Hornby Regulatory News (HRN)

13 Nov 2009 07:00



HORNBY PLC INTERIM  REPORT

CONDENSED CONSOLIDATED

HALF-YEARLY FINANCIAL REPORT

SIX MONTHS TO 30 SEPTEMBER 2009

INTERIM MANAGEMENT REPORT

The period under review has continued to be challenging, yet the outlook for the Group remains positive. 

We have made good progress in improving control over our supply chain arrangements. The positive effects of the changes we have made are now being felt. The Group has felt the impact of Sterling weakness but we have limited our forward exposure to foreign exchange movements by currency hedging. Our strategy to broaden our portfolio of hobby brands has given us defensive qualities, at a time when consumer demand has remained fragile. The Board is confident that the worst is now behind us and that we have established a solid platform from which we can grow our business.

Financials

During the period, turnover was £25.5 million, an increase of 5% compared to the corresponding period last year. This performance is creditable against a background of a weak global economy and the legacy of disruption to our supply chain. Cash generation was strong and net debt reduced to £14.7 million compared to £17.1 million a year ago. The Group has committed banking facilities of £22 million via a five year term loan and a three year revolving credit facility. Operating margins and pre-tax profit have come under pressure, primarily as a result of the weakness of Sterling versus the US and Hong Kong Dollar. As a result of these currency effects and higher ex factory prices our landed costs have increased at a faster rate than we have been able to increase our selling prices. The increase in other operating expenses of £1.2 million compared to the corresponding period last year reflects the adverse exchange rate impact. Pre-tax profit before amortisation of intangibles and net foreign exchange adjustments on intercompany loans (hereafter referred to as underlying pre-tax profits) has therefore reduced to £1.0 million compared to £2.0 million. Statutory pre-tax profit has reduced to £0.7 million compared to £1.8 million. The effects of the weaker Sterling/Dollar rate will continue to be felt during the second half of the current financial year. Looking ahead, we expect to benefit from forward currency purchases at improved exchange rates during the year ending March 2011.

Dividend

Whilst our balance sheet strength has improved considerably, the Group's profit and cash generation potential has continued to be affected adversely by the weaker Sterling/Dollar exchange rate. The Board has therefore decided not to declare an interim dividend this year (2008 - 2.7p). However it is the Board's intention to return to a progressive dividend payment policy as soon as possible. 

Supply Chain 

In my report of 11 June 2009, I said that a key focus for management would be to resolve the issues relating to our supply chain. The Group continued to experience disruption following the acquisition in January 2009 of our primary supplier, Sanda Kan, by Kader Holdings, a Hong Kong based company. I am pleased to report that we have diversified our model railway manufacturing base to reduce overall dependence upon a single source. At the same time, we have established an excellent relationship with Kader, such that both parties recognise the long term benefits of working closely together. We now have much greater clarity on the management of the supply chain processes and the volume of shipments from China has been increasing on a weekly basis. This leaves us well placed as we enter the Christmas trading period.

Operating Review

The Group has made encouraging progress to drive the potential within our brands. In particular Airfix and Corgi have performed well in the first half of the financial year. We have also seen encouraging sales growth in Continental Europe. Sales through our chain of over 130 concessions in the UK and through our internet sites have been very encouraging, confirming the continued appeal of our products to the end consumer. Looking forward, we recognise that the consumer environment is likely to continue to be difficult. Therefore we have taken actions to adapt our product ranges to ensure that they are pitched at attractive price points. 

UK

In the UK, turnover of £18.0 million was 1.5% higher than the same period last year. Corgi and Airfix have performed well whilst model railway and Scalextric sales fell. This is largely a result of retailers delaying taking inventory ahead of the Christmas period. We are now beginning to see an improvement in year on year orders received. Sales of Scalextric sets priced at the top and lower ends of our range remained robust whilst demand for sets priced in the middle of the range was more muted. We anticipated this trend and we have introduced several new Micro Scalextric sets that have proved popular. In particular the Micro Scalextric 'Need for Speed' and Disney's 'Cars' sets are selling very well. 

 

The recent success of the Brawn Formula One team and Jenson Button's World Championship victory are expected to provide a significant boost to the sales of Scalextric and Micro Scalextric. Hornby holds the exclusive worldwide license to produce slot racing products featuring the Brawn team and Jenson Button. The first products carrying this license will be available in time for Christmas 2009.

Our in-store concessions have continued to deliver excellent sales volumes. This demonstrates that when our products are stocked in depth and displayed well we are able to generate strong consumer demand.

Italy

Turnover in Hornby Italia of £2.3 million was 55% higher than the same period last year. This figure includes sales to the Italian market and also sales to third party distributors. This strong performance reflects improvements in the supply chain performance and growing demand for our products in Italy. 

Rest of Continental Europe

Our model train operations have also continued to grow in the rest of continental Europe. Turnover of £4.0 million was 10% above the corresponding period last year, despite the fact that volumes have continued to be impacted by the legacy of supply chain constraints. With these issues now under control, I am confident that our sales in this region will begin to fulfil their true potential. Our major competitors in Continental Europe have continued to suffer from structural difficulties caused by high local manufacturing costs. The market remains fragmented and there is a significant opportunity for Hornby to improve its position in these markets, especially in Germany.

USA

Turnover of £1.1 million was 15% below the same period last year as demand in the US economy continues to be depressed. During the current economic conditions the emphasis will be on the tight control of overheads and cash generation.

Current Trading

Current trading continues to be challenging, but we have the right products and the right distribution network to maximise our performance during these difficult times. Looking to the future, we have an excellent platform from which we can capitalise on the opportunities to drive improvements in performance over the medium term. 

A key highlight over the period was the award of the license to produce a wide range of merchandise across our brands for the London 2012 Olympics. We expect this to be a significant opportunity for the Group. The first product in this range - a limited edition of the 'London-Beijing-London handover bus' has recently been launched. This will be followed by collectible ranges across all of our UK brands during 2010. 

Outlook

After a series of recent challenges, the outlook for Hornby is positive. We have reduced net debt and are focused on cash generation whilst also rebuilding profitability and shareholder value. Our brands are well positioned and enjoy an enduring popularity in their markets. With the effects of our supply chain issues now receding, the Board remains confident in the prospects for the year.

Neil A Johnson 

Chairman

13 November 2009

  

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 September 2009

		Six months to 30 September 2009 (unaudited)	Six months to 30 September 2008 (unaudited)	Twelve months to 31 March 2009 (audited)
	Notes	£'000	£'000	£'000
REVENUE	4	25,455	24,191	61,569
Cost of sales		(12,474)	(11,900)	(32,168)
		_______	_______	_______
GROSS PROFIT		12,981	12,291	29,401
Distribution costs		(1,089)	(994)	(2,454)
Selling and marketing costs		(5,881)	(5,565)	(13,641)
Administrative expenses		(3,742)	(3,594)	(7,976)
Other operating (expenses)/income		(1,148)	40	1,569
		_______	_______	_______
OPERATING PROFIT		1,121	2,178	6,899
Finance income		2	22	27
Finance costs		(380)	(391)	(805)
		_______	_______	_______
PROFIT BEFORE TAXATION	4	743	1,809	6,121
Analysed as:
Underlying profit before taxation		1,013	2,031	6,331
Net foreign exchange impact on intercompany loans		(73)	(57)	535
Amortisation of intangible assets		(197)	(165)	(370)
Restructuring and abortive due diligence costs		-	-	(375)
		_______	_______	_______
PROFIT BEFORE TAXATION	4	743	1,809	6,121
Taxation	8	(328)	(633)	(1,909)
		_______	_______	_______
PROFIT FOR THE PERIOD
AFTER TAXATION		415	1,176	4,212
		_______	_______	_______
OTHER COMPREHENSIVE INCOME
Cash flow hedges, net of tax		183	138	(813)
Currency translation differences		14	(114)	(336)
		_______	_______	_______
OTHER COMPREHENSIVE INCOME FOR THE PERIOD, NET OF TAX		197	24	(1,149)
		_______	_______	_______
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		612	1,200	3,063
		_______	_______	_______
EARNINGS PER ORDINARY SHARE
Basic		1.10p	3.12p	11.17p
Diluted		1.08p	3.06p	10.98p

All of the activities of the Group are continuing.

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

  BALANCE SHEET 

as at 30 September 2009

		30 September 2009 (unaudited)	30 September 2008 (unaudited)	31 March 2009 (audited)
	Notes	£'000	£'000	£'000
ASSETS
NON-CURRENT ASSETS
Goodwill		13,548	12,785	13,624
Intangible assets		5,468	5,627	5,689
Property, plant and equipment		10,774	10,391	10,523
Deferred income tax assets		101	91	67
		_______	_______	_______
		29,891	28,894	29,903
		_______	_______	_______
CURRENT ASSETS
Inventories		17,426	16,214	14,368
Trade and other receivables		15,072	15,554	13,119
Current tax assets		236	-	124
Cash and cash equivalents		1,241	368	427
		_______	_______	_______
		33,975	32,136	28,038
		_______	_______	_______
TOTAL ASSETS		63,866	61,030	57,941
		_______	_______	_______
SHAREHOLDERS' EQUITY
Share capital	6	381	380	380
Share premium		5,340	5,278	5,278
Capital redemption reserve		55	55	55
Translation reserve		(519)	(311)	(533)
Hedging reserve		(497)	271	(680)
Other reserves		1,688	1,688	1,688
Retained earnings		26,074	23,224	25,366
		_______	_______	_______
TOTAL EQUITY		32,522	30,585	31,554
		_______	_______	_______
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings	7	11,594	8,259	7,181
Deferred tax liabilities		328	403	301
		_______	_______	_______
		11,922	8,662	7,482
		_______	_______	_______
CURRENT LIABILITIES
Borrowings	7	4,299	9,198	5,138
Derivative financial instruments		3,923	1,276	3,960
Trade and other payables		10,171	9,688	8,270
Provisions		484	469	538
Current tax liabilities		545	1,152	999
		_______	_______	_______
		19,422	21,783	18,905
		_______	_______	_______
TOTAL LIABILITIES		31,344	30,445	26,387
		_______	_______	_______
TOTAL EQUITY AND LIABILITIES		63,866	61,030	57,941
		_______	_______	_______

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 2008 and 30 September 2009

		Share capital (unaudited)	Share premium (unaudited)	Capital redemption reserve (unaudited)	Translation reserve (unaudited)	Hedging reserve (unaudited)	Other reserves (unaudited)	Retained earnings* (unaudited)	Total equity (unaudited)
GROUP		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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
		______	______	______	______	______	______	______	______
Balance at 1 April 2009		380	5,278	55	(533)	(680)	1,688	25,366	31,554
Exchange adjustment offset in reserves		-	-	-	14	-	-	-	14
Cash flow hedges		-	-	-	-	183	-	-	183
		______	______	______	______	______	______	______	______
Net income recognised directly in reserves		-	-	-	14	183	-	-	197
Profit for the period		-	-	-	-	-	-	415	415
		______	______	______	______	______	______	______	______
Total recognised income for the period		-	-	-	14	183	-	415	612
		______	______	______	______	______	______	______	______
Issue of shares		1	62	-	-	-	-	-	63
Share-based payments		-	-	-	-	-	-	122	122
Shares vested from Short Term Incentive Plan		-	-	-	-	-	-	171	171
		______	______	______	______	______	______	______	______
		1	62	-	-	-	-	293	356
		______	______	______	______	______	______	______	______
Balance at 30 September 2009		381	5,340	55	(519)	(497)	1,688	26,074	32,522
		______	______	______	______	______	______	______	______

*	Retained earnings includes amounts that are not distributable including £664,000 at 30 September 2009 (2008 - £681,000) that relates to a 1986 revaluation of land and buildings.

CASH FLOW STATEMENT 

for the six months ended 30 September 2009

	Six months to  30 September 2009 (unaudited)	Six months to  30 September 2008 (unaudited)	Twelve months to 31 March 2009 (audited)
	£'000	£'000	£'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from /(utilised in) operations	140	(967)	11,377
Interest received	2	22	27
Interest paid	(380)	(391)	(805)
Tax paid	(901)	(1,330)	(2,594)
	_______	_______	_______
Net cash from (utilised in)/generated operating activities	(1,139)	(2,666)	8,005
	_______	_______	_______
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of trade assets and related costs	-	(8,495)	(8,495)
Proceeds from sale of property, plant and equipment	1	2	2
Purchase of property, plant and equipment	(1,880)	(2,173)	(4,763)
	_______	_______	_______
Net cash utilised in investing activities	(1,879)	(10,666)	(13,256)
	_______	_______	_______
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares	63	-	-
Proceeds of loans	3,873	8,700	8,684
Purchase of own shares by Short Term Incentive Plan	-	(284)	(284)
Finance lease capital payments	(9)	(8)	(19)
Dividends paid to Company's shareholders	-	(2,187)	(3,205)
	_______	_______	_______
Net cash generated from financing activities	3,927	6,221	5,176
	_______	_______	_______
Effect of exchange rate movements	195	133	(1,717)
	_______	_______	_______
Net increase/(decrease) in cash and cash equivalents	1,104	(6,978)	(1,792)
Cash, cash equivalents and bank overdrafts
at beginning of the period	(3,060)	(1,268)	(1,268)
	_______	_______	_______
CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS AT END OF PERIOD
	(1,956)	(8,246)	(3,060)
	_______	_______	_______
CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS CONSIST OF:
Cash and cash equivalents	1,241	368	427
Bank overdrafts	(3,197)	(8,614)	(3,487)
	_______	_______	_______
CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS AT END OF PERIOD
	(1,956)	(8,246)	(3,060)
	_______	_______	_______

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 to 30 September 2009 (unaudited)	Six months to 30 September 2008 (unaudited)	Twelve months to 31 March 2009 (audited)
	£'000	£'000	£'000
Profit before taxation	743	1,809	6,121
Interest payable	380	391	805
Interest receivable	(2)	(22)	(27)
Amortisation of intangible assets	197	165	370
Depreciation	1,763	1,528	4,315
(Profit)/loss on disposal of tangible fixed assets	(1)	21	25
Share-based payments	122	124	224
Loss/(gain) on financial derivatives	80	(36)	6
(Decrease)/increase in provisions	(54)	(31)	38
Increase in inventories	(3,058)	(3,731)	(1,735)
Increase in trade and other receivables	(1,714)	(4,275)	(2,535)
Increase in trade and other payables	1,684	3,090	3,770
	_______	_______	_______
CASH GENERATED FROM/(UTILISED IN) OPERATIONS	140	(967)	11,377
	_______	_______	_______

  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, Margate, Kent CT9 4JX.

The Company has its primary listing on the London Stock Exchange and is registered in England No. 01547390.

This condensed consolidated half-yearly financial information was approved for issue on 13 November 2009.

These interim financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2009 were approved by the Board of Directors on 11 June 2009 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 2009 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 2009 which have been prepared in accordance with IFRSs as adopted by the European Union.

  

3. ACCOUNTING POLICIES

The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2009, as described in those annual financial statements.

Adoption of new and revised standards

The following new standards and amendments to standards are mandatory for accounting periods beginning on or after 1 January 2009:

●	IAS 1 (revised), 'Presentation of financial statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement.
	Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).
	The Group has elected to present one statement: a statement of comprehensive income. The interim statements have been prepared under the revised disclosure requirements.
●	IFRS 8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting'. It requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments presented, as the previously reported rest of Europe segment has been split into Italy and rest of Europe segments.
	Other segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board that makes strategic decisions.
●	IFRS 2 (amendment) 'Share-based payment'. This revision of an existing standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions and performance conditions only. Other features of a share-based payment are not vesting conditions.

The following interpretation to published standards is mandatory for accounting periods beginning on or after 1 January 2009 but is not relevant to the Group's operations:

IFRIC 13	Customer loyalty programmes
IFRIC 15	Agreements for the construction of real estate
IFRIC 16	Hedges of a net investment in a foreign operation
IAS 39 (amendment)	Financial instruments: Recognition and measurement

There has been no impact on the measurement of the Group's assets and liabilities. Comparatives for 2008 have been restated.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following standards and amendments to existing standards have been published, but the Group has not early adopted them:

IFRS 3	Revised (Business combinations)
IAS 23	Revised (Borrowing costs)
IFRIC 17	Distributions of non-cash assets to owners
IFRIC 18	Transfers of assets from customers

  

4. SEGMENT INFORMATION 

	UK	USA	Italy	Rest of Europe	Total Reportable Segments
	£'000	£'000	£'000	£'000	£'000
Six months ended 30 September 2009
Total revenue	19,479	1,114	3,404	4,383	28,380
Inter-segment revenue	(1,476)	-	(1,096)	(353)	(2,925)
	_______	_______	_______	_______	_______
Revenue (from external customers)	18,003	1,114	2,308	4,030	25,455
	_______	_______	_______	_______	_______
Underlying profit/(loss) before taxation	722	(53)	209	135	1,013
Foreign exchange on intercompany loans
including impact of foreign exchange collar	(73)	-	-	-	(73)
Amortisation of intangible assets	(132)	-	(48)	(17)	(197)
	_______	_______	_______	_______	_______
Profit/(loss) before taxation	517	(53)	161	118	743
	_______	_______	_______	_______	_______
Six months ended 30 September 2008
Total revenue	19,538	1,308	2,136	3,956	26,938
Inter-segment revenue	(1,804)	-	(643)	(300)	(2,747)
	_______	_______	_______	_______	_______
Revenue (from external customers)	17,734	1,308	1,493	3,656	24,191
	_______	_______	_______	_______	_______
Underlying profit/(loss) before taxation	2,652	(26)	(375)	(220)	2,031
Foreign exchange on intercompany loans
including impact of foreign exchange collar	(57)	-	-	-	(57)
Amortisation of intangibles assets	(106)	-	(44)	(15)	(165)
	_______	_______	_______	_______	_______
Profit/(loss) before taxation	2,489	(26)	(419)	(235)	1,809
	_______	_______	_______	_______	_______
Total Assets
30 September 2009	10,773	1,894	10,182	9,673	32,522
31 March 2009	8,613	2,004	10,309	10,628	31,554
30 September 2008	12,198	1,720	8,001	8,666	30,585

Hornby Hobbies Limited, the Group's UK trading subsidiary, has granted Euro denominated intercompany loans to sister subsidiary companies that are translated to Sterling at statutory period ends thereby creating exchange gains or losses. In order to mitigate the exchange exposure Hornby Hobbies Limited has entered a foreign exchange collar contract to sell an equal number of Euros in October 2011 that will be revalued by an approximately similar but opposite Sterling value at each period end.

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 foreign exchange losses on translation of intercompany loans of £246,000 (2008 - loss of £128,000), offset by a gain on marking to market the foreign exchange collar of £173,000 (2008 - gain of £71,000).

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 2009 the profit impact is a gain of £786,000. Therefore in the period 1 October 2008 to 30 September 2011 there will be an adjustment to the Statement of Comprehensive Income between a £37,000 profit and £446,000 charge. The derivative will become an increasingly efficient hedge as the contract approaches maturity.

  

5. TANGIBLE AND INTANGIBLE ASSETS

Six months ended 30 September 2009	Tangible and intangible assets (unaudited)
	£'000
Opening book amount 1 April 2009	29,836
Exchange adjustment	(181)
Additions	2,095
Disposals	-
Depreciation, amortisation and impairment	(1,960)
	_______
Closing net book amount 30 September 2009	29,790
	_______

The additions relate to new product tooling (£1,883,000), property, plant and equipment (£167,000) and motor vehicles (£45,000).

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 and impairment	(1,693)
	_______
Closing net book amount 30 September 2008	28,803
	_______

	2009	2008
	(unaudited)	(unaudited)
CAPITAL COMMITMENTS	£'000	£'000
At 30 September commitments were:
Contracted for but not provided for	1,188	1,224
	_______	_______

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

6. SHARE CAPITAL

The Group has 38,064,100 ordinary 1p shares in issue with nominal value £380,641 (2008 - £379,891).

75,000 employee share options were exercised during the first half to 30 September 2009 at an average price of 83.4p (2008 - nil share options). 

7. BORROWINGS

	30 September	30 September	31 March
	2009	2008	2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
CURRENT:
Bank overdrafts	3,197	8,614	3,487
Bank loans	1,053	544	1,632
Finance lease obligations	49	40	19
	_______	_______	_______
	4,299	9,198	5,138
	_______	_______	_______
NON-CURRENT:
Bank loans	11,520	8,156	7,068
Finance lease obligations	74	103	113
	_______	_______	_______
	11,594	8,259	7,181
	_______	_______	_______

The Group has a £10,000,000 3-year revolving credit facility at 30 September 2009 (2008 - £12,000,000 overdraft facility) that attracts interest at 2.85% above Libor and a 5-year fixed term loan of £12,000,000 (2008 - £8,700,000) that attracts interest at 3.6% above Libor.

The drawdown amount on the revolving credit facility is included within bank overdrafts. 

The bank loan and revolving credit facility will be secured by a fixed charge over the Group's freehold property in Margate.

8. INCOME TAXATION

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

9. EARNINGS PER SHARE

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

	30 September	30 September	31 March
	2009	2008	2009
	(unaudited)	(unaudited)	(audited)
Earnings per share for profit from
continuing operations attributable
to the equity of the Company
- basic	1.10p	3.12p	11.17p
- diluted	1.08p	3.06p	10.98p
	_______	_______	_______

10. DIVIDENDS

No final dividend was paid in respect of the financial year ended 31 March 2009 (2008 - £2,187,000).

No interim dividend has been declared for the interim period ended 30 September 2009 (2008 - £1,018,000).

  11. 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.

12. RELATED-PARTY TRANSACTIONS

Key management compensation amounted to £1,180,000 for the six months to 30 September 2009 (2008 - £1,283,000).

	30 September	30 September	31 March
	2009	2008	2009
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Salaries and other short-term benefits	978	1,068	2,071
Post-employment benefits	93	91	185
Share-based payments	109	124	206
	_______	_______	_______
	1,180	1,283	2,462
	_______	_______	_______

The Company received management fees from subsidiaries of £604,000 (2008 - £754,000), interest of £114,000 (2008 - £76,000) and dividends from subsidiaries of £nil  (2008 - £4,722,000).

At the year-end balances due from subsidiaries to the Company amounted to £6,179,000 (2008 - £7,020,000) and due to subsidiaries from the Company amounted to £6,358,000 (2008 - £4,990,000).

13. EVENTS OCCURING AFTER THE BALANCE SHEET DATE

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

14. RISKS AND UNCERTAINTIES

The key risks and uncertainties as disclosed on pages 16 to 18 of the Group's Annual Report for the year ended 31 March 2009 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 2009.

15. SEASONALITY

Sales are subject to seasonal fluctuations, with peak demand in the October - December quarter. For the six months ended 30 September 2009 sales represented 41% (2008 - 43%) of the annual sales for the year ended 31 March 2009.

  

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, namely:

●	an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial years; and
●	material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Hornby Plc are listed in the Hornby Plc Annual Report for 31 March 2009. A list of current directors is maintained on the Hornby Plc website: www.hornby.com.

Frank Martin

Chief Executive

13 November 2009

Andrew Morris

Finance Director

13 November 2009

  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 2009 which comprises the statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement, note to 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 2009 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

13 November 2009

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.

ENDIR GUGCGGUPBGPP