Hornby chairman Canham resigns after Phoenix Asset Management offer

Hornby's executive chairman Roger Canham has resigned with immediate effect after Phoenix Asset Management Partners launched a mandatory 32.375 pence a share offer for the shares in the model train set maker it doesn't already own, valuing it at £27.4m.

Phoenix UK Fund Ltd. has agreed to buy 17.6m Hornby shares from New Pistoia Income which it will then transfer to Aurora Investment Trust, another fund managed by Phoenix. Following completion of the acquisition, the Phoenix concert party will hold 46.7m shares, or 55.2%. This will trigger the mandatory offer as required under Takeover Panel rules, meaning Phoenix UK Fund will be required to make a cash offer for the remaining shares the concert party doesn't already own.

Roger Canham is a director of Phoenix Asset Management Partners, which forms part of the Phoenix concert party.

Earlier, Hornby said it was scrapping its dividend again but reported a narrower pre-tax loss for the year to the end of March and said its turnaround plan is on track.

The company's reported pre-tax loss narrowed to £9.5m from £13.5m in 2016, on revenue of £47.4m, down from £55.8m the year before. Hornby incurred exceptional items of £3.3m in the year, down from £7.9m the year before, including costs relating to the restructuring of the business, refinancing and profit on the sale of the Margate and Spanish properties.

The company said sales in the UK and US for the 11 weeks to 18 June are down slightly. Sales in Europe are around half the level compared with the same period for last year due to the timing of new product releases and the lower levels of capital expenditure being invested in International rail brands.

Meanwhile, net cash at 31 March was £1.5m versus net debt of £7.2m in 2016.

Having not paid a dividend last year, the company has decided to go down the same route again as it continues to deliver on its turnaround plan, but it will keep the dividend policy under review.

Chief executive Steve Cooke said: "Our results to March 2017 provide solid evidence of our delivery in phase one of our turnaround plan; notably in terms of cash flow performance and gross margin improvement during the year. We are determined to build on this progress as we move to the next phase of the turnaround plan.

"We have built a sound platform for growth over the last 18 months and we are now planning to deliver sustainable profit and net cash generation into the medium term. The current financial year has started positively and we are well placed to achieve the Board's expectations for the year."

At 1230 BST, the shares were 3.2% firmer at 32.25p, well off earlier highs.