Annual Financial Report

RNS Number : 0292P

Hornby PLC

16 June 2022

 

16 June 2022

HORNBY PLC

HORNBY ANNOUNCES ANNUAL RESULTS

Hornby Plc ("Hornby" or the "Group"), the international models and collectibles group, today announces its results for the year ended 31 March 2022

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Highlights 2022

"Our sales increase despite difficulties in the supply chain. The company has ambitious plans for the future, it is an exciting time to be at Hornby ."

(Lyndon Davies, Executive Chairman)

Revenue (2021: £48.5m)

£53.7m

Operating profit (2021: £0.6m)

£1.0m

Reported profit before taxation (2021: £0.3m)

£0.6m

Underlying1 profit before taxation (2021: £1.5m)

£3.2m

Reported profit after taxation (2021: £1.4m)

£1.5m

Reported profit per share (2021: 0.82p)

0.89p

Underlying2 basic profit per share (2021: 1.36p)

2.18p

Net cash (2021: 4.7m) (see Note 29)

£3.8m

1  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 shared-based payments.

2  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 shared-based payments (see note 7).

Hornby Plc

Lyndon Davies, CEO

Kirstie Gould, CFO

01843 233500

Web:  www.hornby.plc.uk

Liberum Capital Limited (Nominated Advisor & Broker)

Andrew Godber

Edward Thomas

020 3100 2222 

Executive Chairman Report

Introduction

Revenue for the year increase to £53.7 million (2021: £48.5million), up over 10% from the previous year. Underlying profit before tax was £3.2 million (2021: £1.5 million). Reported profit before tax was £0.6 million (2021: £0.3 million). We continue to make good progress.

Sales continue on an upward trend, though delays in shipping and in the supply chain have held them back as well as increasing our costs. We were particularly impacted in the case of Hornby and Scalextric sets, many of which arrived after the Christmas season.

The points I will cover in my statements 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. 

Key Performance Indicator 4: The Digital Change

We are behind schedule, but we are gaining momentum.

Supply Chain

The issues we faced and our medium-term plan.

Brexit, Covid and World Events

Where Hornby is in this context.

Staff Profit Share Scheme

Return to profit means that our employees benefit.

New CEO

Current Trading & Outlook

Governance

Key Performance Indicators (KPIs)

In 2022, we again generated enough gross profit to cover our fixed costs. By improving our KPI's we will ensure that this is sustainable and growing.

	2022 (£'000)	2021 (£'000)	2020 (£'000)	2019 (£'000)	2018 (£'000)
Sales	53,739	48,549	37,842	32,759	35,651
Variable Costs	(28,023)	(26,795)	(21,140)	(19,348)	(21,900)
Gross Profit	25,716	21,754	16,702	13,411	13,751
Fixed Costs	(24,632)	(20,976)	(19,444)	(18,041)	(21,309)
Operating Profit/ (Loss)	1,085	778	(2,742)	(4,630)	(7,578)
Underlying Operating Profit/(Loss)	3,246	1,456	(3,241)	(4,401)	(7,574)

KPI No. 1 Costs

Variable Costs

These have reduced further in proportion to sales. Our long-term target is for these to be below 40% of sales, and there was a point during this financial year when it appeared that we were closing in on 50%.

Further automation took place at the warehouse with the introduction of robots to improve our efficiency in fulfilling orders and in recent months we have increased our operating hours in order to despatch products more quickly.

This table shows our variable costs as a percentage of sales since 2001. After a period of all-time high variable costs, we are now getting closer to our all-time low.

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Sales	64.736	63.372	64.447	57.395	51.557	58.135	55.757	47.420	35.651	32.759	37.842	48.549	53.738
Variable Costs	32.587	34.095	33.290	32.917	28.230	30.961	33.992	29.270	21.900	19.348	21.140	26.800	28.026
%	50%	54%	52%	57%	55%	53%	61%	62%	61%	59%	56%	55%	52%

Fixed Costs

In the last annual report, I reported that our current fixed cost base could service a business bringing in £50 million to £55 million of sales. Our fixed costs have now risen, as they must, if they are to support sales of £60 million to £70 million. These increases in fixed costs are in several parts of the business, but mainly in our Digital Team and the support that they require. This started to bring rewards in the second half of the 2021/22 financial year.

We are investing today for the future. I expect this percentage to be closer to 40% for the 2022/23 financial year

This table shows how our fixed costs have varied as a percentage of sales since 2001:

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Sales	64.736	63.372	64.447	57.395	51.557	58.135	55.757	47.420	35.651	32.759	37.842	48.549	53.738
Fixed Costs	24.547	23.867	25.361	24.591	23.682	25.550	30.565	24.393	20.892	17.815	19.643	21.1	24.4
%	37.9%	37.7%	39.4%	42.8%	45.9%	43.9%	54.8%	51.4%	58.6%	54.4%	51.9%	43.5%	45.4%

KPI No.2: Capital Expenditure Productivity

In this financial year we spent £3,348,000 (2021: £4,124,000) on   Product Tooling.

Our "Capex Productivity" has declined in 2021/22, because products in which we have invested, that we would have expected to be selling in the 2021/22 financial year arrived late and so the sales have not happened. This is disappointing, but those sales are not lost; they will just occur in future years.

A good example of how we are intending to increase our Capex Productivity is to discuss our Pocher brand, a range of highly detailed models. Four years ago, annual sales in this category were only £1,500. They have now risen to more than £1 million pounds per annum and we anticipate this doubling during 2022/23. To achieve this, we have been layering the development of consecutive products. Work started on the highly anticipated Lotus 72 in 2020. An unannounced item is in design for release in 2023 which will triple our Pocher sales. We then have further releases of both of these products in alternative liveries that will require little additional capex but will provide significant profits. If you also factor in our move to more direct sales through our digital channels, it begins to make the numbers look quite exciting in this category alone.

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Gross Profit	32.10	29.28	31.16	24.48	23.33	27.17	21.77	18.15	13.75	13.41	16.70	21.80	25.70
Capital Expenditure (Year Prior)	4.01	3.69	3.76	3.33	3.58	3.68	3.54	2.83	1.70	1.59	1.83	2.40	4.10
£ of Capital Expenditure	£8.00	£7.94	£8.30	£7.34	£6.52	£7.38	£6.14	£6.42	£8.09	£8.43	£9.15	£9.08	£6.27

KPI No. 3: Inventory

Inventory has increased in the period due to the acquisition of LCD Enterprises Limited but is lower than I expected considering the late receipt of stock over the Christmas period.

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Sales	64.736	63.372	64.447	57.395	51.557	58.135	55.757	47.420	35.651	32.759	37.842	48.549	53.738
Inventory	12.27	16.21	17.87	13.64	13.17	12.47	13.64	9.68	10.03	10.86	14.2	15.2	16.5
%	19%	26%	28%	24%	26%	21%	24%	20%	28%	33%	38%	31%	31%

KPI No. 4: The Digital Change

I had believed that at the beginning of 2020 we would begin the move to increase direct sales to consumers through our digital channels. Covid arrived on our shores, however, so instead much of my time was spent in just trying to hold this business together.

This slow transformation to digital was disappointing, but I wanted to prioritise building the engine, interface, and pipework that would be required to make Digital work for us in the long run. Like a Hornby layout, this will now evolve, develop and change constantly.

We entered 2021 bringing on stream twenty-seven websites in place of the one website we previously operated. This took until mid-year to settle down and only then did we begin to put the Digital Team together, along with our partners that were necessary to support this change. This structure started to come together in our third quarter and we are now starting to see the real benefits of this investment.

This new KPI will report where we are and what our ambitions are. Therefore, to be transparent it is better to report this performance in terms of sales value. Our short-term ambition is to at least double those sales over the next two financial years.

	Q1	Q2	Q3	Q4
2018/19	£301,100	£479,767	£582,434	£362,688
2019/20	£426,382	£497,494	£731,252	£638,260
2020/21	£1,222,578	£1,169,936	£1,574,834	£976,711
2021/22	£849,782	£1,038,172	£2,128,918	£1,687,916

Sales in Quarter 3 over the Christmas period will always be heavily loaded, but as part of the digital change we will move to announcing more products outside of the January window, which has always been the traditional time in our industry. The change will vary by brand; for example Corgi has already started staggering releases and Airfix will follow in 2023. Hornby will also announce certain products outside of the January window next year.

Supply Chain

These affected us as follows during this period.

· Container Availability - previously 2 to 3 days, but recently we have been experiencing 2 to 3 weeks.

· Port Closures - Covid shut down the Yantian port for 2 to 3 weeks in May/June 2021, with continual sporadic outbreaks.

· Container Ship Availability - diversion of pre-booked ships due to above, rising demand and a lack of capacity.

· Shipping Times - previously 30 to 35 days total transit time, we experienced over 70 days during the year.

· Container shipping costs - previously £3,000 for a 40-foot container, but we experienced prices as high as £17,000.

· Power shortages to factories in September/October 2021 - this had the potential to severely impact Christmas sales.

· Labour shortages caused by restrictions in movement - making it harder to find the required capacity.

Over the last 12 months we have been planning more production outside of our main China base. This involves laying down duplicate tooling on some evergreen products in other countries. This should not be seen as a movement out of China, but rather an opportunity to work with new manufacturers on our extensive range of existing products; not just to supply ourselves, but also to build new demand in their local markets.

Brexit, Covid and World Events

Brexit continued to affect us in the first quarter of the financial year, but things settled down, and there are now very few problems arising. With most of the world back to normality, Covid now impacts us most in the supply chain. Recent events in Ukraine have not impacted us so far, although there are some specialist materials we are watching closely.

Staff Profit Share Scheme

I am delighted to announce that another year of profitability means that the second part of the profit share scheme kicks in with 15% of the operating profit shared with our staff as we move forward. I am grateful to our shareholders for supporting this scheme.

Once again I thank our employees for all their enthusiasm and backing over the last year. They have supported me throughout.

New CEO

In January we announced that we had started a search for a new CEO. We will take our time to ensure that we find the right person to lead the company over the next decade.

Current Trading & Outlook

Sales for April/May 2022 have been in line with expectations, but it is only when we move into our busier second and third quarters that we can be certain that the supply chain will be able to support our demand.

We have a strong balance sheet with net cash of £3,800,000 as at 31 March 2022   and we appreciate the strong support from our customers and shareholders.

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 ("QCA"). 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.

We will hold our Annual General Meeting on 14 September 2022 and will provide further details nearer the time.

Lyndon Davies

Executive Chairman

15 June 2022

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 Statement on pages 13 to 16. 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.

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 allowing them to plan their factories capacity well into the future. We are planning to reintroduce regular visits this year as the COVID restrictions in China are lifted.

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 25.

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.

Operating and Financial Review of the Year

Financial Review

	2022	2021
Revenue	£53.7m	£48.5m
Gross profit	£25.7m	£21.8m
Gross profit margin	47.9%	44.9%
Overheads	£24.6m	£21.0m
Exceptionals	£0.1m	£0.2m
Reported profit before tax	£0.6m	£0.3m
Underlying profit before tax*	£3.25m	£1.5m
Reported profit after tax	£1.5m	£1.4m
Basic profit per share	0.93p	0.82p
Underlying basic profit per share*	2.19p	1.36p
Net cash	£3.8m	£4.7m
Undrawn Facilities	£12.6m	£14.4m

* 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 2022 was £53.7 million, an increase of 11% compared to the previous year's £48.5 million due to increase in direct sales and acquisition of the LCD group on 303 July 2021. The revenue in the second half of the year of £31.9 million was ahead of previous year which was £27.4 million. Gross profit margin was higher, at 47.9% (2021: 44.9%).

Overheads increased year-on-year by 17% from £21.0 million to £24.6 million predominantly as a result of planned recruitment of additional staff and selling related costs linked to higher revenues, especially direct sales. UK distribution costs were similar to prior year costs despite higher volumes. Sales and marketing costs increased by £1.0 million year-on-year due to ongoing investment in direct relationships with our customers and costs related to running the LCD business. Administration costs were £2.4 million higher due to the £2.3 million LTIP payment accrual that has gone through the Statement of Comprehensive Income this year (2021: £0.7 million). This is detailed further in Note 23. Other operating expenses in the year of £0.03 million (2021: £0.2 million) includes foreign exchange losses and amortization of brand names.

Exceptional costs totalling £0.01 million (2021: £0.2 million) are predominantly restructuring costs in the UK, an adjustment on acquisition of LCD Enterprises Limited both offset by an amortisation adjustment to correct prior year over amortisation.

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: shared-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.

	Group
	2022 £'000	2021 £'000
Statutory Profit before taxation	583	345
Adjustments:
Amortisation of intangibles - brands	194	227
Share-based payments	2,341	673
Exceptional items:
Restructuring costs	88	136
LCD Acquisition	219	-
Relocation costs	9	75
Amortisation adjustment	(177)	-
Underlying profit before taxation	3,257	1,456

Segmental analysis

Third party sales by the UK business of £37.7 million increased by 1% 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 £0.5 million compared to £1.0 million last year reflects the LTIP charge for the year of £2.3 million within administration costs.

Sales by the European businesses of £11.4 million increased by 93% in the year reflecting the Group's focus on growing these markets through correct product selection and overcoming the shipping issues we experienced post Brexit. The profit before tax was £0.8 million compares to £0.5 million loss last year.

Sales in the US business of £4.6 million decreased by 13%. The trading loss of £0.7 million compares to £0.3 million loss in last year. We expect sales to increase in this key market in the longer term and overheads to reduce.

Statement of Financial Position

Property, plant and equipment increased year-on-year by £3.4 million to £10.1 million as a result of increased expenditure in tooling for new products and technologies and the acquisition of LCD. Group inventories increased from £15.1 million to £16.5 million due to the acquisition of LCD offset by a very strong fourth quarter sales. Trade and other receivables increased by £1.5 million or 21% largely due the increase in sales compared to prior year. Trade and other payables are similar to the prior year. Overall investment in new tooling, new intangible computer software and other capital expenditure was £4.0 million (2021: £5.0 million).

Dividend

The Group is still in the turnaround phase and there will not be a dividend payment this year (2021: £nil). The Board continues to keep the dividend policy under review.

Financing

At 31 March 2022 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 PNC facility was replaced with a £12 million Asset Based Lending facility with Secure Trust Bank ("STB") on 21 April 2022.

The facility with STB is a floating facility based on the current asset position capped at £12 million ends October 2024 and carries a margin of 2.5 ‐ 3% over SONIA. The STB Facility has a fixed and floating charge on the assets of the Group. The Company provides customary operational covenants to STB on a monthly basis.

The Phoenix Facility is a £9 million facility which attracts interest at a margin of 5% over SONIA on funds drawn. Undrawn funds attract a non ‐ utilisation fee of the higher of 1% or SONIA. This facility is currently due to expire December 2023.

Borrowings in the year ended 31 March 2022 were £327,000 (2021: nil). This consist of a CBIL loan with £217,000 outstanding (acquired with LCD) and £110,000 shareholder loan drawdown.

Net cash at 31 March 2022 was £3.8 million compared with net cash of £4.7 million at 31 March 2021.

Our Key Performance Indicators ('KPIs')

The Directors are of the opinion that the financial KPIs are revenues, gross margins, underlying profit before tax and 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 Capex Productivity, Inventory, Digital Change, Variable and Fixed Costs as percentage of Sales should be monitored. We provide current and historical analysis in the Executive Chairman Report on pages 3 to 7 and will continue to report in future Annual Reports. The Board monitors progress against plan on a regular basis adjusting future objectives annually in line with current circumstances.

Identification of principal risks and uncertainties

The Board has the primary responsibility for identifying the major risks facing the Group and developing appropriate policies to manage those risks. The Board completes an annual risk assessment programme 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 Group has competition in the model railway, slot racing, model kits, die cast and paint markets. Loss of market share to increased competitor activity or alternative hobbies would have a negative impact on the Group's results. Failure to evolve and innovate products may lead to brands becoming less relevant in the marketplace.	The Group performance is impacted by the actions of competitors and changes in the wider retail landscape.	In many of our markets the Group still enjoys a strong market position due to the continued development of our brands. We will strive to further improve the strength of our brands. Production of high-quality products which customers want is a key mitigating factor.
The Business Plan	The Business Plan may not fully achieve the aims of returning the Group to positive cash generation in 2022/23.	The increase in business scale and reduction of costs and the re-conversion of concession sales currently anticipated is not achieved and the Group does not achieve sustainable profit and cash generation.	The Group has developed clear targets and has cost saving contingencies in the plan being actioned to put the necessary resources in place to deliver the aims of the plan.
Hobby market	Overall decline in the hobby market could lead to greater levels of competition in the medium term, which could have a negative impact on the Group's results.	Failing interest in traditional hobbies may impact our core Independent and National retailers and have a consequent impact upon the Group's performance.	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. We have also implemented tiering and only allowing certain percentage of our goods to go wholesale with balance only being available on our website.
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.	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 continues to hedge short-term exposures by establishing forward currency purchases using fixed rate and participating forward contracts up to twelve months ahead. It is deemed impractical to hedge exchange rate movements beyond that period. In particular the negative impact on sterling of Brexit and the continuing uncertainties world wide will make the US Dollar purchase of its goods more expensive.
Supply chain	The Group's products are manufactured by artisan labour in China, India and Vietnam. Risk that capacity is lost which could lead to delays in production.	The Group does not have exclusive arrangements with its suppliers and there is a risk that competition for manufacturing capacity could lead to delays in introducing new products or servicing existing demand.	The Group is continuing to develop and 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. The Group manages the supply chain forecasts continuously and communicates regularly with suppliers and customers in turn. The Group maintains significant stock levels in the UK at any time and therefore this allows additional time to plan for stock output variances from overseas suppliers in time for the peak season.
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.	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.
Product compliance	The Group's products are subject to compliance with toy safety legislation around the world.	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.	Robust internal processes and procedures, active monitoring of proposed legislation and involvement in policy debate and lobbying of the relevant authorities.
Liquidity	Insufficient financing to meet the needs of the business.	Without the appropriate level of financing, it would be increasingly difficult to execute the Group's business plans.	The Group has a £12.0 million ABL facility with Secure Trust Bank (STB) 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.
System and cyber risk	The Group continues to invest in the development of its website and ERP systems.	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.	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.
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.	Management team to encourage and empower employees. Key lost talent has been reacquired and brought back into the Company. All employees (after 12 months service) 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

15 June 2022

Corporate Governance Report

Corporate Governance

For the year ended 31 March 2022, 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 17 to 21 and the Directors report on pages 23 to 28.

Board of Directors

John Stansfield - aged 67 Independent Non-Executive Director	Lyndon Davies - aged 61 Executive Chairman	Kirstie Gould - aged 49 Chief Finance Officer & Company Secretary	Daniel Carter - aged 27 Independent Non-Executive Director	Henry de Zoete - aged 40 Independent Non-Executive Director
John Stansfield was Non-Executive Chairman in August 2018 to February 2022. 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.	Lyndon joined the Board as Chief Executive in October 2017 and was appointed to Executive Chairman in February 2022. 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 was the majority shareholder of LCD Enterprises Limited, the ultimate owner of the Oxford Diecast brands until July 2021 when Hornby acquired the remaining stake.	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.	Henry de Zoete was appointed as a Non-Executive Director in January 2022 Henry de Zoete is an entrepreneur and alumnus of renowned Silicon Valley start-up accelerator Y Combinator. Henry has previously served on the Board of grassroots campaigning organisation 38 Degrees (2015-2018) and was a Special Adviser in the  Department of Education (2010-2014). Henry is currently an angel investor in tech start-ups and a Non-Executive Board Member of the Cabinet Office. Henry is a member of the Remuneration and Nomination Committee and the Audit Committee.

Our Board and Committees Membership

Director	Board	Audit	Remuneration & Nomination
John Stansfield	Member	Chair	Member
Lyndon Davies	Chair
Kirstie Gould	Member
Daniel Carter	Member	Member	Chair
Henry De Zoete	Member	Member	Member

Composition and independence of the Board

The Board is comprised of two executive directors and three non-executive directors. 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. Henry de Zoete is considered independent.

The Board members collectively have skills and expertise embracing a range of areas including finance, auditing, e-commerce, engineering, manufacturing, design, general management, sales and innovation. The Executive Chairman and John Stansfield 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 Directors' background and experience are set out in the table above.

Appointments to the Board and re-election

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

Division of responsibilities

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

The Board is responsible for the formulating of the overall business strategy and the Executive team is responsible for the managing of the business to realise this strategy. The Exec Chairman is responsible for overseeing the Board and 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 Executive Chairman.

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.

Succession Planning

During the year, the Remuneration and Nomination Committee was delegated with the task of formulating succession plans for the business, identifying areas where there is a skills shortage, extending the area of focus to senior management level and ensuring that the plans cover several years. We have identified a number of employees that have the potential to succeed the Executive Team.

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 apart from Henry who joined near the end of the year. Henry attended 3 board meetings.

The main activities of the Board during the year

Key Board activities this year included:

· dealing with the impact of COVID-19

· dealing with the impact of supply chain issues in China due to power outages

· discussing strategic priorities

· reviewing feedback from our institutional shareholders following our full and half year results; and

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

The Board Committees

The Board delegates authority to two committees: the Audit 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 21 to 27.

The Audit Committee comprises the independent non-executive directors of the Company and met three times during the year. The Exec Chairman, 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. 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. 

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 2022 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 Exec 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.  In addition, no one member of the Board has unfettered powers to make decisions.

Performance Evaluation

The Exec 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.

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 2022.

Membership

The Audit Committee comprises three members, Daniel Carter, Henry de Zoete and myself, John Stansfield. All 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 13.

Meetings and attendance

The Committee met three times during the year ended 31 March 2022. 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 external audit plan, consideration of the scope of the audit 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, the consistency in the application of accounting policies and the going concern review;

- a review and approval of the internal financial statement;

- 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 2023 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 2022. 

Policies for non-audit services

In addition to the audit services they provide, Crowe U.K. LLP do not currently provide any other services.  

Audit process

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

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

Internal Audit

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

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 11 to 12 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 

15 June 2022

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 2022 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 three independent Non-Executive Directors, John Stansfield, Henry de Zoete and myself, Daniel Carter, whose biographies are set out on page 13.

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 Executive Chairman and external advisers, may be invited to attend for all or part of any meeting.

Duties

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

Remuneration

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

-approve the design of, and determine targets for any performance-related pay schemes operated by the Company;

-recommend and monitor the level and structure of remuneration for senior management; and

-review the design of all share incentive plans for approval by the Board and shareholders.

Nomination

-regularly review the structure, size and composition, (including the skills, experience, knowledge and diversity) of the Board and make recommendations to the Board as to any changes necessary;

-give full consideration to succession planning for directors and other senior executives in the course of its work, taking into account the challenges and opportunities facing the Company and the skills and expertise needed on the Board in the future;

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

-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 any future awards under the LTIP;

· succession planning and the search for an additional Non-Executive director;

· election and re-election of directors at the AGM;

· 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 21% (one) female and 80% (four) male Board members. The Board's age demographic ranges from 27 to 67. The business consists of 65% male employees and 35% female employees.

Remuneration policy

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

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

-considers pay and employment conditions within the Company and salary levels within listed companies of a similar size;

-considers Directors' personal performance; and

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

Executive Directors

Base salary

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

Annual bonus

Executive Directors do not receive annual bonuses.

Long-term Incentive Plan

The existing LTIP scheme completes this year based on operating Profit for the year ended 31 March 2022. The Remuneration committee will review and consider a suitable scheme for the future.

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.

Service agreements and termination payments

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

Director	Date of Contract	Unexpired Term	Notice period by Company	Notice period by Director
Lyndon Davies	5 October 2017	Rolling contract	9 months	6 months
Kirstie Gould	21 December 2017	Rolling contract	9 months	6 months

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

Employees' pay

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

A profit share scheme exists for all employees (excluding Executive Directors), and 15% of operating profit is shared among employees proportionately. 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 is decided by the Exec Chairman and Non-Executive Directors (but excluded from discussing their personal fees). The remuneration payable to the 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 months.  John Stansfield signed a letter on 2 January 2018, Daniel Carter signed his on 16 July 2020 and Henry de Zoete signed his on 4 January 2022. The contract continues as long as the Non-Executive Directors are re-elected at the AGM. All three non-exec directors will stand for re-election at the next AGM in September 2022.

Daniel Carter

Chairman of the Remuneration and Nomination Committee

15 June 2022

Directors and Corporate Information

Directors 

The full details of all directors who served in the year ended 31 March 2022 can be found below.

Lyndon Davies

Executive Chairman

Kirstie Gould

Chief Finance Officer

Daniel Carter

Non-Executive Director

John Stansfield

Non-Executive Director

Henry de Zoete

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

Directors' Report

The Directors present their Annual Report together with the audited consolidated and Company financial statements for the year ended 31 March 2022.

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 9 to 10.

The Corporate Governance statement on page 13 to 16.

Details of the Directors who served during the year including their salaries, bonuses, benefits and share interests are on pages 26 to 27.

Directors' responsibility statements on page 25.

Likely future events are disclosed within the Exec Chairman report on page 7.

Post balance sheet events are set out in note 32.

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 seven 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, Hornby Deutschland GmbH in Germany and LCD Enterprises Limited in the United Kingdom. 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 2022 are set out in the Group Statement of Comprehensive Income. Revenue for the year was £53.7 million compared to £48.5 million last year. The profit for the year attributable to equity holders amounted to £0.6 million (2021: £0.3 million). 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 Executive Chairman Statement.

No interim dividend was declared in the year (2021: £nil) and the Directors do not recommend a final dividend (2021: £nil).

GOING CONCERN

The Group has in place a £12.0 million Asset Based Lending (ABL) facility with Secure Trust Bank PLC ("STB") through to October 2024. The Covenants are customary operational covenants applied on a monthly basis. In addition, the Group has a committed £9.0 million loan facility with Phoenix Asset Management Partners Limited (the Group's largest shareholder) if it should be required currently expires December 2023.

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 STB 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 £1.5 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.

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.

		2022	2022	2021	2021
Scope	Activity	Consumption kWh	Consumption (tCO2e)	Consumption kWh	Consumption (tCO2e)
Scope 1	Business Mileage	112,647	27.3	38,263	9.3
Scope 2	Purchased Electricity	548,850	128.0	446,069	104.0
	Purchased Gas	343,019	69.0	493,767	100.6
		1,004,515	224.3.8	978,099	213.9
Intensity metric
An intensity metric of tCO2e per £m revenue has been applied for the annual total consumption
		2022	2021
tCO2e/£m Revenue		3.68	4.22

During the reporting year, the Group's business miles has considerably increased reflecting the return to normal working conditions. The gas consumption has fallen due to proactive efforts to reduce our consumption with Head Office offset by an increase in electricity consumption following a return to working from the office.

Substantial shareholdings

The Company has been notified that at close of business on 15 June 2022 the following parties were interested in 3% or more of the Company's ordinary share capital.

Shareholder	Number of ordinary shares	Percentage held
Phoenix Asset Management	124,634,330	74.66
Artemis Fund Managers Limited	27,551,350	16.50

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 UK-adopted 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;

· state whether applicable UK-adopted 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.

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy.

In the case of each director in office at the date the Directors' Report is approved:

· 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 .

Financial instruments

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

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

FINANCIAL RISK MANAGEMENT

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

Personnel policies

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

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

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 available to all staff;

· Equality in the workplace is good management practice and makes sound business sense;

· To regularly review all our employment practices and procedures to ensure fairness;

· Breaches of our equality policy are regarded as misconduct and may lead to disciplinary proceedings; and

· These policies will be monitored and reviewed on a regular basis.

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

ARTICLES OF ASSOCIATION

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

Share capital

The share capital of the Company comprises ordinary shares of 1p each. Each share carries the right to one vote at general meetings of the Company. The issued share capital of the Company, together with movements in the Company's issued share capital is shown in Note 22. 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 2021 Annual General Meeting to purchase up to 10% of its issued share capital. A resolution will be proposed at the forthcoming Annual General Meeting and authority sought to purchase up to 10% of its issued share capital. Under this authority, any shares purchased must be held as treasury shares or, otherwise, cancelled resulting in a reduction of the Company's issued share capital.

No shares were purchased by the Company during the year.

Change of control - significant agreements

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

POLITICAL DONATIONS

The Company has made no political donations during the year.

Independent auditor

A resolution to reappoint the auditor Crowe U.K. LLP, will be proposed at the forthcoming Annual General Meeting.

Annual General Meeting

The Annual General Meeting is to be scheduled for 14 September 2022. A notice of the Annual General Meeting will be sent out to shareholders separately to this Annual Report and Accounts.

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 2021/22 and 2020/21 in line with the Companies Act 2006 requirement:

AUDITED
	Year ended 31 March 2022			Year ended 31 March 2021
	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)	241	-	241	222	-	222
K Gould (Appointed 4 January 2018)	158	29	187	151	28	179
D Carter (Appointed 16 July 2020)	-	-	-	-	-	-
J Stansfield (Appointed 4 January 2018)	71	-	71	71	-	71
H De Zoete (appointed 5 January 2022)	11	-	11	-	-	-
Total	481	29	510	444	28	472

Performance Share Plan awards outstanding (Audited)

At 31 March 2022, outstanding awards to Directors under the PSP were as follows:

Director	Award date	Vesting date	Market  price at award date	At 1 April 2021	Lapsed during the year	As at 31 March 2022
Lyndon Davies	Nov-20	Jun-22	54p	2,670,846	(988,213)	1,682,633
Kirstie Gould	Nov-20	Jun-22	54p	2,670,846	(988,213)	1,682,633

Under the terms of the LTIP, awards are subject to strict vesting criteria. These are linked to the Company's in the year ended 31 March 2022.

The level of vesting is determined by the level of Operating Profit announced in the 2021/22 Group results. 63% of the target has been met and 63% of the total share options on offer will be granted.

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 2022 and 31 March 2021 were:

	At 31 March 2022 number			At 31 March 2021 number
Executive Directors
L Davies	795,144			795,144
K Gould	55,006			55,006
Non-Executive Directors
H De Zoete	-			-
D Carter	-			-
J Stansfield	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

15 June 2022

Opinion

We have audited the financial statements of Hornby Plc (the "Parent Company") and its subsidiaries (the "Group") for the year ended 31 March 2022 which comprise:

· the Group and parent company statements of comprehensive income for the year ended 31 March 2022;

· the Group and parent company statements of financial position as at 31 March 2022;

· the Group and parent company statements of changes in equity for the year then ended;

· the Group and parent company statements of cash flows 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 UK adopted international accounting standards.

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 2022 and of the Group's profit and Parent Company's loss for the period then ended;

· have been properly prepared in accordance with UK adopted 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 as applied to listed entities, 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 director's 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 Group's and Parent Company'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 Group's or Parent Company'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.

Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £250,000 (2021: £215,000), based on turnover and the underlying profitability of the business. We consider these to be the key performance metrics reported by management to shareholders to assess the performance of the business.  Materiality represents approximately 0.5% of turnover and 8% of underlying profit (2021: 0.5% of turnover and 15% of underlying profit).

Overall Parent Company materiality was set at £200,000 (2021: £200,000) based on net assets, restricted so as not to exceed Group materiality.  Materiality represents 0.3% of net assets. The Parent Company acts as holding company for the investments in the trading subsidiaries and therefore net assets was considered a more relevant measure than turnover or profitability.

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.  Performance materiality was set at £175,000 (2021: £150,500) for the Group and £140,000 (2021: £140,000) for the Parent Company.

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 (2021: £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 financial information of four full scope components, Hornby Plc, Hornby Hobbies Limited, LCD Enterprises Limited and Oxford Diecast Limited.  The European sales offices and US trading subsidiary were audited using a component materiality level of £200,000 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 .

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 and investments  - Notes 9, 10 and 12 The Group holds goodwill at a carrying value of £4.5m and brand relations at a carrying value of £1.9m. 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.	We tested management's impairment review which includes impairment reviews for investments, goodwill and intangible assets. The audit work 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 work was conducted with the support of our valuations team.  As part of our testing 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.  Management prepared a discounted cashflow model to support the value recorded.  We tested this model with the support of our valuations team and challenged management on the assumptions made.
Inventory provisioning The Group was holding £16.5m of inventory at the year end.  There a risk that old inventory may become difficult to sell and thereby become impaired.	We obtained the aged inventory reports and recalculated the provision. We compared the assumptions used to those used in 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 sold below cost.
Acquisition of LCD Enterprises Limited - Note 12 On 31 July the company acquired the remaining 51% of the share capital of LCD Enterprises Limited.  The company previously held a 49% stake. There is a risk that the transaction had been incorrectly accounted for.  Key risks were considered to be the fair value of assets acquired at acquisition, the calculation of cost and related goodwill and the disclosure surrounding the acquisition in the accounts.	We obtained a copy of the acquisition documents and agreed the cost of the acquisition and calculation of goodwill. We completed audit procedures on the opening position including reviewing the stock at acquisition and the fair value of intangibles not previously recognised.  Our internal valuations team were used to audit the calculation of the fair value of intangibles acquired. We checked the disclosures in the accounts to ensure these reflected the underlying agreement and complied with accounting standards.

Our audit procedures in relation to these matters 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.

Responsibilities of the directors for the financial statements

As explained more fully in the directors' responsibilities statement set out on page 25 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 of legal expenditure;

• 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.

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

15 June 2022

Group and Company Statements of Comprehensive Income

for the Year Ended 31 March 2022

		Group		Company
	Note	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Revenue	2	53,739	48,549	1,071	933
Cost of sales		(28,023)	(26,795)	-	-
Gross profit		25,716	21,754	1,071	933
Distribution costs		(6,991)	(6,798)	-	-
Selling and marketing costs		(8,832)	(7,804)	-	-
Administrative expenses		(8,514)	(6,133)	(2,258)	(1,315)
Other operating expenses	4	(294)	(241)	-	-
Operating profit/(loss) before Exceptional items	4	1,085	778	(1,187)	(382)
Exceptional items	4	(139)	(211)	(219)	-
Operating profit/(loss)	2	946	567	(1,406)	(382)
Finance income	3	15	3	175	175
Finance costs	3	(358)	(334)	(209)	(220)
Net finance expense	3	(343)	(331)	(34)	(45)
Share of profit of investments accounted for using the equity method	12	(20)	109	(20)	109
Profit/(loss) before taxation	4	583	345	(1,460)	(318)
Income tax credit	5	896	1,018	-	-
Profit/(loss) for the year after taxation		1,479	1,363	(1,460)	(318)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss:
Cash flow hedges, net of tax		858	(597)	-	-
Currency translation gains/(losses)		175	(187)	53	246
Other comprehensive income/(loss) for the year, net of tax		1,033	(784)	53	246
Total comprehensive income/(loss) for the year		2,512	579	(1,407)	(72)
Comprehensive income attributable to:
Equity holders of the Company		2,500	-	-	-
Non-controlling interests		12	-	-	-
Profit/(loss) per ordinary share
Basic	7	0.89p	0.82p
Diluted	7	0.85p	0.80p

All results relate to continuing operations.

The notes on pages 37 to 69 form part of these accounts .

Group and Company Statements of Financial Position as at 31 March 2022		Group		Company
	Note	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Assets
Non-current assets
Goodwill	9	4,644	4,561	-	-
Intangible assets	10	3,187	3,017	-	-
Property, plant and equipment	11	10,057	6,680	-	-
Investments	12	-	1,839	26,092	23,860
Right of Use Assets	13	2,584	2,690	-	-
Deferred tax assets	21	3,425	2,956	-	-
		23,897	21,743	26,092	23,860
Current assets
Inventories	14	16,462	15,152	-	-
Trade and other receivables	15	8,786	7,247	47,410	48,518
Derivative financial instruments	20	504	32	-	-
Cash and cash equivalents	16	4,139	4,685	2	2
		29,891	27,116	47,412	48,520
Liabilities
Current liabilities
Borrowings	19	(50)	-	-	-
Trade and other payables	17	(7,372)	(7,131)	(6,958)	(6,722)
Lease liabilities	18	(433)	(365)	-	-
Derivative financial instruments	20	-	(513)	-	-
		(7,855)	(8,009)	(6,958)	(6,722)
Net current assets		22,036	19,107	40,454	41,798
Non-current liabilities
Borrowings	19	(277)	-	(5,643)	(5,689)
Lease liabilities	18	(2,313)	(2,443)	-	-
Deferred tax liabilities	21	(233)	(150)	-	-
		(2,823)	(2,593)	(5,643)	(5,689)
Net assets		43,110	38,257	60,903	59,969
Equity attributable to owners of the parent
Share capital	22	1,669	1,669	1,669	1,669
Share premium	24	52,857	52,857	52,857	52,857
Capital redemption reserve	24	55	55	55	55
Translation reserve	24	(1,814)	(1,989)	(963)	(1,016)
Hedging reserve	24	377	(481)	-	-
Other reserves	24	1,688	1,688	19,145	19,145
Accumulated losses		(11,734)	(15,542)	(11,860)	(12,741)
Equity attributable to PLC shareholders		43,098	38,257	60,903	59,969
Non-controlling interests		12	-	-	-
Total equity		43,110	-	-	-

The notes on page 37 to 69 form part of these accounts. The financial statements on pages 33 to 69 were approved by the Board of Directors on 15 June 2022 and were signed on its behalf by:

   K Gould, Director, Registered Company Number: 01547390

Group and Company Statements of Changes in Equity

For the Year Ended 31 March 2022

GROUP		Share capital	Share premium	Capital redemption  reserve	Translation reserve	Hedging reserve	Other   reserves	Non-controlling interests	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2020 and 1 April 2020		1,669	52,857	55	(1,802)	116	1,688	-	(17,578)	37,005
Profit for the year		-	-	-	-	-	-	-	1,363	1,363
Other comprehensive   (expense)/income for the year		-	-	-	(187)	(597)	-	-	-	(784)
Total comprehensive (loss)/income for the year		-	-	-	(187)	(597)	-	-	1,363	579
Transactions with owners
Share-based payments (Note 23)		-	-	-	-	-	-	-	673	673
Total transactions with owners		-	-	-	-	-	-	-	673	673
Balance at 31 March and 1 April 2021		1,669	52,857	55	(1,989)	(481)	1,688	-	(15,542)	38,257
Profit for the year		-	-	-	-	-	-	12	1,467	1,479
Other comprehensive   (expense)/income for the year		-	-	-	175	858	-	-	-	1,033
Total comprehensive (loss)/income for the year		-	-	-	175	858	-	12	1,467	2,512
Transactions with owners
Share-based payments (Note 23)		-	-	-	-	-	-	-	2,341	2,341
Total transactions with owners		-	-	-	-	-	-	-	2,341	2,341
Balance at 31 March 2022		1,669	52,857	55	(1,814)	377	1,688	12	(11,734)	43,110

COMPANY	Share Capital	Share  premium	Capital redemption reserve	Translation reserve	Other reserves	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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	-	-	-	-	-	(318)	(318)
Other comprehensive expense for the year	-	-	-	246	-	-	246
Total comprehensive income/(expense) for the year	-	-	-	246	-	-	246
Transactions with owners
Share-based payments (Note 23)	-	-	-	-	-	673	673
Total transactions with owners	-	-	-	-	-	673	673
Balance at 31 March and 1 April 2021	1,669	52,857	55	(1,016)	19,145	(12,741)	59,969
Loss for the year	-	-	-	-	-	(1,460)	(1,460)
Other comprehensive expense for the year	-	-	-	53	-	-	53
Total comprehensive income/(expense) for the year	-	-	-	53	-	(1,460)	(1,407)
Transactions with owners
Share-based payments (Note 23)	-	-	-	-	-	2,341	2,341
Total transactions with owners	-	-	-	-	-	2,341	2,341
Balance at 31 March and 1 April 2022	1,669	52,857	55	(963)	19,145	(11,860)	60,903

The notes on page 37 to 69 form part of these accounts.

Group and Company Cash Flow Statements

for the Year Ended 31 March 2022

		Group		Company
	Note	2022	2021	2022	2021
		£'000	£'000	£'000	£'000
Cash flows from operating activities
Cash generated from operations	28	4,862	4,372	34	45
Interest paid		(192)	(75)	(209)	(220)
Interest element of lease payments		(166)	(165)	-	-
Tax received/(paid)		-	90	-	-
Net cash generated from/(used in) operating activities		4,504	4,222	(175)	(174)
Cash flows from investing activities
Purchase of business (net of cash acquired)	8	(1,015)	-	-	-
Purchase of property, plant and equipment	11	(3,551)	(4,249)	-	-
Purchase of intangible assets	10	(149)	(726)	-	-
Interest received		15	3	175	175
Net cash (used in)/generated from investing activities		(4,700)	(4,972)	175	175
Cash flows from financing activities
Repayment of CBIL Loan		(25)	-	-	-
Proceeds from shareholder loan		110	-	-	-
Payment of lease liability		(446)	(462)	-	-
Net cash (used in)/generated from financing activities		(361)	(462)	-	-
Net (decrease)/increase in cash and cash equivalents		(557)	(1,212)	-	1
Cash and cash equivalents at the beginning of the year		4,685	5,921	2	1
Effect of exchange rate movements		11	(24)	-	-
Cash and cash equivalents		4,139	4,685	2	2
Cash and cash equivalents consist of:
Cash and cash equivalents	16	4,139	4,685	2	2
Cash and cash equivalents at the end of the year		4,139	4,685	2	2

Notes to the Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES

Accounting policies for the year ended 31 March 2022

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 2022 has been prepared in accordance with UK-adopted international accounting standards. . The consolidated Group and Parent Company financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

GOING CONCERN

The Group has in place a £12.0 million Asset Based Lending (ABL) facility with Secure Trust Bank PLC ("STB") through to October 2024. The Covenants are customary operational covenants applied on a monthly basis. In addition, the Group has a committed £9.0 million loan facility with Phoenix Asset Management Partners Limited (the Group's largest shareholder) if it should be required. This facility currently expires December 2023.

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 STB 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.

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

Adoption of these standards is not expected to have a material impact on the group

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 when the performance obligation is satisfied.

(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, is not subject to amortisation but tested for impairment on an annual basis. Intangible assets, excluding goodwill, arising on a business combination subsequent to 1 April 2004, are separately identified and valued, and subject to amortisation over their estimated economic lives.

GOODWILL

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

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

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 2022 and the corresponding historical credit losses experienced within this period.

FINANCIAL LIABILITIES AND EQUITY

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

An equity instrument is any contract that evidences a residual interest in the assets of the Group and Company after deducting all of its liabilities. Equity instruments issued by the Group and Company are recorded at the proceeds received, net of direct issue costs.

REFUND LIABILITY

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

CASH AND CASH EQUIVALENTS

Cash and cash equivalents for the purpose of the cash flow statement includes cash in hand, deposits at banks, other liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts or loans where there is no right of set off are shown within borrowings in current or non-current liabilities on the balance sheet as appropriate.

BORROWING COSTS

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the Statement of Comprehensive Income over the period of the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs and subsequently amortised over the life of the facility. To the extent that there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates.

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.

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 26.

The Group has a profit share scheme for all employees below Executive level. This scheme commenced in 2020/21 with a 5% bonus for all when the Group broke even. Thereafter, 15% of all Group operating profit will be shared between the employees every year.

R&D COSTS

Research and development expenditure that does not meet the criteria for capitalisation under IAS 36 is expensed as incurred.

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-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 £327,000

(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 2022 the UK had a £12 million Asset Based Lending facility with Secure Trust Bank PLC 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.

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 within Other 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

  Non derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Unless otherwise indicated, the carrying amounts of the Group's and the Company's financial assets and liabilities are a reasonable approximation of their fair values

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 20.

FOREIGN CURRENCY

Transactions denominated in foreign currencies are recorded in the relevant functional currency at the exchange rates ruling at the date of the transaction. Foreign exchange gains and losses resulting from such transactions are recognised in the Statement of Comprehensive Income, except when deferred and disclosed in Other Comprehensive Income as qualifying cash flow hedges. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates ruling at the balance sheet date and any exchange differences are taken to the Statement of Comprehensive Income.

Foreign exchange gains/losses recognised in the Statement of Comprehensive Income relating to foreign currency loans and other foreign exchange adjustments are included within operating profit.

On consolidation, the Statement of Comprehensive Income and cash flows of foreign subsidiaries are translated into Sterling using average rates that existed during the accounting period. The balance sheets of foreign subsidiaries are translated into Sterling at the rates of exchange ruling at the balance sheet date. Gains or losses arising on the translation of opening and closing net assets are recognised in Other Comprehensive Income.

DIVIDEND DISTRIBUTION

Final dividends are recorded in the Statement of Changes in Equity in the period in which they are approved by the Company's shareholders. Interim dividends are recorded in the period in which they are approved and paid.

CRITICAL ESTIMATES AND JUDGEMENTS IN APPLYING THE ACCOUNTING POLICIES

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

Critical accounting estimates and assumptions:

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a)  Impairment of goodwill, intangibles and investments

The Group tests annually whether any goodwill, investment or intangible asset has suffered any impairment. The recoverable amounts of cash-generating units (CGUs) have been determined based on value-in-use calculations. The critical areas of estimation applied within the impairment reviews conducted include the weighted average cost of capital used in discounting the cash flows of the cash generating units, the forecast margin growth rate, the growth rate in perpetuity of the cash flows and the forecast operating profits of the cash generating units. The judgements used within this assessment are set out within Note 9.

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.

(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 make decisions as to whether the lease is likely to be broken and calculations are based on this judgement.

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 39).

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.

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 35 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 2022

	UK	USA	Spain	Italy	Rest of	Total Reportable Segments £'000	Intra	Group
	£'000	'000	£'000	£'000	Europe		Group	£'000
					£'000		£'000
Revenue - External	37,748	4,551	2,181	3,401	5,858	53,739	-	53,739
- Other segments	2,791	-	-	-	-	2,791	2,791	-
Operating Profit/(Loss)	489	(655)	125	337	649	945	-	945
Finance income - External	15	-	-	-	-	15	-	15
- Other segments	471	-	-	-	-	471	(471)	-
Finance costs - External	(339)	(12)	(1)	(2)	(4)	(358)	-	(358)
- Other segments	(175)		(209)	(16)	(71)	(471)	471	-
Share of profit of investments accounted for using the equity method	(20)	-	-	-	-	(20)	-	(20)
Profit/(Loss) before taxation	440	(667)	(85)	319	575	582	-	582
Taxation	911	-	-	(15)	-	896	-	896
Profit/(Loss) for the year	1,351	(667)	(85)	304	575	1,478	-	1,478
Segment assets	63,951	2,663	6,639	269	4,743	78,265	-	78,265
Less intercompany receivables	(17,572)	-	(5,876)	(497)	(3,957)	(27,902)	-	(27,902)
Add tax assets	3,488	-	-	(63)		3,425	-	3,425
Total assets	49,867	2,663	763	(291)	786	53,788	-	53,788
Segment liabilities	(25,098)	(6,968)	(5,399)	(897)	(6,540)	(44,902)	-	(44,902)
Less intercompany payables	14,917	6,872	5,322	520	6,340	33,971	-	33,971
Add tax liabilities	238	-	-	15	-	253	-	253
Total liabilities	(9,943)	(96)	(77)	(362)	(200)	(10,678)	-	(10,678)
Other segment items
Capital expenditure	6,086	2	2	4	-	6,094	-	6,094
Depreciation	2,217	15	3	4	-	2,239	-	2,239
Amortisation of intangible assets	485	-	-	-	-	485	-	485

Year ended 31 March 2021

	UK	USA	Spain	Italy	Rest of	Total Reportable Segments £'000	Intra	Group
	£'000	'000	£'000	£'000	Europe		Group	£'000
					£'000		£'000
Revenue - External	37,428	5,233	1,012	1,719	3,157	48,549	-	48,549
- Other segments	2,603	-	-	-	-	2,603	(2,603)	-
Operating Profit/(Loss)	969	(279)	(56)	10	(77)	567	-	567
Finance income - External	3	-	-	-	-	3	-	3
- Other segments	486	-	-	-	-	486	(486)	-
Finance costs - External	(308)	-	(3)	(21)	(2)	(334)	-	(334)
- Other segments	(176)	-	(220)	(17)	(73)	(486)	486	-
Share of profit of investments accounted for using the equity method	109	-	-	-	-	109	-	109
Profit/(Loss) before taxation	1,083	(279)	(279)	(28)	(152)	345	-	345
Taxation	1,018	-	-	-	-	1,018	-	1,018
Profit/(Loss) for the year	2,101	(279)	(279)	(28)	(152)	1,363	-	1,363
Segment assets	59,490	2,245	5,827	(116)	4,199	71,645	-	71,645
Less intercompany receivables	(16,442)	-	(5,738)	(106)	(3,456)	(25,742)	-	(25,742)
Add tax assets	3,019	-	-	(63)		2,956	-	2,956
Total assets	46,067	2,245	89	(285)	743	48,859	-	48,859
Segment liabilities	(17,628)	(6,235)	(5,213)	(811)	(6,607)	(36,494)	-	(36,494)
Less intercompany payables	8,098	5,687	5,103	503	6,351	25,742	-	25,742
Add tax liabilities	150	-	-	-	-	150	-	150
Total liabilities	(9,380)	(548)	(110)	(308)	(256)	(10,602)	-	(10,602)
Other segment items
Capital expenditure	4,953	18	-	2	2	4,975	-	4,975
Depreciation	1,701	17	5	(2)	-	1,721	-	1,721
Net foreign exchange on intercompany loans	(148)	-	-	-	-	(148)	-	(148)
Amortisation of intangible assets	533	-	-	-	-	533	-	533

All transactions between Group companies are on normal commercial terms.

3. NET FINANCE EXPENSE

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Finance costs:
Interest expense on borrowings	(100)	(85)	-	-
Interest expense on shareholder loan	(92)	(84)	-	-
Interest element of leases	(166)	(165)	-	-
Interest expense on intercompany borrowings	-	-	(209)	(220)
	(358)	(334)	(209)	(220)
Finance income:
Bank interest	15	3	-	-
Interest income on intercompany loans	-	-	175	175
	15	3	175	175
Net finance expense	(343)	(331)	(34)	(45)

4. PROFIT/(LOSS) BEFORE TAXATION

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
The following items have been included in arriving at loss before taxation:
Staff costs	11,761	9,257	1,747	834
Inventories:
- Cost of inventories recognised as an expense (included in cost of sales)	22,982	22,429	-	-
- Stock provision	263	27	-	-
Depreciation of property, plant and equipment:
- Owned assets	2,239	1,721	-	-
- Leased assets	489	492
Repairs and maintenance expenditure on property, plant and equipment	55	81	-	-
Research and development expenditure	1,501	1,320	-	-
Impairment of trade receivables	(61)	( 25)	-	-
Share-based payment charge	2,341	673	-	-
Other operating expenses/(income):
- Foreign exchange on trading transactions	101	14	-	-
- Amortisation of intangible brand assets	194	533	-	-

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Exceptional items comprise:
- Restructuring costs	88	136	-	-
- Relocation	9	75	-	-
- Adjustment on Acquisition	219	-	219	-
- Amortisation adjustment	(177)	-	-	-
	139	211	219	-

The exceptional items totalling £95,000 (2021: £211,000) include restructuring costs relating to redundancy costs and dilapidation costs on relocation of the Hong Kong office. These are classified as exceptional as they are one off, non-recurring costs. In addition there is a one off cost £219k relating to the Acquisition of LCD Enterprises Limited as detailed in Note 8 and an overstatement of the  amortisation charge in prior years as a credit of £221,000).

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:

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Fees payable to the Company's auditors for the audit of Parent Company and consolidated accounts	33	31		11
Fees payable to the Company's auditors and its associates for other services:
- The auditing of accounts of the Company's subsidiaries	54	39	-	-
- Audit-related assurance services	-	-	-	-
- Tax services		6	-	-
	87	76		11

Current year subsidiary fees relate to Hornby Italia (£8,000) and Hornby Hobbies Limited (£33,000) and LCD Enterprises Limited (£12,750).

In the prior financial year the level of non-audit fees were £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

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Current tax	-	-	-	-
UK Taxation:
-  Current	5
-  Adjustments in respect of prior years	(87)	(92)
Overseas taxation	15
Deferred tax (Note 21)	-	-	-	-
Origination and reversal of temporary differences	57	(926)	-	-
Effect of tax rate change on opening balance	(886)	-	-	-
Total tax credit to the loss before tax	(896)	(1,018)	-	-

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

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Profit/(Loss)before taxation	582	345	(1,460)	(318)
Loss on ordinary activities multiplied by rate of
Corporation tax in UK of 19% (2021: 19%)	111	65	(277)	(60)
Effects of:
Adjustments to tax in respect of prior years	(87)	(92)
Permanent differences	259	(138)	150	8
Non taxable income	-	(21)	-	(21)
Plant and machinery super-deduction	(207)	-	-	-
Difference on overseas rates of tax	66	(40)	-	-
Deferred tax not recognised	(152)	(792)	128	73
Effect of tax rate change	(886)	-	-	-
Total taxation	(896)	(1,018)	-	-

The Company's profits for this accounting year are taxed at an effective rate of 19% (2021: 19%)

UK deferred tax balances have been restated in these accounts and carried forward at a rate of 25% (2021: 19%)

The current rate of tax is 19%. The new rate of corporation tax of 25% comes into effect on 1 April 2023. Therefore timing differences expected to reverse after this rate are recognised for Deferred Tax purposes at 25%, 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 significant taxable profits are likely to be achieved in the short term. More detail can be found in Note 21.

6. DIVIDENDS

No interim or final dividends were paid in relation to the year ended 31 March 2021 and no interim dividend has been paid in relation to the year ended 31 March 2022. The Directors are not proposing a final dividend in respect of the financial year ended 31 March 2022.

7. PROFIT PER SHARE

Basic profit 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 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 2022

The underlying profit 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.

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

	2022			2021
	(Loss) / earnings	Weighted average number of shares	Per-share amount	(Loss) / earnings	Weighted average number of shares	Per-share amount
	£'000	'000s	pence	£'000	'000s	pence
REPORTED
Basic profit per share
Profit attributable to ordinary shareholders	1,479	166,929	0.89	1,363	166,929	0.82
Effect of dilutive share options	-	6,731	-	-	4,127	-
Diluted profit per share	1,479	173,660	0.85	1,363	171,056	0.8
UNDERLYING
Profit attributable to ordinary shareholders	1,479	166,929	0.89	1,363	166,929	0.82
Share-based payments	1,896		1.14	545		0.33
Amortisation of intangibles	157	-	0.09	432	-	0.26
Restructuring costs	71	-	0.04	110	-	0.07
Amortisation adjustment	(143)	-	(0.09)	-	-	-
Relocation	7	-	(0.00)	61	-	0.04
Acquisition adjustment	177	-	0.11	-	-	-
Underlying basic profit /EPS	3,644	166,929	2.18	2,511	166,929	1.5
Underlying diluted profit /EPS	3,644	173,660	2.10	2,511	171,056	1.47

The above numbers used to calculate the EPS for the year ended 31 March 2022 and 31 March 2021 have been tax effected at the rate of 19% .

8. BUSINESS COMBINATIONS

On 30 July 2021 the Company acquired the remaining 51 per cent. of the issued share capital of LCD Enterprises Limited ("LCD") which it did not already hold from Lyndon Davies, CEO of the Company, and his wife Catherine Davies, who together owned this remaining stake.

LCD owns the Oxford Diecast Group, which supplies diecast model vehicles and railway products to the collector, gift and hobby markets in the UK, Hong Kong and North America.

Summary of the Acquisition

On 8 December 2017 the Company completed the acquisition of 49 per cent. of the issued ordinary share capital of LCD, for a consideration of 1.6 million payable in cash pursuant to the LCD SPA.

The Company acquired the remaining 51% per cent. of the issued share capital of LCD, for a total cash consideration of 1.3 million on 30 July 2021. Management assessed the value of the existing holding of 49% and did not consider that the investment was impaired on the basis that the 51% was obtained at a favourable price

A purchase price allocation exercise has been completed which identified £0.3 million of acquired intangible assets relating to the Oxford Diecast brand.

The fair value of the assets acquired at completion and the consideration payable :

		Book cost	Fair Vaue Adj	Fair value
		£'000	£'000	£'000
Intangible assets		-	330	330
Property, plant and equipment		2,064	-	2,064
ROU Assets		-	180	180
Inventories		2,200	-	2,200
Trade and other receivables		299	-	299
Cash and cash equivalents		285	-	285
Trade and other payables		( 2,015)	(180)	(2,195)
Deferred tax liability			(83)	(83)
Income tax		(263)	-	(263)
Net assets		2,570	247	2,817
Cash consideration				(2,900)
Goodwill				83

Acquisition related costs

Acquisition related costs of £nil are included in operating expenses in the income statement.

Revenue and profit contribution

The acquired business contributed revenues of £1,897,000 and net profit of £132,000 to the Group for the period 1 August to 31 March 2022. If the acquisition had completed 1^st April 2021 the contribution would have been revenue of £2,688,000 and net profit of £136,000.

9. GOODWILL

GROUP	£'000
COST
At 1 April 2021	13,052
Acquired on business combination	83
At 31 March 2022	13,135
AGGREGATE IMPAIRMENT
At 1 April 2021 and 31 March 2022	8,491
Net book amount at 31 March 2022	4,644
COST
At 1 April 2021	13,052
Exchange adjustments	-
At 31 March 2022	13,052
AGGREGATE IMPAIRMENT
At 1 April 2021 and 31 March 2022	8,491
Net book amount at 31 March 2022	4,644
Net book amount at 31 March 2021	4,561

The Company has no goodwill.

The goodwill has been allocated to cash-generating units and a summary of carrying amounts of goodwill by geographical segment (representing cash-generating units) at 31 March 2022 and 31 March 2021 is as follows:

GROUP	UK £'000	USA £'000	France £'000	Germany £'000	Total £'000
At 31 March 2022	4,075	9	364	196	4,644
At 31 March 2021	3,992	9	364	196	4,561

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 2022 forecasts are based on a 4 year business plan for the years ending 31 March 2023 to 31 March 2026. Cash flows beyond these years are extrapolated using an estimated 5.0% year on year growth rate to 2030 and 2% thereafter. The cash flows were discounted using a pre-tax discount rate of 11.6% (2021: 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 2022 and 2021 are as follows:

2022

GROUP	UK	UK	France	Germany
	(Corgi)	(Airfix & Humbrol)
Gross Margin1	59.2%	63.7%	59.1%	59.0%
Growth rate to perpetuity2	2.0%	2.0%	2.0%	2.0%

1. Average of the variable yearly gross margins used over the period 22'23 to 29'30. 2. Weighted average growth rate used to extrapolate cash flows beyond the budget period reflecting the long term future growth rate of the economy.
2021
GROUP		UK	UK	France	Germany
		(Corgi)	(Airfix & Humbrol)
Gross Margin1		63.7%	64.5%	57.0%	56.7%
Growth rate to perpetuity2		2.0%	2.0%	2.0%	2.0%

1. Average of the variable yearly gross margins used over the period 22'23 to 29'30.

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 £9.6 million. A reduction of the average gross margin to respectively 56.0% for Corgi and 54.5% for Airfix / Humbrol, or a rise in discount rate to respectively 14.6% for Corgi and 30.6% 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 £14.0 million. A reduction of the average gross margin to 6.8%, or a rise in discount rate to 75.1% would remove the remaining headroom.

For the Germany CGU, the recoverable amount calculated based on value in use exceeded carrying value by £11.2million. A reduction of the average gross margin to 12.3%, or a rise in discount rate to 113.6% would remove the remaining headroom.

10. INTANGIBLE ASSETS

GROUP	Brand names £'000	Customer lists  '000	Computer Software and Website £'000	Total £'000
INTANGIBLE ASSETS
COST
At 1 April 2021	4,914	1,415	4,176	10,505
Additions	286	44	149	479
At 31 March 2022	5,200	1,459	4,325	10,984
ACCUMULATED AMORTISATION
At 1 April 2022	3,439	1,415	2,634	7,488
Charge for the year	194	-	291	485
Adjustment related to prior years	(177)	-	-	(177)
At 31 March 2022	3,456	1,415	2,925	7,796
Net book amount at 31 March 2022	1,744	44	1,399	3,187

GROUP	Brand names £'000	Customer lists  '000	Computer Software and Website £'000s	Total £'000
INTANGIBLE ASSETS
COST
At 1 April 2020	4,914	1,415	3,450	9,779
Additions	-	-	726	726
At 31 March 2021	4,914	1,415	4,176	10,505
ACCUMULATED AMORTISATION
At 1 April 2020	3,212	1,415	2,328	6,955
Charge for the year	227	-	306	533
At 31 March 2021	3,439	1,415	2,634	7,488
Net book amount at 31 March 2021	1,475	-	1,542	3,017

All amortisation charges in the year have been charged in other operating expenses. The Company held no intangible assets. The Company holds intangible computer software and website assets that are fully amortised but still in use and therefore the cost is still included.

The adjustment in the amortisation charge in relation to prior years relates to a group adjustment on transfer of intangibles from overseas subsidiaries into the UK. The adjustment has been classed within exceptional costs.

11. PROPERTY, PLANT AND EQUIPMENT

GROUP		Plant and equipment £'000	Motor Vehicles	Tools and moulds	Total
			£'000	£'000	£'000
COST
At 1 April 2021		1,525	54	71.601	73,180
Exchange adjustments		6	1	-	7
Additions at cost		203	-	3,348	3,551
Acquired from business combination		-	-	2,064	2,064
Disposals		(28)	-	-	(28)
At 31 March 2022		1,706	55	77,013	78,774
ACCUMULATED DEPRECIATION
At 1 April 2021		1,251	45	65,204	66,500
Exchange adjustments		5	1	-	6
Charge for the year		92	4	2,143	2,239
Disposals		(28)	-	-	(28)
At 31 March 2022		1,320	50	67,347	68,717
Net book amount at 31 March 2022		386	5	9,666	10,057

Depreciation is charged in the Group's statement of comprehensive income within Administrative expenses.

GROUP		Plant and equipment £'000	Motor Vehicles	Tools and moulds	Total
			£'000	£'000	£'000
COST
At 1 April 2020		1,529	55	67,477	69,061
Exchange adjustments		(53)	(1)	-	(54)
Additions at cost		125	-	4,124	4,249
Disposals		(76)	-	-	(76)
At 31 March 2021		1,525	54	71.601	73,180
ACCUMULATED DEPRECIATION
At 1 April 2020		1,237	42	63,617	64,896
Exchange adjustments		(41)	(1)	-	(41)
Charge for the year		130	4	1,587	1,721
Disposals		(76)	-	-	(76)
At 31 March 2021		1,251	45	65,204	66,500
Net book amount at 31 March 2021		274	9	6,397	6,680

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

12. INVESTMENTS

COMPANY

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

	Interests in subsidiary undertakings  £'000	Interests in associate undertakings £'000	Loans to subsidiary undertakings	Total
			£'000	£'000
At 1 April 2021	17,672	1,839	4,349	23,860
Share of profit of investments accounted for using the equity method		(20)		(20)
LCD Acquisition	2,900	(1,819)	-	1,081
Capital contribution relating to share-based payment	1,171	-	-	1,171
At 31 March 2022	21,743	-	4,349	26,092
At 1 April 2020	17,336	1,730	4,349	23,415
Share of profit of investments accounted for using the equity method	-	109	-	109
Capital contribution relating to share-based payment	336	-	-	336
At 31 March 2021	17,672	1,839	4,349	23,860

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

Loans are unsecured and exceed five years' maturity.

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., Hornby Deutschland GmbH, LCD Enterprises Limited and Oxford Diecast Limited are distributors of models. Hornby Industries Limited,H&M (Systems) Limited and Hornby World Limited are dormant companies. All subsidiaries are held directly by Hornby PLC with the exception of Oxford Diecast Limited which is held by LCD Enterprises Limited.

			Proportion of nominal value of issued shares held
	Country of incorporation, registration and business	Description of shares held	Group %	Company  %
Hornby Hobbies Limited	Westwood, Margate, Kent CT9 4JX, UK	Ordinary shares	100	100
Hornby America Inc.	3900 Industry Dr E, Fife, WA 98424, USA	Ordinary shares	100	100
Hornby España S.A	C/Federico Chueca, S/N, E28806 ALCALA DE HENARES Spain	Ordinary shares	100	100
Hornby Italia s.r.l.	Viale dei Caduti, 52/A6 25030 Castel Mella (Brescia), Italy	Ordinary shares	100	100
Hornby France S.A.S.	31 Bis rue des Longs Pres, 92100 Boulogne, Billancourt, France	Ordinary shares	100	100
Hornby Deutschland GmbH	Oeslauer StraBe 36, 96472, Rodental, Germany	Ordinary shares	100	100
Hornby Industries Limited	Westwood, Margate, Kent CT9 4JX, UK	Ordinary shares	100	100
H&M (Systems) Limited	Westwood, Margate, Kent CT9 4JX, UK	Ordinary shares	100	100
Hornby World Limited	Westwood, Margate, Kent CT9 4JX, UK	Ordinary shares	100	100
LCD Enterprises Limited	Unit 6 119 Ystrad Road, Fforestfach, Swansea, Wales, SA5 4JB	Ordinary shares	100	100
Oxford Diecast Limited	Unit 6 119 Ystrad Road, Fforestfach, Swansea, Wales, SA5 4JB	Ordinary shares	91	91

13. RIGHT OF USE ASSETS

GROUP		Property £'000	Motor Vehicles	Fixtures, Fittings and Equipment	Total
			£'000	£'000	£'000
COST
At 1 April 2021		3,376	317	17	3,710
Additions at cost		189	13	2	204
Acquired from business combination		161	16	3	180
At 31 March 2022		3,726	346	22	4,094
ACCUMULATED DEPRECIATION
At 1 April 2021		851	156	13	1,020
Charge for the year		415	70	5	490
At 31 March 2022		1,266	226	18	1,510
Net book amount at 31 March 2022		2,460	120	4	2,584

GROUP		Property £'000	Motor Vehicles	Fixtures, Fittings and Equipment	Total
			£'000	£'000	£'000
COST
At 1 April 2020		2,898	192	11	3,101
Additions at cost		478	125	6	609
At 31 March 2021		3,376	317	17	3,710
ACCUMULATED DEPRECIATION
At 1 April 2020		445	76	7	528
Charge for the year		406	80	6	492
At 31 March 2021		851	156	13	1,020
Net book amount at 31 March 2021		2,525	161	4	2,690

14. INVENTORIES

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Finished goods	16,462	15,152	-	-
	16,462	15,152	-	-

Movements on the Group provision for impairment of inventory is as follows:
	2022	2021
	'000	£'000
At 1 April	1,205	1,179
Provision for inventory impairment	(56)	207
Inventory written off during the year	(211)	(160)
Acquired from business combination	1,486	-
Exchange adjustments	4	(21)
At 31 March	2,428	1,205

15. TRADE AND OTHER RECEIVABLES

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
CURRENT:
Trade receivables	6,208	6,893	-	-
Less: loss allowance for receivables	(789)	(853)	-	-
Trade receivables - net	5,419	6,010	-	-
Other receivables	1,724	270	-	-
Prepayments	1,643	967	87	87
Amounts owed by subsidiary undertaking	-	-	47,322	48,431
	8,786	7,247	47,409	48,518

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:

	2022  '000	2021 £'000
Fully performing	4,470	5,320
Past due	949	690
Fully impaired	789	853
Trade receivables	6,208	6,863

As of 31 March 2022 trade receivables of £949,000 (2021: £690,000) 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 2022, trade receivables of £789,000 (2021: £853,000) 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:

	2022  '000	2021 £'000
At 1 April	853	1,050
(Decrease)/increase in loss allowance	(61)	(25)
Receivables written-off during the year as uncollectible	-	(140)
Exchange adjustments	(3)	(32)
At 31 March	789	853

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

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

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

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Sterling Intercompany	-	-	47,322	48,431
Sterling	3,188	4,396	-	-
Euro	2,657	979	-	-
US Dollar	1,318	905	-	-
	7,163	6,280	47,322	48,431

16. CASH AND CASH EQUIVALENTS

		Group		Company
		2022 £'000	2021 £'000	2022 £'000	2021 £'000
	Cash at bank and in hand	4,139	4,685	2	2

Cash at bank of £4,139,000 (2021: £4,685,000) is with financial institutions with a credit rating of A3 per Moody's rating agency.

17. TRADE AND OTHER PAYABLES

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
CURRENT:
Trade payables	3,919	2,833	-	-
Other taxes and social security	730	1,294	32	30
Other payables	578	603	856	599
Refund liability	252	231	-	-
Accruals and contract liabilities	1,893	2,170	50	73
Group receivables guarantee	-	-	6,020	6,020
	7,372	7,131	6,958	6,722

Contract liabilities relate to payments of £178,777 (2021: £438,308) received upfront for products where delivery is yet to take place. Delivery is expected to take place over the next 3 months. Revenue of £438,308, deferred in 2021, was recognised as income in the year ended 31 March 2022

18. RIGHT OF USE LEASE LIABILITIES

The movement in the right of use lease liability over the year was as follows:

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
As at 1 April	2,808	2,639	-	-
New leases	192	609	-	-
Acquired from business combination	190	-	-	-
Interest payable	166	165	-	-
Repayment of lease liabilities	(610)	(605)	-	-
As at 31 March	2,746	2,808	-	-
Lease liability less than one year	433	365	-	-
Lease liability greater than one year and less than five years	664	791	-	-
Lease liability greater than five years	1,649	1,652	-	-
Total Liability	2,746	2,808	-	-

Maturity analysis of contracted undiscounted cashflows is as follows:

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Lease liability less than one year	575	522	-	-
Lease liability greater than one year and less than five years	1,134	1,378	-	-
Lease liability greater than five years	2,299	2,304	-	-
Total Liability	4,008	4,204	-	-
Finance charges included above	(1,262)	(1,396)	-	-
	2,746	2,808	-	-

19. BORROWINGS

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Secured borrowing at amortised cost
CBIL Bank Loan	217	-	-	-
Shareholder Loan	110	-	-	-
Loan from subsidiary undertakings	-	-	5,643	5,689
	327	-	5,643	5,689
Total borrowings
Amount due for settlement within 12 months	50	-	-	-
Amount due for settlement after 12 months	277	-	5,643	5,689
	327	-	5,643	5,689

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 twelve months.

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

At 31 March 2022 the UK had a £12 million Asset Based Lending facility with PNC Credit Limited (replaced on 13 April 2022 with a £12 million Asset Based Lending facility with Secure Trust Bank PLC (STB)) and a £9 million loan facility with Phoenix Asset Management Partners.

The £12 million facility with STB extends until October 2024 and carries a margin of 2.5 ‐ 3% over SONIA. The STB Facility has a fixed and floating charge on the assets of the Group. The Company is expected to provide customary operational covenants to STB on a monthly basis.

The Phoenix Facility is a £9 million facility with a current expiration date of December 2023 and attracts interest at a margin of 5% over SONIA on funds drawn. Undrawn funds attract a non ‐ utilisation fee of the higher of 1% or SONIA.

LCD Enterprises Limited has a CBIL loan of £217,000 being repaid at £4,167 per month. This should be repaid by August 2026.

Undrawn borrowing facilities

At 31 March 2022, the Group had available £12,611,165 (2021: £14,380,773) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. The facility from Secure Trust Bank PLC has limits based on the Group's asset position at any one time .

20. 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
	Amortised Cost		Held at Fair Value
	Financial Assets	Financial Liabilities	Cash flow hedges	Carrying value	Fair value
	£'000	£'000	£'000	£'000	£'000
At 31 March 2022
Trade and other receivables	7,143	-	-	7,143	7,143
Trade and other payables	-	(4,496)	-	(4,496)	(4,496)
Derivative Financial instruments	-	-	504	504	504
Cash and cash equivalents	4,139	-	-	4,139	4,139
Lease liabilities	-	(2,746)	-	(2,746)	(2,746)
	Amortised Cost		Held at Fair Value
	Financial Assets	Financial Liabilities	Cash flow hedges	Carrying value	Fair value
	£'000	£'000	£'000	£'000	£'000
At 31 March 2021
Trade and other receivables	6,279	-	-	6,279	6,279
Trade and other payables	-	(3,342)	-	(3,342)	(3,342)
Derivative Financial instruments	-	-	(481)	(481)	(481)
Cash and cash equivalents	4,685	-	-	4,685	4,685
Lease liabilities	-	(2,808)	-	(2,808)	(2,808)

The Group's policies and strategies in relation to risk and financial instruments are detailed in note 1.

	Assets		Liabilities
GROUP	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Carrying values of derivative financial instruments
Forward foreign currency contracts - cash flow hedges	504	32	-	(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 2022 are recognised in the Statement of Comprehensive Income first in the period or periods during which the hedged forecast transaction affects the Statement of Comprehensive Income, which is within twelve months from the balance sheet date.

At 31 March 2022 and 31 March 2021, the gross value of forward currency contracts was as follows:

	2022 '000s	2021 '000s
US Dollar	20,025	22,000

The net fair value for the forward foreign currency contracts is an asset of £504,000 (2021: £32,000 asset) and a liability of nil (2021: £513,000) of which £504,000 net asset (2021: £481,000 liability) represents an effective hedge at 31 March 2022 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	2022	2021
	£'000s	£'000s
Less than one year	3,730	3,957
Between one and five years	1,134	1,378
More than five years	2,299	2,304
	7,163	7,639

COMPANY	2022 Intercompany Debt £'000	2021 Intercompany Debt £'000
More than five years (Note 19)	5,643	5,689

HIERARCHY OF FINANCIAL INSTRUMENTS

The following tables present the Group's assets and liabilities that are measured at fair value at 31 March 2022 and 31 March 2021. 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

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Assets
Derivatives used for hedging	-	504	-	504
Total assets as at 31 March 2022	-	504	-	504
Liabilities
Derivatives used for hedging	-	-	-	-
Total liabilities at 31 March 2022	-	-	-	-
	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Assets
Derivatives used for hedging	-	32	-	32
Total assets as at 31 March 2021	-	32	-	32
Liabilities
Derivatives used for hedging	-	(513)	-	(513)
Total liabilities at 31 March 2021	-	(513)	-	(513)

Interest rate sensitivity

The Group is exposed to interest rate risk as the Group borrows funds at both fixed and floating interest rates. The exposure to these borrowings varies during the year due to the seasonal nature of cash flows relating to sales.

In order to measure risk, floating rate borrowings and the expected interest costs are forecast on a monthly basis and compared to budget using management's expectations of a reasonably possible change in interest rates.

The effect on both income and equity based on exposure to borrowings at the balance sheet date for a 1% increase in interest rates is £17,000 (2021: £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.

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.

	Comprehensive Income and Equity Sensitivity
	2022 £'000	2021 £'000
US dollars	1,559	670
Euros	660	655
	2,219	1,325

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the gearing ratio. The ratio is calculated as net (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.

	2022 £'000		2021 £'000
Total borrowings (Note 19)	327		-
Less:
Total cash and cash equivalents (Note 16)	(4,139)		(4,685)
Net (cash)	(3,812)		(4,685)
Total equity	43,110		38,257
Total capital	39,298		33,572
Gearing	(10%)		(14%)

21. DEFERRED TAX

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

Deferred tax assets have been recognised in respect of certain UK timing differences only. Temporary differences giving rise to deferred tax assets have been recognised in the UK where it is probable that those assets will be recovered.

No deferred tax is provided for tax liabilities which would arise on the distribution of profits retained by overseas subsidiaries because there is currently no intention that such profits will be remitted.

The movements in deferred tax assets and liabilities during the year are shown below.

Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset.

					Acquisition intangibles	Fixed Asset & Other UK temporary timing  differences
							Total
Deferred tax liabilities					£'000	£'000	£'000
At 1 April 2021					150	-	150
Acquired on business combination					83	294	377
Charge to Statement of Comprehensive Income					-	64	64
Charge to Other Comprehensive Income						127	127
At 31 March 2022					-233	485	718
At 1 April 2020					-150	-	150
Charge to Statement of Comprehensive Income					-	-	-
At 31 March 2021					-150	-	150

					Acquisition intangibles	Fixed Asset & Other UK temporary timing differences
							Total
Deferred tax liabilities					£'000	£'000	£'000
At 1 April 2021					150	-	150
Acquired on business combination					83	294	377
Charge to Statement of Comprehensive Income					-	64	64
Charge to Other Comprehensive Income						127	127
At 31 March 2022					233	485	718
At 1 April 2020					150	-	150
Charge to Statement of Comprehensive Income					-	-	-
At 31 March 2021					150	-	150

	Group			Company
Deferred tax assets	Acquisition intangibles	Fixed Asset and other UK temporary timing differences	Total	Short-term incentive plan	Total
	£'000	£'000	£'000	£'000	£'000
At 1 April 2021	-	2,956	2,956	-	-
Acquired on business combination	-	61	61	-	-
Credit to Statement of Comprehensive Income	-	893	893	-	-
At 31 March 2022	-	3,910	3,910	-	-
At 1 April 2020	-	2,030	2,030	-	-
Credit to Statement of Comprehensive Income	-	926	926	-	-
At 31 March 2021	-	2,956	2,956	-	-
Net deferred tax (liability   )/asset
At 31 March 2022	(233)	3,425	3,192	-	-
At 31 March 2021	(150)	2,956	2, 806	-	-

	2022		2021
GROUP	Recognised £'000	Not recognised £'000	Recognised £'000	Not recognised £'000
Deferred tax comprises:
Depreciation in excess of capital allowances	2,032	-	2,817	461
Losses and other temporary differences - UK	1,159	4,557	(11)	3,360
Losses and other temporary differences - Overseas	-	2,912	-	3,327
Deferred tax asset	3,191	7,469	2,806	7,148
	2022		2021
COMPANY	Recognised £'000	Not recognised £'000	Recognised £'000	Not recognised £'000
Deferred tax comprises:
Other timing differences	-	(589)	-	(320)
Deferred tax (asset)/liability	-	(589)	-	(320)

The UK deferred tax asset not recognised of £4,557,000 primarily relates to unrecognised losses in Hornby Hobbies Limited of £15,136,000 (potential deferred tax asset of £3,784,000) and Hornby Plc of £1,459,000 (potential deferred tax asset of £365,000). It also relates to an unrecognised gross temporary difference of £1,632,000 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 £2,912,000 relates to losses carried forward of £1,444,000 in respect of Hornby Espana SA (potential deferred tax asset of £361,000), £2,597,000 in respect of Hornby France SAS (potential deferred tax asset of £649,000), £1,506,000 in respect of Hornby Deutschland GmbH (potential deferred tax asset of £452,000), £3,650,000 in respect of Hornby Italia srl (potential deferred tax asset of £876,000) and £2,734,000 in respect of Hornby America Inc (potential deferred tax asset of £574,000).

22. SHARE CAPITAL

GROUP AND COMPANY

Allotted, issued and fully paid:

	2022		2021
	Number of shares	£'000	Number of shares	£'000
Ordinary shares of 1p each:
At 1 April and 31 March	166,927,838	1,669	166,927,838	1,669

23. SHARE-BASED PAYMENTS ('PSP')

All Performance Share Plan ('PSP') awards outstanding at 31 March 2022 vest only if performance conditions are met. Awards granted under the PSP must be exercised within six months 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 £2,341,000 and the charge for the Company amounted to £1,171,000 in the year ended 31 March 2022 (2021: £673,000 charge for the Group and £337,000 charge for the Company).

No options were granted during the year.

		2021 PSP
Fair Value		53.0p
Options pricing model used		Black-Scholes (Stochastic)
Share price at grant date (p)		54.0p
Exercise price (p)		1.0p
Risk-free rate (0.5%)		0.50%
Expected option term (years)		1.5
Expected dividends (per year, %)		0%

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.

24. RESERVES

GROUP

Capital Redemption Reserve

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

Share Premium reserve

Share premium represents the excess of the fair value of consideration received for the equity shares, net of expenses of the share issue, over the nominal value of the equity shares.

Accumulated losses

This reserve represents accumulated gains and losses less distributions to the shareholders.

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.

Accumulated losses

This reserve represents accumulated gains and losses less distributions to the shareholders.

25. EMPLOYEES AND DIRECTORS

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Staff costs for the year:
Wages and salaries	7,940	7,514	482	408
Furlough scheme	(1)	(184)	-	-
Share-based payment (Note 23)	2,341	673	1,171	337
Social security costs	869	823	69	61
Other pension costs (Note 26)	478	411	29	28
Redundancy and compensation for loss of office	134	20	-	-
	11,761	9,257	1,751	834

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
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Operations	83	76	-	-
Sales, marketing and distribution	92	83	-	-
Administration	35	34	4	3
	210	193	4	3

Key management compensation:

	Group		Company
	2022 £'000	2021 £'000	2022 £'000	2021 £'000
Salaries and short-term employee benefits	900	853	482	445
Share-based payments	2,341	673	1,171	337
Other pension costs	38	36	29	28
Redundancy and compensation for loss of office	-	-	-	-
	3,279	1,562	1,682	810

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 25 to 30 and forms part of these financial statements.

26. PENSION COMMITMENTS

The Group operates a defined contribution pension scheme by way of a Stakeholder Group Personal Pension Plan set up through the Friends Provident Insurance Group.

Alexander Forbes International is appointed as Independent Financial Adviser to work in liaison with the Group.

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

The Group pension cost for the year was £478,000 (2021: £411,000) representing the actual contributions payable in the year and certain scheme administration costs. The Company pension cost for the year was £29,000 (2021: £28,000). No contributions were outstanding at the year end of 31 March 2022.

27. FINANCIAL COMMITMENTS

GROUP	2022 £'000	2021 £'000
At 31 March capital commitments were:
Contracted for but not provided	1,967	1,847

The commitments relate to the acquisition of property, plant and equipment.

The Company does not have any capital commitments.

Contingent Liabilities

The Company and its subsidiary undertakings are, from time to time, parties to legal proceedings and claims, which arise in the ordinary course of business. The Directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position.

28. CASH (USED IN) / GENERATED FROM OPERATIONS

	Group		Company
	2022	2021	2022	2021
	£'000	£'000	£'000	£'000
Profit/(loss) before taxation	583	345	(1,460)	(318)
Interest payable	192	169	209	220
Interest paid on Lease liabilities	166	165	-	-
Interest receivable	(15)	(3)	(175)	(175)
Share of profit of investments accounted for using the equity method	20	(109)	240	(109)
Disposal of equity interest	219	-	-	-
Amortisation of intangible assets	308	533	-	-
Depreciation	2,239	1,721	-	-
Depreciation on right of use assets	490	492	-	-
Share-base payments (non cash)	2,341	673	1,171	337
Decrease/(increase) in inventories	994	(1,223)	-	-
(Increase)/Decrease in trade and other receivables	(1,150)	(764)	(175)	(64)
Increase/(Decrease) in trade and other payables	(1,525)	2,373	224	154
Cash generated from/(used in) operations	4,862	4,372	34	45

29. NET FUNDS RECONCILIATION

	2022	2021
	£'000	£'000
Cash and cash equivalents	4,139	4,685
Borrowings - repayable within one year	(50)	-
Borrowings - repayable after one year	(277)	-
Net Funds	3,812	4,685
Cash and liquid investments	4,139	4,685
Gross debt - variable interest rates	(327)	-
Net Funds	3,812	4,685

30. RELATED PARTY DISCLOSURES

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:

	Transactions	Balance at year end
Company	£'000	£'000
Rawnet Limited	656	79

Phoenix Asset Management Partners who own the majority shareholding in Hornby PLC have also provided a funding facility to the Group (see note 19). 

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

The Company received management fees from subsidiaries of £1,071,000 (2021: £933,000), interest of £175,000 (2021: £175,000) and incurred interest of £209,000 (2021: £220,000) on intercompany borrowings.

Hornby Plc have provided a guarantee of £6.109m against intercompany receivables in Hornby Hobbies.  This guarantee is included in liabilities.

31. 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.

32. EVENTS AFTER THE END OF THE REPORTING PERIOD

On the 21 April 2022 we transferred our Asset Based Lending Facility from PNC Credit Limited to Secure Trust Bank PLC.

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

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

 

END

 

 

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