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DT
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Hornby Plc today announced its preliminary results for the year ended 31 March 2006:-

*Pre-tax profits up 8% to £8.2 million (2005: £7.6 million)

*Turnover reduced by 2% to £44.1 million (2005: £45.0 million)

*Earnings per share up 4% to 15.64p (2005: 15.06p)

*Profits generated in newly acquired overseas subsidiaries

Frank Martin, Chief Executive of Hornby, said:

"We are delighted with the performance that the Group has delivered. This is the seventh consecutive year of profits growth. Despite the challenging backdrop of our core UK market, we have demonstrated once again the robust nature of the hobbyist market. Our international operations are now profitable and we are confident that they will continue to deliver encouraging progress in the future."

"The launch of the Scalextric Sport Digital System has been extremely successful. This major advance in technology has been further developed to offer digital control racing across a wider range of price points, thus bringing significantly enhanced play-value into the mass market for slot racing."

"One of the most significant developments in recent years has been the launch in 2004 of the Scalextric Sport Digital System (SSD). Customer reaction has been excellent. SSD is now gaining recognition worldwide as the system of choice for digital slot car racing, combining easy compatibility with existing systems and an excellent record of reliability."

"This year we have introduced a number of new products within SSD, aimed at securing wider distribution around the world, at mass-market price points. We believe that, over time, the market will move decisively towards digital control. The patented SSD technology places Hornby in pole position to take advantage of this shift in the market."

"Looking to the future, we remain confident that our overseas operations will continue to drive our growth. We are now focused on building the scale of our marketing and sales distribution, in both Model Railways and Scalextric slot car racing so that we can take advantage of the opportunities in important markets in Germany, Italy, France and Spain. I look forward to reporting further progress. The Hornby Group is in excellent health."

Decrease in Sales, Increase in Profits

While overall sales decreased by 2% to £44.1 million, pre-tax profit at £8.2 million is 8% above last year's result (£7.6 million). Basic earnings per share rose by 4% to 15.64p.

Difficult UK Trading Conditions

On a number of occasions during the year, Hornby had highlighted the difficult trading conditions in the UK market. However, as a result of early action to bring costs in line with sales expectations they were able to mitigate the worst effects of the sales downturn in the UK.

Steps were taken to broaden and diversify the Group's revenue streams which included the acquisition of a number of overseas businesses to take advantage of opportunities in new markets. These businesses have been fully integrated and are performing very well. Significantly, both the recently established Hornby Italia and Hornby France subsidiaries were able to contribute positively to Group profit in the year. The European subsidiaries in total contributed operating profits of £453,000 to the Group result.

The Future

According to Chairman Neil Johnson, Hornby expects trading in the UK market to be challenging again in the new financial year. However, the overseas subsidiaries are all now extremely well placed to become the main drivers of growth in the business during the coming years.

Neil Johnson said:

"At the London Toy Fair in January 2006 we launched the Hornby Digital Control System for model railways. This system uses similar technology to SSD and both systems will benefit from the economies of scale thus derived. In this way the Group is also able to leverage investment in Research and Development."

"The price points of the Hornby system are very competitive and the system has been designed with ease of operation in mind. We expect an increasing proportion of our model railway products to be sold as digital-enabled over the coming years. We plan to roll out the launch of the Hornby system, suitably branded, through our overseas subsidiaries at the Toy Fairs in 2007."

International subsidiaries

"The UK market for model railways represents only c.10% of the total European market. The major manufacturers in Europe have experienced difficulties in recent years as a result of their continued focus on manufacturing in Europe. Hornby embarked upon a strategy some 3 years ago to acquire a series of strong European brands that would lend themselves to relocation of manufacturing to China and the subsequent revitalisation of their European distribution."

"The first of these acquisitions, our Spanish operation Electrotren, made good progress in expanding the distribution of the Superslot brand in Spain during the year, supported by the exclusive rights in Spain during 2005 to use on slot-car racing products the image and name of Formula 1 World Champion Fernando Alonso. Consequently overall sales revenues increased significantly. However, a reduction in the number of new Electrotren model railway introductions occurred during the year, as a result of longer lead times associated with the latest high specification designs now being developed. Consequently Electrotren made a reduced contribution to Group profit during the year. New model introductions are now on track and we are looking forward to a year of significant progress from Electrotren."

"Shareholders will recall that we acquired certain assets of Lima SpA in December 2004, and subsequently commenced trading as Hornby Italia. We have made excellent progress in re-establishing this business. During the year, we have relocated the operations to new premises in Brescia, Northern Italy and commenced production in China of the first ranges. We have also improved the sales and distribution network in Europe and this has shown through in the financial results. This has been very much a year of transition for Hornby Italia, and therefore the achievement of an operating profit is particularly encouraging."

"Similarly, the achievement of a positive operating profit in Hornby France is also encouraging. We acquired the goodwill and certain assets of our French distributor MKD in December 2005, and began trading as Hornby France from 1 January 2006. The rationale for this acquisition was based on our ownership of the French brand leader in model railways - Jouef - acquired as part of the Lima assets. It was clear that the opportunity to relaunch the Jouef brand in France via a wholly owned Hornby company would deliver the best return to our shareholders. That Hornby France has been able to make a contribution to profit in its first 3 months of trading bodes well for the future performance of this subsidiary. We expect both Hornby Italia and Hornby France to produce a significantly improved performance in the new financial year."

Neil Johnson concluded:

"We expect trading in the UK market to be challenging again in the new financial year. However, the overseas subsidiaries are all now extremely well placed to become the main drivers of growth in the business during the coming years. The outlook for the Group is bright and we look forward to the future with confidence."
 

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It will be interesting to see how their European brands develop. It is possible they may one day become the largest manufacturer in Europe. They would have make huge inroads into the German market to achieve that though and then they would be in for some serious competition. Something which has been lacking in Hornbys domestic market.
 

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They could do with developing the UK outline models as well, all we have is 3 decent models of which they are severely lack in the livery department, the rest of the range is a complete joke and we desperatley need some decent freight stock from them, I don't hold out much hope for the new re-motored Lima's
, 2006 is a very disappointing year from them for the Modern Image modeller
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i agree. i have long thought that hornby have a bit of a brain-fart when it comes to managing their assets. they have all that almost brand new A4 tooling and still no green or silver streaks. still no LMS maroon princesses/duchesses (none of those in about 3 years i think, i think there was a weathered princess) and then theirs that huge back catalouge sitting there doing nothing. they may not make them mega bucks but a pile it high and sell it cheap would be better than nothing and an APT would certainatly turn some heads at toys'r us and might get some new blood into the system (notice how tactfully i avoided using the blue pullman there!!)

and how about some wagons. the new ones are fantastic but i just want 40 of them to run behind a big loco. i would be perfectly happy with the old mouldings if they were sold off cheap.

Peter
 

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The shares are tipped as a buy and everything looks rosy, however the market has not reacted positively, the shares are down 8p this morning, so why are people not buying?

It mystifies me.

Colombo
 

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DT
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QUOTE (Colombo @ 2 Jun 2006, 12:31) <{POST_SNAPBACK}>The shares are tipped as a buy and everything looks rosy, however the market has not reacted positively, the shares are down 8p this morning, so why are people not buying?
Because any broker worth his salt will see that there is no new news. We've seen all of this before. They are still talking Scalextric Digital which was announced three years ago and shown in 2004. The shares jumped then on that news. They are not going to jump every time Hornby mentions the same thing.

The news is that they are on target regarding profits. So it is rated as a 'buy', but this rating has been there for a while now.

What amazes me is how they manage to keep on talking about International development. I don't see anything new from Hornby on this piece of the Continent that I'm sitting on. We've been waiting impatiently since the news of new Lima and Jouef products was announced in 2004, then promised in 2005...
 

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Thats right Peter, the A4's are lacking, on the Diesel front still no Dutch 50 or refurbed BR Blue 50 , a riviera blue with grey roof would be nice, the 60 is really disappointing we have 1 TG Mainline, I 'm sure most would have prefered a TG Transrail or a sectorised coal or steel, the 31 another disappointing year 1 fragonset is of interest to me, the worlds there oyster with that one, the class has just about carried every conceivable livery sectorised, dutch, intercity, ews there is more than just BR Blue Hornby
, Heljan's release plan 2006/7 for the 33 is huge almost too many, if they can do it why cant Hornby the tooling's there all they have to do is paint the darn things
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doug i agree about them going on about intl developement. i know they had alot to get through with sorting the moulds. but in waiting such a long time to introduce ANYTHING they have compleatly lost the retail presence that Lima group had. and how long has it been now? i think it was august 2004 the deal was done. i have not seen a single box.

i think if i were them i would have done it very differently. i would have got anything out and into the shops. i wouldnt care if it was the latest loco or just a wagon. just to keep the name on the shelfs i think that would have saved them alot of time and money. and it would have ment that they had at least some money rolling in while they were restructuring.

"tooling's there all they have to do is paint the darn things " i could not have put it better.

Peter
 

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QUOTE (Doug @ 2 Jun 2006, 12:16) <{POST_SNAPBACK}>What amazes me is how they manage to keep on talking about International development. I don't see anything new from Hornby on this piece of the Continent that I'm sitting on. We've been waiting impatiently since the news of new Lima and Jouef products was announced in 2004, then promised in 2005...

I hope they don't turn like Bachmann, with their fingers in too many pies
, I just don't think I could take it
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I'm sure the Class 31 and 60 will be in the Hornby range for a long while, so I expect they are saving new liveries for subsequent years to keep the sales running along nicely.
If they released them all now sales in future years will be poor.
Heljan released loads of liveries on the 47 but consequent sales went flat.
 

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I've just taken a quick look at Doug's first link to Times Online

Some incredible stupidities

QUOTE acquisitions in Spain, France and Italy in the past three years have given the group a strong foothold in areas accounting for 90 per cent of the European model railway market
90% without Germany? Come on!!!!!
And I too would welcome some news about what they have in store for Arnold and Germany.

QUOTE racing cars can now run six to a lane, change tyres and renew dynomos .
Well that IS good to know! (if I knew what it actually meant)
 

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QUOTE (Oakydoke @ 2 Jun 2006, 20:25) <{POST_SNAPBACK}>I'm sure the Class 31 and 60 will be in the Hornby range for a long while, so I expect they are saving new liveries for subsequent years to keep the sales running along nicely.
If they released them all now sales in future years will be poor.
Heljan released loads of liveries on the 47 but consequent sales went flat.

They could make a slightly more concerted effort and release a few more than they have
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QUOTE (37197 @ 2 Jun 2006, 21:24) <{POST_SNAPBACK}>They could make a slightly more concerted effort and release a few more than they have
.I did expect at least two new 60's for 2006 rather than the one, however with the launch of the original 3 versions so close to the end of the previous year, it's no surprise they were carried over to this year.
Maybe next year we will see one carried over (mainline TG) and three new liveries?
 

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QUOTE (Oakydoke @ 2 Jun 2006, 21:32) <{POST_SNAPBACK}>I did expect at least two new 60's for 2006 rather than the one, however with the launch of the original 3 versions so close to the end of the previous year, it's no surprise they were carried over to this year.
Maybe next year we will see one carried over (mainline TG) and three new liveries?

The 1 60 is very disappointing, I will buy 5 but all will re-numbered 2 are going to be sectorised and 2 Transrail and 1 Loadhaul, as for the 31 very disappointing considering it's been out over two years, the only ones I posses are 2 Rail Express le's 1 to be re-numbered and I will only buy the Fragonset this year
.

PS: Forgot I have my priority order for 60 081 IKB as well
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Some Quotes from the report.

"Looking to the future, we remain confident that our overseas operations will continue to drive our growth".

While overall sales decreased by 2% to £44.1 million, pre-tax profit at £8.2 million is 8% above last year's result (£7.6 million).

Difficult UK Trading Conditions...

On a number of occasions during the year, Hornby had highlighted the difficult trading conditions in the UK market.

Despite the challenging backdrop of our core UK market.....

......able to mitigate the worst effects of the sales downturn in the UK.

According to Chairman Neil Johnson, Hornby expects trading in the UK market to be challenging again in the new financial year. However, the overseas subsidiaries are all now extremely well placed to become the main drivers of growth in the business during the coming years.


The gist of all this is that the UK market is shrinking and is expected to shrink further in future years.
The best way forward for Hornby is not to rely on diminishing UK business, but to expand into other markets, which they have done.

The other key to survival and future business growth, is the introduction of Digital technologies into their products, both slot cars and model railways.
 

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Not surprised the UK market is diminishing if there are plenty of people like me, I only purchased four Hornby loco's last year now my Bachmann and Heljan purchases are completely the opposite
.
 
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