Today we have updated the stock market with details of our financial results for our year ending March 2016 which though in line with most recent expectations, were very disappointing. As previously announced we have been undertaking a full review of the business and today we have also been able to set out details of a new business plan and a refinancing package to support the new plan. While last year was extremely difficult, it is excellent news that we now have the renewed backing of our stakeholders to deliver on the new plan which will allow us to concentrate our efforts on serving our customers.
I am writing to you today to explain as much as I can about these latest developments at Hornby Hobbies.
Results were in line with the revised expectations that we set out in February. The underlying loss before tax for the year was £5.7m. However, there were also exceptional costs of £2.6m associated with last year’s refinancing, reorganising our subsidiaries last year and implementing our new ERP system. In addition, we are also making an exceptional non-cash charge of £5.1m as a direct result of committing to the new business plan. Taken together this has resulted in a total loss before tax of over £13m.
Root and branch business review
Since February we have undertaken a thorough review of our business and the output of this review has provided the basis of the new business plan. The review covered all of our brands, products, channels and countries. It has focused on identifying where we are able to serve our customers profitably and where we need to make changes.
New business plan to return to profit and cash generation
The business review has confirmed that Hornby has a very strong and sustainably profitable business at its core but substantial change is required in some areas. In the UK we will be retaining all brands but we will be refocusing the product range and exiting the concessions channel. We recognise that we need to make particular effort to support the independent retail channel. In Europe, we will be making significant changes to our business in order to streamline the operation and make it profitable.
Our financial partners have endorsed our plan
Our bank (Barclays) and shareholders are backing our plan with the bank recommitting to a £10m facility and shareholders providing additional investment of £8m in Hornby. This will provide us with sufficient financial resources to execute the plan.
We recognise that many of our customers have traded with Hornby, Scalextric, Airfix, Humbrol and Corgi for many years. Throughout this time, you have continued to support us through stocking our products and giving us your feedback on ways we can improve. I am very clear that the best way to deliver future success for Hornby is to focus on delivering great products to our customers. I hope that you will take this letter as an indication of my commitment to do just that and I would like to thank you in advance for your continuing support.