Hornby Regulatory News (HRN)

7 Nov 2008 07:00



 

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, Margate, Kent 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.

ENDIR VQLFBVFBEFBF