Notice of GM and Disposal of Interest

Hornby PLC

5 November 2024

Hornby plc

("Hornby", or the "Company" and, together with its subsidiaries, the "Group")

Disposal of interests in LCD Enterprises Limited

and

Publication of Circular and Notice of General Meeting

As part of the strategic review discussed in the Annual Report earlier this year, Hornby (HRN), the toy and hobby Group is looking to rationalise its portfolio of brands to ensure that management, and the business, are focused on core product and markets. As part of this process, the Company has today entered into a conditional agreement to dispose of its wholly-owned subsidiary LCD Enterprises Limited ("LCD") to EKD Enterprises Limited, a company owned by Lyndon Davies and his family for an aggregate consideration of approximately £1.38 million (the "Disposal"). The Disposal will release the Oxford Diecast brand from the Company's portfolio.

Oxford Diecast is currently a loss-making business with losses before tax amounting to c.£200k in the Year Ended 31 March 2024, and is no longer aligned with the core activities of the Group. The current net book value of LCD as represented on Hornby's balance sheet as at 30 September 2024 is £2.99 million.

Strategic Rationale

·     Streamlining of the Group's business, enabling resources and investments to be focused on the core brands

·     Positive impact on the overall aged inventory position through the release of Oxford Diecast stock, reducing total inventory by a further 11%

·     Simplification of our proposition in the collectable diecast category, allowing Hornby to focus exclusively on Corgi in the space 

Further information and related party transaction

The aggregate consideration of approximately £1.38 million (the "Consideration") is structured as follows:

·     Approximately £1.1 million of the Consideration is payable in cash over a 5-year period post-Completion (the "Cash Consideration"), with £0.25 million of such amount being payable by the Buyer on Completion, and the outstanding amount being payable in five equal instalments of approximately £0.17 million on or around each anniversary of Completion for the five-year period following Completion

·     If the Cash Consideration is not paid in accordance with the terms of the Agreement, the Buyer shall be required to pay an additional consideration payment to the Company of £600,000

·     As part of the Consideration for the Disposal, the Company has agreed to acquire 1,526,627 ordinary shares in the capital of the Company that Lyndon Davies holds (representing 0.9% of Hornby's share capital) for total consideration of £1.00 (the "Buy Back"). As at market close on 4 November 2024 the shares have a current market value of approximately £0.28 million at the mid-price of 18.0 pence. This will be implemented as an off market share buyback and the shares will be cancelled following Completion.

In addition, the transaction also sees Lyndon Davies step down from the Board and his role as a Non-Executive Director of the Group with immediate effect from Completion.

As Lyndon Davies is a Director of the Company prior to Completion, the Disposal constitutes a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The independent directors of Hornby, consisting of the full Board of Directors excluding Lyndon Davies, consider, having consulted with Panmure Liberum, the Company's nominated adviser, that the Disposal and the Buy Back are fair and reasonable insofar as the Company's shareholders are concerned.

A circular containing further details of the Disposal, the Buy Back and the Sale Agreement, and convening a general meeting of the Company (the "General Meeting") to take place at 9.00 a.m. on 27 November 2024 at the offices of the Company at Enterprise Road, Westwood Industrial Estate, Margate, England, CT9 4JX, to consider and approve the Disposal and the Buy Back (the "Circular") is expected to be published and posted to shareholders today. The Circular, when published, will be made available on the Group's website (www.hornby.plc.uk).  Relevant extracts of the Circular are included in this announcement below. A summary of the material terms of the Sale and Buy Back Agreement is included in the Circular.

Commenting on today's announcement, Neil Sachdev, Non-Executive Chairman, said:

"On behalf the board, I would like to thank Lyndon for his commitment to, and support of, Hornby in various roles over the last 7 years. He has been a passionate member of the Board, and we wish him well with Oxford Diecast in the future.

Hornby and its family of brands remains world renowned, and rationalising our portfolio in this way presents a more coherent offering to our customers. Through consistently adapting to change we will ensure that we are best placed to continue to support our existing customers whilst we create a new generation of hobbyists".

Enquiries:

Hornby PLC

Oliver Raeburn, CEO                        01843 233 500

Kirstie Gould, CFO 

Holly Barnett, PR

Panmure Liberum Limited, Nominated Advisor and Broker

Andrew Godber                                020 3100 2222

Edward Thomas

Ailsa MacMaster

 FURTHER DETAILS OF THE DISPOSAL AND GENERAL MEETING

The following text are extracts from the Circular expected to be published today.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Introduction

For the reasons set out below, the Company has entered into a conditional agreement to dispose of its entire interest in the share capital of LCD to the Buyer for aggregate consideration of approximately £1.38 million (the "Consideration"). £0.25 million of the Consideration will be payable by the Buyer in cash on Completion and approximately £1.1m of the Consideration is payable in cash in five equal instalments of approximately £0.17 million on or around each anniversary of Completion for the five year period following Completion (the "Cash Consideration"). The balance of the Consideration will be settled by the transfer by Lyndon Davies of the Hornby Shares to the Company. If the Cash Consideration is not duly paid to the Company on the dates and in the amounts set out in the Sale and Buy Back Agreement, the Buyer shall be required to pay an additional consideration payment to the Company of £600,000.

In connection with the Disposal, the Company has also conditionally agreed to buy back all of the Hornby Shares held by Lyndon Davies, which have a current market value of approximately £0.28 million, for a total consideration of £1.00. These transactions will be implemented pursuant to the terms of the Sale and Buy Back Agreement,  details of which are summarised in the Circular. In addition, under the terms of the Sale and Buy Back Agreement, the Company, the Buyer, LCD and Oxford Diecast have entered into the Debenture, pursuant to which each of the Buyer, LCD and Oxford Diecast have granted to the Company a fixed and a floating charge of all of their respective assets until the whole of the Cash Consideration has been paid.

On 25 April 2024, the Company announced that Lyndon Davies would formally stand down from his position as Non-Executive Chairman of the Company, effective 30 April 2024. Lyndon Davies has continued to serve on the Board as a Non-Executive Director since that date and has agreed to resign as a director of the Company and all other Group Companies of which he is a director, with effect from Completion. In addition and in connection with Disposal, each of Kirstie Gould and Oliver Raeburn have agreed to resign as directors of LCD and Oxford Diecast with effect from Completion.

The Proposals require certain approvals from Shareholders pursuant to the Resolutions. The General Meeting to be convened in order for the Shareholders to consider, and if thought fit approve, the Resolutions will be held at Enterprise Road, Westwood Industrial Estate, Margate, England, CT9 4JX at 09.00 a.m. on 27 November 2024.

Background to the Disposal and the Buy Back

The Hornby Group of companies is a UK-based models and collectibles group that operates internationally and owns some of the most recognisable hobbyist brands, including "Hornby", "Corgi", "Airfix" and "Scalextric". Through these brands, the Company offers a diverse range of modelling products that appeal to all age groups. The Company acquired 49% of LCD in December 2017, and the remaining 51% was acquired in July 2021. The aggregate consideration paid by the Company for LCD was £2.9 million.

Oxford Diecast, a wholly owned-subsidiary of LCD, was founded in 1993. Oxford Diecast supplies diecast vehicles to the collector, gift, hobby and promotional markets. It has a collectors club with worldwide membership and subsidiary companies in China and North America. Whilst LCD was historically a profitable business it has been loss-making in recent years. The Group is strategically focused on its return to profitability, and as such has been reviewing its non-core businesses. Given LCD's negative financial contribution, it is expected that the Disposal will improve the Group's overall profitability.

The table below summarises the combined results of Oxford Diecast and LCD recorded for the two financial years ending on 31 March 2024:

The current net book value of LCD as represented on Hornby's balance sheet as at 31 October 2024 (being the latest practicable date prior to the publication of the Circular) is £2.99 million.

The Group is also focused on improving its operational efficiency and in particular, reducing operational complexity. The Disposal is part of this broader strategy, which should allow management and senior leadership to focus their efforts on areas of the business that offer the most shareholder value. Furthermore, by selling LCD, the Group expects to be able to both improve its inventory position, and reduce future capital expenditure requirements. The Company's stock position will reduce by approximately £2.5 million post Completion.

In connection with the Disposal, the Company has agreed to buy back all of the Hornby Shares held by Lyndon Davies for a total consideration of £1.00. The Buy Back will constitute an off-market buy back under the Act. The key terms of the Buy Back are summarised the Circular, and a copy of the Sale and Buy Back Agreement is available for inspection at the registered office of the Company for a period of 15 days ending on the date of the General Meeting. The Company is seeking approval at the General Meeting for the Buy Back pursuant to the Buy Back Resolution.

The Disposal and the Buy Back also require the  approval of the  Company's Shareholders pursuant to section 190 of the Act as a substantial property transaction  The Company is therefore seeking approval at the General Meeting of the substantial property transaction pursuant to the SPT Resolution.

General Meeting and Resolutions

A Notice of General Meeting is set out in the Circular.

The General Meeting will take place at Enterprise Road, Westwood Industrial Estate, Margate, England, CT9 4JX at 09.00 a.m. on 27 November 2024. At the General Meeting, the Resolutions set out in Part V of the Circular will be proposed to Shareholders. An ordinary resolution will be passed if 50% or more of the votes cast (in person or by proxy) at the General Meeting are in favour of it.

The Resolutions, are summarised below:

Resolution 1 - this is a special resolution to approve the Buy Back. This resolution is conditional on the passing of resolution 2 below.

Resolution 2 - this is an ordinary resolution for the Disposal and the Buy Back as a substantial property transaction under sections 190 and 191 of the Act. This resolution is conditional on the passing of resolution 1 above.

Action to be taken in respect of the General Meeting

Shareholders will find a Form of Proxy enclosed with the Circular for use at the General Meeting. Whether or not you intend to be present at the General Meeting, you are requested to complete and return the Form of Proxy in accordance with the instructions printed thereon as soon as possible. To be valid, completed Forms of Proxy must be received by the Company's Registrars, Link Group, by not later than 09.00 a.m. on 25 November 2024, or 48 hours (excluding any part of a day that is not a Business Day) before any adjourned General Meeting. Completion of the Form of Proxy will not preclude you from attending the meeting and voting in person if you so wish.

Recommendation

The Independent Directors believe that the Resolutions to be considered at the General Meeting are in the best interests of the Company and its shareholders as a whole and unanimously recommend that Shareholders vote in favour of each of the Resolutions, as the Independent Directors who are Shareholders intend to do in respect of their beneficial shareholdings representing, in aggregate, over approximately 0.49 per cent. of the current issued share capital of the Company.

DEFINITIONS

The following definitions apply throughout this announcement, the Circular and the accompanying Form of Proxy unless the context otherwise requires: