Toy maker Hornby Plc (LON:HRN) is to carry out a root and branch restructuring after disruption caused by a new software system sent it plunging into the red.
The Scalextric owner is raising £8mln at 27p through a share issue, cutting back its European operation and reducing the number of lines by 40% after losses soared to £13.5mln in 2016.
Without the money, Hornby said there would be 'serious concerns' over its ability to keep trading.
Further product streamlining will take place in 2017, said new chief executive Steve Cooke, with the business to regroup around its most well-known brands, which also include Airfix and Corgi.
One-offs cost £7.9mln last year and included charges for the new software system but more will come this year as restructuring and the financial impact of stock reduction are felt, Cooke added.
One bright spot was that sales in the ten weeks to 12 June this year have grown by 6%, driven largely by the UK and the US.
In the year to March, revenues fell 4% to £55.8mln, with disruption caused by the reorganisation of its distributions and back office systems last year one of the reasons.
“Last year was difficult and disappointing as we faced significant challenges during the continued turnaround and improvement of the business,” said Cooke.
Hornby added that trading in Europe over the last year was “severely impacted” by supply chain issues.
Richard Ames stepped down as chief executive in February after the latest in a number of profit warnings in recent years.
Hornby added that it has agreed a new £10mln loan facility with its bank through to December 2019.
Shares were down 3p, or 9%, to 29p.