Hornby Regulatory News (HRN)

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

Pre-Close Statement

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 a trading update for the financial year ended 31 March 2010 and anticipates making its annual results announcement on 4 June 2010.

Business Performance

Consistent with our Trading Update at the end of January, we are delighted to report that the financial year finished with an excellent performance across the business. Following a good pre-Christmas sell-through, we have experienced good order intake during the final quarter of the financial year in all of our brands and in most of the markets in which we operate. It is particularly encouraging to note that there has been a significant increase in orders in our Hornby and Scalextric ranges compared to the same period last year. Our Airfix, Humbrol and Corgi ranges also continue to show gains.

There is no denying that the financial year to 31 March 2010 has been challenging. Adverse foreign exchange effects and de-stocking by retailers in the early part of the financial year impacted first half performance, although this situation improved in the second half. Underlying pre-tax profit is expected to be in line with market expectations. Cash generation has been strong and we have reduced our debt levels significantly.

The Board will review the level of dividend payable for the year ended 31 March 2010, prior to the annual results announcement in June 2010.

Supply Chain

Consistent with our Trading Update at the end of January, we are pleased to report continuing improvements in the reliability of our supply chain. We have continued to maintain a close focus on the relationship with our principal supplier in China. As our relationship develops, both parties are benefitting from significant capacity and volume increases. At the same time, as reported previously, we have diversified our supply base to reduce our overall exposure to an individual major supplier. We therefore look forward with renewed confidence in our ability to service the growing demand for our products, particularly in Continental Europe.

Business Development

Our strategy to build a broadly based European hobby business continues to offer substantial growth opportunities. Following the challenging financial year to 31 March 2010, we are now seeing all of our brands demonstrating strong year-on-year increases in order intake.

In the case of Hornby and Scalextric this reflects imaginative product innovation and strong licenses. We are pleased to have secured a further license with Disney Pixar for model train and slot cars racing sets associated with the forthcoming Toy Story 3 movie. The film is due to be released in the summer. This follows our successful licence for slot car products linked to the Disney Pixar Cars Movie which proved very popular. We have high hopes for the model train set, which will appeal to a younger generation and help to introduce them to the model railway hobby. The Toy Story Micro Scalextric will have a mid-level entry price and we hope will also appeal to younger consumers.

In our model trains business, we have launched the Digital sound feature on a number of our Hornby locomotives. This is proving extremely popular with hobbyists and the feedback we are getting has been encouraging.

In our Scalextric slot car range, we are delighted to have secured the worldwide exclusive licence with the Mercedes GP Formula One racing team to produce products featuring German ace Michael Schumacher. This builds on our relationship with McLaren who now have two British World Championship winners, Jenson Button and Lewis Hamilton.

In Airfix, we are seeing the positive results of our investment in new product development. We have updated the packaging design to introduce a more eye catching formula. The recently launched 1:24 scale Mosquito has achieved immediate worldwide acclaim as one of the finest model kits ever produced. We have also improved the distribution network on which we have been working hard since we acquired the brands in November 2006. It is likely that Airfix and Humbrol will show the greatest percentage sales increases of all our brands in the coming year. We expect this trend to continue as we continue to rebuild distribution around the world.

In Corgi, we expect to see good year-on-year growth as we continue to restore the momentum in product development. The Corgi Toy ranges are achieving broad distribution and increased volumes. We are also re-establishing the Corgi Collector ranges as the leaders in this stable and profitable niche market.

We will also benefit from the the early releases of merchandise based on the London 2012 Olympic Games. Early indications are that the ranges of merchandise that we will produce based on the London 2012 games will prove very popular and will also enable us to open significant new channels of distribution. One of the success stories of 2009 was the introduction of the Hornby model of the Hitachi Class 395 High Speed train. The first of the Hornby models of these trains in London 2012 Olympic livery is scheduled for delivery in September 2010.

In mainland Europe demand for our model railway products remains strong. The improvements to our supply chain will continue to enable us to achieve significant year-on-year sales growth.

Outlook

The past year was a challenging one in many areas of our business. However, we enter the new financial year in a significantly stronger position. We are pleased that consumer demand for our products has held up well over the past year, resulting in low inventories both in our business and at the retail/distributor level. We are now seeing a strong recovery - our retail customers are more confident about the future and both serious new enquiries and firm orders are growing. This provides a receptive market for our new products introduced at the annual Toy Fairs in January and February 2010. Order intake in the first three months of 2010 has been extremely encouraging, which gives us confidence that we are set to deliver a solid performance in the year to 31 March 2011. The strength in depth represented by our broad portfolio of brands has enabled us to weather the recent economic downturn better than many of our competitors. This puts us in a strong position to grow the business in the years ahead.

Chairman, Neil Johnson commented:

"We are positive about the future. We see the potential for a period of sales growth across all our product ranges, which should deliver a significantly improved performance in the new financial year and beyond.

"A year ago we were facing three major challenges: a fragile supply chain, reduced demand from our retailers and an unfavourable sterling/dollar exchange rate. Today, we have much improved visibility and control over the supply chain, retailers are hungry for our products and we have secured the bulk of our currency requirements for the year to 31 March 2011 at favourable rates.

"Whilst the challenges to the global economy are likely to remain with us for some time, we enter the new financial year in a positive frame of mind. We have continued to invest in product innovation, introducing exciting new ranges. We are delighted that, as a result, demand is growing both in the UK and overseas markets. We continue to see opportunities to build our business and generate improved returns for our shareholders."

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Date: 31st March 2010

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