Interim Results

RNS Number : 6727H
Hornby PLC
07 November 2008
 



 


HORNBY ANNOUNCES HALF YEAR RESULTS


Hornby Plc ('Hornby'), the international hobby products group, has today announced its half year results for the period ended 30 September 2008. Hornby owns a number of model railway and slot car brands, Airfix models, Humbrol paints and Corgi die cast.


  • Turnover for the period £24.2 million  

  • Pre-tax profits of £1.8 million 

  • Earnings per share of 3.12p 

  • Airfix and Corgi acquisitions integrated and performing to plan

  • James Bond 'Quantum of Solace' Scalextric products expected to perform well over Christmas

  • Demand strong but model railway sales constrained by supply issues

  • Proposed Interim dividend of 2.7p 

Frank Martin, Chief Executive of Hornby, said,


' We have made good progress during the first half of the year. We have now assembled a portfolio of heavyweight hobby brands that are all market leaders in their field.  


' The retail markets are undoubtedly more challenging. However the hobby sector has distinctive defensive characteristics, which will help us in a more difficult economic environment. Accordingly, we remain confident that the combination of our experienced management team and our strong brand portfolio will enable us to continue to drive the business forward. In the shorter term run up to Christmas, we expect sales of Scalextric to be boosted by our McLaren and James Bond 'Quantum of Solace' licensed products and the proposed launch of an Airfix kit featuring McLaren and Lewis Hamilton.  


' We have integrated the Corgi acquisition successfully. We are delighted that the business is performing well. Encouragingly, both Airfix and Humbrol brands acquired in 2006, continue to grow. We are sure that all three of these brands will continue to deliver excellent opportunities for growth. 


' Looking forward, despite the challenges we face, we remain confident about the Group's prospects.'



-Ends-

Date: 7th November 2008

For further information contact:


Hornby Plc

City Profile

Frank Martin, Chief Executive

Simon Courtenay

Andrew Morris, Finance Director

William Attwell 

01843-233500

020-7448-3244 





 

INTERIM MANAGEMENT REPORT


I am pleased to report that during the first half of the year the Group has made further good progress towards our goal of building a broadly based model and hobby company. We now have a strong portfolio of well known brands with a distribution network across a wide range of territories. In particular, we are very pleased with our acquisition of Corgi and the integration and relaunch of the business is proceeding according to plan. We continue to have every confidence that Corgi will become a significant contributor to Group profit in the future.

  

Trading conditions in some of our markets have been more difficult than in previous years and this, coupled with the supply constraints in our model railway business which we outlined in July, resulted in sales for the half year being £24.2 million, marginally below the equivalent period last year (£24.5 million). 


Profit before tax at £1.8 million was below last year's £2.7 million and impacted as expected by a £1.3 million increase in our overheads associated mainly with the acquisition of the Corgi business. Our gross margin performance, one percentage point higher than the previous year, was satisfactory and in line with our expectations.


The Group net debt position of £17.1 million as at 30 September 2008 has increased by £8.2 million compared to the previous year reflecting the payment of £8.5 million for the Corgi assets during the first half, in addition to associated increased working capital requirements subsequent to the acquisition. 


Dividend


The Board has declared an interim dividend of 2.7p (2007 - 2.7p) per ordinary share, payable on 30 January 2009 for those shareholders on the register as at 19 December 2008.


Operating Review


The first half of the year has been a busy period for management which has coped well with the demands imposed on it. In addition to the more normal demands of managing and developing an expanding portfolio of products, the Board is pleased that management has also been able to take on and meet the challenges of integrating and relaunching Corgi whilst at the same time managing the challenges posed by the difficulties faced by our principal Chinese supplier. 


UK


In the UK, sales of both Hornby and Airfix were higher than last year. Corgi sales were modest in the half as expected, but forecast volumes for the second half are encouraging. However, sales of Scalextric were below the previous year which was in itself a particularly strong period for Scalextric sales. Taken together these factors resulted in sales in Hornby Hobbies Limited 3% above the previous year.  

 

USA


Hornby America reported sales in line with the previous year in local currency, although the strengthening Dollar during the period resulted in an increase of 7% in reported sales when translated into Sterling


Continental Europe


All of our subsidiaries in continental Europe suffered as a result of continued shortage of supplies as reported previously. This resulted in an overall decrease in sales of 15%. This was disappointing as the order books, particularly in Italy and France were significantly higher than the previous year. 


Supply arrangements


In our AGM announcement, we indicated that our principal supplier in China had been experiencing some difficulties as a result of raw material and other input costs and this had led to some disruption in our supply chain.  As a result, we agreed price rises and have since been working closely with our supplier. We are pleased with the results of these initiatives and are now seeing a marked improvement in availability of supply and expect a significant improvement in performance in the second half.


Current Trading


The Group is operating in an increasingly challenging retail environment as we enter the critical Christmas trading period. Since the beginning of the Autumn we have seen some evidence of retailers taking a more cautious view of likely retail demand and therefore we will take steps to promote sales of our products to ensure a strong sell-through prior to Christmas. On the supply side, we are pleased with the acceptance of the price increases we introduced in September. 


Outlook


The Group has a powerful collection of hobby brands spanning a wide range of price points, market sectors and territories. The Board believes that the defensive qualities of our brands and the breadth of our revenue streams will stand the Group in good stead to weather better a more challenging economic environment. In addition, the positive response to our initiatives to rebuild the Airfix, Humbrol and Corgi brands has been very encouraging. We have strong licensed products in our Scalextric range, including the McLaren and Lewis Hamilton products as well as the James Bond 'Quantum of Solace' ranges. Accordingly, the Board remains confident in the prospects for the year. 




Neil A Johnson

Chairman

7 November 2008


  INCOME STATEMENT

for the six months ended 30 September 2008




Six months to 

30 September

2008

(unaudited)

Six months

to 30 September

2007

Re-stated

(unaudited)

Twelve months

to 31 March

2008

(audited)








Note

£'000

£'000

£'000






REVENUE

4

24,191

24,536

55,692

Cost of sales


(11,900)

(12,400)

(26,297)



_______

_______

_______

GROSS PROFIT


12,291

12,136

29,395






Distribution costs


(994)

(897)

(2,138)

Selling and marketing costs


(5,565)

(4,866)

(11,551)

Administrative expenses


(3,594)

(3,074)

(6,268)

Other operating income/(expenses)


40

(432)

(52)



_______

_______

_______

OPERATING PROFIT


2,178

2,867

9,386






Finance income


22

1

5

Finance costs


(391)

(191)

(374)



_______

_______

_______

PROFIT BEFORE TAXATION

4

1,809

2,677

9,017






Analysed as:





Underlying profit before taxation


2,031

2,614

8,400

Net foreign exchange impact on intercompany loans


(57)

143

780

Amortisation of intangibles


(165)

(80)

(163)



_______

_______

_______

PROFIT BEFORE TAXATION

4

1,809

2,677

9,017

Taxation

9

(633)

(1,214)

(2,940)



_______

_______

_______

PROFIT FOR THE PERIOD





AFTER TAXATION 


1,176

1,463

6,077



_______

_______

_______











EARNINGS PER ORDINARY SHARE 





Basic


3.12p

3.90p

16.15p

Diluted


3.06p

3.76p

15.62p



All of the activities of the Group are continuing.


* See note 2.


The notes form an integral part of this condensed consolidated half-yearly financial information.

  BALANCE SHEET 

as at 30 September 2008




30 September

2008

(unaudited)

30 September

2007

(unaudited)

31 March

2008

(audited)






Note

£'000

£'000

£'000

ASSETS





NON-CURRENT ASSETS





Goodwill


12,785

9,323

9,925

Intangible assets


5,627

2,284

2,404

Property, plant and equipment


10,391

7,634

8,360

Deferred income tax assets


91

199

123



_______

_______

_______



28,894

19,440

20,812



_______

_______

_______






CURRENT ASSETS





Inventories


16,214

12,142

11,890

Trade and other receivables


15,554

17,312

10,851

Cash and cash equivalents


368

134

940



_______

_______

_______



32,136

29,588

23,681



_______

_______

_______

LIABILITIES





CURRENT LIABILITIES





Borrowings

8

(9,198)

(9,017)

(2,220)

Derivative financial instruments


(1,276)

(57)

(1,350)

Trade and other payables


(9,688)

(10,016)

(6,851)

Provisions


(469)

(596)

(500)

Current tax liabilities


(1,152)

(1,263)

(1,723)



_______

_______

_______



(21,783)

(20,949)

(12,644)



_______

_______

_______






NET CURRENT ASSETS


10,353

8,639

11,037



_______

_______

_______

NON-CURRENT LIABILITIES





Borrowings

8

(8,259)

(47)

(41)

Deferred tax liabilities


(403)

(390)

(346)



_______

_______

_______



(8,662)

(437)

(387)



_______

_______

_______

NET ASSETS

4

30,585

27,642

31,462



_______

_______

_______






SHAREHOLDERS' EQUITY





Share capital

7

380

378

380

Share premium


5,278

5,236

5,278

Other reserves


1,743

1,772

1,743

Retained earnings


23,184

20,256

24,061



_______

_______

_______

TOTAL EQUITY


30,585

27,642

31,462



_______

_______

_______






The notes form an integral part of this condensed consolidated half-yearly financial information.

  STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 September 2007 and 30 September 2008




Capital







Share

Share

redemption

Translation

Hedging

Other

Retained

Total


capital

premium

reserve

reserve

reserve

reserves

earnings*

equity


(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(unaudited)

GROUP

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Balance at 1 April 2007

378

5,236

55

(77)

(133)

1,740

20,646

27,845










Exchange adjustment offset in reserves

-

-

-

(34)

-

-

-

(34)

Cash flow hedges

-

-

-

-

81

-

-

81


____

____

_____

____

______

____

______

______

Net (expense)/income recognised directly in reserves

-

-

-

(34)

81

-

-

47

Profit for the period

-

-

-

-

-

-

1,463

1,463


____

____

_____

____

______

____

______

______

Total recognised (expense)/income for the period

-

-

-

(34)

81

-

1,463

1,510


____

____

_____

____

______

____

______

______










Share based payments

-

-

-

-

-

-

114

114

Deferred tax on share based payments

-

-

-

-

-

(23)

-

(23)

Shares vested from Short Term Incentive Plan

-

-

-

-

-

-

295

295

Dividends

-

-

-

-

-

-

(2,099)

(2,099)


____

____

_____

____

______

____

______

______


-

-

-

-

-

(23)

(1,690)

(1,713)


___

____

_____

____

______

____

______

______

Balance at 30 September 2007

378

5,236

55

(111)

(52)

1,717

20,419

27,642


____

____

_____

____

______

____

______

______










Balance at 1 April 2008

380

5,278

55

(197)

133

1,688

24,125

31,462










Exchange adjustment offset in reserves

-

-

-

(114)

-

-

-

(114)

Cash flow hedges

-

-

-

-

138

-

-

138


____

____

_____

____

______

____

______

______

Net (expense)/income recognised directly in reserves

-

-

-

(114)

138

-

-

24

Profit for the period

-

-

-

-

-

-

1,176

1,176


____

____

_____

____

______

____

______

______

Total recognised (expense)/income for the period

-

-

-

(114)

138

-

1,176

1,200


____

____

_____

____

______

____

______

______










Share based payments

-

-

-

-

-

-

124

124

Purchase of own shares by Short Term Incentive Plan

-

-

-

-

-

-

(284)

(284)

Shares vested from Short Term Incentive Plan

-

-

-

-

-

-

270

270

Dividends

-

-

-

-

-

-

(2,187)

(2,187)


____

____

_____

____

______

____

______

______


-

-

-

-

-

-

(2,077)

(2,077)


____

____

_____

____

______

____

______

______










Balance at 30 September 2008

380

5,278

55

(311)

271

1,688

23,224

30,585


____

____

_____

____

______

____

______

______



*    Retained earnings includes £681,000 at 30 September 2008 (2007 - £698,000) which is not distributable and relates to a 1986 revaluation of land and buildings. 


 

 

CASH FLOW STATEMENT 

for the six months ended 30 September 2008






Six months

Six months

Twelve months


to 30 September

to 30 September

to 31 March


2008

2007

2008


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





CASH FLOWS FROM OPERATING ACTIVITIES



Cash (utilised in)/generated from operations

(967)

(2,977)

10,007

Interest received

22

1

5

Interest paid

(391)

(191)

(374)

Tax paid

(1,330)

(1,088)

(2,385)


_______

_______

_______

Net cash (utilised in)/generated from operating activities

(2,666)

(4,255)

7,253


_______

_______

_______









CASH FLOWS FROM INVESTING ACTIVITIES



Purchase of trade assets and related costs

(8,495)

-

-

Proceeds from sale of property, plant and equipment

2

5

71

Purchase of property, plant and equipment

(2,173)

(1,684)

(3,485)


_______

_______

_______

Net cash utilised in investing activities

(10,666)

(1,679)

(3,414)


_______

_______

_______









CASH FLOWS FROM FINANCING ACTIVITIES



Proceeds from issuance of ordinary shares

 -

-

44

Proceeds/(repayment) of loans

8,700

(16)

(13)

Purchase of own shares by Short Term Incentive Plan

(284)

-

-

Finance lease capital payments

(8)

(11)

(49)

Dividends paid to Company's shareholders

(2,187)

(2,099)

(3,118)


_______

_______

_______

Net cash generated from/(utilised in) financing activities

6,221

(2,126)

(3,136)


_______

_______

_______









Effect of exchange rate movements

133

(152)

(1,344)


_______

_______

_______









Net decrease in cash and cash equivalents

(6,978)

(8,212)

(641)

Cash and cash equivalents at beginning of the period

(1,268)

(627)

(627)


_______

_______

_______

CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS 

AT END OF PERIOD

(8,246)

(8,839)

(1,268)


_______

_______

_______





CASH AND CASH EQUIVALENTS CONSIST OF:


Cash and cash equivalents

368

134

940

Bank overdrafts

(8,614)

(8,973)

(2,208)


_______

_______

_______

CASH AND CASH EQUIVALENTS AT END OF PERIOD

(8,246)

(8,839)

(1,268)


_______

_______

_______


The notes form an integral part of this condensed consolidated half-yearly financial information.

  

 

NOTES TO THE CASH FLOW STATEMENT 



Cash flows from operating activities









Six months

Six months

Twelve months


to 30 September

to 30 September

to 31 March


2008

2007

2008


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





Profit before taxation

1,809

2,677

9,017

Interest payable

391

191

374

Interest receivable

(22)

(1)

(5)

Amortisation of intangible assets

165

80

163

Depreciation

1,528

1,474

2,908

Loss/(profit) on disposal of tangible fixed assets

21

6

(7)

Share-based payments

124

114

225

Gain on financial derivatives

(36)

(67)

(65)

(Decrease)/increase in provisions

(31)

303

207

Increase in inventories

(3,731)

(3,701)

(3,449)

Increase in trade and other receivables

(4,275)

(7,145)

(551)

Increase in trade and other payables

3,090

3,092

1,190


_______

_______

_______

CASH (UTILISED IN)/GENERATED FROM OPERATIONS

(967)

(2,977)

10,007


_______

_______

_______



  NOTES TO CONDENSED CONSOLIDATED HALF-YEARLY FINANCIAL REPORT


1.    GENERAL INFORMATION


The Company is a limited liability company incorporated and domiciled in the UK. The address of the registered office is Westwood, MargateKent CT9 4JX.


The Company has its primary listing on the London Stock Exchange.


This condensed consolidated half-yearly financial information was approved for issue on 7 November 2008.


These interim financial results do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 March 2008 were approved by the Board of Directors on 12 June 2008 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 half-yearly 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


This condensed consolidated half-yearly financial information for the half-year ended 30 September 2008 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with the annual financial statements for the year ended 31 March 2008 which have been prepared in accordance with IFRSs as adopted by the European Union.


2007 Income Statement Restatement

The directors are constantly reviewing accounting policies and classification for appropriateness and believe that export commissions (£59,000) should offset revenue and overseas tooling amortisation (£384,000) and royalties (£71,000) should be included in cost of sales. In 2007 these costs were included in operating expenses. Operations overheads (£800,000), included in cost of sales in 2007, have been reclassified to administrative costs.  


The restatement is summarised in the table below:



2007

Export

Tooling

Royalties

Operations

2007


Reported

commission

amortisation


overheads

Restated


£'000

£'000

£'000

£'000

£'000

£'000








Revenue

24,595

(59)

-

-

-

24,536

Cost of Sales

(12,745)

-

(384)

(71)

800

(12,400)


______

_____

____

____

_____

______

Gross Profit

11,850

(59)

(384)

(71)

800

12,136

Distribution costs

(897)

-

-

-

-

(897)

Selling and marketing costs

(5,380)

59

384

71

-

(4,866)

Administrative costs

(2,274)

-

-

-

(800)

(3,074)

Other operating expenses

(432)

-

-

-

-

(432)


______

_____

____

____

_____

______

Operating profit

2,867

-

-

-

-

2,867

Finance income

1

-

-

-

-

1

Finance costs

(191)

-

-

-

-

(191)


______

_____

____

____

_____

______

Profit before tax

2,677

-

-

-

-

2,677


______

_____

____

____

_____

______


There is no change to the profit before tax as a consequence of these re-classifications.

  

Reconciliation of statutory information to non statutory information used in the Interim Management Report 



Group



Six months to

Six months to


30 September

30 September


2008

2007


£'000

£'000




Profit before taxation

1,809

2,677







Foreign exchange on intercompany loans



including impact of foreign exchange collar*

55

(143)

Amortisation of intangibles

165

80


______

______

Underlying profit before taxation

2,029

2,614


______

______


The foreign exchange collar is for a principal amount of Euro 16.5 million and is in place to minimise exposure to Euro denominated intercompany loans.


The amount shown above comprises losses on translation of intercompany loans of £126,000 (2007 - gain of £317,000), offset by a gain on marking to market the foreign exchange collar of £71,000 (2007 - loss of £174,000).


Beneficial cumulative profit impact of the collar from inception to 3 October 2011 is expected to be a minimum of £340,000 if the exchange rate exceeds the strike rate of €1.4300:£, increasing to a maximum of £823,000 at the participation cap rate of €1.3725:£ compared to the intercompany loans Sterling valuation at 31 March 2007 (€1.4734:£).  


As at 30 September 2008 the profit impact is a gain of £725,000. Therefore in the period 1 October 2008 to 30 September 2011 there will be an adjustment to the Income Statement between a £98,000 profit and £385,000 charge. The derivative will become an increasingly efficient hedge as the contract approaches maturity.


 

3.    ACCOUNTING POLICIES


The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2008, as described in those annual financial statements.


The following interpretation is mandatory for the first time for the financial year ending 31 March 2009 but is not relevant for the Group.


IFRIC 14  IAS 19 - 'The limit on a defined benefit asset, minimum funding requirements and their interaction'.


  

4.    GEOGRAPHICAL SEGMENT INFORMATION 


    


Six months

Six months

Twelve months


to 30 September

to 30 September

to 31 March


2008

2007

2008


(unaudited)

(unaudited)

(audited)

BY ORIGIN

£'000

£'000

£'000

REVENUE




United Kingdom

17,734

17,268

40,420

United States of America

1,308

1,226

2,696

Rest of Europe

5,149

6,042

12,576


_______

_______

_______


24,191

24,536

55,692


_______

_______

_______






£'000

£'000

£'000

PROFIT BEFORE TAXATION




United Kingdom

2,401

2,115

7,915

United States of America

(19)

27

34

Rest of Europe

(204)

725

1,437


_______

_______

_______

Total operating profit

2,178

2,867

9,386

Interest

(369)

(190)

(369)


_______

_______

_______

Profit before taxation

1,809

2,677

9,017


_______

_______

_______






£'000

£'000

£'000

NET ASSETS




United Kingdom

12,198

11,055

13,312

United States of America

1,720

1,073

978

Rest of Europe

16,667

15,514

17,172


_______

_______

_______


30,585

27,642

31,462


_______

_______

_______





BY DESTINATION

£'000

£'000

£'000

REVENUE




United Kingdom

15,168

14,247

34,847

Rest of the world

9,023

10,289

20,845


_______

_______

_______


24,191

24,536

55,692


_______

_______

_______


  

5.    ACQUISITIONS


CORGI


On 1 May 2008 Hornby Hobbies Limited acquired the Corgi brand and related tooling and intellectual property rights from Corgi International Limited for £7,589,000 and inventories for £743,000. Legal fees of £163,000 were incurred by Hornby Plc.


The table below sets out the Group's provisional assessment of the fair values of the assets acquired.





Acquirer's

Provisional




carrying

fair value




amount

to the Group




£'000

£'000

Intangible assets:





- customer lists



-

729

- brand names



-

2,676






Property, plant and equipment


1,433

1,433

Inventories



743

743




______

______

Net assets acquired



2,176

5,581

Goodwill




2,914





______

Consideration




8,495





______






Consideration -satisfied by cash

                          -direct costs relating to acquisition


8,332

163

 

 

 

 





______





8,495





______


Goodwill is attributable to significant synergies arising post-acquisition due to Hornby's existing presence in the hobby sector and it's extensive customer base.


Hornby Hobbies Limited acquired a part of the Corgi International Limited assets and therefore historical trading performance is not available in relation to the assets acquired. The Corgi assets have been fully integrated into Hornby Hobbies Limited and it is not possible to extract meaningful trading results of the assets since acquisition to 30 September 2008 other than £1.2 million sales of Corgi product in the period would have been approximately £1.5 million had the Corgi brands been included in the Group from the start of the financial year.


  6.    CAPITAL EXPENDITURE


    

Six months ended 30 September 2008


Tangible and



intangible assets



(unaudited)



£'000




Opening book amount 1 April 2008


20,689

Exchange adjustment


(97)

Additions


2,175

Acquisitions


7,752

Disposals


(23)

Depreciation, amortisation, impairment and other movements


(1,693)



______

Closing net book amount 30 September 2008


28,803



______




The fixed asset additions primarily relate to new product tooling (£1,715,000), property, plant and equipment (£345,000) and motor vehicles (£115,000).







Six months ended 30 September 2007


Tangible and



intangible assets



(unaudited)



£'000

Opening book amount 1 April 2007


18,985

Exchange adjustment


218

Additions


1,603

Disposals


(11)

Depreciation, amortisation, impairment and other movements


(1,554)



______

Closing net book amount 30 September 2007


19,241



______








2008

2007


(unaudited)

(unaudited)

CAPITAL COMMITMENTS

£'000

£'000




At 30 September commitments were:



Contracted for but not provided for

1,224

519


_______

_______




The commitments relate to the acquisition of property, plant and equipment.

  7.    SHARE CAPITAL


The Group has 37,989,100 ordinary 1p shares in issue with nominal value £379,891 (2007 - £378,408).


No employee share options were exercised during the first half to 30 September 2008 (2007 - nil shares). 


8.    BORROWINGS AND LOANS






30 September

30 September

31 March


2008

2007

2008


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000

CURRENT:




Bank overdrafts

8,614

8,973

2,208

Bank loans

544

-

-

Finance lease obligations

40

44

12


______

______

______


9,198

9,017

2,220


______

______

______









NON-CURRENT:




Bank loans

8,156

-

-

Finance lease obligations

103

47

41


______

______

______


8,259

47

41


______

______

______


The Group has a £12,000,000 overdraft facility at 30 September 2008 (2007 - £12,000,000) that attracts interest at 1% above Barclays Bank base rate.


9.    INCOME TAXATION


The tax expense is recognised based on management's last estimate of the weighted average annual tax rate expected for the full financial year. 


10.    EARNINGS PER SHARE


Earnings per share attributable to equity holders of the Company arise from continuing and discontinued operations as follows:


    


30 September

30 September

31 March


2008

2007

2008


(unaudited)

(unaudited)

(audited)





Earnings per share for profit from continuing operations




attributable to the equity of the Company




- basic

3.12p

3.90p

16.15p

- diluted

3.06p

3.76p

15.62p


11.    DIVIDENDS


A dividend that related to the year ended 31 March 2008 and amounted to £2,187,000 was paid in August 2008 (2007 - £2,099,000).


12.    CONTINGENT LIABILITIES


The Company and its subsidiary undertakings are, from time to time, parties to legal proceedings and claims, which arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings and claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position.


  13.    RELATED-PARTY TRANSACTIONS


    Key management compensation amounted to £1,283,000 for the six months to 30 September 2008 (2007 - £1,134,000).






30 September

30 September

31 March


2008

2007

2008


(unaudited)

(unaudited)

(audited)


£'000

£'000

£'000





Salaries and other short-term benefits

1,068

967

1,934

Post-employment benefits

91

72

143

Share-based payments

124

95

206


______

______

______


1,283

1,134

2,283


______

______

______


14.    EVENTS OCCURING AFTER THE BALANCE SHEET DATE


The Directors propose an interim dividend of 2.7p per ordinary share which is payable on 30 January 2009.


There have been no significant events since the balance sheet date.


15.    RISKS AND UNCERTAINTIES


The key risks and uncertainties as disclosed on pages 16 and 17 of the Group's Annual Report for the year ended 31 March 2008 remain valid. The principal risks and uncertainties of the Group for the remaining six months of the current financial year are disclosed in the interim management report for the half year ended 30 September 2008.


16.    SEASONALITY


Sales are subject to seasonal fluctuations, with peak demand in the October - December quarter. For the six months ended 30 September 2008 sales represented 43% (2007 - 52%) of the annual sales for the year ended 31 March 2008.



  

STATEMENT OF DIRECTORS' RESPONSIBILITIES


The Directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.


The Directors of Hornby Plc are listed in the Hornby Plc Annual Report for 31 March 2008 with the exception of N J Cosh who resigned on 22 July 2008. A list of current directors is maintained on the Hornby Plc website: www.hornby.co.uk






Frank Martin

Chief Executive


7 November 2008




Andrew Morris

Finance Director


7 November 2008

  INDEPENDENT REVIEW REPORT TO HORNBY PLC



INTRODUCTION

We have been engaged by the Company to review the condensed consolidated half-yearly financial information in the condensed consolidated half-yearly financial report for the six months ended 30 September 2008 which comprises the income statement, balance sheet, statement of changes in equity, cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated half-yearly financial information.


DIRECTORS' RESPONSIBILITIES

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.


As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of consolidated financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.


OUR RESPONSIBILITY

Our responsibility is to express to the Company a conclusion on the condensed consolidated half-yearly financial information in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.


SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.


CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated half-yearly financial information in the half-yearly financial report for the six months ended 30 September 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.




PRICEWATERHOUSECOOPERS LLP

Chartered Accountants

Gatwick


7 November 2008


Notes:


(a)

The maintenance and integrity of the Hornby Plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.



(b)

Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.








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