Hornby Regulatory News (HRN)

25 Jan 2010 07:00



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 its regular update on trading and Interim Management Statement for the period from 1st October 2009 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 2009, we indicated that some of our UK retail customers had been cautious in taking in inventory. We are pleased to report that, driven by high consumer demand for our products, this situation improved significantly in the pre-Christmas period, resulting in a high level of shipments. In addition, following good consumer sell-through, our retailers have ended the year with stocks at historically low levels. We are delighted that the appeal of our products remains strong. Demand has continued to be good in the early weeks of January and we are experiencing a correspondingly high level of order intake. 

In mainland Europe, demand continued to be strong prior to Christmas and with a good pipeline of new introductions, we expect to finish the financial year with sales and profits significantly ahead of the previous year. This positive performance demonstrates once again the benefits of our geographic and product diversification. 

The positive contribution and growth potential of our European businesses have provided welcome support to the Group during the recent economic downturn. The underlying resilience of all sectors of our Hobby business has been proven once again. Increased overall exposure to Euro denominated markets has helped to mitigate the effects of the weakness of Sterling against the US Dollar, the currency in which most of our purchases are made. Looking forward, as our purchases are now being made at more favourable Dollar exchange rates, we expect to see a steady recovery in our margin performance in the UK.

Trading continues to be in line with market expectations and cash generation during the period has been strong. Net debt as at 31st December was £10.5 million (30th September 2009 £14.7 million, 31st December 2008 £14.3 million).

Supply chain

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, which is now 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 respect of our ability to service the growing demand for our products, particularly in Continental Europe.

Outlook 

As we enter the annual round of global toy and hobby trade fairs, we are well positioned to increase our sales in all the markets in which we operate. 

We have developed more competitive products to provide increased value for money to our customers and the Airfix, Humbrol and Corgi brands added in recent years continue to show encouraging growth. We expect to continue to build on this in the future. 

We have continued to seek appropriate licences to develop new product ranges and these have performed well. Scalextric product associated with BBC Worldwide's Top Gear, Disney/Pixar's Cars and the Formula 1 Grand Prix teams have been among our best sellers. For 2010 we have secured licences with Disney/Pixar for our Hornby and Micro Scalextric brands inspired by the forthcoming Summer 2010 release of Toy Story 3.

We have also launched the first products in the range associated with the London 2012 Olympic Games. Market feedback has been positive. We have a programme in place to release the complete range of Olympic merchandise in the run up to the Games.

With the major supply chain issues now under control, we look forward to the future with confidence. 

Chairman, Neil Johnson commented:

" We have entered 2010 in a strong position. Sales were encouraging in the important pre Christmas period and indeed in the early weeks of 2010. This should ensure a positive final quarter to the financial year as retailers replenish their stocks. Our ranges for 2010 are focussed on value for money and impressive licenses which will continue to drive consumer interest in our products. 

" The progress that has been made in resolving the previous supply chain issues, coupled with a more favourable Dollar/Sterling exchange rate will stand the Company in good stead during the next financial year. We are excited about the future prospects for the company and I look forward to updating investors on future progress. " 

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Date: 25th January 2010 

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