Hornby Regulatory News (HRN)

28 Jul 2008 12:00



AGM TRADING UPDATE 

AND INTERIM MANAGEMENT STATEMENT

Speaking today at the Annual General Meeting of Hornby Plc, the international models and collectibles Group, the Chairman Neil Johnson, will provide the following trading update and first interim management statement, relating to the period from 1 April 2008 to 30 June 2008.

" I am pleased to report to shareholders that there have been no significant changes in the position of the company since the publication of the Report and Accounts in respect of the financial year ended 31 March 2008.

" Our businesses in the UK, mainland Europe and the USA continue to experience good demand for our products. Sales to consumers via our network of concessions and via our retail customers have been encouraging and have held up well in a generally challenging retail environment. Our order intake across the Group has been higher compared to the prior year, on a like for like basis. 

" We continue to see great opportunities in Europe to leverage the strength of the brands we have acquired and to continue to grow our sales. In the UK our product listings with the major retailers are stronger than last year. We have a good product pipeline driven by licenses such as James Bond and McLaren. As is the case every year much will depend upon consumer confidence and the robustness of consumer demand in the pre-Christmas period in determining the overall result for the year. Historically hobby products such as ours have performed relatively well in times of consumer uncertainty. 

" Our recent strategy has been to diversify and strengthen the Group's supply and revenue streams. We have completed a number of acquisitions of established hobby brands that have extended our subsidiaries into new international markets. The main European markets are currently experiencing more favourable economic conditions than the UK, providing better balance to our business. 

" The acquisition of the Airfix and Humbrol brands in November 2006 has proved to be very successful. We continue to rebuild market share in the model kits business and we are confident that we will continue to grow sales and profits in these brands. 

" The integration of the Corgi business, acquired in April 2008, is proceeding according to plan. We expect this business to be earnings neutral in the current year, and earnings positive thereafter. However, given the inevitable time-lag between buying the Corgi assets and receiving supplies of new products from our suppliers in China, earnings will be adversely affected in the first half of the current financial year. As with Airfix and Humbrol, the introduction of new product ranges will be the main driver of future growth in this new segment of our business. We see great synergies in product development, licensing and distribution between Corgi and our other product categories.

" We have taken positive steps to improve our supply chain performance, which last year constrained our sales of model railway products in Europe. Whilst many of the issues have been resolved by improved communication and providing additional engineering resource, both in the UK and also in China, some underlying problems continue, largely due to the increasing input costs borne by our suppliers. Accordingly, to assist further, we have agreed to revise our purchasing agreement with our principal Chinese supplier which will increase our purchasing costs in the current financial year by up to US$2M. We anticipate mitigating this cost pressure over time but it is likely that this will only partially be achieved by the end of the current financial year. 

" In conclusion, although the Group is operating against a background of higher input prices and in difficult economic circumstances, the brand, product and distribution strengths of the Group, coupled with increased breadth of sectoral and geographic coverage give confidence that we are in a good position to continue to build our business during the current financial year and beyond."

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Date:  28th July 2008

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