 11.17p (2008: 16.15p)
No final dividend declared (2008: 5.8p) due to Sterling volatility and the need to retain strong balance sheet
Total dividend for year 2.7p (2008: 8.5p)
Corgi fully integrated and performing well
Consumer demand strengthened in final quarter of financial year and has continued strongly since then
Results constrained by supply chain issues
New licence announced with the Brawn GP Formula One team
Frank Martin, Chief Executive of Hornby, commented:
" This has been a challenging year for Hornby. As a result of the weak pound and continuing supply chain issues, our profits and margins have come under pressure. As a result, the Board thinks it prudent not to pay a final dividend. This is a decision that will enable us to strengthen an already healthy balance sheet. Our supply chain issues are a source of frustration but we remain committed to and are making progress towards the implementation of a satisfactory solution.
" The diversity of our products across the Group continues to impress and attract customers. We are a broadly based hobby business and the continued demand for our products proves our resilience in times of recession.
" We continue to explore new and exciting ways of extending our product offering. Recently, for example, we have signed an exclusive worldwide license agreement with the Brawn GP Formula One team. Our work with the McLaren Formula One team continues and we wish both Lewis Hamilton and Jensen Button the very best for the rest of the season. Further, we have signed agreements with Disney Productions for the blockbuster movie series "Cars". We have also agreed an extension of the James Bond 007 licence to cover our Corgi ranges.
" We are also extending our existing online activities by further site development and links to social networking sites. Our websites attract over 65,000 unique visitors per week. Online represents an exciting opportunity for Hornby. The results of our work so far have been very encouraging and highlight our innovative approach to maximising our brand strengths.
" In Hornby, Airfix, Scalextric, Corgi and Humbrol, we have some of the best known global hobby brands. We have built a robust platform for the Group to deliver longer term success and added value for our shareholders. This is an excellent business and we are fully prepared to meet the challenges facing us."
* Pre tax profit before amortisation of intangibles, net foreign exchange adjustments on inter-company loans, restructuring costs and abortive due diligence costs.
-ends-
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Date: 5th June 2009
For further information contact:
| Hornby Plc | City Profile |
| Frank Martin, Chief Executive | Simon Courtenay 07958-754273 |
| Andrew Morris, Finance Director | William Attwell 07973-281650 |
| 01843-233500 | 020-7448-3244 |
| Web: www.hornby.com | |
CHAIRMAN'S STATEMENT
Year ended 31 March 2009
Introduction
This has been a challenging year for the Group. Consumer demand for our products has strengthened in the period since Christmas and continues to be strong, although a combination of de-stocking by large retailers, increased product costs from China and continuing disruption in our supply chain during the year, has impacted negatively both on sales and margins.
The most significant challenge has been to maintain continuity of supplies from our largest vendor in China. During the year this supplier faced serious financial problems arising from the debt burden it had carried since its heavily leveraged purchase by a venture capital investor in 2004. We maintained close contact with all interested parties during the greatest period of difficulty between July and November 2008. During this period, in order to ensure that our ongoing supplies would be protected, we incurred due diligence costs in a process that may have led to Hornby acquiring this supplier. These costs are identified separately in note 3. In the event, the supplier was acquired in January 2009 by a well resourced Hong Kong company which is a well established supplier to the toy and model railway industries. We continue to work closely with the new owners to improve our supply chain performance.
Despite the difficulties in model railway supplies, overall Group sales grew by 11% to £61.6 million mainly as a result of increased Airfix sales and the first time contribution of the Corgi business acquired in May 2008. We expect further strong growth from these brands in the current year.
Pre-tax profit before amortisation of intangibles, net foreign exchange adjustments on intercompany loans, restructuring costs and abortive due diligence (hereafter referred to as underlying pre-tax profits) was £6.3 million (2008 - £8.4 million) (see note 3). Basic earnings per share calculated on underlying pre-tax profit (hereafter referred to as underlying basic earnings per share) were 11.92p (2008 - 15.13p). Statutory pre-tax profit was £6.1 million (2008 - £9.0 million). Statutory basic earnings per share were 11.17p (2008 - 16.15p).
Dividend
In view of the challenging economic environment and in particular the current volatility of Sterling against the Hong Kong Dollar, the currency in which most of our purchases are made, the Board has determined that the primary focus of the business should be on maintaining a strong balance sheet. Accordingly the Board is recommending that no final dividend be paid.
The interim dividend of 2.7p, paid in January 2009, therefore becomes the total dividend for the year to 31 March 2009.
Review of the Business
After a flat sales performance in the first half of the financial year, in which sales fell by 1% compared to the previous corresponding period, sales in the second half increased by 20% against a much stronger comparative period. Airfix and Humbrol sales continued to show good growth and the bulk of Corgi sales were made in the second half. Supply chain issues during the year related to our largest supplier once again constrained sales of model railways, mainly in Continental Europe. This supplier was purchased by a well-resourced Hong Kong based company in January 2009 and since this time we have established a positive relationship with the new owners and continue to work closely with them to resolve these supply issues. In addition, for a number of years we have been building relationships with potential alternative suppliers of model railway products and we are now in a position to transfer a substantial proportion of our requirements away from Sanda Kan, should this become necessary.
One of the most encouraging aspects of the year is the fact that demand for our model railway products remains robust in the UK and is continuing to grow in Continental Europe despite the difficult economic environment.
Our Scalextric range continues to attract media attention due to powerful licensing arrangements with partners such as McLaren. The Scalextric products based on the James Bond agreement with Eon Productions were particularly successful and we have recently entered into license agreements with Disney to produce Scalextric products based on the "Cars" movie series. We are also delighted that we have recently secured the rights to the highly successful Brawn GP Formula One team.
It is becoming increasingly apparent that the breadth of our product and brand portfolio now makes Hornby the primary candidate worldwide for media and other Intellectual Property owners to engage with in awarding licenses for our product sectors. We will continue to leverage this strength in acquiring relevant licenses to promote our products.
UK Subsidiaries
Sales in the principal UK operating companies grew by 8% to £43.5 million (2008 - £40.4 million), and underlying profit before tax was £5.9 million (2008 - £7.7 million). Reported profit before tax was £5.9m (2008 - £8.4m). This result includes export sales to third parties of £5.2 million (2008 - £5.6 million).
International Subsidiaries
Our subsidiaries in mainland Europe bore the brunt of product supply difficulties and were unable to fulfil their true sales potential. Accordingly underlying profit before tax was lower than the year before at £414,000 on sales of £14.8 million, compared with £723,000 in the previous year on sales of £12.6 million. Reported profit before tax was £255,000 (2008 - £617,000). However our strong European brands continue to attract increasing support from the model railway communities in each of our key territories. Improvements in our supply chain will result in an improved performance in Europe.
Sales in Hornby America were slightly higher at $5.6 million (2008 - $5.4 million), producing a profit before tax of $13,000 (2008 - $32,000). Upon translation into Sterling, due to the stronger US dollar, sales were £3.3 million (2008 - £2.7 million) with profit before tax of £8,000 (2008 - £16,000). However, Hornby Hobbies in the UK benefits from a gross margin contribution of £565,000 (2008 - £450,000) generated on sales made to Hornby America, which has the effect of increasing significantly the overall contribution to Group profit of our US operation. The potential for sales of Corgi in the US is significantly greater than we had envisaged at the time of the acquisition, and this will help to improve the future performance of our US operations.
Banking Facilities
The Group has improved the security of its banking facilities. A formal offer from the Group's principal bankers, Barclays, has been received and agreed subject to contract. The revised arrangements comprise a combination of a Term Loan over 5 years and a Secured Money Market Loan over 3 years.
Product Development
Our product development programme continues to be a key driver of our business and we continue to increase further our resources in this area in order to cope with the additional demands of our subsidiaries and the increase in product categories.
Outlook
Our strategy of building a broadly based model and hobby group with strong defensive attributes has been further strengthened by the successful and profitable integration of the Corgi business.
The broader product and geographical spread that this and earlier acquisitions gives the Group is clearly assisting in maintaining sales growth against the challenging economic environment in all our key markets. Consumer demand for our products has strengthened in the period since Christmas and continues to be strong despite the current economic downturn and is proof yet again of the resilience of our business.
Without doubt the key focus for management is to ensure that our supply chain issues are resolved on a sustainable basis in order to allow our model railway businesses to reach their true potential.
Finally I should like to thank our Chief Executive Frank Martin and through him all our staff, for their continuing commitment to growing the business, and ensuring that future return to shareholders is maximised.
Neil Johnson
Chairman
5 June 2009
GROUP INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2009
| 2009 | 2008 | ||
| (unaudited) | |||
| £'000 | £'000 | ||
| REVENUE | 61,569 | 55,692 | |
| Cost of sales | (32,168) | (26,297) | |
| _______ | _______ | ||
| GROSS PROFIT | 29,401 | 29,395 | |
| Distribution costs | (2,454) | (2,138) | |
| Selling and marketing costs | (13,641) | (11,551) | |
| Administrative expenses | (7,976) | (6,268) | |
| Other operating income/(expenses) | 1,569 | (52) | |
| _______ | _______ | ||
| OPERATING PROFIT | 6,899 | 9,386 | |
| Finance income | 27 | 5 | |
| Finance costs | (805) | ( 374) | |
| _______ | _______ | ||
| PROFIT BEFORE TAXATION | 6,121 | 9,017 | |
| Analysed as: | |||
| Underlying profit before taxation | 6,331 | 8,400 | |
| Net foreign exchange impact on intercompany loans | 535 | 780 | |
| Amortisation of intangibles | (370) | (163) | |
| Restructuring and abortive due diligence costs | (375) | - | |
| _______ | _______ | ||
| PROFIT BEFORE TAXATION | 6,121 | 9,017 | |
| Taxation | (1,909) | (2,940) | |
| _______ | _______ | ||
| PROFIT FOR THE YEAR ATTRIBUTABLE | |||
| TO EQUITY HOLDERS | 4,212 | 6,077 | |
| _______ | _______ | ||
| EARNINGS PER ORDINARY SHARE | |||
| Basic | 11.17p | 16.15p | |
| Diluted | 10.98p | 15.62p |
All of the activities of the Group are continuing.
GROUP BALANCE SHEET
AT 31 MARCH 2009
| 2009 | 2008 | |
| (unaudited) | ||
| £'000 | £'000 | |
| ASSETS | ||
| NON-CURRENT ASSETS | ||
| Goodwill | 13,624 | 9,925 |
| Intangible assets | 5,689 | 2,404 |
| Property, plant and equipment | 10,523 | 8,360 |
| Deferred tax assets | 67 | 123 |
| _______ | _______ | |
| 29,903 | 20,812 | |
| _______ | _______ | |
| CURRENT ASSETS | ||
| Inventories | 14,368 | 11,890 |
| Trade and other receivables | 13,119 | 10,699 |
| Current tax assets | 124 | 152 |
| Cash and cash equivalents | 427 | 940 |
| _______ | _______ | |
| 28,038 | 23,681 | |
| _______ | _______ | |
| LIABILITIES | ||
| CURRENT LIABILITIES | ||
| Borrowings | (5,138) | (2,220) |
| Derivative financial instruments | (3,529) | (1,350) |
| Trade and other payables | (8,270) | (6,851) |
| Provisions | (538) | (500) |
| Current tax liabilities | (999) | (1,723) |
| _______ | _______ | |
| (18,474) | (12,644) | |
| _______ | _______ | |
| NET CURRENT ASSETS | 9,564 | 11,037 |
| _______ | _______ | |
| NON-CURRENT LIABILITIES | ||
| Borrowings | (7,181) | (41) |
| Deferred tax liabilities | (301) | (346) |
| _______ | _______ | |
| (7,482) | (387) | |
| _______ | _______ | |
| NET ASSETS | 31,985 | 31,462 |
| _______ | _______ | |
| SHAREHOLDERS' EQUITY | ||
| Share capital | 380 | 380 |
| Share premium | 5,278 | 5,278 |
| Capital redemption reserve | 55 | 55 |
| Translation reserve | (533) | (197) |
| Hedging reserve | (249) | 133 |
| Other reserves | 1,688 | 1,688 |
| Retained earnings | 25,366 | 24,125 |
| _______ | _______ | |
| TOTAL EQUITY | 31,985 | 31,462 |
| _______ | _______ |
GROUP STATEMENT OF CHANGES IN EQUITY
Years ended 31 March 2009 (unaudited) and 31 March 2008
| Capital | ||||||||
| Share | Share | redemption | Translation | Hedging | Other | Retained | Total | |
| capital | premium | reserve | reserve | reserve | reserves | earnings | equity | |
| GROUP | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 1 April 2007 | 378 | 5,236 | 55 | (77) | (133) | 1,740 | 20,646 | 27,845 |
| Exchange adjustment offset in reserves | - | - | - | (120) | - | - | - | (120) |
| Cash flow hedges | - | - | - | - | 266 | - | - | 266 |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Net expense recognised directly in reserves | - | - | - | (120) | 266 | - | - | 146 |
| Profit for the year | - | - | - | - | - | - | 6,077 | 6,077 |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Total recognised income for the year | - | - | - | (120) | 266 | - | 6,077 | 6,223 |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Issue of shares | 2 | 42 | - | - | - | - | - | 44 |
| Share-based payments | - | - | - | - | - | - | 225 | 225 |
| Deferred tax on share-based payments | - | - | - | - | - | (52) | - | (52) |
| Shares vested from EBT | - | - | - | - | - | - | 295 | 295 |
| Dividends | - | - | - | - | - | - | (3,118) | (3,118) |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| 2 | 42 | - | - | - | (52) | (2,598) | (2,606) | |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Balance at 31 March 2008 | 380 | 5,278 | 55 | (197) | 133 | 1,688 | 24,125 | 31,462 |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Exchange adjustment offset in reserves | - | - | - | (336) | - | - | - | (336) |
| Cash flow hedges | - | - | - | - | (382) | - | - | (382) |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Net expense recognised directly in reserves | - | - | - | (336) | (382) | - | - | (718) |
| Profit for the year | - | - | - | - | - | - | 4,212 | 4,212 |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Total recognised income for the year | - | - | - | (336) | (382) | - | 4,212 | 3,494 |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Share-based payments | - | - | - | - | - | - | 224 | 224 |
| Purchase of own shares for EBT | - | - | - | - | - | - | (284) | (284) |
| Shares vested from EBT | - | - | - | - | - | - | 294 | 294 |
| Dividends | - | - | - | - | - | - | (3,205) | (3,205) |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| - | - | - | - | - | - | (2,971) | (2,971) | |
| ____ | _____ | ____ | ______ | ____ | ______ | ______ | ______ | |
| Balance at 31 March 2009 | 380 | 5,278 | 55 | (533) | (249) | 1,688 | 25,366 | 31,985 |
| ____ | ____ | _____ | ____ | ______ | ____ | ______ | ______ |
Retained earnings includes £672,000 at 31 March 2009 (2008 - £689,000) which is not distributable and relates to a 1986 revaluation of land and buildings.
GROUP CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2009
| 2009 | 2008 | ||
| (unaudited) | |||
| £'000 | £'000 | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||
| Cash generated from operations | 11,377 | 10,007 | |
| Interest received | 27 | 5 | |
| Interest paid | (805) | (374) | |
| Tax paid | (2,594) | (2,385) | |
| _______ | _______ | ||
| Net cash generated from operating activities | 8,005 | 7,253 | |
| _______ | _______ | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||
| Purchase of trade assets and related costs | (8,495) | - | |
| Proceeds from sale of property, | |||
| plant and equipment | 2 | 71 | |
| Purchase of property, plant and equipment | (4,763) | (3,485) | |
| _______ | _______ | ||
| Net cash utilised in investing activities | (13,256) | (3,414) | |
| _______ | _______ | ||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||
| Proceeds from issuance of ordinary shares | - | 44 | |
| Proceeds from issue/(repayment) of loans | 8,684 | (13) | |
| Purchase of own shares by Short Term Incentive Plan | (284) | - | |
| Finance lease capital payments | (19) | (49) | |
| Dividends paid to Company's shareholders | (3,205) | (3,118) | |
| _______ | _______ | ||
| Net cash generated from/(utilised in) financing activities | 5,176 | (3,136) | |
| _______ | _______ | ||
| Effect of exchange rate movements | (1,717) | (1,344) | |
| _______ | _______ | ||
| Net decrease in cash and cash equivalents | (1,792) | (641) | |
| Cash, cash equivalents and bank overdrafts | |||
| at beginning of the year | (1,268) | (627) | |
| _______ | _______ | ||
| CASH, CASH EQUIVALENTS AND | |||
| BANK OVERDRAFTS AT END OF YEAR | (3,060) | (1,268) | |
| _______ | _______ | ||
| CASH, CASH EQUIVALENTS AND | |||
| BANK OVERDRAFTS CONSIST OF: | |||
| Cash and cash equivalents | 427 | 940 | |
| Bank overdrafts | (3,487) | (2,208) | |
| _______ | _______ | ||
| CASH, CASH EQUIVALENTS AND | |||
| BANK OVERDRAFTS AT END OF YEAR | (3,060) | (1,268) | |
| _______ | _______ |
NOTES TO THE CASH FLOW STATEMENT
CASH FLOW FROM OPERATING ACTIVITIES
| 2009 | 2008 | |
| (unaudited) | ||
| £'000 | £'000 | |
| Profit before taxation | 6,121 | 9,017 |
| Interest payable | 805 | 374 |
| Interest receivable | (27) | (5) |
| Amortisation of intangible assets | 370 | 163 |
| Depreciation | 4,315 | 2,908 |
| Loss/(profit) on disposal of tangible fixed assets | 25 | (7) |
| Share-based payments | 224 | 225 |
| Loss/(gain) on financial derivatives | 6 | (65) |
| Increase in provisions | 38 | 207 |
| Increase in inventories | (1,735) | (3,449) |
| Increase in trade and other receivables | (2,535) | (551) |
| Increase in trade and other payables | 3,770 | 1,190 |
| _______ | _______ | |
| CASH GENERATED FROM OPERATIONS | 11,377 | 10,007 |
| _______ | _______ |
SEGMENTAL REPORTING
The primary reporting format for segmental purposes is geographic, as this is the basis on which the Group is organised and managed. Transactions with and balances to the other segments have been identified below and eliminated.
Hornby's secondary reporting format is business and as the Group operates on a single business segment, further analysis is not required here.
| Year ended 31 March 2009 (unaudited) | |||||||
| Rest | Total | ||||||
| of | Reportable | Intra | |||||
| UK | USA | Europe | Segments | Group | Group | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Revenue | - External | 43,497 | 3,253 | 14,819 | 61,569 | - | 61,569 |
| - Other segments | 3,582 | - | 3,329 | 6,911 | (6,911) | - | |
| Operating profit | 5,773 | 21 | 1,105 | 6,899 | - | 6,899 | |
| Interest expense | - External | (749) | - | (56) | (805) | - | (805) |
| - Other segments | (230) | (16) | (796) | (1,042) | 1,042 | - | |
| Interest income | - External | 22 | 3 | 2 | 27 | - | 27 |
| - Other segments | 1,042 | - | - | 1,042 | (1,042) | - | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Profit before tax | 5,858 | 8 | 255 | 6,121 | - | 6,121 | |
| Taxation | (1,694) | (4) | (211) | (1,909) | - | (1,909) | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Profit for the year | 4,164 | 4 | 44 | 4,212 | - | 4,212 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Segment assets | 53,004 | 2,061 | 25,530 | 80,595 | (22,845) | 57,750 | |
| Less intercompany receivables | (21,045) | (2) | (1,798) | (22,845) | 22,845 | - | |
| Add tax assets | 67 | - | 124 | 191 | - | 191 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Total assets | 32,026 | 2,059 | 23,856 | 57,941 | - | 57,941 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Segment liabilities | 22,160 | 2,252 | 23,089 | 47,501 | (22,845) | 24,656 | |
| Less intercompany payables | (367) | (2,198) | (20,280) | (22,845) | 22,845 | - | |
| Add tax liabilities | 1,189 | 1 | 110 | 1,300 | - | 1,300 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Total liabilities | 22,982 | 55 | 2,919 | 25,956 | - | 25,956 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Other segment items | |||||||
| Capital expenditure | 4,422 | 23 | 1,713 | 6,158 | - | 6,158 | |
| (including acquisitions) | |||||||
| Depreciation | 2,839 | 11 | 1,465 | 4,315 | - | 4,315 | |
| Net foreign exchange on | |||||||
| intercompany loans |
| (535) | - | - | (535) | - | (535) |
| Amortisation of intangible assets | 247 | - | 123 | 370 | - | 370 | |
| Share-based payment | |||||||
| - charge to Income Statement | 224 | - | - | 224 | - | 224 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
All transactions between Group companies are on normal commercial terms and an arm's length basis.
Year ended 31 March 2008
| Rest | Total | ||||||
| of | Reportable | Intra | |||||
| UK | USA | Europe | Segments | Group | Group | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Revenue | - External | 40,420 | 2,696 | 12,576 | 55,692 | - | 55,692 |
| - Other segments | 3,067 | - | 2,601 | 5,668 | (5,668) | - | |
| Operating profit | 7,915 | 34 | 1,437 | 9,386 | - | 9,386 | |
| Interest expense | - External | (301) | - | (73) | (374) | - | (374) |
| - Other segments | (109) | (22) | (748) | (879) | 879 | - | |
| Interest income | - External | - | 4 | 1 | 5 | - | 5 |
| - Other segments | 879 | - | - | 879 | (879) | - | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Profit before tax | 8,384 | 16 | 617 | 9,017 | - | 9,017 | |
| Taxation | (2,524) | - | (416) | (2,940) | - | (2,940) | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Profit for the year | 5,860 | 16 | 201 | 6,077 | - | 6,077 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Segment assets | 40,830 | 1,021 | 20,861 | 62,712 | (18,494) | 44,218 | |
| Less intercompany receivables | (17,582) | (1) | (911) | (18,494) | 18,494 | - | |
| Add tax assets | 244 | - | 31 | 275 | - | 275 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Total assets | 23,492 | 1,020 | 19,981 | 44,493 | - | 44,493 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Segment liabilities | 8,597 | 1,004 | 19,855 | 29,456 | (18,494) | 10,962 | |
| Less intercompany payables | (21) | (962) | (17,511) | (18,494) | 18,494 | - | |
| Add tax liabilities | 1,604 | - | 465 | 2,069 | - | 2,069 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Total liabilities | 10,180 | 42 | 2,809 | 13,031 | - | 13,031 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
| Other segment items | |||||||
| Capital expenditure | 1,960 | 23 | 1,632 | 3,615 | - | 3,615 | |
| (including acquisitions) | |||||||
| Depreciation | 1,970 | 8 | 930 | 2,908 | - | 2,908 | |
| Net foreign exchange on | |||||||
| Intercompany loans | (780) | - | - | (780) | - | (780) | |
| Amortisation of intangible assets | 57 | - | 106 | 163 | - | 163 | |
| Share-based payment | |||||||
| - charge to Income Statement | 225 | - | - | 225 | - | 225 | |
| ______ | ______ | ______ | ______ | ______ | ______ | ||
All transactions between Group companies are on normal commercial terms and an arm's length basis.
NOTES
1. Basis of preparation
The financial information for the year ended 31 March 2009 has been prepared in accordance with International Accounting Standards ('IAS') and International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and also as issued by the International Accounting Standards Board, International Financial Reporting Interpretations Committee interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. It is also prepared in accordance with the Group's accounting policies which have been consistently applied as set out in the 2008 financial statements. This information does not constitute statutory accounts and has not been audited.
The Group's banking facilities are renewable from time to time. In respect of this renewal, the Group has received an offer to provide continued banking facilities from the Group's existing bankers. The Directors are satisfied that these facilities provide adequate funding for the Group's ongoing operations and acceptance of these facilities has been approved by the Group's Board. Accordingly the Directors are satisfied that the accounts should be prepared on a going concern basis.
These statements do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985. The financial statements for the year ended 31 March 2008 were prepared in accordance with IFRS and have been delivered to the Registrar of Companies and on which the auditors made an unqualified report.
| 2009 | 2008 | |
| £'000 | £'000 | |
| Profit before taxation | 6,121 | 9,017 |
| Foreign exchange on intercompany loans | ||
| including impact of foreign exchange collar* | (535) | (780) |
| Amortisation of intangibles | 370 | 163 |
| Restructuring costs | 154 | - |
| Abortive due diligence costs | 221 | - |
| _______ | _______ | |
| Underlying/adjusted profit before taxation | 6,331 | 8,400 |
| _______ | _______ |
The Income Statement disclosed restructuring and aborted due diligence costs in administrative expenses. Foreign exchange movements and amortisation of intangibles were disclosed in other operating income/(expenses).
* The foreign exchange collar is for a principal amount of Euro 16.5 million and is in place to minimise exposure to Euro denominated intercompany loans.
The amount shown above comprises gains on translation of intercompany loans of £2,459,000 (2008 - gain of £2,126,000), offset by a loss on marking to market the foreign exchange collar of £1,924,000 (2008 - loss of £1,346,000).
Underlying/adjusted profit before taxation is shown to present a clearer view of the trading performance of the business. Management has identified the following non-trivial adjustments, whose inclusion in earnings could distort underlying trading performance: restructuring and abortive due diligence costs which are not expected to recur, net foreign exchange gains/losses on intercompany loans which are dependent on exchange rates from time to time and can be volatile and amortisation of intangibles which result from historic acquisitions.
4. Earnings per share
The calculation of earnings per ordinary share is based on the profits after taxation for the period of £4,212,000 (year ended 31 March 2008 - £6,077,000) and the weighted average number of ordinary shares in issue during the period of 37,723,891 (year ended 31 March 2008 - 37,637,184).
The calculation of diluted earnings per ordinary share is based on the weighted average number of ordinary shares in issue as adjusted to assume conversion of all dilutive potential ordinary shares, 38,350,904 (year ended 31 March 2008 - 38,914,255).
The calculation of adjusted earnings per ordinary share is based on profit after tax adjusted for amortisation of intangibles of £370,000 (year ended 31 March 2008 - £163,000), foreign exchange translational adjustments on intercompany loans after tax of £385,000 gain (year ended 31 March 2008 - £546,000 gain), restructuring costs of £111,000 (year ended 31 March 2008 - £nil) and abortive due diligence costs of £190,000 (year ended 31 March 2008 - £nil).
5. Short Term Incentive Plan
182,096 ordinary shares to the value of £284,195 were acquired by the Employee Benefit Trust in June 2008 in accordance with the incentive plan, details of which were included in the 2008 Annual Report and Accounts.
The Trust waives its right to dividends.
6. CORGI ACQUISITION
On 1 May 2008 Hornby Hobbies Limited acquired the Corgi brand and related tooling and intellectual property rights from Corgi International Limited for £7,589,000 and inventories for £743,000. Legal and due diligence fees of £163,000 were incurred by Hornby Plc.
The table below sets out the Group's assessment of the fair values of the assets acquired.
| Acquirer's | Fair value | ||
| carrying | to the | ||
| amount | Group | ||
| £'000 | £'000 | ||
| Intangible assets: | |||
| - customer lists | - | 729 | |
| - brand names | - | 2,676 | |
| Property, plant and equipment | 1,432 | 1,432 | |
| Inventories | 743 | 743 | |
| ______ | ______ | ||
| Net assets acquired | 2,175 | 5,580 | |
| Goodwill | 2,915 | ||
| ______ | |||
| Consideration | 8,495 | ||
| ______ | |||
| Consideration | |||
| - satisfied by cash | 8,332 | ||
| - direct costs relating to acquisition | 163 | ||
| ______ | |||
| 8,495 | |||
| ______ |
Goodwill is attributable to significant synergies arising post-acquisition due to Hornby's existing presence in the hobby sector and its extensive customer base.
Goodwill arising on the acquisition of Corgi is expected to be deductible for tax purposes.
Hornby Hobbies Limited acquired a part of the Corgi International Limited assets and therefore historical trading performance is not available in relation to the assets acquired. The Corgi assets have been fully integrated into Hornby Hobbies Limited and it is not possible to extract meaningful trading results of the assets since acquisition to 31 March 2009 other than £5.5 million sales of Corgi product in the period would have been approximately £5.8 million had the Corgi brands been included in the Group from the start of the financial year.