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 2010 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 2010, we indicated that sales in the UK had shown good growth compared to the previous year. This trend did not continue during the pre-Christmas period. The Group's retail customers experienced weaker sales than expected in the weeks immediately prior to Christmas. The major reason was the impact of the inclement weather which led to sales to consumers being lower than expectations. This, in turn, resulted in reduced sales by the Company to its retailers.

Whilst interest in our products remains strong, a further consequence of lower consumer sales prior to Christmas is that our retailers have entered the New Year with higher stocks than normal. This will result in retailers reducing their restocking orders in the remaining weeks of the current financial year.

In the interim report we stated that sales in our European subsidiaries were constrained by shortages of product due to supply chain issues. These issues are continuing to improve but sales in Europe prior to the end of the financial year will not recover the ground lost in the first half.

The Company therefore expects that pre-tax profits in respect of the year to 31 March 2011 are likely to be below current market expectations. 

Net debt as at 31 December 2010 was £10.3 million (30 September 2010 £10.8 million, 31 December 2009 £10.5 million).

Supply Chain

As indicated above, we continue to see improvements to our supply chain. Shipments from our largest supplier are running at substantially higher levels than a year ago. We expect this trend to continue. At the same time we have diversified our supply base and are now much less dependent upon our largest supplier. The combination of improved shipments and a broader supply base gives confidence that sales in the next financial year should not be constrained by supply issues.

Outlook

The Board remains confident in the Group's current strategy. The performance of the supply chain is continuing to improve and we have an encouraging pipeline of new product releases. Despite the short-term challenges, we enter the annual round of global Toy and Hobby Fairs on a positive note. In model railways, we will launch our new highly innovative computer based digital control system - "Railmaster". This system has been developed to interface with our "Elite" digital controller to allow the user to programme and store complex sequential activities to control multiple locomotives and accessories. In Scalextric we will launch a range of products based on the forthcoming Disney/Pixar movie "Cars 2" due for release during the Summer of 2011. Airfix developments continue apace and sales continue to grow. In Corgi we have an increasing range of merchandise associated with the 2012 London Olympic Games. We expect sales of our 2012 ranges, across all our brands, to gather significant momentum during 2011.

Hornby will announce its preliminary results for the year ended 31 March 2011 in early June.

Chairman, Neil Johnson commented:

" The negative impact on the Group caused by the unusually adverse weather in December is almost certainly a one-off event. Coming on top of the previously reported supply chain issues the result for the year will clearly be impacted. Nonetheless, due to its diverse product and geographic spread Hornby continues to occupy a position of strength amongst its peers. We continue to see significant growth potential in many of our markets. The further positive progress on our supply chain issues will enable us to capture this potential as the business grows."

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Date: 25 January 2011

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