Hornby Regulatory News (HRN)

6 Jun 2008 07:00



 

HORNBY CONTINUES MOMENTUM AS AIRFIX

PROVES MODEL ACQUISITION

Hornby Plc ("Hornby", or "the Group"), the international hobby products group, has today announced its full year results for the year ended 31st March 2008.

Turnover up 19% to £55.7m (2007: £46.8m)

Pre-tax profits up 17% to £9.0m (2007: £7.7m)

Underlying pre-tax profits increased to £8.4m (2007: £8.1m)

Earnings per share up 10% to 16.15p (2007: 14.64p)

Airfix and Humbrol fully integrated and performing well ahead of expectations

European subsidiaries delivering growth in sales and profits

Corgi acquisition announced post year end

Digital Technology Systems in Hornby and Scalextric proving extremely popular

New licence announced with James Bond 

Full year dividend of 8.5p, up 5% (2007: 8.1p)

Frank Martin, Chief Executive of Hornby, commented:

" This has been another excellent year of growth for Hornby. Since buying Airfix in November 2006, we have carried out our detailed plan to re-invigorate the business. Airfix is now well and truly back on its feet. We are delighted that it has delivered a performance that is well ahead of our expectations.

" Our strategy to build a broader base of exciting product ranges selling in more countries is well on target. We have acquired a series of well known hobby brands that have responded well to our fresh investment and active management. Our team has the experience, innovative approach and track record to re-invigorate famous hobby brands successfully.

" In a further move, we are delighted to have acquired Corgi, the iconic die-cast model brand. Our plans to re-launch the business are already well advanced. Corgi retailers and collectors are delighted that Hornby has taken over. We are confident that we will quickly rebuild sales, profits and market share.

" The Group is very well placed to deliver further growth. We have a fantastic portfolio of brands and an exceptional team to drive forward their potential. Our broad range of products together with our growing geographical presence, gives us a solid base to enter Hornby's next phase of growth. 

" Looking to the future, we have an exciting pipeline of products, including James Bond themed Scalextric sets. We continue to keep a close eye on the market for other brands that could strengthen our portfolio in the international hobby market. Despite the challenging market conditions, the Group is confident that it will continue to deliver further growth."

-ends-

High resolution images are available for the media to view and download free of charge from www.vismedia.co.uk

Date: 6th June 2008

For further information contact:

Hornby Plc	City Profile
Frank Martin, Chief Executive	Simon Courtenay 07958-754273
Andrew Morris, Finance Director	William Attwell 07973-281650
01843-233500	020-7448-3244
Web: www.hornby.com

CHAIRMAN'S STATEMENT

Year ended 31 March 2008 

Introduction

I am pleased to report a strong performance for the year.  As we reported at the time of the Interim results, we experienced good demand for our products in all subsidiaries during the first half of the financial year. This high demand continued throughout the Christmas period, and I am particularly delighted that sales of Airfix and Humbrol, acquired in November 2006, exceeded our expectations at the time of the acquisition.  This not only gives us confidence that sales of these acquired ranges will continue to grow, but also confirms our ability to integrate and grow acquired businesses.

Sales in all of our European subsidiaries grew significantly during the year, resulting in Group sales ahead 19% to £55.7 million. Pre-tax profit before amortisation of intangibles and foreign exchange translation adjustments on intercompany loans (hereafter referred to as underlying pre-tax profits) increased to £8.4 million (2007 - £8.1 million) (see note 4). Basic earnings per share before the effect of amortisation of intangibles and foreign exchange translation adjustments on intercompany loans (hereafter referred to as underlying basic earnings per share), both non-cash items, were 15.13p (2007 - 15.58p). Statutory pre-tax profits were £9.0 million (2007 - £7.7 million).  Statutory basic earnings per share were 16.15p (2007 - 14.64p).

Underlying basic earnings per share and statutory basic earnings per share were adversely affected by a higher tax charge of 32.6% (2007 - 28.0%).  This increased charge arose as a result of the tax treatment of the Company's employee share schemes.  The company receives a future tax deduction based on the market value of shares less the option price (if any) at the date of exercise of the share option by the employee.  The fall in the company's share price during the year has resulted in a decrease in the deferred tax asset in relation to the employee share schemes. 

Gross Margins in the second half of the year improved to 55.4% (49.5% in the first half - restated), as anticipated at the time of the interim report. Full year gross margin was 52.8% (2007 - 56.5% restated) The lower margin in the full year is due to higher charges for tooling amortisation, a change in customer and product mix towards set sales in major retail accounts, and a reduced effect of releases and exchange rate treatment compared to the previous year.

Dividend

The Board is recommending an increase in the final dividend to 5.8p per ordinary share. This will be paid on 15 August 2008 to shareholders on the register at 11 July 2008.

Taken together with the interim dividend of 2.7p, this gives a total dividend for the year of 8.5p, an increase of 4.9% over the dividend of 8.1p in respect of the previous financial year. This marks the eighth consecutive year of dividend growth.  The Board continues to believe that a progressive dividend policy is appropriate given the inherently cash-generative properties of the business. 

Review of the Business

After the strong first half of the financial year, in which sales compared to the previous year increased  by 37%, sales in the second half increased by 7% against a much stronger comparative period.  Airfix and Scalextric sales continued to show good growth, however sales of model railway products in the final quarter of the financial year were constrained to an extent by delays in new product supplies to our European subsidiaries.  Steps have been taken to ensure that the engineering capacity available to us is matched more closely to our new product introduction programme.

Underpinning these results the Group has continued to make excellent progress in establishing itself as a broadly based global supplier to the Hobby market.  Against a background of increased competition from electronic toys and games, demand for our products has continued to grow.  We have ensured that our ranges are at the cutting edge of applicable technology with the Hornby and Scalextric digital systems, both of which have proven very popular.  We are also able to position our products at the forefront of media awareness due partly to powerful licensing arrangements with partners such as McLaren and more recently the James Bond agreement with Eon Productions. 

Sales of the Scalextric Sport Digital System (SSD) showed strong year on year growth as the market continues to migrate towards our superior digital racing format.

  The Hornby Digital Control System for model railways gained further market share during the year, and our digital Virgin Trains Pendolino set generated the highest revenue amongst our model railway set range.  We expect the market, as with Scalextric, to continue to migrate to our superior digital format. In addition, during the year we introduced the entry level range -"Hornby Railroad".  This range is designed to encourage younger enthusiasts to build their Hornby collections at lower price points than the fully detailed and more expensive main Hornby range.  This range has been well received by the younger market and we will be extending the scope of "Railroad" over the coming years. 

Sales in the principal UK operating companies grew by 17% to £40.4 million, and underlying profit before tax increased to £7.7 million (2007 - £7.6 million). This result includes export sales to third parties of £5.6 million (2007 - £4.3 million).

International Subsidiaries

Our subsidiaries in mainland Europe have made good progress and have increased their market share.  They contributed profits before tax of £617,000 to the Group result on sales of £12.6 million, compared with £419,000 in the previous year on sales of £9.7 million. This result would have been better if not for the delays in product introductions already mentioned.  However the infrastructure is now in place to continue to increase sales and profits in Europe and we expect further significant improvements in performance in the future. 

Sales in Hornby America were slightly down at $5.4 million (2007 - $5.6 million), producing a profit before tax of $32,000 (2007 - $82,000).  Upon translation into Sterling, due to the continuing weakness in the US dollar, sales were £2.7 million (2007 - £2.8 million) with profit before tax of £16,000 (2007 - £42,000).  However, Hornby Hobbies in the UK benefits from a gross margin contribution of £450,000 generated on sales made to Hornby America, which has the effect of increasing significantly the overall contribution to Group profit of our US operation. 

Product Development

Our product development programme continues to be a key driver of our business and we have increased further our resources in this area, to cope with the additional demands of our subsidiaries and the increase in product categories.  We have also increased our product development resources to reduce our design dependence on external sources.  In so doing we expect to gain a greater degree of control over the timing of new product introductions, particularly for our European markets.

Acquisition of Corgi

On 30 April 2008, we acquired the principal assets of the Corgi die cast business from Corgi Inc.  Following the sale of these assets, Corgi Inc. will change its name and has no continuing rights in the name Corgi.  We have long recognised Corgi as a logical fit with our existing business.  Synergies in product development, licensing, sourcing, operations, distribution and marketing are expected to result in the Corgi assets becoming a significant contributor to Group profit over the coming years.  We are already making good progress with the integration programme and we are confident that we will reinvigorate the Corgi business.

Board changes

During the year there have been a number of significant developments at Group Board level.  Andrew Morris has joined us as Group Financial Director and we welcome his input and experience.  At the same time John Stansfield has stepped down from the Board but his enormous depth of experience remains available to us as he continues in his role as Company Secretary and as Finance Director of Hornby Hobbies Limited.

At Non-executive level we welcome Nigel Carrington and Mark Rolfe to the Board.  They both bring excellent and relevant experience to our activities.  Nick Cosh has decided to leave the Board after nine years' outstanding service, contributing to strategic development and also Chairing the Audit Committee.  I should like to express my thanks to Nick on behalf of the Board, and our best wishes for the future.

  Outlook

Our strategy of building a broadly based model and hobby group with strong defensive attributes has been further strengthened by the successful and profitable integration of the Airfix and Humbrol business.  The acquisition of the Corgi assets now allows us to take further advantage of our distribution network and product development skills. 

Notwithstanding the general economic downturn in many of the markets in which we operate, we are anticipating another year of good progress.  We will continue to build sales of the Humbrol and Airfix brands and we expect demand for our model railway and slot-racing brands to continue to increase.  We now also have the added opportunity to restore sales of Corgi to their historically high levels.  The outlook across the Group, both geographically and by product sector is positive, and we look forward with confidence.

Finally I should like to thank our Chief Executive Frank Martin and through him all our staff, for their continuing dedication to growing the business, improving profitability and ensuring a strong future.

Neil Johnson

Chairman

6 June 2008

  

GROUP INCOME STATEMENT

FOR THE YEAR ENDED 31 MARCH 2008

	2008	2007
	(unaudited)	(restated*)
	£'000	£'000
REVENUE	55,692	46,849
Cost of sales	(26,297)	(20,356)
	_______	_______
GROSS PROFIT	29,395	26,493
Distribution costs	(2,138)	(1,678)
Selling and marketing costs	(11,551)	(10,128)
Administrative expenses	(6,268)	(5,158)
Other operating expenses	(52)	(1,650)
	_______	_______
OPERATING PROFIT	9,386	7,879
Finance income	5	7
Finance costs	(374)	(224)
	_______	_______
PROFIT BEFORE TAXATION	9,017	7,662

Analysed as -

Underlying profit before taxation 8,400 8,118

Net foreign exchange impact on intercompany loans 780 (342)

Amortisation of intangibles (163) (114)

_____ ____

PROFIT BEFORE TAXATION 9,017 7,662

Taxation	(2,940)	(2,149)
	_______	_______
PROFIT FOR THE YEAR ATTRIBUTABLE
TO EQUITY HOLDERS	6,077	5,513
	_______	_______
EARNINGS PER ORDINARY SHARE
Basic	16.15p	14.64p
Diluted	15.62p	14.11p

All of the activities of the Group are continuing.

* See note 3.

  

GROUP BALANCE SHEET

AT 31 MARCH 2008

Groups

	2008	2007
	(unaudited)
	£'000	£'000
ASSETS
NON-CURRENT ASSETS
Goodwill	9,925	9,206
Intangible assets	2,404	2,321
Property, plant and equipment	8,360	7,458
Deferred tax assets	123	421
	_______	_______
	20,812	19,406
	_______	_______
CURRENT ASSETS
Inventories	11,890	8,441
Trade and other receivables	10,851	10,087
Cash and cash equivalents	940	329
	_______	_______
	23,681	18,857
	_______	_______
LIABILITIES
CURRENT LIABILITIES
Borrowings	(2,220)	(1,005)
Derivative financial instruments	(1,350)	(202)
Trade and other payables	(6,851)	(7,216)
Provisions	(500)	(293)
Current tax liabilities	(1,723)	(1,291)
	_______	_______
	(12,644)	(10,007)
	_______	_______
NET CURRENT ASSETS	11,037	8,850
	_______	_______
NON-CURRENT LIABILITIES
Borrowings	(41)	(53)
Deferred tax liabilities	(346)	(358)
	_______	_______
	(387)	(411)
	_______	_______
NET ASSETS	31,462	27,845
	_______	_______
SHAREHOLDERS' EQUITY
Share capital	380	378
Share premium	5,278	5,236
Capital redemption reserve	55	55
Translation reserve	(197)	(77)
Hedging reserve	133	(133)
Other reserves	1,688	1,740
Retained earnings	24,125	20,646
	_______	_______
TOTAL EQUITY	31,462	27,845
	______	_______

  

GROUP STATEMENT OF CHANGES IN EQUITY 

for the years ended 31 March 2008 (unaudited) and 31 March 2007

			Capital
	Share	Share	redemption	Translation	Hedging	Other	Retained	Total
	capital	premium	reserve	reserve	reserve	reserves	earnings	equity
GROUP	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2006	376	5,050	55	(85)	-	1,688	17,779	24,863
Exchange adjustment offset in reserves
recognised directly in equity	-	-	-	8	-	-	-	8
Cash flow hedges	-	-	-	-	(133)	-	-	(133)
	____	______	____	______	____	______	______	____
Net expense recognised directly in reserves	-	-	-	8	(133)	-	-	(125)
Profit for the year	-	-	-	-	-	-	5,513	5,513
	____	______	____	______	____	______	______	____
Total recognised income for the year	-	-	-	8	(133)	-	5,513	5,388
	____	______	____	______	____	______	______	____
Issue of shares	2	186	-	-	-	-	-	188
Share-based payments	-	-	-	-	-	-	237	237
Deferred tax on share-based payments	-	-	-	-	-	52	-	52
Purchase of own shares for EBT	-	-	-	-	-	-	(177)	(177)
Shares vested from EBT	-	-	-	-	-	-	231	231
Dividends	-	-	-	-	-	-	(2,937)	(2,937)
	____	______	____	______	____	______	______	____
	2	186	-	-	-	52	(2,646)	(2,406)
	____	______	____	______	____	______	______	____
Balance at 31 March 2007	378	5,236	55	(77)	-133	1,740	20,646	27,845
	____	______	____	______	____	______	______
Exchange adjustment offset in reserves	-	-	-	(120)	-	-	-	(120)
Cash flow hedges	-	-	-	-	266	-	-	266
	____	______	____	______	____	______	______	______
Net expense recognised directly in reserves	-	-	-	(120)	266	-	-	146
Profit for the year	-	-	-	-	-	-	6,077	6,077
	____	______	____	______	____	______	______	______
Total recognised income for the year	-	-	-	(120)	266	-	6,077	6,223
	____	______	____	______	____	______	______	____
Issue of shares	2	42	-	-	-	-	-	44
Share-based payments	-	-	-	-	-	-	225	225
Deferred tax on share-based payments	-	-	-	-	-	(52)	-	(52)
Shares vested from EBT	-	-	-	-	-	-	295	295
Dividends	-	-	-	-	-	-	(3,118)	(3,118)
	____	______	____	______	____	______	______	____
	2	42	-	-	-	(52)	(2,598)	(2,606)
	____	______	____	______	____	______	______	____
Balance at 31 March 2008	380	5,278	55	(197)	133	1,688	24,125	31,462
	____	______	____	______	____	______	______	____

Retained earnings includes £689,000 at 31 March 2008 (2007 - £706,000) which is not distributable and relates to a 1986 revaluation of land and buildings. 

  GROUP CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 MARCH 2008

Group

	2008	2007
	(unaudited)
	£'000	£'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations	10,007	10,372
Interest received	5	7
Interest paid	(374)	(224)
Tax paid	(2,385)	(2,213)
	_______	______
Net cash generated from operating activities	7,253	7,942
	_______	______
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of trade assets and related costs	-	(2,653)
Proceeds from sale of property, plant and equipment	71	33
Purchase of property, plant and equipment	(3,485)	(3,657)
	_______	______
Net cash utilised in investing activities	(3,414)	(6,277)
	_______	______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares	44	188
Repayment of loans	(13)	(192)
Purchase of own shares by Short Term Incentive Plan	-	(177)
Finance lease capital payments	(49)	(47)
Dividends paid to Company's shareholders	(3,118)	(2,937)
	_______	______
Net cash utilised in financing activities	(3,136)	(3,165)
	_______	______
Effect of exchange rate movements	(1,344)	127
	_______	______
Net decrease in cash and cash equivalents	(641)	(1,373)
Cash, cash equivalents and bank overdrafts
at beginning of the year	(627)	746
	_______	______
CASH, CASH EQUIVALENTS AND
BANK OVERDRAFTS AT END OF YEAR	(1,268)	(627)
	_______	______
CASH, CASH EQUIVALENTS AND
BANK OVERDRAFTS CONSIST OF -
Cash and cash equivalents	940	329
Bank overdrafts	(2,208)	(956)
	_______	______
CASH, CASH EQUIVALENTS AND
BANK OVERDRAFTS AT END OF YEAR	(1,268)	(627)
	_______	______

  NOTES TO THE CASH FLOW STATEMENT

CASH FLOW FROM OPERATING ACTIVITIES

Group

	2008	2007
	(unaudited)
	£'000	£'000
Profit before taxation	9,017	7,662
Interest payable	374	224
Interest receivable	(5)	(7)
Amortisation of intangible assets	163	114
Depreciation	2,908	2,114
(Profit)/loss on disposal of tangible fixed assets	(7)	21
Share-based payments	225	237
(Gain)/loss on financial derivatives	(65)	69
Increase/(decrease) in provisions	207	(7)
(Increase)/decease in inventories	(3,449)	184
Increase in trade and other receivables	(551)	(814)
Increase in trade and other payables	1,190	575
	_______	_______
CASH GENERATED FROM OPERATIONS	10,007	10,372
	_______	_______

  SEGMENTAL REPORTING

The primary reporting format for segmental purposes is geographic, as this is the basis on which the Group is organised and managed. Transactions with and balances to the other segments have been identified below and eliminated.

Hornby's secondary reporting format is business and as the Group operates on a single business segment, further analysis is not required here.

Year ended 31 March 2008 (unaudited)

				Rest	Total
				of	Reportable	Intra
		UK	USA	Europe	Segment	Group	Group
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue	- External	40,420	2,696	12,576	55,692	-	55,692
	- Other segments	3,067	-	2,601	5,668	(5,668)	-
Operating profit		7,915	34	1,437	9,386	-	9,386
Interest expense	- External	(301)	-	(73)	(374)	-	(374)
	- Other segments	(109)	(22)	(748)	(879)	879	-
Interest income	- External	-	4	1	5	-	5
	- Other segments	879	-	-	879	(879)	-
		______	______	______	______	______	______
Profit before tax		8,384	16	617	9,017	-	9,017
Taxation		(2,524)	-	(416)	(2,940)	-	(2,940)
		______	______	______	______	______	______
Profit for the year		5,860	16	201	6,077	-	6,077
		______	______	______	______	______	______
Segment assets		41,074	1,021	20,892	62,987	(18,494)	44,493
Less intercompany receivables		(17,582)	(1)	(911)	(18,494)	18,494	-
		______	______	______	______	______	______
Total assets		23,492	1,020	19,981	44,493	-	44,493
		______	______	______	______	______	______
Segment liabilities		10,201	1,004	20,320	31,525	(18,494)	13,031
Less intercompany payables		(21)	(962)	(17,511)	(18,494)	18,494	-
		______	______	______	______	______	______
Total liabilities		10,180	42	2,809	13,031	-	13,031
		______	______	______	______	______	______
Other segment items
Capital expenditure		1,960	23	1,632	3,615	-	3,615
(including acquisitions)
Depreciation		1,970	8	930	2,908	-	2,908
Net foreign exchange on inter company loans		(780)	-	-	(780)	-	(780)
Amortisation of intangible assets		57	-	106	163	-	163
Short Term Incentive Plan
- charge to Income Statement		225	-	-	225	-	225
		______	______	______	______	______	______

All transactions between Group companies are on normal commercial terms and an arm's length basis.

  Year ended 31 March 2007 (restated *)

				Rest	Total
				of	Reportable	Intra
		UK	USA	Europe	Segment	Group	Group
		£'000	£'000	£'000	£'000	£'000	£'000
Revenue	- External	34,337	2,829	9,683	46,849	-	46,849
	- Other segments	2,964	-	2,046	5,010	(5,010)	-
Operating profit		6,694	70	1,115	7,879	-	7,879
Interest expense	- External	(190)	-	(34)	(224)	-	(224)
	- Other segments	(79)	(29)	(667)	(775)	775	-
Interest income	- External	1	1	5	7	-	7
	- Other segments	775	-	-	775	(775)	-
		______	______	______	______	______	______
Profit before tax		7,201	42	419	7,662	-	7,662
Taxation		(1,822)	(8)	(319)	(2,149)	-	(2,149)
		______	______	______	______	______	______
Profit for the year		5,379	34	100	5,513	-	5,513
		______	______	______	______	______	______
Segment assets		35,434	1,037	16,982	53,453	(15,113)	38,340
Less intercompany receivables		(14,397)	-	(716)	(15,113)	15,113	-
		______	______	______	______	______	______
Total assets		21,037	1,037	16,266	38,340	-	38,340
		______	______	______	______	______	______
Segment liabilities		7,949	977	16,722	25,648	(15,153)	10,495
Less intercompany payables		(34)	(954)	(14,165)	(15,153)	15,153	-
		______	______	______	______	______	______
Total liabilities		7,915	23	2,557	10,495	-	10,495
		______	______	______	______	______	______
Other segment items
Capital expenditure		2,725	2	1,403	4,130	-	4,130
(including acquisitions)
Depreciation		1,578	11	518	2,107	-	2,107
Net foreign exchange on intercompany loans		342	-	-	342	-	342
Amortisation of intangible assets		14	-	100	114	-	114
Short Term Incentive Plan - charge to Income Statement		232	-	-	232	-	232
		______	______	______	______	______	______

* See note 3.

  NOTES

1. Basis of preparation

The financial information for the year ended 31 March 2008 has been prepared in accordance with International Accounting Standards ('IAS') and International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU') and also as issued by the International Accounting Standards Board, International Financial Reporting Interpretations Committee interpretations and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. It is also prepared in accordance with the Group's accounting policies which have been consistently applied as set out in the 2007 financial statements (except as set out below). This information does not constitute statutory accounts and has not been audited.

2. Non-statutory accounts

These statements do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985.  The financial statements for the year ended 31 March 2007 were prepared in accordance with IFRS and have been delivered to the Registrar of Companies and on which the auditors made an unqualified report.

3. 2007 Restatement

The directors are constantly reviewing accounting policies and classification for appropriateness and believe that export commissions (£62,000) should offset revenue and overseas tooling amortisation (£474,000) and royalties (£96,000) should be included in cost of sales. In 2007 these costs were included in operating expenses. Operations overheads (£1,652,000), included in cost of sales in 2007, have been reclassified to administrative costs. In addition, year end foreign exchange translation adjustments of intercompany currency loans (£342,000) are more appropriately shown within operating expenses. In 2007 these were included in finance costs. The restatement is summarised in the table below -

	2007	Export	Tooling	Royalties	Exchange	Operations	2007
	Reported	commission	amortisation		i'c loans	overheads	Restated
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Revenue	46,911	(62)	-	-	-	-	46,849
Cost of Sales	(21,438)	-	(474)	(96)	-	1,652	(20,356)
	______	______	______	______	______	______	______
Gross Profit	25,473	(62)	(474)	(96)	-	1,652	26,493
Distribution costs	(1,678)	-	-	-	-	-	(1,678)
Selling and Marketing costs	(10,760)	62	474	96	-	-	(10,128)
Administrative costs	(3,506)	-	-	-	-	(1,652)	(5,158)
Foreign exchange losses	(888)	-	-	-	(342)	-	(1,230)
Other operating expenses	(420)	-	-	-	-	-	(420)
	______	______	______	______	______	______	______
Operating profit	8,221	-	-	-	(342)	-	7,879
Finance income	7	-	-	-	-	-	7
Finance costs	(566)	-	-	-	342	-	(224)
	______	______	______	______	______	______	______
Profit before tax	7,662	-	-	-	-	-	7,662
	______	______	______	______	______	______	______

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

  4. Reconciliation of statutory information to non-statutory information used in the preliminary announcement

Group

	2008	2007
	£'000	£'000
Profit before taxation	9,017	7,662
Foreign exchange on inter company loans
including impact of foreign exchange collar*	(780)	342
Amortisation of intangibles (note 4)	163	114
	______	______
Adjusted profit before taxation	8,400	8,118
	______	______

* 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 gains on translation of intercompany loans of £2,126,000 (2007 - loss of £342,000), offset by a loss on marking to market the foreign exchange collar of £1,346,000 (2007 - nil).

5. Earnings per share

The calculation of earnings per ordinary share is based on the profits after taxation for the period of £6,077,000 (year ended 31 March 2007 - £5,513,000) and the weighted average number of ordinary shares in issue during the period of 37,637,184 (year ended 31 March 2007 - 37,647,278).

The calculation of diluted earnings per ordinary share is based on the weighted average number of ordinary shares in issue as adjusted to assume conversion of all dilutive potential ordinary shares, 38,914,255 (year ended 31 March 2007 - 39,065,431).

The calculation of adjusted earnings per ordinary share is based on profit after tax adjusted for amortisation of intangibles of £163,000 (year ended 31 March 2007 - £114,000) and foreign exchange translational adjustments on intercompany loans after tax of £(546,000) gain (year ended 31 March 2007 - £239,400 loss).

6. Short Term Incentive Plan

No ordinary shares were acquired by the Employee Benefit Trust in the year in accordance with the incentive plan, details of which were included in the 2007 Annual Report and Accounts.

The Trust waives its right to dividends.

7. Post Balance Sheet Event

On 1 May 2008, the Group announced it had acquired the die-cast model business "Corgi Classics". Hornby purchased the brand, tooling and intellectual property rights from Corgi International Limited for a cash consideration of £7.5 million excluding professional fees. Fixed assets at completion had a book value of c. £1.4 million. The balance of the consideration relates to goodwill, trademarks and intellectual property but it is currently considered too early to attribute specific values, to each intangible asset. In addition inventory has been acquired for a consideration c. £0.8 million.

As the acquisition took place on 30 April 2008, the Directors consider it impracticable to provide the disclosures required by IFRS 3 (Business Combinations) and have therefore used the exemption available which permits non-disclosure in such instances. Further disclosures will be provided in the 2008/9 interim announcement.

ENDFR SSIFAISASESM