Hornby Regulatory News (HRN)

Hornby Plc ("Hornby" or "the Company")

Interim Management Statement and Trading Update

Hornby is an international hobby products group, whose brand portfolio includes Hornby, Scalextric, Electrotren, Lima, Jouef, Rivarossi, Airfix, Humbrol and Corgi. The Company is today issuing an update on trading and Interim Management Statement for the period from 1 October 2011 to date, which includes the important Christmas and January period.

Business Performance 

In the Interim Report on the first half of the financial year to 30 September 2011, we highlighted the good progress made in growing sales in our Continental European subsidiaries. This trend has continued to date.

At the time of the Interim Report we indicated that sales growth in the UK had been muted. Against a background of fragile consumer confidence and cautious retail trade buying, sales in the pre-Christmas period in the UK were below the corresponding period last year. In particular, sales of high-ticket items such as our Hornby and Scalextric sets were affected adversely.

Although Group sales for the financial year to date remain ahead of the same period last year, the rate of growth is below management expectations. The Company therefore expects that pre-tax profits in respect of the year to 31 March 2012 are likely to be below current market expectations.

Net debt as at 31 December 2011 was £8.5 million (30 September 2011 £12.8 million, 31 December 2010 £10.3 million).

Supply Chain

Our supply chain is performing well and we have continued to diversify our supplier base.

Outlook

The Board remains confident in the Group's strategy. We recognise that trading conditions in the UK and the rest of Europe will continue to be challenging for the foreseeable future and are likely to continue to constrain sales of our high ticket Hornby and Scalextric items. However we have taken steps to broaden our portfolio of products, resulting in lower average price points. We have also signed a number of exciting license and distribution agreements which will help to underpin the business over the coming years.

At the London Toy Fair earlier this week, we showcased our major product introductions for 2012. Leading this programme is our range of London 2012 merchandise, produced for the London Games which start in July this year. Our retail listings for this event in mass market channels of distribution are very strong and these new channels represent a unique opportunity to launch mass market ranges following on from our London 2012 range.

Our new category initiatives for 2012 include:

·; Scalextric "Star Wars" products based on the Lucasfilm series of movies, the first of which will be released in 3D format in February 2012. Hornby holds global rights to slot racing products related to "Star Wars".

·; A comprehensive range of pre-school products at keen price points based on the new TV Series "Olly the Little White Van", launched under the Corgi brand. The range includes die cast vehicles, playsets, jigsaw puzzles and remote control vehicles. Hornby holds global rights to toy products related to "Olly the Little White Van". The producer of the series is at an advanced stage in negotiations for transmission rights in a number of overseas markets.

·; A newly tooled range of collectable Corgi die cast toys designed to hit the key £1.99 retail price point. The products are designed around the UK/European vehicles that children see every day on the roads of UK/ Europe, a market not currently served by our die cast competitors.

·; A recently signed distribution agreement with Reeves International (USA) to distribute their range of Breyer Horses in the UK. This range of collectable horses fits perfectly with our distribution profile and brings Hornby into the arena of girl and adult female collectables, alongside our traditional male directed ranges. A flagship launch product for this range will be the "War Horse" collectable which will be available for shipping in the UK in February 2012.

·; A global distribution agreement with fantasy war gaming specialist Mantic Games. Hornby will distribute Mantic's "Kings of War" product range under our highly complementary Humbrol brand. In doing so we will enter the lucrative fantasy war gaming market, and provide a further vehicle for sales of our Humbrol paint ranges.

·; Last but by no means least, we have entered into a global license agreement with Mind Candy for its global kids entertainment brand 'Moshi Monsters'. Drawing on our London 2012 collectable experience, Hornby has secured global rights to produce and distribute collectable pin badges and die cast vehicles based on the Moshi Monsters characters.

Our activity in developing these new categories has been recognised at the London Toy Fair by Hornby gaining 3 Best New Toy Awards; for our London 2012 Pictogram range, the Corgi Toys range and our Micro Scalextric Star Wars set.

Hornby will announce its preliminary results for the year ended 31 March 2012 in early June.

Chairman, Neil Johnson commented:

" The challenging economic environment impacted UK sales negatively pre- Christmas. In anticipation of continuing difficult trading conditions, we have adapted our business to offer a wider range of products at lower price points in categories complementary to our core business. We maintain an undiminished focus on the development of our core ranges whilst continuing to broaden our product range, appeal and geographic reach. It is however proving extraordinarily difficult to predict sales accurately in these turbulent markets.

 " The successful acquisition of a number of important global licenses reinforces our mission statement:

"To be the most successful model, hobby and collectable toy company in the world".

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Date: 27 January 2012

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