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British toy group Hornby is planning to raise fresh capital for the third time in as many years as the new management team at the model trainmaker struggles to stem losses.

Hornby said it would look to raise £12m through an open offer and placing to shore up its balance sheet and fund a £1.6m acquisition of a 49 per cent stake in a company majority-owned by its new chief executive. It has also renegotiated its banking covenants “to align them to the new strategy through to December 2019″, conditional on the fundraising going ahead.

The veteran UK company last tapped the equity markets in June 2016, raising £8m via a placing to implement a restructuring programme it had declared partially complete earlier this year. That followed a £15m issue in 2015, when Hornby needed cash to pay down its debts and avoid breaching the terms of its banking covenants.

On Friday it also announced pre-tax losses had grown in its latest half year compared to a year ago, now standing at £4.6m compared to £3.3m for the six months to September 30 last year. Revenues also dropped, by 22 per cent to £17m, while net debt had more than doubled to £4.7m, leaving it with only £350,000 of headroom in its current £7.75m revolving credit facility.

Even by its own standards, Hornby has had a turbulent year.

A campaign by an activist investor resulted in a change in control of the company after its largest shareholder bought out the activist’s stake. Now holding some 70 per cent — before the latest capital call — Phoenix Asset Management has overseen a shake-up in the group’s management.

Hornby is now on its third new chief executive since the start of 2014, and is on the hunt for a new chairman less than six months after the current interim appointee was brought in.

Lyndon Davies, Hornby chief executive, said on Friday that the latest strategy review had “revealed opportunities to improve performance”.

He said the plan to invest in the group’s key brands, introduce a “clear pricing policy” and strengthen the company balance sheet would “provide the platform for long term sustainable profitability and cash generation” and help “re-establish the value of our brands in the eyes of consumers and collectors alike”.

Hornby said the acquisition of a minority stake in the holding company of rival model business Oxford Diecast, which was founded by Mr Davies, “provides an opportunity to align the interests of the Hornby and the Oxford Diecast businesses,” given Mr Davies’ appointment as chief executive of Hornby.

(Photo: Getty)

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