HYNS.L Regulatory News (HYNS)

31 Jan 2008 07:00

Haynes Publishing Group PLC31 January 2008 HAYNES PUBLISHING GROUP P.L.C. INTERIM RESULTS FOR THE 6 MONTHS ENDED 30 November 2007 Haynes Publishing Group P.L.C. is the worldwide market leader in the productionand sale of automotive and motorcycle repair manuals. Every Haynes manual is based on a complete vehicle strip-down and rebuild in ourworkshops, so that the instructions to our customers are inherently practicaland easy to follow. The Haynes Group publishes many other DIY titles as well as an extensive arrayof books about motor sport, vehicles and general transport. Financial Highlights - Turnover on continuing operations of £14.4m (2006: £14.5m) - Operating profit on continuing operations of £2.8m (2006: £3.1m) - Profit before tax on continuing operations of £2.8m (2006: £3.1m) - Basic earnings per share from continuing operations of 11.3 pence (2006: 12.6 pence) - Net cash of £4.5m (2006: £1.8m) - Interim dividend declared of 5.0 pence per share (2006: 5.5 pence) Enquiries : Haynes Publishing Group P.L.C.John Haynes OBE, Chairman 01963 442009Eric Oakley, Group Chief Executive 01963 442009 Blue Oar Securities PlcJerry Keen 0207 448 4492Mike Coe 0117 933 0020 Cautionary Statement : This report contains certain forward-looking statements with regards thefinancial condition and results of the operations of Haynes Publishing GroupP.L.C. These statements and forecasts involve risk factors which are associatedwith, but are not exclusive to, the economic and business circumstancesoccurring from time to time in the countries and sectors in which the Groupoperates. These forward-looking statements are made only as at the date of thisannouncement. Nothing in this announcement should be construed as a profitforecast. Except as required by law, Haynes Publishing Group P.L.C. has noobligation to update the forward-looking statements or to correct anyinaccuracies therein. INTERIM STATEMENT Business overview In the Group's Interim Management Statement (IMS) released in mid-October, weupdated shareholders as to how trading conditions in the important US automotiveaftermarket were soft and that trading at the start of the second quarter hadcontinued in a similar manner. It is disappointing to report that thesedifficult trading conditions persisted through the second quarter. As aconsequence, US revenue in local currency ended the six month period 3% down onthe comparable period last year. However, the impact of a continuing weak USDollar, which averaged $2.03 for the six months to 30 November 2007, against anaverage of $1.89 over the same period last year, reduced further US revenue whentranslated to Sterling by £0.6 million, increasing the shortfall against lastyear to 10%. In the UK and Europe, the position has been more encouraging. During the periodthe UK and European automotive division experienced its fourth consecutivequarter of year-on-year growth, with revenue of the core Haynes Owners WorkshopManuals ending the six month period 9% ahead of the comparable period last year.The UK has also experienced strong growth in its licensing and branded productdivision with revenue from this division more than double last year. On a lesspositive note, whilst external revenue in the UK's production division ended thesix month period 50% ahead of last year, the characteristic low margins in thecompetitive UK print market meant that the UK and European operations suffered amarked deterioration in the overall contribution from its external printingoperation. Financial review Income statement Group revenue from continuing operations ended the six month period to 30November 2007 down 1% at £14.4 million (2006: £14.5 million). As mentioned abovethe difficult trading conditions in the important US automotive aftermarketcoupled with a continued weak US Dollar had an obvious impact on Group revenueduring the six month period. Gross profit for the period was £8.5 million, down 8% (2006: £9.2 million). Inthe US business, the gross margin percentage ended the period slightly belowlast year due to the lower sales of the core automotive manuals. While in the UKand Europe, the benefits of the improved sales of core manuals and higher incomefrom the licensing and branded product division were largely offset by the lowercontribution from external printing. The resulting net impact of the abovefactors led to an overall decline in the Group's gross margin from continuingoperations to 59.1% (2006: 63.3%). The Group continues to manage a tight control over its overheads and despite theincreasing cost of fuel and utilities has been able to reduce overheads by 4%against last year. However, management are conscious of the need to maintaincosts in line with revenue trends and will continue to identify ways of trimmingthe cost base of the businesses without impacting operational capabilities. During the period, net interest receivable from cash deposits increased by 83%to £106,000 (2006: £58,000). The Group's cash generation remains strong and theincreased deposit interest receivable benefited from the higher cash balancesfollowing the disposal of Sutton Publishing in January 2007 coupled with thehigher deposit rates during the period. The charge to taxation has been based on an estimated effective tax rate for the12 months to 31 May 2008 of 34.7% (2006: 33.7%). From April 2008 the UKcorporation rate reduces from 30% to 28% and as a consequence, the UK's deferredtax balances have been adjusted to reflect this change. Basic earnings per share from continuing operations were 11.3 pence (2006: 12.6pence). Balance sheet and cash flow During the six month period, expenditure on property, plant and equipmentincreased to £1.7 million (2006: £0.2 million). The increased expenditure wasprincipally in relation to the purchase of new freehold premises in Sydney,Australia for A$2.3 million (£1.0 million) exclusive of taxes, to house thenewly combined Australian businesses as well as £0.3 million of investment incustomer display stands, mainly in the US. The net cash inflow from continuing operations was £3.4 million (2006: £3.8million). During the period, inventory levels increased by £0.3 million, thisfollowing the acquisition of Bookworks in June 2007 which increased inventorylevels by £0.5 million. The Group's IAS 19 pension scheme deficit ended theperiod at £7.0 million, marginally ahead of the £6.9 million as at 31 May 2007.However, there has been a marked improvement in the position since November2006, when the pension scheme deficit stood at £11.7 million. Interim dividend Following the £3.0 million cash in-flow from the disposal of Sutton Publishingin January 2007, the Group's net cash position has more than doubled since thistime last year. However, trading remains difficult and with the pressures beingplaced on lenders the Board feels it is appropriate, at this point in time, toconserve cash within the business to focus on growing the Haynes Group whetherthrough acquisition, geographical expansion or organic growth. Accordingly, theBoard is recommending an interim dividend of 5.0 pence per share (2006: 5.5pence). The payment of the interim dividend will be made on 22 April 2008 toshareholders on the register at the close of business on 25 March 2008, theshares being declared ex-dividend on 19 March 2008. Operational Review North America and Australia As previously mentioned, the core North American automotive aftermarketexperienced soft trading conditions throughout the first six months of thefinancial year. This had an adverse impact on sales with US revenue, in localcurrency, ending the period down 3% at $15.7 million (2006: $16.2 million).However, the weak US Dollar has had an even more significant impact on theresults of the US operation when translated to Sterling, with the average USDollar exchange rate against Sterling 8% weaker than the equivalent period lastyear, reducing US revenue by £0.6 million and profit before tax by £0.2 million. The amalgamation of the newly acquired Bookworks businesses with the existingHaynes Australian operation is close to completion. The new combined Australianoperation, located in Sydney, New South Wales is well positioned to grow thebusiness in this region and sales from the enlarged combined operation ended theperiod, in US Dollars, $0.9 million ahead of last year. The new US website came on line shortly before the end of the last quarter andvery quickly saw traffic to the website increase significantly. Sales from thewebsite, whilst still modest in volume terms, are starting to grow and the newimproved site provides the US business with an important channel to communicatewith consumers. The net impact of the above factors left the North American and Australianbusiness with a segmental profit in local currency down 11%. However, aftertranslation to Sterling, segmental profit ended the period at £2.2 million(2006: £2.7 million), down 19%. UK and Europe Revenue from the UK and European operations ended the period 13% ahead of thecomparative six month period. Sales of the core Haynes manuals had anotherstrong quarter, with revenue ending the six month period 9% ahead of last year.Sales of our core Manuals also performed well in Scandinavia and although salesduring the second quarter did not match the 10% increase experienced in thefirst three months of the financial year, revenue still ended the six monthperiod 3% ahead of last year. Revenue in the Haynes Book Division ended the six month period marginally aheadof last year. This was another strong performance by the Book Division, withsales of the Motor Racing Season Reviews once again featuring in the top fiveselling titles and the Haynes Spitfire Manual, the first title to be released inthe co-publishing programme with the RAF, ending the period as the Division'stop selling title. The Haynes licensing division has made considerable progress since its inceptioneighteen months ago. The revenue from this division, whilst modest in Groupterms, is derived from a list of prestigious licensing partners which nowinclude Next, Lee Cooper, Pyramid Posters and Trends. The launch of the newHaynes combustion engine toy, in late October, has sold well in the run up toChristmas and will hopefully be the first of a range of toys aimed at educatingour younger customers that DIY can be fun. As mentioned earlier in the statement, the UK's production division had adifficult six months of trading. Despite an increase in the volume of externalproduction passing through the plant, the low margins in this part of thebusiness have had an adverse impact on the profitability of the UK and Europeanbusinesses. As a result of the above factors, UK and European segmental revenue fromcontinuing operations increased to £6.7 million (2006: £5.9 million). However,whilst the UK and European businesses benefited from the higher revenue, thelower margins from the external printing meant that the increase in segmentalprofit was all but eroded ending the period at £0.6 million (2006: £0.6million). Future outlook In the Haynes US business there are no clear signs that difficult marketconditions experienced in the first half of the year are set to improvesignificantly during the second six months. However, with continued marketinginitiatives and a price increase effective from 1 January 2008, management willbe making every effort to recover some of the shortfall experienced in the firsthalf. In the UK, reports of a mixed Christmas trading period for retailers and anexpectation of a further slow down in consumer spending is a concern. However,sales of the Haynes manuals have been performing well and the focus willcontinue on developing product and marketing initiatives aimed at growing salesof the core Haynes Manuals. Responsibility statement Pages 18 and 19 of the Annual Report & Accounts for the financial year ended 31May 2007 provide details of the serving Board Directors and there have been nochanges during the six months to 30 November 2007. A copy of recent AnnualReport & Accounts can be found on the Haynes website www.haynes.co.uk/investor .The 31 May 2007 Annual Report & Accounts also provide a statement of theDirectors' responsibilities on page 35. The Board confirm that to the best of its knowledge: • The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. • The Interim management report includes a fair review of the information required by the Disclosure and Transparency Rules (DTR). J H Haynes, OBEChairman of the Board 30 January 2008 Consolidated Income Statement (unaudited) 6 months to Year ended 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000Continuing operationsRevenue (note 2) 14,391 14,492 29,202Cost of sales (5,888) (5,321) (10,498)Gross profit 8,503 9,171 18,704Other operating income 73 17 53Distribution costs (3,386) (3,549) (7,437)Administrative expenses (2,440) (2,493) (4,169)Operating profit 2,750 3,146 7,151Finance income (note 4) 758 528 1,104Finance costs (note 5) (669) (579) (1,174) Profit before taxation 2,839 3,095 7,081Taxation (note 6) (985) (1,042) (1,913) Profit for the period from continuing operations 1,854 2,053 5,168 Discontinued operationsLoss for the period from discontinued operations (note 7) - (2,945) (2,946) Profit/(loss) for the period attributable to the equity 1,854 (892) 2,222holders of the parent Earnings per 20p share - pence Earnings per share from continuing operations - Basic 11.3 12.6 31.6 - Diluted 11.3 12.6 31.6 Earnings/(loss) per share from continuing and discontinuingoperations - Basic 11.3 (5.5) 13.6 - Diluted 11.3 (5.5) 13.6 Loss per share from discontinued operations- Basic - (18.0) (18.0)- Diluted - (18.0) (18.0) Consolidated Statement of Recognised Income and Expense (unaudited) 6 months to Year ended 30 Nov 2007 30 Nov 2006 31 May 2007 £000 £000 £000 Exchange differences on translation of foreign operations (650) (822) (940)Actuarial gains/(losses) on retirement benefit obligation - UK Scheme 532 (3,242) 474 - US Scheme (494) 85 919Deferred tax on retirement benefit obligation - UK Scheme (149) 973 (142) - US Scheme 197 (34) (368)Deferred tax arising on change in UK tax rate (115) - -Net expense recognised directly in equity (679) (3,040) (57) Profit/(loss) for the financial period 1,854 (892) 2,222 Total recognised income/(expense) for the financial period 1,175 (3,932) 2,165 Consolidated Balance Sheet (unaudited) 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000Non-current assetsProperty, plant and equipment 8,183 6,838 6,763Intangible assets 4,338 4,383 4,359Deferred tax assets 2,749 4,378 2,802 15,270 15,599 13,924Current assetsInventories 11,296 11,008 10,810Trade and other receivables 9,361 10,231 9,801Cash and cash equivalents 4,546 3,761 6,478Total current assets 25,203 25,000 27,089Assets classified as held for sale - 2,762 - 25,203 27,762 27,089 Total assets 40,473 43,361 41,013 Current liabilitiesTrade and other payables (3,815) (4,665) (3,857)Tax liabilities (616) (698) (879)Bank overdrafts - (1,974) -Total current liabilities (4,431) (7,337) (4,736)Liabilities directly associated with assets - (14) -classified as held for sale (4,431) (7,351) (4,736) Non-current liabilitiesDeferred consideration (130) (203) (135)Deferred tax liabilities (550) (506) (384)Retirement benefit obligation (note 13) (6,973) (11,650) (6,909)Total non-current liabilities (7,653) (12,359) (7,428) Total liabilities (12,084) (19,710) (12,164) Net assets 28,389 23,651 28,849 Equity (note 14)Share capital 3,270 3,270 3,270Share premium 638 638 638Retained earnings 26,473 20,967 26,283Foreign currency translation reserve (1,992) (1,224) (1,342)Total equity 28,389 23,651 28,849 Consolidated Cash Flow Statement (unaudited) 6 months to Year ended 30 Nov 2007 30 Nov 2006 31 May 2007 £'000 £'000 £'000 Net cash generated from operating activities - Continuing operations (note 11) 3,438 3,789 7,889 - Discontinued operations (note 11) - (861) (583) Cash generated by operations 3,438 2,928 7,306 Tax paid (1,212) (1,809) (2,505) Interest received 106 58 161 Interest paid - (4) (29) Retirement benefit obligation 115 (34) (332) Net cash generated from operation activities 2,447 1,139 4,601 Investing activitiesProceeds from sale of property, plant and equipment 16 - - Disposal of subsidiary - - 2,780 Closure of operation - - (141) Purchases of property, plant and equipment (1,735) (184) (500) Acquisition costs : - Business operation (660) - - - Deferred consideration (7) (122) (208) Net cash used in investing activities (2,386) (306) 1,931 Financing activities Dividends paid (1,635) (1,635) (2,534) Net cash used in financing activities (1,635) (1,635) (2,534) Net (decrease)/increase in cash and cash equivalents (1,574) (802) 3,998 Cash and cash equivalents at beginning of year 6,478 3,077 3,077 Effect of foreign exchange rate changes (358) (488) (597) Cash and cash equivalents at end of period 4,546 1,787 6,478 Notes to the Interim Results 1. Basis of accounting The financial statements for the six months ended 30 November 2007 and 30November 2006 and for the twelve months ended 31 May 2007 do not constitutestatutory accounts for the purposes of Section 240 of the Companies Act 1985.The financial information in relation to the year ended 31 May 2007 is abridgedfrom the Company's Annual Report and Consolidated Financial Statements, a copyof which has been delivered to the Registrar of Companies. The auditors' reporton those accounts was unqualified, did not contain an emphasis of matterparagraph and did not contain a statement under Section 237(2) or (3) of theCompanies Act 1985. The 30 November 2007 statements were approved by a dulyappointed and authorised committee of the Board of Directors on 30 January 2008and are unaudited. The financial statements for the six months ended 30 November 2007 includes thefollowing accounting policy in relation to acquired intangible assets :- An intangible asset acquired as part of a business combination is recognised asan asset if it is separately identifiable from the acquired business or arisesfrom contractual or legal rights, is expected to generate future economicbenefit and its fair value can be measured reliably. An acquired intangibleasset with a finite life is amortised on a straight-line basis so as to chargeits cost, which represents its fair value at the acquisition date, to the incomestatement over its expected useful life. An acquired asset with an indefinitelife is not amortised but is tested annually for impairment and carried at costless any recognised impairment losses. The intangible assets which were acquired through the acquisition of Bookworksin June 2007 and which relate to trademarks and copyright are deemed to haveindefinite lives. Apart from the inclusion of the new accounting policy above, the financialstatements have been prepared in accordance with the accounting policies set outin the 2007 Annual Report and Accounts. Along with IFRS 7 'FinancialInstruments: Disclosures' and the amendment to IAS 1 'Capital Disclosures', bothof which are first effective for accounting periods commencing on or after 1January 2007, these are the accounting policies which are expected to befollowed in the preparation of the full financial statements for the financialyear ended 31 May 2008. The financial information has been prepared in accordance with the Disclosureand Transparency rules of the Financial Services Authority and withInternational Accounting Standard (IAS) 34 'Interim Financial Reporting' asendorsed by the European Union. 2. Revenue 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000Turnover by geographical destination on continuing operations :United Kingdom 5,217 4,282 9,510Rest of Europe 1,052 1,104 2,054United States of America 6,598 7,863 15,213Rest of World 1,524 1,243 2,425Total consolidated turnover 14,391 14,492 29,202 3. Segmental analysis For management purposes, the Group is currently organised into two geographicaloperating segments. These geographical segments are the basis on which the Groupreports its primary segment information. The principal activities of the two primary segments are as follows :- • The origination, production and sale of automotive repair manuals in the UK and Europe • The origination, production and sale of automotive repair manuals in North America and Australia Analysis of results by geographical segment: Eliminations/ North Reclassification UK America Discontinued of discontinued & Europe & Australia Operations Operations Consolidated 6 months to 6 months to 6 months to 6 months to 6 months to 30 Nov 30 Nov 30 Nov 30 Nov 30 Nov 2007 2007 2007 2007 2007 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 6,682 7,709 - - 14,391Inter-segmental sales (1) 114 340 - (454) -Total revenue 6,796 8,049 - (454) 14,391ResultSegment operating profit 597 2,248 - - 2,845Unallocated head office income less expense (95)Finance income 758Finance costs (669)Consolidated profit before tax 2,839 Eliminations/ North Reclassification UK America Discontinued of discontinued & Europe & Australia Operations Operations Consolidated 6 months to 6 months to 6 months to 6 months to 6 months to 30 Nov 30 Nov 30 Nov 30 Nov 30 Nov 2006 2006 2006 2006 2006 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 5,917 8,575 2,038 (2,038) 14,492Inter-segmental sales (1) 108 383 764 (1,255) -Total revenue 6,025 8,958 2,802 (3,293) 14,492ResultSegment operating profit 558 2,659 - - 3,217Unallocated head office income less expense (71)Finance income 528Finance costs (579)Consolidated profit before tax 3,095 (1) Inter-segmental sales are charged at the prevailing market rates Eliminations/ North Reclassification UK America Discontinued of discontinued & Europe & Australia Operations Operations Consolidated Year ended Year ended Year ended Year ended Year ended 31 May 31 May 31 May 31 May 31 May 2007 2007 2007 2007 2007 £'000 £'000 £'000 £'000 £'000RevenueExternal sales 11,755 17,447 2,600 (2,600) 29,202Inter-segmental sales (1) 231 849 890 (1,970) -Total revenue 11,986 18,296 3,490 (4,570) 29,202ResultSegment operating profit 1,086 5,865 (100) 100 6,951Unallocated head office income less expense 200Finance income 1,104Finance costs (1,174)Consolidated profit before tax 7,081 (1) Inter-segmental sales are charged at the prevailing market rates 4. Finance income 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000 Interest receivable on bank deposits 106 58 161Expected return on pension scheme assets 652 470 943 758 528 1,104 5. Finance costs 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000Finance costs can be analysed as follows:Interest payable on bank loans and overdrafts - - 29Interest charge on pension scheme liabilities 669 583 1,170 669 583 1,199 Less: Amounts included in profit from discontinued operations - (4) (25) 669 579 1,174 6. Taxation The charge for taxation for the six months ending 30 November 2007 has beenbased on an estimated full year effective tax rate of 34.7% (30 November 2006:33.7%) The rate reflects the significant proportion of profit generated byoverseas subsidiaries with a higher corporate tax rate and an adjustment to theUK's deferred tax calculations to reflect the reduction in UK corporation taxrates from April 2008. 7. Discontinued operations On 24 November 2006 the Group announced the closure of its French operation,Editions Haynes SARL and this was followed on 24 January 2007 by the sale ofSuttons Publishing Limited for a consideration of £3.0 million in cash. 8. Acquisition On 5 June 2007, the Board announced the acquisition of certain assets andliabilities including finished goods inventory, work in progress, intellectualproperty and equipment from Bookworks Pty Ltd, Rellim Pty Ltd, Motordata Pty Ltdand Stan H Earle Pty Ltd all private Australian companies in the bookorigination, printing and distribution business. The total consideration for theacquisition was A$1.5 million (£0.6 million). Given the proximity of the acquisition to the date of the publication of theConsolidated Financial Statements for the year ended 31 May 2007 it was notpossible to determine the fair values of any intangible assets arising on theacquisition. Accordingly, provisional fair values were included in theseConsolidated Financial Statements. Following a review undertaken postacquisition, intangible assets of £144,000 (A$334,000) have been identified inrelation to the trademarks (£26,000) and copyrights (£118,000) held by theBookworks companies. The table below shows the fair values arising on the acquisition : Carrying value Recognised on acquisition £'000 £'000Assets acquiredProperty, plant and equipment 75 105Intangible assets - 144Inventories 504 540Other creditors (40) (40)Deferred tax arising on recognition of intangible assets - (49) Fair value of net assets 539 700Excess of acquirer's interest in the net fair value of the identifiable (40)assets and liabilities over costTotal consideration 660 Consideration 606Costs associated with the acquisition 54Total consideration 660 The cash outflow on acquisition was as follows :Cash paid 660Net cash outflow 660 In August 2007 new premises in Sydney, Australia were acquired for aconsideration of A$2.3 million (£1.0 million) exclusive of taxes, which hasenabled the Group's Australian businesses to be combined and operate from onelocation. As a result of the amalgamation during the period it is impracticableto determine the amount of profit for the period, which would have been derivedsolely from the newly acquired business as required by Paragraph 67(i) of IFRS 3'Business Combinations'. Paragraph 70 (a) and (b) of IFRS 3 requires an acquirer to disclose the Grouprevenue and Group profit attributable to equity holders of the parent, as if theacquisition had been effected at the beginning of the financial period. However,as the acquisition of the Bookworks businesses was completed at the beginning ofthe financial period there is no difference between the basis as required underIFRS 3 above and that shown in the Consolidated Income Statement. The excess of the acquirer's interest in the net fair value of the identifiableassets and liabilities over cost of £40,000 has been included within otheroperating income in the Consolidated Income Statement. 9. Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing :- 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000Earnings :Profit after tax - continuing operations 1,854 2,053 5,168Profit after tax - discontinuing operations - (2,945) (2,946)Profit after tax - all operations 1,854 (892) 2,222 No. No. No. Number of shares :Weighted average number of shares 16,351,540 16,351,540 16,351,540 As at 30 November 2007, 31 May 2007 and 30 November 2006 there were nopotentially dilutive shares in issue on either of the Company's two classes ofshares. Accordingly, there is no difference between the weighted average numberof shares used in the basic and diluted earnings per share calculation. 10. Dividends 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000Amounts recognised as distributions to equity holders : Final dividend of 10.0p per share (2006: 10.0p) 1,635 1,635 1,635Interim dividend of 5.5p per share - - 899 1,635 1,635 2,534 An interim dividend of 5.0p per share (2006: 5.5p) amounting to £817,577 (2006:£899,335) has been declared during the period but has not been reflected in theinterim accounts. The payment of the interim dividend will be made on 22 April2008 to shareholders on the register at the close of business on 25 March 2008.The shares will be declared ex-dividend on 19 March 2008. 11. Cash flow analysis 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000Cash flows from operating activities - continuing Profit after tax 1,854 2,053 5,168 Adjusted for :Income tax expense 985 1,042 1,913Interest payable and similar charges - - 4Interest receivable (106) (58) (161)Excess of acquirer's interest in the net fair value of the identifiable (40) - -assets and liabilities over costIAS 19 pension charge for defined benefit scheme 17 109 227Operating profit 2,710 3,146 7,151Depreciation on property, plant and equipment 329 374 735Gain/(loss) on disposal of property, plant and equipment (14) - - 3,025 3,520 7,886Changes in working capital :(Increase)/decrease in inventories 54 (116) (215)(Increase)/decrease in receivables 440 (204) 526Increase/(decrease) in payables (81) 589 (308) 3,438 3,789 7,889Cash flows from operating activities - discontinuing Loss after tax - (2,945) (2,946) Adjusted for :Interest payable and similar charges - 4 25Loss on disposal of subsidiary - - 2,288Closure of operation - - 533Operating loss - (2,941) (100) Depreciation on property, plant and equipment - 20 22Write-down of assets for sale to fair value less costs to sell - 2,316 - - (605) (78)Changes in working capital :(Increase)/decrease in inventories - (266) (235)(Increase)/decrease in receivables - 57 (280)Increase/(decrease) in payables - (47) 10 - (861) (583) 12. Analysis of the changes in net funds As at As at 1 June Exchange 30 Nov 2007 Cashflow movements 2007 £'000 £'000 £'000 £'000 Cash at bank and in hand 6,478 (1,574) (358) 4,546 6,478 (1,574) (358) 4,546 13. Retirement benefit obligation The Group operates a number of different retirement programmes in the countrieswithin which it operates. The principal pension programmes are a contributorydefined benefit scheme in the UK and a non contributory defined benefit plan inthe US. The assets of all schemes are held independently of the Group and itssubsidiaries. During the period the financial position of the above pension arrangements havebeen updated in line with the anticipated annual cost for current service, theexpected return on scheme assets, the interest on scheme liabilities and cashcontributions made to the schemes. The last full IAS 19 actuarial valuation was carried out by a qualifiedindependent actuary as at 31 May 2007 and this valuation has been updated by theScheme's actuaries on an approximate basis to 30 November 2007. The movements in the retirement benefit obligation were as follows :- 6 months to Year ended 30 Nov 30 Nov 31 May 2007 2006 2007 £000 £000 £000 Retirement benefit obligation at beginning of period (6,909) (8,517) (8,517) Movement in the period :- Total expenses charged in the income statement (575) (692) (1,330)- Contributions paid 443 617 1,435- Actuarial gains/(losses) taken directly to reserves 38 (3,157) 1,393- Foreign currency exchange rates 30 99 110 Retirement benefit obligation at end of period (6,973) (11,650) (6,909) 14. Consolidated statement of changes in equity Foreign exchange Share Share translation Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000Current interim period :Balance at 1 June 2007 3,270 638 (1,342) 26,283 28,849Profit for the period - - - 1,854 1,854Currency translation adjustments - - (650) - (650)Actuarial gains/(losses) on defined benefit plans - - - (29) (29)(net of tax)Dividends - - - (1,635) (1,635)Balance at 30 November 2007 3,270 638 (1,992) 26,473 28,389 Prior interim period :Balance at 1 June 2006 3,270 638 (402) 25,712 29,218Profit for the period - - - (892) (892)Currency translation adjustments - - (822) - (822)Actuarial gains/(losses) on defined benefit plans - - - (2,218) (2,218)(net of tax)Dividends (1,635) (1,635)Balance at 30 November 2006 3,270 638 (1,224) 20,967 23,651 Prior year :Balance at 1 June 2006 3,270 638 (402) 25,712 29,218Profit for the period - - - 2,222 2,222Currency translation adjustments - - (940) - (940)Actuarial gains/(losses) on defined benefit plans - - - 883 883(net of tax)Dividends - - - (2,534) (2,534)Balance at 31 May 2007 3,270 638 (1,342) 26,283 28,849 15. Exchange rates The foreign exchange rates used in the financial statements to consolidate theoverseas subsidiaries are as follows (local currency equivalent to £1): Period End Rate Average Rate 30 Nov 30 Nov 31 May 30 Nov 30 Nov 31 May 2007 2006 2007 2007 2006 2007US Dollar 2.06 1.97 1.98 2.03 1.89 1.93Euro 1.40 1.48 1.47 1.45 1.47 1.48Swedish Krona 13.14 13.46 13.67 13.46 13.57 13.61 16. Capital expenditure Property, plant and equipment £'000Net book values at 1 June 6,763Exchange rate movements (89)Additions 1,735Additions resulting from business combinations 105Disposals (2)Depreciation and amortisation (329) 8,183 The property, plant and equipment additions include £1.0 million (A$2.3 million)for the purchase of new freehold premises in Sydney, Australia and £0.3 millionof investment in customer display stands. 17. Related party transactions During the six months to 30 Nov 2007 there were no material related partytransactions. 18. Principal risks and uncertainties The Board is primarily responsible for identifying and monitoring risk and themanner in which the Board manages this process is outlined in the CorporateGovernance report on page 28 of the Group's Annual Report, a copy of which isavailable on the Group's website www.haynes.co.uk/investor. The principal financial risks and uncertainties affecting the Group for theremaining six months of the year are outlined in the Interim Statement on pages2 to 4 of this report. 19. Other information A copy of this half-year report will be distributed to all shareholders and willalso be available to members of the public from the Company's registered officeat Sparkford, Near Yeovil, Somerset BA22 7JJ. A copy of the interim report willalso be available on the UK website at www.haynes.co.uk/investor. INDEPENDENT REVIEW REPORT TO HAYNES PUBLISHING GROUP P.L.C. Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30November 2007 which comprises a consolidated income statement, consolidatedstatement of recognised income and expense, consolidated balance sheet,consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial reportand considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financialstatements. Directors' responsibilities The half-yearly financial report is the responsibility of and has been approvedby the directors. The directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the group areprepared in accordance with International Financial Reporting Standards (IFRSs)as adopted by the European Union. The condensed set of financial statementsincluded in this half-yearly financial report has been prepared in accordancewith International Accounting Standard 34, ''Interim Financial Reporting'', asadopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. Our report has been prepared in accordance with the terms of our engagement toassist the company in meeting its responsibilities in respect to half-yearlyfinancial reporting in accordance with the Disclosure and Transparency Rules ofthe United Kingdom's Financial Services Authority and for no other purpose. Noperson is entitled to rely on this report unless such a person is a personentitled to rely upon this report by virtue of and for the purpose of our termsof engagement or has been expressly authorised to do so by our prior writtenconsent. Save as above, we do not accept responsibility for this report to anyother person or for any other purpose and we hereby expressly disclaim any andall such liability. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, ''Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity'', issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof 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 believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 November 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34, asadopted by the European Union, and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. BDO Stoy Hayward LLPChartered AccountantsSouthampton30 January 2008 This information is provided by RNS The company news service from the London Stock Exchange