Hornby Regulatory News (HRN)

10 Nov 2006 07:01

Hornby PLC10 November 2006 HORNBY MAKING PROGRESS WITH INTERNATIONAL SALES GROWTH AS AIRFIX / HUMBROL ACQUISITION UNVEILED Hornby Plc, ("Hornby") the international models and collectables Group, hastoday announced its interim results for the six months to 30 September 2006. Hornby's two main products in the UK are Hornby model railways and Scalextricslot car racing systems. It also operates a number of overseas subsidiariesincluding Hornby Italia in Italy, Hornby Deutschland in Germany and Electrotrenin Spain. • Pre-tax profit of £1.4 million • Sales of £17.9 million • Overseas subsidiaries making good progress • Hornby Digital Railway system introduced • Acquisition of Heico Modell in Germany completed • Acquisition of certain assets of Humbrol Limited announced today - Brands include: Airfix / Humbrol Paints / Young Scientist • Dividend increased by 9% to 2.5p (2005:2.3p) Frank Martin, Chief Executive of Hornby, said, " The group is making excellent progress towards our objective of building aninternational hobby business and reducing our dependency on the UK market. " We are delighted to announce today that we have agreed to acquire certainassets of the Humbrol business. The brands include Airfix, Humbrol Paints andYoung Scientist. This is an important acquisition and we believe that thesebrands can be re-invigorated in the same way that we have been able to developour existing brands over the past few years. " Looking ahead to Christmas, we are in good shape. We have an excellent productrange and current indications are that we will experience a significantlystronger performance in the second half." -ends- Date: 10 November 2006For further information contact: Hornby Plc cityPROFILEFrank Martin, Chief Executive Simon CourtenayJohn Stansfield, Finance Director William AttwellTel: 01843-233500 Tel: 020-7448-3244On 10 November - Tel: 020-7448-3244Web: www.hornby.com or: www.scalextric.com High resolution images are available for the media by contacting William Attwell at cityPROFILE CHAIRMAN'S REVIEW The Group continues to make excellent progress towards its objectives ofbuilding an international Hobby business and reducing its dependency on the UKmarket. However, for the time being, the UK remains the main driver of Groupsales and profits. In common with many consumer goods retailers, we began toexperience slower retail take-up during the early summer - particularly duringthe period of the World Cup. These conditions continued during the rest of thesummer due, we believe, to the unusually warm weather which is not conducive toindoor hobby activities. We have therefore experienced lower sales in the UKduring the first half of the current financial year. Sales in all ourinternational subsidiaries were higher than the previous year, but the neteffect was a decline in total sales of 3% to £17.9m (2005 - £18.5m). However, astrengthening order book in the UK and further progress at our internationalsubsidiaries, including a first time contribution from Hornby Deutschland, givethe board confidence in the outturn for the full year. Reflecting the conditions in the UK, profit before tax of £1.4m was below thesame period last year (2005 - £2.5m). Diluted earnings per share were 2.29p(2005 - 4.48p). Dividend Your Board is continuing its policy of paying one third of the previous year'sfull dividend at the half-year. Consistent with this policy, I am thereforepleased to announce a 9% increase in the interim dividend to 2.5p (2005 - 2.3p)per ordinary share, payable on 26 January 2007 for those shareholders on theregister as at 6 January 2007. Operating Review At the Annual General Meeting in July we recognised that the balance of profitsin the current year would be more heavily skewed towards the second half. Wehave recently experienced improved trading in the UK and the reaction to our newproduct introduction programme in the second half, including the Hornby Digitalsystem, has been excellent. Our overseas subsidiaries have all made good progress in the first half. Scalextric USA reported an improvement in sales, and this trend is expected tocontinue in the second half. Electrotren has increased sales as a result of a stronger new productintroduction programme in its model railways business. In addition, Electrotrenhas supplied model railway products in component form for use in a "part-work"publication in Spain. This has contributed to the sales increase whilst alsohaving the additional benefit of broadening the base of model railway users inSpain. Over the previous year Hornby Italia has doubled its sales and is on track tocontinue to show a significant level of improvement in the second half. Hornby France, contributing to Group sales and profits for the first time,achieved all its targets in the first half and is expected to continue thisstrong performance in the second half. Hornby Deutschland, established to acquire certain assets and liabilities ofHeico Modell on 1 September 2006, did not contribute to Group sales in the half,but is expected to contribute to sales and profits in the second half. The Company's net debt position rose to £3.8m as at 30 September 2006, anincrease of £0.5m compared to 30 September 2005. However this position is afterthe payment of £1.3m in aggregate for the Hornby France and Hornby Deutschlandassets and associated working capital requirements. The Company thereforecontinues to demonstrate its ability to generate significant positive cash flowfrom its operations. Current Trading Despite some difficult market conditions in the first half in our main market,we are pleased with the Group's overall progress. Current indications forChristmas trading in the UK are better than last year, and provided that thistrend continues we are expecting a significantly stronger second half in the UK.All our international subsidiaries are also expected to perform better than lastyear in the second half. Acquisition of certain assets of Humbrol Limited in Administration (Humbrol) I am pleased to report that Hornby has entered into contracts to acquire certainassets of Humbrol. These assets include the Airfix, Humbrol and Young Scientistbrands, together with their associated assets, and Intellectual Properties. Theacquired assets achieved sales in the year to 31 December 2005 of £6.5m, atgross margins similar to those currently achieved by Hornby. The considerationfor this acquisition will be £2.6m. It is our intention to integrate thesebrands into the current Hornby structure, with a relatively modest increase infixed overhead. We believe the acquired brands can be substantiallyre-invigorated, in the same way as we have been able to develop our existingbrands over the past few years. We expect this acquisition to be broadlyearnings neutral in the current financial year, but to be earnings enhancingthereafter. This acquisition consolidates the Group's strategy to build an internationalhobby business with a broad range of brands, allied to a tightly controlledcost-base. Neil Johnson10 November 2006 GROUP INCOME STATEMENTfor the six months ended 30 September 2006 Six months Six months Year ended to 30 September to 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 REVENUE 17,905 18,460 44,113Cost of sales (9,510) (9,043) (20,820)-------------------------------------------------------------------------------- GROSS PROFIT 8,395 9,417 23,293Distribution costs (673) (658) (1,504)Selling and marketing costs (4,186) (4,190) (9,924)Administrative expenses (1,830) (1,842) (3,354)Other operating expenses (218) (110) (217)-------------------------------------------------------------------------------- OPERATING PROFIT 1,488 2,617 8,294 Finance income 3 17 30Finance costs (70) (119) (160)--------------------------------------------------------------------------------PROFIT BEFORE TAXATION 1,421 2,515 8,164 Taxation (527) (777) (2,306)--------------------------------------------------------------------------------PROFIT FOR THE PERIOD AFTER TAXATION 894 1,738 5,858================================================================================ EARNINGS PER ORDINARY SHAREBasic 2.38p 4.65p 15.64pDiluted 2.29p 4.48p 15.08p GROUP BALANCE SHEETas at 30 September 2006 30 September 30 September 31 March 2006 2005* 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 ASSETSNON-CURRENT ASSETSGoodwill 8,154 7,719 8,116Intangible assets 1,513 1,356 1,608Property, plant and equipment 6,252 5,130 5,539Deferred income tax assets 378 438 369-------------------------------------------------------------------------------- 16,297 14,643 15,632-------------------------------------------------------------------------------- CURRENT ASSETSInventories 10,645 9,568 8,227Trade and other receivables 11,456 11,910 9,325Derivative financial instruments - 13 -Cash and cash equivalents 621 727 829-------------------------------------------------------------------------------- 22,722 22,218 18,381-------------------------------------------------------------------------------- LIABILITIESCURRENT LIABILITIESBorrowings (4,423) (4,042) (124)Derivative financial instruments (51) - -Trade and other payables (9,258) (9,181) (6,914)Current tax liabilities (806) (1,241) (1,542)Provisions (425) (510) (300)-------------------------------------------------------------------------------- (14,963) (14,974) (8,880)--------------------------------------------------------------------------------NET CURRENT ASSETS 7,759 7,244 9,501-------------------------------------------------------------------------------- NON-CURRENT LIABILITIESBorrowings (92) (45) (39)Deferred tax liabilities (220) (233) (231)-------------------------------------------------------------------------------- (312) (278) (270)--------------------------------------------------------------------------------NET ASSETS 23,744 21,609 24,863================================================================================ SHAREHOLDERS' EQUITYShare capital 376 375 376Share premium 5,081 5,010 5,050Other reserves 1,743 1,743 1,743Retained earnings 16,544 14,481 17,694--------------------------------------------------------------------------------TOTAL EQUITY 23,744 21,609 24,863-------------------------------------------------------------------------------- * Deferred income tax assets and liabilities at 30 September 2005 have beendisclosed gross rather than net which is consistent with 31 March 2006 and 30September 2006. GROUP STATEMENT OF CHANGES IN EQUITY for the six months ended 30 September 2006 and 30 September 2005, and the yearended 31 March 2006 Share Share Redemption Other Retained Total Capital Premium Reserve Reserves Earnings* Equity (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 £'000 £'000 £'000 At 31 March 2005 373 4,906 55 1,688 14,750 21,772 Adoption of IAS32 and IAS39 - - - - (38) (38)------------------------------------------------------------------------------------------------------------------- Balance at 1 April 2005 373 4,906 55 1,688 14,712 21,734 Profit for the period - - - - 1,738 1,738 Issue of shares 2 104 - - - 106 Share based payments - - - - 110 110 Exchange adjustment offset in - - - - (8) (8)reserves Purchase of own shares - - - - (364) (364) Shares vested - - - - 138 138 Dividends - - - - (1,845) (1,845)------------------------------------------------------------------------------------------------------------------- Balance at 30 September 2005 375 5,010 55 1,688 14,481 21,609 Profit for the period - - - - 4,120 4,120 Issue of shares 1 40 - - - 41 Share based payments - - - - 48 48 Exchange adjustment offset in - - - - (103) (103)reserves Dividends - - - - (852) (852)------------------------------------------------------------------------------------------------------------------- Balance at 31 March 2006 376 5,050 55 1,688 17,694 24,863 Profit for the period - - - - 894 894 Issue of shares - 31 - - - 31 Share based payments - - - - 117 117 Exchange adjustment offset in - - - - 23 23 reserves Transfer to STIP fund - - - - (178) (178) Dividends - - - - (2,006) (2,006) ------------------------------------------------------------------------------------------------------------------- Balance at 30 September 2006 376 5,081 55 1,688 16,544 23,744=================================================================================================================== * Attributable to equity holders of the Company. Retained Earnings includes £715,000 at 30 September 2006 (2005 - £732,000) whichis not distributable and relates to a 1986 revaluation reserve of land andbuildings. This reserve was reclassified at 31 March 2006 in accordance with theexemption taken under IFRS1 'First Time Adoption of International FinancialReporting Standards' whereby the Group elected to use this valuation as deemedcost at the date of transition. As a result the comparatives set out above havebeen reclassified accordingly, recognising this reserve within Retained Earningsrather than Other Reserves. GROUP CASH FLOW STATEMENT for the six months ended 30 September 2006 Six months Six months Year ended to 30 September to 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000CASH FLOWS FROM OPERATING ACTIVITIESCash generated from/ 318 (1,228) 7,546(utilised in) operations Interest received 3 17 30Interest paid (70) (119) (160)Tax paid (1,336) (811) (1,939)--------------------------------------------------------------------------------Net cash (utilised in)/ (1,085) (2,141) 5,477generated from operating activities -------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of trade assets (36) - (1,072) and related costs Proceeds from sale of property, 32 - 23plant and equipment Purchase of property, plant (1,515) (916) (2,545)and equipment --------------------------------------------------------------------------------Net cash utilised in investing (1,519) (916) (3,594)activities -------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of 31 106 147ordinary shares Repayment of loans (52) - -Purchase of own shares by STIP - (364) (364)Finance lease capital payments (37) (11) (23)Dividends paid to Company's (2,006) (1,845) (2,697)shareholders --------------------------------------------------------------------------------Net cash utilised in financing (2,064) (2,114) (2,937) activities --------------------------------------------------------------------------------Effect of exchange rate movements 140 43 (60)--------------------------------------------------------------------------------Net decrease in cash and (4,528) (5,128) ( 1,114)cash equivalents Cash and cash equivalents 746 1,860 1,860at beginning of the period --------------------------------------------------------------------------------CASH AND BANK OVERDRAFTS (3,782) (3,268) 746AT END OF PERIOD -------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS CONSIST OF:Cash and cash equivalents 621 727 829 Bank overdrafts (4,403) (3,995) (83)-------------------------------------------------------------------------------- CASH AND BANK OVERDRAFTS (3,782) (3,268) 746 AT END OF PERIOD -------------------------------------------------------------------------------- NOTES TO THE CASH FLOW STATEMENT Cash flows from operating activities Six months Six months Year ended to 30 September to 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the financial 894 1,738 5,858period Taxation 527 777 2,306Interest payable 70 119 160Interest receivable (3) (17) (30)Amortisation of intangible 50 51 97assets Depreciation 944 899 2,075Profit on disposal of tangible - - (11)fixed assets Share based payments 117 110 158Loss/(gain) on financial 51 (13) (38)derivatives Increase/(decrease) in provisions 125 141 (69)Increase in inventories (2,291) (2,042) (219)Increase in trade and other receivables (2,070) (4,610) (2,058)Increase/(decrease) in trade and other payables 1,904 1,619 (683)-------------------------------------------------------------------------------- CASH GENERATED FROM (UTILISED IN)/OPERATIONS 318 (1,228) 7,546-------------------------------------------------------------------------------- NOTES: 1. GEOGRAPHICAL SEGMENT INFORMATION Six months Six months Year ended to 30 September to 30 September 31 March 2006 2005 2006 (unaudited) (unaudited) (audited) BY ORIGIN £'000 £'000 £'000REVENUEUnited Kingdom 13,149 15,312 34,196United States of America 1,203 1,171 2,952Rest of Europe 3,553 1,977 6,965--------------------------------------------------------------------------------Group 17,905 18,460 44,113-------------------------------------------------------------------------------- £'000 £'000 £'000 PROFIT BEFORE TAXATIONUnited Kingdom 1,510 2,891 8,190United States of America 16 (50) 67--------------------------------------------------------------------------------Rest of Europe - operating profit 238 (51) 491 - interest (343) (275) (584)--------------------------------------------------------------------------------Rest of Europe (105) (326) (93)--------------------------------------------------------------------------------Group 1,421 2,515 8,164-------------------------------------------------------------------------------- £'000 £'000 £'000 NET ASSETSUnited Kingdom 8,889 8,651 10,392United States of America 1,354 1,314 973Rest of Europe 13,501 11,644 13,498--------------------------------------------------------------------------------Group 23,744 21,609 24,863-------------------------------------------------------------------------------- BY DESTINATION £'000 £'000 £'000 REVENUEUnited Kingdom 10,963 12,634 29,330Rest of the world 6,942 5,826 14,783--------------------------------------------------------------------------------Group 17,905 18,460 44,113-------------------------------------------------------------------------------- On 1 September 2006 a newly formed 100% owned subsidiary of Hornby Plc, namelyHornby Deutschland GmbH, acquired the trade and certain assets and liabilitiesof Heico Modell. This Company commenced trading on 1 September 2006. Its resultsare included within Rest of Europe in the table above and are revenue of £3,000and a loss before tax of £14,000. It is not possible or practical to determinewhat this business's revenue and profit/loss would have been for the full sixmonths ended 30 September 2006 had the acquisition date commenced at the startof this reporting period, as a new business has been formed out of some of theassets and liabilities of another business. The acquisition cost was £nil and the fair value of the assets and liabilitiesacquired were as follows: £'000Fixed assets 21Stock 127Debtors 8Creditors (54)Loans (221)Goodwill 119-------------------------------------------------------------------------------- (119)Acquisition cost nil-------------------------------------------------------------------------------- Goodwill 119-------------------------------------------------------------------------------- Intangible assets acquired have not been identified and split out from goodwillat 30 September 2006 in accordance with IFRS3 'Business Combinations'. This willbe performed in the second half of the financial year. The impact is notexpected to be material on the numbers included in this report. 2. BASIS OF PREPARATION The interim financial information has been prepared in accordance with theaccounting policies set out in the Hornby Plc Report and Accounts for the yearended 31 March 2006, which is in accordance with International AccountingStandards ('IAS') and International Financial Reporting Standards ('IFRS') asadopted by the European Union ('EU') and also as issued by the InternationalAccounting Standards Board, International Financial Reporting InterpretationsCommittee ('IFRIC') interpretations and with those parts of the Companies Act1985 applicable to companies reporting under IFRS. References to IFRS throughout refer to the application of InternationalAccounting Standards and International Financial Reporting Standards. The financial statements of the Company and its subsidiaries have been preparedunder the historical cost convention, except in respect of certain financialinstruments and certain land and buildings that are included in the financialstatements at valuation. 3. NON STATUTORY ACCOUNTS These statements do not constitute statutory financial statements within themeaning of Section 240 of the Companies Act 1985. Hornby Plc consolidatedfinancial statements for the year ended 31 March 2006 were prepared inaccordance with IFRS and have been delivered to the Registrar of Companies andon which the auditors made an unqualified report. The comparative figures forthe year ended 31 March 2006 have been prepared as set out above and are anabridged statement of the full financial statements for that period. Nofinancial statements will be filed for the six months ended 30 September 2006. 4. EARNINGS PER SHARE The calculation of earnings per ordinary share is based on the profits aftertaxation for the period of £894,000 (six months ended 30 September 2005 -£1,738,000) and the weighted average number of ordinary shares in issue duringthe period of 37,605,661 (six months ended 30 September 2005 - 37,360,169). The calculation of diluted earnings per ordinary share is based on the weightedaverage number of ordinary shares in issue as adjusted to assume conversion ofall dilutive potential ordinary shares, 38,971,133 (six months ended30 September 2005 - 38,837,156). 5. SHORT TERM INCENTIVE PLAN £177,596 was transferred to the Employee Benefit Trust in June 2006 inaccordance with the incentive plan, details of which were included in the 2006Annual Report and Accounts. The Trust waives its right to dividends. 6. DIVIDENDS During the period a dividend of 5.4p per share was paid to shareholders on 18August 2006 totalling £2,006,000 that related to the year ended 31 March 2006(2005 - £1,845,000). 7. INTERIM STATEMENT Copies of this statement will be sent to all shareholders and are available fromthe Company's registered office. This information is provided by RNS The company news service from the London Stock Exchange