Hornby FY loss widens; placing and turnaround plan announced

AIM-listed train set maker Hornby posted a wider full-year loss and announced an £8m placing as it outlined plans to turnaround the business after a string of profit warnings.

For the year to the end of March, the loss before tax widened to £13.5m from £200,000 in 2015 as revenue dropped 4% to £55.8m.

The company booked exceptional items of £7.9m, up from £800,000 in 2015 as it restructured its operations.

Also on Wednesday, Hornby outlined its turnaround plans, saying it intends to reduce the business scale and costs, while maintaining key brands and a focused product range.

The group announced an £8m placing to support the delivery of its strategic objectives.

Chief executive officer Steve Cooke said: "Last year was difficult and disappointing as we faced significant challenges during the continued turnaround and improvement of the business. We were pleased with the progress made in modernising many of our systems and processes, but much of the change last year resulted in substantial unplanned disruption which had a significant adverse impact on trading performance.

"The board has now completed a thorough review, which has identified that many core parts of the group are stable, profitable and cash generative, driven by iconic brands with strong market positions. The review has also identified areas that require fundamental change. The turnaround plan is intended to return the business to sustainable profitability and cash generation."

Subject to completion of the proposed equity fundraising, Hornby has agreed with Barclays Bank, its main lender, to refinance and extend its existing banking facilities with a £10m revolving credit facility that is expected to allow sufficient headroom for trading working capital and capital expenditure needs.

The company said trading in the UK was strong during the Christmas season but weakened dramatically into the New Year.

In the international business, sales fell 21% in the year and generated an underlying loss of £3.6m. Hornby said trading was hit by problems with the supply of international model rail for much of the first half of the financial year and by the streamlining of supply and logistics.