Final Results

Hornby PLC 05 June 2003 HORNBY DELIVERS SPARKLING PERFORMANCE Hornby Plc, ('Hornby') the models and collectables Group, has today announced its preliminary results for the year ended 31 March 2003. Hornby's two main products are Hornby model railways and Scalextric slot car racing systems. • Pre-tax profits up 45% to £5.4 million (2002: £3.7 million) • Turnover up 20% to £34.1 million (2002: £28.5 million) • Earnings per share up 62% to 53.32p (2002: 32.97p) • Cash position at 31 March 2003 at £7.9 million (31 March 2002: £6.5 million) • Final dividend of 19p declared - Total dividend up 47% to 25p (2002: 17p) Frank Martin, Chief Executive of Hornby, said, ' Hornby has again delivered an excellent financial performance. Sales of both the Hornby and Scalextric product ranges are exceeding our expectations. We are seeing a real resurgence of interest in both Hornby and Scalextric products across all ages, driven by the improved detailing and authenticity. ' The growth of Hornby Railways has been mainly UK based, whilst Scalextric has also been growing strongly overseas, especially as the appeal for Motorsport becomes ever more global. One particular success was the launch of a range of American 'Muscle Cars' based on the 1970s Ford Mustang and Chevrolet Camaro. ' An important aspect of new product design is winning licences to create products associated with popular titles such as Harry Potter and the Simpsons TV characters. We have recently been awarded the licence to sell Scalextric sets and accessories based on the new 'Italian Job' movie. Licensing will be an important aspect of the Company's future growth. ' The Board is confident that the recent sales growth is sustainable and, indeed very robust. There is a new generation of young hobbyists and enthusiasts becoming committed to our products, which we will be able to build upon in the future. The momentum is continuing to gather pace as we open more in-store concessions and our pipeline of new products offers excellent potential for future sales growth.' -ends- Date: 5 June 2003 For further information contact: Hornby Plc City Profile Group Frank Martin, Chief Executive Simon Courtenay John Stansfield, Finance Director 01843-233500 020-7448-3244 or 07958-754273 On 5 June: 020-7448-3244 Web: www.hornby.com or: www.scalextric.com High resolution images are available for the media to view and download free of charge from: www.vismedia.co.uk CHAIRMAN'S STATEMENT It is pleasing, once again, to be able to report 12 months of sustained progress in your Company. Sales, in generally challenging global trading conditions, have increased 20% to £34.1m. Profit before tax at £5.4m is 45% above last year's result (£3.7m), and earnings per share are up by 62% to 53.3p. In March of this year the Company's progress was recognised at the UK PLC Awards 2002 when it won the 'Company of the Year' award. This was a strong endorsement of the strategies that we continue to implement and was a wonderful boost to morale for everyone in the business. Dividend The Board is recommending a final dividend of 19p. This will bring the total dividend for the year to 25p, an increase of 47% over 17p in the previous year. This dividend is payable to all shareholders on the register at Friday 25 July 2003 and will be paid on Friday 15 August 2003. Business Review All of the Company's distribution channels, both in the UK and Internationally, showed good year on year sales growth across both the Hornby and Scalextric ranges highlighting a well-balanced business across our two brands. Growth in the Hornby range has come primarily from the independent retail sector in the United Kingdom and a particularly strong performance in Scalextric was achieved through International sales. It is also pleasing to report that our in-store concessions numbered 65 as at 31 March 2003, compared to 28 a year earlier. These outlets now account for an important part of the Company's sales and profits. The maintenance of a year round display presence in these stores also helps to underpin the collectable hobby nature of both Hornby and Scalextric brands. The Harry Potter franchise makes a continuing contribution to Hornby sales. The success we have enjoyed with licensed merchandise encourages us to establish other relationships and product licences for the future. At the 2003 International Toy Fairs, held in the first quarter of 2003, we launched a new Micro Scalextric range based on 'The Simpsons' TV characters, which we expect to provide good prospects for future growth. We have also secured a licence to produce Scalextric sets and accessories based on the 'Italian Job' film release. This film has recently been released in the USA and is due for release in Europe this autumn, which will coincide with the first deliveries of our Scalextric sets. Further development of the already successful CD-Rom based 'Hornby Virtual Railway' has continued and an all-new version will be released during the first half of this financial year. Innovation in this fast-growing area for technology-related products and improved on-screen graphics have enabled us to deliver far greater functionality and interactivity which bodes well for further development of the hobby. In the United States, despite a generally difficult trading environment, it is pleasing to see Scalextric USA back in profit. During the year the management team has been re-structured in order to meet the demands of this rapidly-expanding business. Our strategy of producing products with an American focus, including the Ford Mustang, Chevrolet Camaro and Ford GT40 models, has improved significantly both our product appeal and sales performance. On the back of this success we have been able to attract new retailers to our brands; during the trading year we have opened 134 active new accounts, taking the total as at 31 March 2003 to 455. Property As outlined in last year's report we still hope to be in a position to develop a new UK headquarters for Hornby, including a 'Hornby Heritage Centre' on a site near our current Margate facility. Our application to redevelop our existing site was referred to the Secretary of State last year, and the planning inquiry took place in January. We hope to learn the final outcome of this inquiry by the autumn of 2003. Global Context Since the end of the financial year two major issues have dominated global confidence; Iraq and the SARS virus. Uncertainties surrounding the hostilities in Iraq drew to a speedy conclusion and despite our outsourced production facilities being located in the People's Republic of China, the SARS virus is having no impact on production levels or our current or projected trading. Our Chinese production facilities are both modern and efficient and management there have taken all reasonable steps to ensure that their business and staff are protected. Product Development The past year has seen further development in the success and sophistication of our product offerings across both Hornby and Scalextric ranges. Whilst continuing to exploit the potential of the adult collector's market in both sectors, we have continued to develop new products for the younger age groups who are likely to be the Hornby and Scalextric collectors of the future. 'Bash ' n Crash' was the biggest selling Scalextric set in the United Kingdom in the run-up to Christmas 2002. This was a most encouraging performance. In the future it remains your Company's strategy to develop further products targeted at both adult and toy markets across both ranges. We will continue to ensure that the adult enthusiast's market is satisfied with high quality, authentic detail products whilst at the same time developing new entry points to both the Hornby and Scalextric ranges for the younger age groups. This balance is fundamental to our business philosophy. As part of the programme of re-enforcing Scalextric as the 'home motorsport' for enthusiasts, we have announced recently a strategic relationship with another household name in motorsport, Goodwood. Both Hornby and particularly Scalextric products will feature at this year's Festival of Speed to be held on 11 - 13 July, and later in the year on 5 - 7 September when Scalextric will again feature prominently at the Goodwood Revival Motorsport meeting. I am confident that this will further raise the profile of our motoring heritage. Outlook Finally, I am pleased to be able to report that, following a most successful performance in the year to 31 March 2003 our sales growth momentum is now well established in both the UK and our international target markets. I am delighted to report that the new financial year has started well. A strong pipeline of new product developments should ensure the continued organic growth of the Company during the current financial year and beyond. I should like to thank Frank Martin our chief executive, our directors and all our staff working on both Hornby and Scalextric ranges for their dedicated support and hard work. Without them, none of this would have been possible. Neil Johnson 5 June 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2003 2003 2002 £'000 £'000 TURNOVER 34,142 28,489 Cost of sales (18,369) (16,206) _______ _______ GROSS PROFIT 15,773 12,283 Net operating expenses (10,417) (8,609) _______ _______ OPERATING PROFIT 5,356 3,674 Net interest receivable 55 48 _______ _______ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5,411 3,722 Tax on profit on ordinary activities (1,519) (1,329) _______ _______ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 3,892 2,393 Dividends (1,830) (1,234) _______ _______ RETAINED PROFIT FOR THE FINANCIAL YEAR 2,062 1,159 _______ _______ ATTRIBUTED TO: The Company (45) (41) Subsidiary undertakings 2,107 1,200 _______ _______ 2,062 1,159 _______ _______ EARNINGS PER ORDINARY SHARE 53.32p 32.97p Basic 52.00p 32.56p Diluted All of the activities of the Group are continuing. STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 31 MARCH 2003 2003 2002 £'000 £'000 Profit for the financial year 3,892 2,393 Exchange adjustments offset in reserves (21) - _______ _______ Total recognised gains for the year 3,871 2,393 _______ _______ CONSOLIDATED BALANCE SHEET AT 31 MARCH 2003 2003 2002 £'000 £'000 FIXED ASSETS Intangible assets 31 36 Tangible assets 3,569 3,625 Investments - Short Term Incentive Plan 192 - _______ _______ 3,792 3,661 _______ _______ CURRENT ASSETS Stocks 6,150 5,535 Debtors 5,222 4,888 Cash at bank and in hand 7,909 6,477 _______ _______ 19,281 16,900 CREDITORS: Amounts falling due within one year (7,187) (6,755) _______ _______ NET CURRENT ASSETS 12,094 10,145 _______ _______ TOTAL ASSETS LESS CURRENT LIABILITIES 15,886 13,806 CREDITORS: Amounts falling due after more than one year (22) (16) PROVISIONS FOR LIABILITIES AND CHARGES (486) (628) _______ _______ NET ASSETS 15,378 13,162 _______ _______ CAPITAL AND RESERVES Called up share capital 367 363 Capital redemption reserve 55 55 Share premium account 4,696 4,525 Revaluation reserve 774 791 Other reserves 1,688 1,688 Profit and loss account 7,798 5,740 _______ _______ EQUITY SHAREHOLDERS' FUNDS 15,378 13,162 _______ _______ CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2003 2003 2002 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 5,814 4,437 Returns on investments and servicing of finance 55 48 Taxation (1,662) (872) Capital expenditure and financial investment - purchase of fixed assets (1,219) (1,440) - sale of fixed assets 60 34 ______ ______ (1,159) (1,406) Purchase of own shares - Short Term Incentive Plan (192) - Payment of deferred consideration (49) (38) Equity dividends paid (1,524) (871) ______ ______ Net cash inflow before financing 1,283 1,298 Financing Issue of ordinary shares 175 - Capital element of finance lease payments (17) (33) ______ ______ Increase in cash in the year 1,441 1,265 ______ ______ RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2003 2002 £'000 £'000 Increase in cash in the year 1,441 1,265 Cash outflow from decrease in lease financing 17 33 _______ _______ Change in net funds resulting from cash flows 1,458 1,298 New finance leases (28) - Exchange movements (9) - _______ _______ Movement in net funds in the year 1,421 1,298 Net funds at 1 April 2002 6,446 5,148 _______ _______ Net funds at 31 March 2003 7,867 6,446 _______ _______ NOTES TO THE CASH FLOW STATEMENT NET CASH FLOW FROM OPERATING ACTIVITIES 2003 2002 £'000 £'000 Operating profit 5,356 3,674 Exchange adjustments offset in reserves (7) - Depreciation charges 1,266 1,468 Amortisation of goodwill 3 2 Profit on sale of tangible fixed assets (18) (10) (Increase) in stocks (615) (1,295) (Increase)/decrease in debtors (374) 67 Increase in creditors 348 512 (Decrease)/increase in sales returns provision (145) 19 _______ _______ Net cash inflow from operating activities 5,814 4,437 _______ _______ SEGMENTAL INFORMATION The directors consider there to be one class of business, being the development, manufacture and distribution of model products. BY ORIGIN Turnover Profit/(loss) before tax Net assets 2003 2002 2003 2002 2003 2002 £'000 £'000 £'000 £'000 £'000 £'000 United Kingdom 30,680 25,746 5,347 3,839 15,143 12,950 United States of America 3,462 2,743 64 (117) 235 212 ______ ______ ______ ______ ______ ______ Group 34,142 28,489 5,411 3,722 15,378 13,162 ______ ______ ______ ______ ______ ______ TURNOVER BY DESTINATION 2003 2002 £'000 £'000 United Kingdom 26,473 22,439 Rest of World 7,669 6,050 ______ ______ Group 34,142 28,489 ______ ______ NOTES 1. The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders for the financial year of £3,892,000 (2002 - £2,393,000) and the weighted average number of ordinary shares in issue during the year of 7,299,894 (2002 - 7,257,320). 2003 2002 Earnings Earnings Earnings per share Earnings per share £'000 pence £'000 pence Earnings per share Basic 3,892 53.32p 2,393 32.97 Diluted 52.00p 32.56 The following table shows a reconciliation of the weighted average number of shares used for calculating the basic and diluted earnings per share. 2003 2002 Number Number of shares of shares Used for calculating basic earnings per share 7,299,894 7,257,320 Dilution due to share option schemes 185,147 91,356 _________ _________ Used for calculating diluted earnings per share 7,485,041 7,348,676 _________ _________ 2. The proposed dividend will be paid on 15 August 2003 to members on the register as at 25 July 2003. The ex-dividend date will be 23 July 2003. 3. The profit and loss account, statement of group total recognised gains and losses and balance sheet set out above for the year ended 31 March 2003 are not statutory accounts and are abridged and audited. Full audited accounts will be filed with the Registrar of Companies in due course. Full audited accounts for the year ended 31 March 2002 containing an unqualified audit report have been filed with the Registrar of Companies. 4. The preliminary financial information has been prepared on the basis of accounting policies set out in the Report & Accounts for the year ended 31 March 2002. 5. This preliminary announcement was approved by the Board on 5 June 2003. 6. Copies of this preliminary announcement are available from J W Stansfield, Finance Director, Hornby Plc, Westwood, Margate, Kent, CT9 4JX. This information is provided by RNS The company news service from the London Stock Exchange

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