Toymaker Hornby has called for £12m of funding from its owners after today issuing a gloomy update, flagging increased losses and rising levels of net debt.
The Scalextric, Airfix and Thomas the Tank owner revealed half-year pre-tax losses had risen from £4.7m to £5.7m and net debt jumped from £2.1m to £4.7m.
New boss Lyndon Davies, who made his mark in the toy sector founding Oxford Diecast, used the announcement to roll out a new strategy and funding.
City A.M. understands the multi-million pound placing has the support of Hornby's major shareholders, including 72 per cent backer Phoenix Asset Management.
Davies replaced Steve Cooke, who was helicoptered in at the start of 2016 in order to resize Kent-based firm's balance sheet.
Since taking over in October Davies has reviewed the business and wants to shake-up systems and practices. Changes include no longer offering large quantities of stock at discount, streamlining systems and growing the firm's European offering.
"The review of the business, operations and its strategy has revealed opportunities to improve performance," he said.
By simplifying and improving basic business process, together with better selection and delivery of the highest quality products, we will re-establish the value of our brands in the eyes of consumers and collectors alike.
Despite the fact Hornby is not in breach of its banking covenants, the firm decided to use the new funding as an opportunity renegotiate its existing covenants with lenders to "align them with the new strategy".
Some £1.6m of the proceeds will be used to buy a 49 per cent of Davies' interest in Oxford Diecast.
Shares rose 3.5 per cent in trading.
Read more: Hornby shares slide on softer trading