HORNBY PLC

Earnings Release • Jun 27, 2014

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RNS Number : 6869K

Hornby PLC

27 June 2014

HORNBY ANNOUNCES FULL YEAR RESULTS

Hornby Plc ("Hornby"), the international hobby products Group, has today announced its results for the year ended 31 March 2014.  Hornby owns a number of model railway and slot car brands including Scalextric, Airfix models, Humbrol paints and Corgi die cast models.

Highlights

·     Revenue of £51.6 million (2013: £57.4 million)

·     Like for like revenues excluding London 2012 down by 2%

·     Underlying loss* £1.14 million (2013: £0.15 million profit)

·     Net debt at 31 March 2014: £7.3 million (2013: £2.2 million)

·     Renegotiation of banking facilities to end of December 2015

·     Statutory loss after tax £4.445 million (2013: £2.501 million loss)

* Stated before amortisation of intangibles, net foreign exchange adjustments on intercompany loans, re-structuring costs and impairment of goodwill.

Supply Chain

·     Supply Chain re-organised and strengthened

·     Exit from previous principal supplier completed

Management Changes

·     Richard Ames appointed as Chief Executive

·     Roger Canham resumes role as Non-Executive Chairman

·     Charlie Caminada and David Adams appointed as Non-Executive Directors

Richard Ames, Chief Executive of Hornby, said,

" I am delighted to have joined Hornby.  Since arriving at the  business eight weeks ago, I am more convinced than ever that the group can build on a more solid supply chain and support the demand from our customers for our products. 

"  Hornby has been through a difficult period.  Whilst I am under no illusion that there will be challenges ahead, I am confident that I can lead the group successfully during this next phase of our development.  It is an important time for Hornby as the business strives to reach its full potential.

" Although it is early days, one decision that I have made is to move our UK warehousing and logistics operations to a new site.  This is the first step to improve the distribution and stock management, which will enable us to improve our service to our customers."

-ends-

Date:  27 June 2014

For further information contact:

Hornby Plc	Broker Profile
Richard Ames, Chief Executive Nick Stone, Finance Director 01843-233500	Simon Courtenay Tamsin Shephard 020-7448-3244

CHAIRMAN'S STATEMENT

Personal Perspectives

In April 2013 I took on the role of executive chair and commenced the search for our next business leader. Throughout the year, I have been steadfast in my resolve to find the right person for the role no matter how long that process might take.  This was consistent with the commitment to build a long term platform for growth. The transformation of Hornby is a challenging, but equally rewarding proposition and I am delighted that we have secured Richard Ames to lead the business through these exciting times.  Richard has plenty of experience of working in consumer focused businesses.  As a result of this appointment on 28 April 2014, I have now resumed the role of Non-Executive Chairman.

We have also appointed two new Non-Executive Directors, Charlie Caminada and David Adams.  They have a wealth of relevant experience and they are already making a significant contribution as we manage the Group.

From a trading perspective, this year has once again been one dominated by the continued supply chain disruption.  During the year, we eventually agreed the basis for a managed exit from our principal manufacturer in China. The process of recognising the true scale of the issue and then formulating and executing a risk managed plan to conclude that relationship has been lengthy and complex.  But I am confident that we are now on the other side. The corollary of this is the imperative to develop balanced partnerships with a portfolio of manufacturers who have the capacity to support our strategic ambitions over the long term. This piece of work is well underway but will take many months to reach a level of maturity such that the supply chain no longer constrains but positively supports the sales growth of Hornby.

It was clear from the outset that we must focus on doing the very simple things right before making any longer term strategic plans. There were some fundamental elements of the business that needed attention if any future strategic plans were to stand on solid foundations. In our interim report we referred to the three simple key pillars that we felt were central to this immediate phase of the transformation process:

·     Success through people

·     Success through focussed execution

·     Success through passion for our brands

I am pleased that we are making progress on all three points, as detailed in Richard's report.

The role of the Board

Good corporate governance provides a framework for delivering the objectives of the Company and is fundamental to a sound-decision making process.  It supports executive management in achieving the maximum performance for the business. Maintaining good corporate governance is a key priority and with the exception of a separate CEO and Chairman until 28 April 2014 when Richard Ames joined the Group, I am pleased to say that we were compliant with the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012, throughout the year. 

In the current uncertain economic environment, management of risk 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 policies to manage those risks.  The Board reviews the major risks and any mitigating actions required on a bi-annual basis. Through the Board and the Audit Committee we retain good visibility of the issues and challenges faced by management and the work to address them.

Shareholder Engagement

I am delighted that once again this year, we will be hosting our Annual General Meeting at the Hornby headquarters in Margate on 10 September 2014.  This will be an excellent opportunity for shareholders to see the new products for themselves and to understand the progress that the Company is making.  Personally I am looking forward to welcoming as many shareholders as possible that are able to attend. 

I am confident that under Richard's guidance, the Group has the potential to build on the significant progress that has already been made. With the steps we have taken to resolve our supply chain issues together with the passion and energy to support our brands, I am hopeful that the future of the business is brighter than it has been for some time.

Roger Canham

Chairman

Hornby Plc continues to make progress against its vision to be the most successful model, hobby and collectible toy company in the world.

CHIEF EXECUTIVE'S REPORT

May I firstly take this opportunity to say that it is a privilege and a pleasure to be joining the Hornby team.  I am excited to be arriving at the Company at this key time in its history and development.

Having joined Hornby on 28 April 2014, I have spent the first eight weeks visiting the various international sales teams in Europe and spending a week with our Asian sourcing operation and a selection of manufacturers in Hong Kong and China.  My first impressions of the Group are that we have teams of dedicated and talented people who have been facing significant commercial challenges.  They have already begun taking difficult decisions and actions to improve the fortunes of the Company. There is a real pride in the brands and products that we make and a strong desire to succeed.

It is early days, but I am convinced that Hornby can recover and return to profit in the future.

Manufacturing Supply Chain

The challenges that we have faced in our Asian manufacturing and supply chain have been well documented.  As we have reported previously, we have increased our number of manufacturing sites and we are now bringing the production from these partners to market.  The complex nature of the model manufacturing process and the length of the supply chains involved has meant that the initiatives, started in 2013, have not delivered results in the financial year.  However, they have created the foundation upon which improvements in 2014-15 can be built. 

The Hornby team in Hong Kong has undergone significant change, introducing new processes and taking on a broader range of operational responsibilities.  The Asian team is now operating a new 'critical path monitor' and a 'manufacturing tool database,' both of which are designed to increase Hornby's control over product development.  This will lead to greater visibility of the new design projects and will enable the Group to communicate more regularly and accurately with suppliers, customers and consumers alike.  With ongoing investment in the Hornby Asia team, new supplier partnerships and better working practises, we are confident that we approach 2014-15 on a stronger platform to drive profitability.

Serving Our Customers

The production issues that the Company has faced have not only restricted financial performance, but have also risked the Company's relationship with our channel partners and end users.  This is an extremely important issue, as these are the true fans of the brands.  It is key that we do not take these fans for granted.  With my experience of working in consumer focused businesses, I am making this one of my first key objectives. 

In addition to delivering high quality Hornby products, we must be able to inform and communicate with our partners to enable them to continue to support the brands.  This communication will come in many forms, including improvements in trade news, social media and the Company's website.  In recent weeks we have seen a renewed commitment to weekly trade announcements via Corgi News, Hornby News, Airfix News and Scalextric News.  This is all designed to give retail channels and end users an up to date view of new product releases, stock availability and promotional information.  New colleagues, now working in the Social Media team, are focused on providing daily updates and interactions with fans and sharing the information that drives the passion for collecting, modelling and driving our products.

The new Hornby UK website, launched in June 2014, is another tool designed to give consumers greater access to Company and product information, as well as new initiatives such as Simon Says - a regular blog of the thoughts of industry and Hornby Grandee Simon Kohler.  All of these initiatives are work in progress, but show a commitment to improving the dialogue and relationship that the Company has with its partners and customers.  The initial feedback has been very encouraging.

At the beginning of 2014, the commercial team in Hornby UK underwent a restructure.  This reorganisation was designed to provide clearer lines of commercial responsibility within the product, sales and marketing teams based in Margate and to enable greater focus on the actions necessary to grow the business. In particular, category management and a more analytical approach to our customer relationships will be the drivers of future growth. New roles and responsibilities are now in place, and we will see benefits as a result of improved stock management, sales methods and marketing and promotional communications, flowing through during 2014-15. 

Improving Stock Management and Distribution

Stock management within the Group is a key area of opportunity.  In addition to improvements in manufacturing capabilities, the Group is also committed to managing stock in the most effective and efficient way within the sales organisations of Europe and the USA.  The facility in Margate that has housed the Company's UK stock since manufacturing started to move to China in the late 1990's, has been an area of concern for some time.  A lack of outside space to allow transport access, a lack of I.T. infrastructure upon which to run modern warehousing systems and a building with significant repair and maintenance issues has led to a review of the site.  This has concluded with a decision to move to a new, third party warehouse, run by an independent logistics specialist DS Logistics.  This purpose built facility has modern stock systems and the space to grow with the Company as the turnaround materialises.  The proximity of the site to Margate, 11 miles from the current building, means that we are able to offer roles to all existing Hornby staff and retain this wealth of experience within the operation. This is a key decision for the Company, and one not taken lightly, given the history and tradition of the current site.  Nevertheless, we are confident that this move will facilitate a significant improvement in the handling and distribution of the Company's product, not only in the UK but also, as we progress, for the broader Group in Europe.

The Company has also started a discovery project to ascertain the opportunity to be derived from the creation of a group wide ERP system.  A variety of systems, of differing age and quality exist within the various divisions, with a low level of integration and it is believed that benefits can be gained from running the business on one system.  This discovery project will make recommendations in late summer at which point any decision to proceed with implementation will be made.  A group-wide ERP system would facilitate the creation of an international ecommerce platform. Again it is believed that this could present a significant opportunity for the Company to target new and underdeveloped markets with the Group's wide and varied range of products and brands.

Outlook for 2014-5

As 2014 continues, we will further review Group performance and capabilities.  Improvements in manufacturing, new product development processes and sales and marketing capabilities around the Group are priorities and will receive immediate attention.  As the stock situation that has held back the Group over the last few months is resolved, the opportunity to benefit from improvements in other areas of the business will rise in importance and become integral to our plan to return the Group to profitability. This process will continue through 2014/15/16 and we are confident that we have the brands, team and know how to bring the Company back to past levels of financial performance and beyond.

Trading in the current year so far is in line with the Board's expectations. The focus that is being given to clearing the older elements of stock is progressing, with Group stock currently some £1 million lower than at year end.  Whilst the delivery of the transformation plan comes with execution risk, the Group has a portfolio of fantastic brands that if managed well offer plenty of potential for long term growth.  I am looking forward to updating our shareholders on the progress that we are making.

Richard Ames

Chief Executive

OPERATIONAL AND FINANCIAL REVIEW OF THE YEAR

	2014	2013
Revenue	£51.6m	£57.4m
Underlying (loss) / profit before tax *	£(1.14m)	£0.15m
Gross profit margin	45.2%	42.6%
Underlying (loss) / profit before tax margin *	(2.2%)	0.26%
Reported loss before tax margin	(8.8%)	(5.9%)
Underlying basic (loss) / earnings per share *	(3.43)p	0.47p
Statutory basic loss per share	(11.35)p	(6.39)p
Net debt	£7.3m	£2.2m
Statutory loss after tax	£4.5m	£2.5m

* Stated before amortisation of intangibles, net foreign exchange adjustments on intercompany loans, re-structuring costs and impairment of goodwill.

Consolidated revenue for the year ended 31 March 2014 was £51.6 million, a decrease of 10.2% compared to the previous year's £57.4 million. 2013 included £4.7 million revenue for London 2012, so excluding this revenue, the decrease is 2%.

Full year gross profit margin was 45% (2013 - 43%). The increase in gross profit margin was primarily a result of the heavy discounting on London 2012 stock in the previous year. As discussed below the availability and supply of high end model rail products with higher margins is still well below planned levels.  Therefore the overall margin is still suppressed when compared to historic levels. Foreign exchange losses in the year totalled £1.0 million compared to a gain of £0.2 million. Sales and marketing costs reduced as the level of commissions paid through our concessions channel reduced following the collapse of Modelzone in July 2013.

Pre-tax loss before net foreign exchange adjustments on intercompany loans, amortisation of intangibles, re-structuring costs and impairment of goodwill (hereafter referred to as underlying pre-tax (loss) / profit) was (£1.14) million (2013 - profit of £0.15 million). Basic loss per share calculated on underlying pre-tax (loss) / profit (hereafter referred to as underlying basic (loss) per share was (3.43)p loss per share (2013 - earnings per share 0.47p).  Statutory pre-tax loss was £4.6 million (2013 - loss of £3.4 million) and statutory basic loss per share was 11.35p (2013 - 6.39p loss per share). Taxation at £0.1 million credit (2013 - £0.9 million credit) was 2% of reported loss before tax (2013 - 26%).

Group inventories reduced during the year by 3% from £13.6 million to £13.2 million. Trade and other receivables also reduced from £9.6 million at the last year end to £9.0 million at 31 March 2014. Trade and other payables decreased by £1.2 million as the management re-organisation provided for last year was implemented and in addition net derivative liabilities reduced by £1.7 million due to the settlement of the historic FX collar arrangement offset in part by the reduction in hedged contracts classed as an asset at 31 March 14. Investment in new tooling and other capital expenditure was £4.1 million (2013 - £3.5 million). The net effect of these factors was an increase in working capital requirements and an increase in net debt at 31 March 2014 to £7.3 million, from £2.2 million in 2013.

Dividend

This has been another year in which trading has been challenging and therefore the decision has been taken not to pay a dividend (2013 - 0.0p).

Underlying loss

A total of £3.4 million costs in these accounts have been identified as exceptional in nature and classified as outside of our measure of underlying profit as can be seen in note 4. Of this total £2.5 million (2013 - £2.8 million) was the write-off of goodwill in the Italian business described below, amortisation of the intangible assets and the revaluation of intercompany loans, all of which are non-cash costs.

In the previous year, a re-structuring of the senior team below the Board level was announced and a provision of £0.7 million made for the implementation costs which were carried out in the year just ended. This work is ongoing and a smaller scale re-organisation of the marketing resources in the UK business was implemented recently at a cost of £0.2 million. The changes will allow a stronger focus on our brands and their development as well as being more streamlined and a reduction in overhead costs. Re-structuring costs also include £0.6 million paid to our long standing major supplier of model railway product for work in progress, materials and components when the agreement was reached with them to end the relationship. As has been described above this was a necessary step in the restructuring of our supply chain but they have little or no immediate value to the business and therefore have been written off. The final element is a £0.1 million charge for the bad debt and other costs that arose from the failure of our main concession partner Modelzone that went into administration in July 2013.

Impact of supply chain disruptions

Deliveries of model railway product over the year totalled 59% of our budget for the Group as a whole. This further deterioration reflects the time taken to reach an agreement with our long standing major supplier for an orderly exit from our manufacturing relationship and the delays in releasing the tools and moulds that were needed for production in our other suppliers' operations. Model rail sales declined further on the back of this to £11.4 million from £14.0 million last year in the UK and decreased from £9.4 million to £9.2 million in continental Europe.

Banking Facilities

The Group has recently been successful in renegotiating its main banking facilities for a further 18 months. At 31 March 2014 the Group had a revolving credit facility of £10 million expiring August 2015 and a 5-year fixed-term loan agreement of £12 million with outstanding repayments of £1.5 million scheduled to be completed by July 2014. These have now been replaced by a new revolving credit facility of £13 million expiring in December 2015 which is expected to allow sufficient headroom for trading working capital needs in the current year whilst longer term plans and funding requirements are developed. The Group also has additional facilities of £5 million in place in its European subsidiaries through bank loans and import credit line facilities of which £3.5m was undrawn at year end. Borrowings in the year ended 31 March 2014 peaked at £11.8 million. 

United Kingdom

Trading conditions in our UK home market were impacted by the largest single customer going into administration. Modelzone's financial situation was evident, and all steps were taken to mitigate our risk but the sales line felt the impact. There was also considerable operational impact as the concession stock of Hornby and Scalextric product had to be uplifted and returned to our warehouse. Despite our best efforts and new ventures with WH Smith, Hawkins Bazaar and other smaller partners we could not make up the full year budgeted shortfall. Across all other retail channels there was no significant up tick to replace these lost sales with our Independent sector continuing to decline. National Accounts grew, and our export sales improved. Our Direct channels continue to improve but still make up a small percentage of our total business.

Model Railways

Sales of Hornby model railways declined as we wrestled with getting production capability out of the incumbent supplier, and we have renewed optimism now that much of the tooling is within our control. We have significant pent up demand so the reduced actual performance is frustrating to both our consumers, and our trade customers but when we fulfil it we anticipate a return to growth. Our work with the National Railway Museum ('NRM') and the sponsorship of the "Great Gathering" remains a key highlight with 6,000 replica locomotives sold out within days of release. Hornby sponsored the event and our partnership with the NRM was honoured with the Arts & Business Sponsorship award and was covered extensively in the press and on television. Great efforts have been made by all the team to put model railways back into the public domain, and put the hobby back into public discussion.  This gives the team real encouragement for the future, that when we position our products well, the demand from customers is strong.

Slot Car Product Range

Sales of Scalextric were buoyed by our key set "Demolition Derby", a combination of the product development around our Quick Build concept, and the simple pleasure of "bash n crash" explosive collisions whilst racing. TV advertised, and PR supported it was recognised at the London Toy Fair as the Editor's choice, and didn't disappoint as it went on to be our biggest selling Scalextric item. The challenge remains to deliver a range of product that works for both newcomers to the hobby, and the "racers". International performance held up but remains challenging as markets felt global pressures on disposable income.

Airfix

Sales of Airfix were positive as we continue to re-establish Airfix credentials as the lead brand to a mass audience, and at the same time deliver real credibility as the modeller's model manufacturer. The Javelin was a particular hero item together with the celebration of the famous "Dambuster's Lancaster bomber". The introduction of the Quick Build range exceeded initial retailer expectation. This further reinforced the right decision to make this product in the United Kingdom as the benefit of being able to increase production to meet significant demand quickly out-weighed the marginal cost increase on this type of product when compared to our production sources in China or India.

Corgi Models

Corgi sales continued to benefit from our award winning Corgi Toys range. Notable support came from Argos, and Tesco in the United Kingdom which demonstrates our ability to work with mass merchant retailers. Our heartland of collectors is under pressure from cheaper imitations of the quality Corgi delivers. We still manage to deliver strong sales when we match up the sub categories with the right subject matter - best sellers being the Eddie Stobart lorries, and our Lancaster bombers within the Aviation Archive section of the business.

Continental Europe

Our subsidiaries have again sustained the most detrimental overall impact to sales as a result of the supply chain disruption as the relative proportion of model railway sales in their businesses is higher. This is particularly the case in Italy where a disproportionate share of the supply chain disruption as a whole was borne. Furthermore and despite the weakening Euro exchange rate, sales in our European subsidiaries were slightly higher than last year in sterling terms at £12.2 million from £11.5 million in 2013. This was mainly due to the re-launch of the Pocher brand. Our subsidiaries in mainland Europe contributed an underlying loss before tax of £1.3 million in line with that in the previous year. Reported loss before tax was £3.4 million (2013 - loss of £3.9 million) including the goodwill impairment charge (see below). 

The current macro-economic issues surrounding the Euro zone continue to be a cause for concern, especially in Italy and Spain but also affecting business in France and Germany to a lesser extent. Our strong European brands continue to attract increasing support from the model railway communities in each of our key territories and where new product has been available the response has been encouraging. In Germany the introduction of new 'N scale' railcars and coaches was very successful and won some industry awards. The re-launch of the 1:8 scale Pocher diecast car kits by our Spanish subsidiary succeeded in generating sales in more than 30 countries. In France the launch of a new diesel locomotive in five different liveries was voted model of the year by one of the train magazines, a fitting award to mark Jouef's 70th anniversary.

Goodwill Impairment

The previously mentioned supply chain issues and general economic weakness have impacted Italy disproportionally, depressing short-term cash flow and earnings resulting in an impairment charge in the year of £2.1 million to goodwill which arose on the acquisition of assets within the Italian subsidiary in 2004. This non-cash one-off charge has been made to the Statement of Comprehensive Income through Other operating expenses.

America

Sales in Hornby America were least impacted by the supply chain issues and increased in the year from £2.7 million to £3.0 million, producing a profit before tax of £0.85 million (2013 - profit £0.01 million).  Notable successes included the introduction of a range of Airfix kits into the Barnes and Noble chain and sales through the Independent store channel grew by 15%.

Nick Stone

Group Finance Director

GROUP STATEMENT OF COMPREHENSIVE INCOME

for the Year Ended 31 March 2014

		Group
		2014 £'000		2013 £'000
REVENUE		51,557		57,395
Cost of sales		(28,230) ______		(32,917) ______
GROSS PROFIT		23,327		24,478
Distribution costs		(2,549)		(2,408)
Selling and marketing costs		(11,322)		(12,768)
Administrative expenses		(9,811)		(9,415)
Other operating expenses		(3,718) ______		(2,726) ______
OPERATING LOSS		(4,073)		(2,839)
Income from shares in Group undertakings		-		-
Finance income		8		13
Finance costs		(492) ______		(561) ______
LOSS PROFIT BEFORE TAXATION		(4,557)		(3,387)
Analysed as:
Underlying (loss) / profit before taxation		(1,139)		147
Net foreign exchange impact on intercompany loans		(108)		20
Amortisation of intangibles		(389)		(385)
Exceptional items:
Re-structuring costs		(875)		(723)
Impairment of goodwill		(2,046) ______		(2,446) _____
LOSS BEFORE TAXATION		(4,557)		(3,387)
Income tax income		112 ______		886 ______
LOSS FOR THE YEAR AFTER TAXATION		(4,445)		(2,501)
OTHER COMPREHENSIVE INCOME
Items that may be subsequently reclassified to Profit and Loss:
Cash flow hedges, net of tax		(714)		461
Currency translation differences		(146) ______		(67) ______
OTHER COMPREHENSIVE (LOSS) / INCOME FOR THE YEAR,  NET OF TAX		(860) ______		394 ______
TOTAL COMPREHENSIVE (LOSS) FOR THE YEAR		(5,305) \======		(2,107) \======
LOSS PER ORDINARY SHARE
Basic		(11.35)p	(6.39)p
Diluted		(11.35)p	(6.39)p

All results relate to continuing operations.

GROUP BALANCE SHEET

at 31 March 2014

		Group
		2014 £'000	2013 £'000
ASSETS
NON-CURRENT ASSETS
Goodwill		8,530	10,598
Intangible assets		3,569	3,978
Property, plant and equipment		10,383	10,048
Investments		-	-
Deferred tax assets		1,858 ______	1,714 ______
		24,340 \======	26,338 \======
CURRENT ASSETS
Inventories		13,165	13,637
Trade and other receivables		9,043	9,603
Derivative financial investments		39	367
Current tax assets		601	512
Cash and cash equivalents		619 ______	3,554 ______
		23,467 ______	27,673 ______
LIABILITIES
CURRENT LIABILITIES
Borrowings		(7,630)	(3,907)
Derivative financial instruments		(445)	(2,194)
Trade and other payables		(7,618)	(8,834)
Provisions		(238)	(235)
Current tax liabilities		(128) ______	(466) ______
		(16,059) ______	(15,636) ______
NET CURRENT ASSETS / (LIABILITIES)		7,408 ______	12,037 ______
NON-CURRENT LIABILITIES
Borrowings		(242)	(1,815)
Deferred tax liabilities		(136) ______	(159) ______
		(378) ______	(1,974) ______
NET ASSETS		31,370 ______	36,401 ______
EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT
Share capital		392	392
Share premium		6,180	6,180
Capital redemption reserve		55	55
Translation reserve		(758)	(612)
Hedging reserve		(440)	274
Other reserves		1,688	1,688
Retained earnings		24,253 ______	28,424 ______
TOTAL EQUITY		31,370 \======	36,401 \======

N P Stone

Director

Registered Company Number: 01547390

GROUP STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2014 and 31 March 2013

GROUP	Share capital £'000	Share premium £'000		Capital redemption reserve £'000		Translation reserve £'000		Hedging reserve £'000		Other reserves £'000		Retained earnings £'000		Total equity £'000
Balance at 1 April 2012	392	6,180		55		(545)		(187)		1,688		31,598		39,181
Total Loss for the year	-	-		-		-		-		-		(2,501)		(2,501)
Other comprehensive income for the year	-	-		-		(67)		461		-		-		394
Total comprehensive income for the year	-	-		-		(67)		461		-		(2,501)		(2,107)
Transactions with owners
Issue of shares
Share-based payments	-	-		-		-		-		-		20		20
Shares vested from employee benefit trust	-	-		-		-		-		-		90		90
Dividends												(783)		(783)
Total transactions with owners	- ______	- ______		- ______		- ______		- ______		- ______		(673) ______		(673) ______
	- ______	- ______		- ______		- ______		- ______		- ______		(673) ______		(673) ______
Balance at 31 March 2013	392	6,180		55		(612)		274		1,688		28,424		36,401
Total Loss for the year	-	-		-		-		-		-		(4,445)		(4,445)
Other comprehensive income for the year	-	-		-		(146)		(714)		-		-		(860)
Total comprehensive income for the year	-	-		-		(146)		(714)		-		(4,445)		(5,305)
Transactions with owners
Share-based payments	-	-		-		-		-		-		274		274
Shares vested from employee benefit trust	-	-		-		-		-		-		-		-
Dividends	-	-		-		-		-		-		-		-
Total transactions with owners	-	-		-		-		-		-		274		274
	______	______		______		______		______		______		______		______
Balance at 31 March 2014	392 \======	6,180 \======		55 \======		(758) ======		(440) ======		1,688 \======		24,253 \======		31,370 \======

Retained earnings includes £587,000 at 31 March 2014 (2013 - £604,000) which is not distributable and relates to a 1986 revaluation of land and buildings.

GROUP CASH FLOW STATEMENT

for the Year Ended 31 March 2014

	Group
	2014 £'000	2013 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash (used in) / generated from operations	(76)	10,407
Interest paid	(492)	(561)
Tax (paid)	(482) ______	(1,394) ______
Net cash (used in) / generated from operating activities	(1,050) ______	8,452 ______
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment	-	97
Purchase of property, plant and equipment	(4,059)	(3,457)
Interest received	8	13
Dividends received	- ______	- ______
Net cash used in investing activities	(4,051) ______	(3,347) ______
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of loans	(3,060)	(3,046)
Finance lease capital payments	(3)	(62)
Dividends paid to Company's shareholders	-	(783)
Advances to subsidiary undertakings	-	-
Repayments to subsidiary undertakings	- ______	- ______
Net cash used in financing activities	(3,063) ______	(3,891) ______
Net (decrease) / increase in cash and cash equivalents	(8,164)	1,214
Cash, cash equivalents and bank overdrafts at beginning of the year	2,725	1,591
Effect of exchange rate movements	(17)	(80)
CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS AT END OF YEAR	(5,456) \======	2,725 \======
CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS CONSIST OF:
Cash and cash equivalents	619	3,554
Bank overdrafts	(6,076) ______	(829) ______
CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS AT END OF YEAR	(5,456) ______	2,725 ______

NOTES TO THE CASH FLOW STATEMENTS

GROUP CASH FLOWS FROM OPERATING ACTIVITIES

	Group
	2014 £'000	2013 £'000
Loss before taxation	(4,557)	(3,387)
Interest payable	492	561
Interest receivable	(8)	(13)
Dividend income	-	-
Amortisation of intangible assets	389	385
Impairment of Goodwill	2,046	2,446
Depreciation	3,604	3,664
Loss on disposal of property, plant and equipment	22	8
Share-based payments	274	20
(Gain) / loss on financial derivatives	(135)	58
Increase / (Decrease)  in provisions	3	(89)
Decrease in inventories	472	4,230
Decrease in trade and other receivables	560	3,566
Decrease in trade and other payables	(1,451)	(1,042)
Decrease in derivate financial instruments	(1,787)	-
	______	______
CASH (USED IN) / GENERATED FROM OPERATIONS	(76) \======	10,407 \======

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, US, 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.

Year ended 31 March 2014

		UK £'000	USA £'000	Spain £'000	Italy £'000	Rest of Europe £'000	Total Reportable Segments £'000	Intra Group £'000	Group £'000
Revenue	-External	36,413	2,966	2,885	2,952	6,341	51,557	-	51,557
	- Other segments	2,877	-	5,238	402	-	8,517	(8,517)	-
Operating (loss) / profit		(1,335)	85	(115)	(2,431)	(277)	(4,073)	-	(4,073)
Finance cost	- External	(375)	-	(87)	(1)	(29)	(492)	-	(492)
	- Other segments	(175)	-	(208)	(191)	(98)	(672)	672	-
Finance income	- External	7	-	-	1	-	8	-	8
	- Other segments	672 ______	- ______	- ______	- ______	- ______	672 ______	(672) ______	- ______
(Loss) / profit before taxation		(1,206)	85	(410)	(2,622)	(404)	(4,557)	-	(4,557)
Analysed as:
Underlying profit / (loss) before taxation		41	85	(410)	(483)	(372)	(1,139)	-	(1,139)
Net foreign exchange impact on intercompany loans		(108)	-	-	-	-	(108)	-	(108)
Amortisation of intangibles		(264)	-	-	(93)	(32)	(389)	-	(389)
Restructuring costs		(875)	-	-	-	-	(875)	-	(875)
Impairment of goodwill		- ______	- ______	- ______	(2,046) ______	- ______	(2,046) ______	- ______	(2,046) ______
(Loss) / profit before taxation		(1,206)	85	(410)	(2,622)	(404)	(4,557)	-	(4,557)
Taxation		338 ______	(4) ______	13 ______	(291) ______	56 ______	112 ______	- ______	112 ______
(Loss) / profit for the year		(868) \======	81 \======	(397) \=====	(2,913) \======	(348) \======	(4,445) \======	- \=====	(4,445) \======
Segment assets		40,430	1,329	10,678	4,214	3,879	60,530	(15,182)	45,348
Less intercompany receivables		(14,052)	(91)	(697)	(304)	(38)	(15,182)	15,182	-
Add tax assets		1,936 ______	- ______	29 ______	318 ______	176 ______	2,459 ______	- ______	2,459 ______
Total assets		28,314 \======	1,238 \======	10,010 \=====	4,228 \======	4,017 \======	47,807 \======	- \=====	47,807 \======
Segment liabilities		22,398	1,259	9,635	4,361	3,783	41,436	(25,263)	16,173
Less intercompany payables		(10,220)	(1,173)	(7,034)	(3,844)	(2,992)	(25,263)	25,263	-
Add tax liabilities		226 ______	3 ______	35 ______	- ______	- ______	264 ______	- ______	264 ______
Total liabilities		12,404 \======	89 \======	2,636 \=====	517 \======	791 \======	16,437 \======	- \=====	16,437 \======
Other segment items
Capital expenditure		2,247	7	1,594	192	19	4,059	-	4,059
Depreciation		2,520	22	966	76	20	3,604	-	3,604
Net foreign exchange on intercompany loans		108	-	-	-	-	108	-	108
Amortisation of intangible assets		264	-	-	92	33	389	-	389
Impairment of goodwill		-	-	-	2,046	-	2,046	-	2,046
Share-based payment		274 \======	- \======	- \=====	- \======	- \======	274 \======	- \=====	274 \======

All transactions between Group companies are on normal commercial terms and an arm's length basis.

Year ended 31 March 2013

		UK £'000	USA £'000	Spain £'000	Italy £'000	Rest of Europe £'000	Total Reportable Segments £'000	Intra Group £'000	Group £'000
Revenue	- External	43,195	2,696	2,655	3,234	5,615	57,395	-	57,395
	- Other segments	2,936	-	3,617	99	-	6,652	(6,652)	-
Operating profit / (loss)		337	12	(132)	(2,754)	(302)	(2,839)	-	(2,839)
Finance cost	- External	(478)	-	(50)	(1)	(32)	(561)	-	(561)
	- Other segments	-	(2)	(213)	(271)	(100)	(586)	586	-
Finance income	- External	11	-	-	2	-	13	-	13
	- Other segments	586 ______	- ______	- ______	- ______	- ______	586 ______	(586) ______	- ______
Profit /(loss) before taxation		456	10	(395)	(3,024)	(434)	(3,387)	-	(3,387)
Analysed as:
Underlying profit before taxation		1,370	10	(395)	(435)	(403)	147	-	147
Net foreign exchange impact on intercompany loans		20	-	-	-	-	20	-	20
Amortisation of intangibles		(264)	-	-	(90)	(31)	(385)	-	(385)
Reorganisation costs		(670)	-	-	(53)	-	(723)	-	(723)
Impairment of goodwill		- ______	- ______	- ______	(2,446) ______	- ______	(2,446) ______	- ______	(2,446) ______
Profit / (loss) before taxation		456	10	(395)	(3,024)	(434)	(3,387)	-	(3,387)
Taxation		(284) ______	- ______	148 ______	936 ______	86 ______	886 ______	- ______	886 ______
Profit / (loss) for the year		172 \======	10 \======	(247) \=====	(2,088) \======	(348) \======	(2,501) \======	- \=====	(2,501) \======
Segment assets		48,938	1,482	10,459	6,829	3,069	70,777	(18,992)	51,785
Less intercompany receivables		(17,530)	-	(1,273)	(189)	-	(18,992)	18,992	-
Add tax assets		1,315 ______	- ______	129 ______	637 ______	145 ______	2,226 ______	- ______	2,226 ______
Total assets		32,723 \======	1,482 \======	9,315 \=====	7,277 \======	3,214 \======	54,011 \======	- \=====	54,011 \======
Segment liabilities		13,571	1,449	9,439	6,823	4,695	35,977	(18,992)	16,985
Less intercompany payables		-	(1,286)	(7,806)	(6,236)	(3,664)	(18,992)	18,992	-
Add tax liabilities		539 ------______	- ______	86 ______	- ______	- ------______	625 ______	- ______	625 ______
Total liabilities		14,110 \======	163 \======	1,719 \=====	587 \======	1,031 \======	17,610 \======	- \======	17,610 \======
Other segment items
Capital expenditure		2,337	26	1,377	31	9	3,780	-	3,780
Depreciation		2,774	20	713	126	31	3,664	-	3,664
Net foreign exchange on intercompany loans		(20)	-	-	-	-	(20)	-	(20)
Amortisation of intangible assets		264	-	-	90	31	385	-	385
Impairment of goodwill		-	-	-	2,446	-	2,446	-	2,446
Share-based payment		20 \======	- \======	- \=====	- \======	- \======	20 \======	- \=====	20 \======

All transactions between Group companies are on normal commercial terms and an arm's length basis.

NOTES

1. General Information

The Company is a limited liability company incorporated and domiciled in the UK.  The address of the registered office is Westwood, Margate, Kent CT9 4JX. The Company has its primary listing on the London Stock Exchange and is registered in England No. 01547390.

This condensed consolidated annual financial information was approved for issue on 26 June 2014.

These preliminary results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.  Statutory accounts for the year ended 31 March 2013 were approved by the Board of Directors on 7 June 2013 and delivered to the Registrar of Companies.  The Report of the Auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act 1985.

Forward Looking Statements

Certain statements in this annual report are forward-looking.  Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct.  Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.

We undertake no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

2.  Basis of preparation

The financial information for the year ended 31 March 2014 has been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'), IFRS Interpretations Committee ('IFRS-IC') interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.  It is also prepared in accordance with the Group's accounting policies which have been consistently applied as set out in the 2013 financial statements.  This information does not constitute statutory accounts but has been extracted from the audited consolidated financial statements which will be sent to shareholders in due course for their approval at the AGM on 10 September 2014.

The Group's banking facilities are renewable from time to time.  The directors are satisfied that these facilities provide adequate funding for the Group's on-going operations.  Accordingly the directors are satisfied that the accounts should be prepared on a going concern basis.

3.  Accounting Policies

Adoption of New and Revised Standards.

Interpretations effective in the current year and relevant to the Group

There are no IFRSs or IFRS-IC interpretations that are effective for the first time for the financial year beginning on 1 April 2013 that have a material impact on the Group.

Amendment to IAS 1, 'Financial statement presentation' regarding other comprehensive income, the main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially re-classifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.

Amendment to IFRS 7 'Financial instruments: Disclosures'

Interpretations effective in the current year but not relevant

The following interpretations to published standards are mandatory for accounting periods beginning on or after 1 April 2013 but are not relevant to the Group's operations in the current year:

Amendment to IAS 12 'Income taxes', on deferred tax, subject to endorsement by the EU

IFRS 13 'Fair value Measurement' provides a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS's

IAS 19 'Employee benefits' is effective for periods beginning on or after 1 January 2013.

Annual Improvements Project 2011; these annual improvements, address six issues in the 2009-2011 reporting cycle, it includes changes to

IFRS 1, First time adoption', IAS 1, 'Financial statement presentation', IAS 16, 'Property, plant and Equipment',

IAS 32, 'Financial instruments; Presentation' and IAS 34, 'Interim financial reporting'. The Group is yet to assess the full impact of these annual improvements and intends to adopt them no later than the accounting period beginning on 1 April 2014.

Amendment to IAS 32 'Financial instruments: Presentation', on asset and liability offsetting. The Group is yet to IAS 32 amendment's full impact and intends to adopt it no later than the accounting period beginning on 1 April 2014.

4. Reconciliation of statutory information to non-statutory information used in the preliminary announcement

Underlying profit before taxation is shown to present a clearer view of the trading performance of the business.  Management has identified the following non-trivial adjustments, whose inclusion in earnings could distort underlying trading performance: net foreign exchange gains/losses on intercompany loans which are dependent on exchange rates from time to time and can be volatile and amortisation of intangibles which result from historic acquisitions and re-structuring. Additionally exceptional items, re-structuring costs and impairments to goodwill, add volatility as these are considered to be one-off items and therefore have also been added back in calculating underlying profit before taxation.

	Group
	2014 £'000	2013 £'000
Loss before taxation	(4,557)	(3,387)
Foreign exchange on intercompany loans
including impact of foreign exchange collar	108	(20)
Amortisation of intangibles	389	385
Impairment of goodwill	2,046	2,446
Restructuring costs	875 ______	723 ______
Underlying (loss) / profit before taxation	(1,139) \======	147 \======

The Statement of Comprehensive Income discloses foreign exchange movements, amortisation of intangibles and impairment of goodwill within other operating expenses. Re-structuring costs are disclosed within administrative expenses. Re-structuring costs include £555,000 associated with the exit agreement with our principal model rail supplier. It also includes the write off of bad debt of a £147,000 associated with one of our largest concessions, Modelzone, which went into administration within the year. The balance of £173,000 is associated with the restructuring costs in the Hong Kong office and in the UK.

The amount shown above comprises loss (2013 - gain) on translation of intercompany loans of £108,000 (2013 - gain of £199,000), offset by a loss on marking to market the foreign exchange collar of £nil (2013 - loss of £179,000).

Reconciliation of net debt:
	Group
	2014 £'000	2013 £'000
Cash	619	3,554
Total borrowings	(7,872) ______	(5,722) ______
Net debt	(7,253) \======	(2,168) \======

Cash of £619,000 above includes restricted cash of £348,055 held within an Escrow account that relates to the exit payment to our previous principal model railway supplier as mentioned within the Financial and Operating review.

1. Dividend

No final dividend is recommended for the year ended 31 March 2014 (2013 - nil). Total dividend for the year ended 31 March 2014 will be nil (2013 - nil).

1. Loss per share

The calculation of loss per ordinary share is based on the loss after taxation for the period of £4,445,000 (year ended 31 March 2013 - loss of £2,501,000) and the weighted average number of ordinary shares in issue during the period of 39,151,439 (year ended 31 March 2013 - 39,151,439).

The calculation of adjusted (loss) / earnings per ordinary share is based on loss after tax adjusted for net tax impact of amortisation of intangibles of £300,000 (year ended 31 March 2013 - £293,000), impairment of goodwill of £2,046,000 (year ended 31 March 2013 - £1,859,000), re-structuring costs of £674,000 (year ended 31 March 2013 - £549,000) and foreign exchange translational adjustments on intercompany loans after tax of £83,000 loss (year ended 31 March 2013 - £15,000 gain).

7.  Related-party Disclosures

There were no 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 was materially interested.  The Group has taken advantage of the exemption available under IAS 24 'Related party disclosures' not to disclose transactions and balances between Group entities that have been eliminated on consolidation.

8.  Risks and Uncertainties

The Board has the primary responsibility for identifying the major business risks facing the Group and developing appropriate policies to manage those risks.  The Board has completed a risk assessment programme in order to identify the major business risks and has reviewed and determined any mitigating actions required.

Business risks include:

UK Market Dependence

The UK market represents a significant part of Group revenue; 71% in 2014 (2013 - 75%).  In order to reduce the proportional exposure to the UK market the Board's strategy continues to be to expand overseas sales.  The acquisitions of the brands Electrotren, Rivarossi, Lima, Jouef, Airfix, Humbrol and Corgi have provided the Group significant market shares of the model railway, model and die cast markets in the UK, Spain, Italy, France and Germany to facilitate European expansion.

Market Conditions

The Group's products are sold in the main to its retail customers.  The performance of the market is affected by the general economic climate including overall consumer and retailer confidence, interest rates and the level of unemployment.  In reviewing the future forecasts for the business the directors consider reasonable changes in macro-economic and associated market conditions, albeit any significant downturn could negatively impact Group sales and margins.

Distribution channels

The retail landscape is changing with the Group's traditional high street independent distribution network under significant commercial pressure from online retailers and discounters. The Group formulates its business strategy, including the website and direct to consumer channels, based on the changing retail dynamics. An increased focus on direct web based selling, selling directly at exhibitions and other events and expanding own retail concession network are all being developed to protect the brand position.

Competing brands

The Group has competition in the model railway, slot racing, model kits, die cast and paint market but in many of its markets the Group enjoys a strong market position due to the continued development of its brands.

Brands are extremely important in the models sector.  In addition market entry capital cost is prohibitive to new entrants even for individual models but especially as they would need to offer an entire branded system.

Exchange rate

The Group finances its operations through a mixture of retained profits and bank borrowings.  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 comprised finance leases, a revolving credit facility, bank overdrafts and a fixed-term loan agreement.  An interest rate hedge is in place to protect the Group against future interest rate rises.

Interest rate risk

The Group finances its operations through a mixture of retained profits and bank borrowings.  The Group borrows, principally in Sterling, at floating rates of interest to meet short term funding requirements.  At the year end the Group's only borrowings were finance leases, a revolving credit facility, bank overdrafts and a fixed term loan agreement. 

Credit risk

The Group manages its credit risk through a combination of internal credit management policies and procedures and external credit insurance.

Supply Chain

The Group purchases goods, in the main, from third party Chinese suppliers due to the significant cost advantage when compared to products manufactured in Europe there is therefore a risk that competition for manufacturing capacity could lead to delays. Input cost escalation in China could reduce or remove the Group's pricing advantage and impact margins. The Group is continuing to develop and diversify its supplier portfolio, which includes a supplier in India and more recently in the UK, and closely monitors production through an increased number of locally based employees (who also ensure the maintenance of quality standards).

Capital Allocation

The Group now holds over 5,000 product lines across its own brand range, producing smaller quantities of more products puts pressure on gross margins. An improved capital allocation process is being developed to deliver a more focused product range in line with consumer demand with robust gross margins.

Product compliance

The Group's products are subject to compliance with toy safety legislation around the world. The Group manages compliance through active monitoring of legislation, robust internal processes and procedures, and policy debate and lobbying with the relevant authorities. 

Liquidity risk        

At 31 March 2014 the Group had a revolving credit facility of £10 million expiring August 2015 and a 5-year fixed-term loan agreement of £12 million with outstanding repayments of £1.5 million scheduled to be completed by July 2014. These have now been replaced by a new revolving credit facility of £13 million expiring in December 2015 which is expected to allow sufficient headroom for trading working capital needs in the current year whilst longer term plans and funding requirements are developed. The Group also has additional facilities of £5 million in place in its European subsidiaries through bank loans and import credit line facilities of which £3.5 million was undrawn at year end. Borrowings in the year ended 31 March 2014 peaked at £11.8 million.  The needs are determined by monitoring forecast and actual cash flows. The Group regularly monitors its performance against its banking covenants to ensure compliance.

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 on-going 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 and quarterly.  Performance against budget is monitored and where any significant deviations are identified appropriate action is taken.

Monitoring system used by the Board

The Board as a whole monitors the operation of the system of internal control through management reviews of the effectiveness of the system of internal control each year.  The Board has adopted a schedule of matters which are required to be brought to it for decision in order to ensure that it maintains full and effective control over appropriate strategic, financial, organisational and compliance issues, including procedures for seeking and obtaining approval for major transactions and capital purchases.

The Board reviews the effectiveness of the system of internal controls on a continuous basis and considers it appropriate for the size of the Group.  The review comprises regular scrutiny of monthly accounts and reports prepared by individual subsidiary companies.  The Board also regularly reviews and formalises financial authority limits throughout the Group.

Corporate Social Responsibility

The Board considers the social, environmental and ethical matters pertinent to the Group, and will review items of significance where appropriate.  The risk assessment procedures in place are designed to highlight any key areas of concern including health and safety considerations, employee recruitment and retention and environmental issues, with controls put in place as necessary.

The Group is pro-active in working with all suppliers to ensure compliance with the International Council of Toy Industries (ICTI) Code of Business Practices to include child and forced labour, working conditions, hours of work, pay, non-discrimination and health and safety.  Compliance is managed through an annual audit process.

Environmental Responsibility

The Group believes that protection of the environment is an integral part of good practice and that it satisfies itself that all of its operations are conducted with reasonable proper regard for the environment.  It is committed to maintaining, and wherever possible improving, the quality of this environment both for the people who work in the Group, and for the wider community now and in the future.  The Group seeks to make the most effective and efficient use of all resources, encouraging all members of the Group to develop an ecologically sound approach to their work.

Statement of Directors' responsibilities

The directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the Group and Parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 the Company and of the profit or loss of the Group and Company for that period.  In preparing these financial statements, the directors are required to:

·     select suitable accounting policies and then apply them consistently;

·     make judgements and accounting estimates that are reasonable and prudent;

·     state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

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. 

The directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

Each of the directors, whose names and functions are listed in the Directors and Corporate Information section, confirm that, to the best of their knowledge:

·      the Group and Company financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group and profit of the Company; and

·      the Strategic Review and Corporate Governance Statement includes a fair review of the true development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

So far as the directors are aware, there is no relevant audit information of which the Company's auditors are unaware; and each director has 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 Company's auditors are aware of that information.

By order of the Board

Richard Ames

Chief Executive

27 June 2014

Nick Stone

Group Finance Director

27 June 2014

This information is provided by RNS

The company news service from the London Stock Exchange

END

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