HORNBY PLC
|
ANNUAL REPORT & ACCOUNTS 2006
YEAR ENDED 31 MARCH 2006
HORNBY PLC, WESTWOOD, MARGATE, KENT CT9 4JX
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Hornby Cover 2006 A-W  3/7/06  17:26  Page 1 1 Financial Highlights 
2 Chairman’s Statement
5 Chief Executive’s Report
8 Directors and Corporate Information
9 Report of the Directors
13 Corporate Governance
17 Statement of Directors’ Responsibilities
18 Remuneration Report 
24 Independent Auditors’ Report to the Members of Hornby Plc 
26 Group and Company Income Statement
27 Group and Company Balance Sheet 
28 Group and Company Cash Flow Statement 
29 Notes to the Cash Flow Statement
30 Notes to the Financial Statements  
30 Accounting Policies
73 Notice of Annual General Meeting 
76 Five Y ear Summar y
Designed by White Design
SHAREHOLDERS’ INFORMATION SERVICE
HORNBY WELCOMES CONTACT WITH ITS SHAREHOLDERS.
IF YOU HAVE QUESTIONS OR ENQUIRIES ABOUT THE GROUP 
OR ITS PRODUCTS, PLEASE CONTACT:
J W STANSFIELD, FINANCE DIRECTOR
HORNBY PLC,WESTWOOD, MARGATE, KENT CT9 4JX
Hornby Cover 2006 A-W  3/7/06  17:26  Page 2 1
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Financial Highlights
Revenue £’000
2005
2006
45,006
44,113
Operating profit £’000
2005
2006
7,714
8,294
Profit before taxation £’000
2005
2006
7,585
8,164
T otal equity £’000
2005
2006
21,772
24,863
Cash and bank overdrafts £’000
2005
2006
1,860
746
Earnings per ordinary share Basic 
2005
2006
15.06p
15.64p
Earnings per ordinary share Diluted 
2005
2006
14.38p
15.08p
Dividends per ordinary share
2005
2006
7.0p
7.7p
Net assets per ordinary share
2005
2006
58.4p
66.2p
1
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2
Chairman’s Statement
We highlighted on a number of occasions during the
year, the difficult conditions in the UK market. How-
ever, as a result of early action to bring costs in line
with sales expectations we were able to mitigate the
worst effects of the sales downturn in the UK.
Shareholders will be aware that the management
team has also taken steps to broaden and diversify
the Group’s revenue streams. We have acquired a
number of overseas businesses to take advantage of
the 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.
DIVIDEND
Reflecting the continued progress that the Group
has made, the Board is recommending a final dividend
of 5.4p per ordinary share. This will be paid to
shareholders on the register at 28 July 2006 and will
be paid on 18 August 2006.
Taken together with the interim dividend, this gives a
total dividend for the year of 7.7p, an increase of 10%
over the dividend of 7.0p declared in the previous
financial year. We remain committed to rewarding
our shareholders with a dividend of approximately
50% of earnings per share.
REVIEW OF THE BUSINESS
Despite the backdrop of a difficult trading environment
in the UK market we are pleased with the performance
of our UK business. Weaker consumer demand, first
reported at our AGM in July 2005, continued through
to Christmas. However our strong network of
independent retailers and in-store concessions
continued to offer a prominent high-street presence.
This, coupled with a strong new product introduction
programme in the period January-March 2006,
resulted in sales in this final quarter of the year
exceeding our earlier expectations, confirming once
again the defensive nature of our hobby-based
products in times of general consumer uncertainty.
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.
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.
I am delighted once again to report an encouraging performance for the year.
This has been achieved despite the background of a weaker consumer
environment in the UK, our main market.
Whilst 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). Both years are reported on the basis
of IFRS. Basic earnings per share rose by 4% to 15.64p.
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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.
The European subsidiaries in total contributed
operating profits of £453,000 to the Group result.
Results in Scalextric USA were much better than the
previous year. Sales were up by 9% at $5.1 million.
The loss before tax of $141,000 in the previous year
was turned round to a profit before tax of $116,000
as a result of actions taken to reduce overheads and
increase sales efforts. In addition, as previously
reported, margins generated in Hornby Hobbies in
the UK on sales made to Scalextric USA have the
effect of increasing significantly the overall contribution
to Group profit of our US operation.We are looking
for a further improvement in the USA during the
new financial year.
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4
Chairman’s Statement 
continued
In our International subsidiaries, both in Europe and
the USA, we now have committed management
teams who are capable of driving further sales and
profits growth.
PRODUCT DEVELOPMENT
Our product development programme is the engine
room of our business and we have continued to
focus on maintaining a full new product pipeline.
During the year we have increased our resources in
this area, to cope with the additional demands of
our subsidiaries and to design new products specifically
for those markets. We are confident that as these
newly designed products come on stream, there will
be a resurgence of interest in our ranges throughout
Europe, in the same way as our Hornby model railways
business in the UK benefited from the influx of new
products produced in China from 2000 onwards.
OUTLOOK
Three years ago we recognised that although the
Group was performing well, the Hornby model
railway business was effectively trapped in the UK
market as a result of the scale (00) and the exclusive
focus on UK subject matter. It was clear that in
order to ensure a continued pattern of sales and
profits growth we had to expand our activities
outside the UK.
Our acquisitions of Electrotren in Spain, the Lima
assets in Italy and the assets of MKD in France now
provide the Group with the widest brand and
product portfolio in the worldwide model railway
market, together with the distribution infrastructure
to capitalise on these assets. We have proved that
we have the expertise to re-invigorate our hobby
brands in the UK and we have enjoyed a significant
renaissance in the popularity of model railways and
slot car racing. We have worked hard to extend the
appeal of our brands across the age ranges and to
increase sales. We now have a major opportunity to
repeat this success with our overseas businesses,
both in model railways and slot racing. We own a
superb portfolio of brands which have strong
potential for growth.
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.
Neil Johnson
Chairman
2 June 2006
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There was a net cash outflow during the year of
£1.114 million. Cash at 31 March 2006 was
£746,000 compared to £1.860 million for the
previous year. The reduction in the year-end cash
position is in part due to the acquisition of certain
assets and the goodwill of MKD SRL. These assets
were acquired by a newly formed, wholly owned
subsidiary of Hornby Plc - Hornby France SAS.
The Group manufactures all of its products in China,
via third-party contract manufacturers. However
some packing operations remain in the UK where
this strategy provides greater flexibility in meeting
market needs. All purchases from our Chinese
suppliers are made either in US or Hong Kong
Dollars. It is the Group’s policy to enter into forward
currency contracts in anticipation of future purchases.
The Group retains intellectual property rights in its
products and controls all sales of its products.
A profit before tax margin of 18.5% on sales 
(2005 - 16.9%) was achieved despite an increase in
fixed overheads as a result of a full year’s overheads
in respect of Hornby Italia and overheads in Hornby
France from 1 January 2006.
In the UK market we experienced a more difficult
trading environment than in previous years and
reduced sales in the UK resulted in the overall
reduction in sales for the Group as a whole. Sales
through major retail accounts were particularly
affected by slow consumer off-take during November
and December.
However we have continued to place emphasis on
building our portfolio of in-store concessions, where
sales increased in the year. Our concessions
numbered 116 as at 31 March 2006, compared to
121 a year earlier. This is despite the Receivership in
December 2005 of Greens Superstores Limited,
which accounted for 17 of our concessions as at 31
March 2005. As stock held in Greens concessions
was held on an agency basis, our financial exposure
to the Receivership was limited. Since the end of
the financial year we have established a concession
in Hamleys of London. We are confident that we
will see a significant uplift in turnover via the Hamleys
concession. Year-round availability of our products,
properly displayed and demonstrated in prominent
high-street locations is an important factor in the
continuing growth of our business. Despite the
Greens situation, total concessions sales totalled 
£5.4 million, an increase of 6% over the £5.1million
recorded in the previous year.
Scalextric USA achieved a positive turn-round in the
year. Sales increased to $5.1 million compared to
$4.7 million in the previous year. Despite the
Chief Executive’s Report
OPERATIONAL AND FINANCIAL REVIEW
The Group’s principal business is the development and supply of Hobby and T oy products. The Group distributes
its products through a network of specialist and multiple retailers throughout the UK and overseas. The Group
markets its products under a number of brands well known in their respective markets. These brands include
Hornby, Scalextric, Electrotren, SuperSlot, Lima, Jouef, Rivarossi and MKD.
Consolidated turnover for the year to 31 March 2006 was £44.1 million, a decrease of 2% compared to the
previous year's £45.0 million.
Profit before tax of £8.2 million, accounted for on an IFRS basis, was 8% above last year's result of £7.6 million.
Dividend for the year increased 10% to 7.7p (2005 - 7.0p).
Basic underlying earnings per share, rose to 15.64p, an increase of 4% (2005 - 15.06p).
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6
Chief Executive’s Report 
continued
continued effects of a weak US Dollar a profit of
$116,000 was recorded, compared to a loss of
$141,000 in the previous year. The result in both
years was achieved after management charges from
Hornby Hobbies Limited. It should also be noted
that in addition to the result generated in the USA 
a contribution of £430,000 arose on sales from
Hornby Hobbies Limited to Scalextric USA, thus
making Scalextric USA a material net contributor to
Group profit.
During the year Scalextric Race World, our retail
store, established in a shopping mall between Seattle
and Tacoma, made an encouraging start in building a
base of Scalextric hobby fans in the local area.
Overall revenues from the store were insufficient for
the store to be profitable in its own right in its first
full year of trading. However we are learning at first
hand valuable marketing lessons about the US
market. We believe that at its current level of
trading Race World represents a worthwhile
investment and subject to ongoing review we
propose to continue to support the store for the
foreseeable future.
The new financial year will see Scalextric USA
commence distribution of a selected range of
Rivarossi model railway products targeted at the 
US market. This will represent a new, incremental
source of revenue for Scalextric USA.
On 31 December 2005 we acquired certain assets
and goodwill of our French distributor MKD.
Hornby France began trading from 1 January 2006.
The acquisition gave us the opportunity to relaunch
the Jouef model railway brand through our own
subsidiary in France.
Our subsidiaries in Continental Europe made good
progress in the financial year to 31 March 2006.
Overall, sales increased by 156% to £7.5 million.
An operating profit of £453,000 was generated
compared to £341,000 in the previous year. Each of
the subsidiaries, Electrotren, Hornby Italia and
Hornby France made an operating profit. This has
been a transitional year for our operations in
Europe. We have relocated the business of Hornby
Italia to premises suitable for its continuing needs.
We have also introduced the first Rivarossi, Lima and
Jouef ranges produced in China, via Hornby Italia
and Hornby France. Each of the European
subsidiaries enters the new financial year with
excellent prospects for an improved financial
performance.
With our growing network of European distribution,
supported by continued investment in new product
development for all of our markets, the Group is
building the momentum to grow its business in
Europe significantly.
The Scalextric Sport Digital System (SSD) is
continuing to make progress in establishing itself as
the market leader in digitally controlled slot racing.
Technology sharing agreements have been entered
into with companies in Spain, Italy and Japan. Under
these agreements the companies in question are
permitted to purchase SSD chips for fitting to their
slot cars, in return for promoting the SSD concept
on their packaging and in their advertising. This
generates a profit for Hornby and also helps to
establish SSD as the worldwide standard for digital
slot car racing. Supporting this strategy, we have
introduced a lower priced entry-level set into the
SSD range.
The launch of the Hornby Digital Control system 
for model railways at the London Toy Fair in January
was extremely well received by the model trade and
press. The system uses the same basic technology 
as SSD and allows multiple locomotives and
accessories to be controlled from a single control
box. The system, which enhances significantly the
entertainment value of model railways has been
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
designed with ease of use in mind and is marketed
at competitive price points. Existing railway layouts
can be updated to digital control by fitting the
locomotives with chips that are separately available.
We expect large numbers of model railway
enthusiasts to convert their systems to digital control
over the coming years. We have also introduced a
number of keenly priced “starter” sets with digital
control aimed at encouraging newcomers to the
hobby of model railways to move straight into the
digital format. First deliveries of this system are
expected in September 2006.
Against the background of a challenging retail
environment in the UK, and in a year of transition in
two of our continental European subsidiaries, we are
encouraged that all trading subsidiaries were able to
report an operating profit. As we move into the
new financial year we are confident that all subsidiaries
can make further improvements in their financial
performance.
Our strategy of expansion by acquisition in Europe
has been proven to be sound. The Group is now
better placed than ever before to continue to
strengthen its position in the world hobby market.
Frank Martin
2 June 2006   
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8
Directors and Corporate Information
DIRECTORS
N A Johnson
Chairman
F Martin
Chief Executive
J W Stansfield
Finance Director
N J Cosh
Non-Executive Director
SECRETARY
J W Stansfield, FCMA
REGISTERED OFFICE
Westwood
Margate
Kent  CT9 4JX
COMPANY REGISTERED NUMBER
Registered in England No. 01547390
AUDITORS
PricewaterhouseCoopers LLP
First Point
Buckingham Gate
Gatwick
RH6 0PP
SOLICITORS
Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London  EC4R 9HA
PRINCIPAL BANKERS
Barclays Bank PLC
9 St George’s Street
Canterbury
Kent  CT1 2JX
FINANCIAL ADVISERS
AND BROKERS
Bridgewell Securities Limited
Old Change House
128 Queen Victoria Street
London  EC4V 4BJ
REGISTRARS AND
TRANSFER AGENTS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent  BR3 4TU
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Report of the Directors
The directors submit their annual report together
with the audited financial statements for the year
ended 31 March 2006.
PRINCIPAL ACTIVITIES AND BUSINESS
REVIEW
The Company is a holding company with a Spanish
branch and has 5 operating subsidiaries: Hornby
Hobbies Limited in the United Kingdom, Scalextric
USA, Inc. in the USA, Electrotren S.A in Spain, Hornby
Italia s.r.l. in Italy and Hornby France S.A.S. in France.
Hornby France S.A.S. was established to acquire the
trade and certain assets of MKD, France on 
31 December 2005. Hornby Plc is a public limited
company incorporated and operating in the United
Kingdom. Its registered office is set out on page 8.
The Group is principally engaged in the development,
design, sourcing and distribution of hobby and
interactive home entertainment products.
The Group’s Business Review and future developments
are included in the Chairman’s Statement, Chief
Executive’s Report and Corporate Governance section.
RESULTS AND DIVIDENDS
The results for the year ended 31 March 2006 are
set out in the Group Income Statement on page 26.
Turnover for the year was £44.1 million compared
to £45.0 million last year. The profit on ordinary
activities after taxation for the year amounted to
£5.9 million (2005 - £5.6 million). The position of
the Group is set out in the Group Balance Sheet on
page 27.
An interim dividend of 2.3p (2005 - 2.0p) per ordinary
share amounting to £852,278 (2005 - £737,293)
was paid on 27 January 2006. The Group's Short
Term Incentive Plan Trust waived its right to the
interim dividend on 477,957 ordinary shares (see
note 11).
The directors recommend an increased final
dividend of 5.4p (2005 - 5.0p) per ordinary share
amounting to £2,029,511 (2005 - £1,865,426)
payable on 18 August 2006 to those shareholders
on the Register at 28 July 2006.
This represents a total dividend paid and proposed
in respect of the year ended 31 March 2006 of 7.7p
per ordinary share (2005 - 7.0p).
INTERNATIONAL FINANCIAL REPORTING
STANDARDS
Hornby Plc has adopted International Financial
Reporting Standards ('IFRS') for first time in these
financial statements. The 2005 comparatives have
been re-stated for IFRS. Reconciliations of the results
and net assets under UK GAAP , as previously
reported, to IFRS are given in note 33. The adoption
of IFRS has resulted in a number of adjustments to
the previously reported results and net assets. These
are explained in the same note. The main changes
were in relation to intangible assets, share based
payments, dividends, deferred taxation and
segmental reporting.
RESEARCH & DEVELOPMENT
The Board considers that research and development
into new products continues to play an important
role in the Group’s success.
All costs incurred are charged to the Profit and Loss
Account as set out in note 4.
PROPERTY VALUES
In the opinion of the directors, and given current
planning use approvals, there is no significant
difference between the book value and the current
market value of interests in land and buildings.
CHARITABLE DONATIONS
During the year the Group made donations of
£12,480 (2005 - £14,343) for charitable purposes.
DIRECTORS
The persons who were directors during the year are
listed below:
Neil A Johnson, aged 57, was originally appointed 
a non-executive director on 1 July 1998. On 
22 December 2000 Mr Johnson assumed the
responsibilities of Chairman. Mr Johnson is currently
Chairman of Motability Finance Limited, CybIT PLC
and Tenon Group Plc and non-executive director 
of Auto-Logic Holdings plc. Mr Johnson retires by
rotation under article 97 of the Articles of Association
and offers himself for re-election at the forthcoming
Annual General Meeting.
Frank Martin, aged 54, was appointed Chief
Executive on 3 January 2001. Mr Martin was
previously Chief Executive of Humbrol Limited, and
formerly Managing Director of Denby Pottery Limited
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10
Report of the Directors
continued
and Group Marketing Director of Hasbro (UK)
Limited. Mr Martin's conditions of employment
include a notice period of one year to be given by
the Company and of six months to be given by 
Mr Martin.
John W Stansfield, aged 51, has been employed by
the Group since April 1982. He was appointed
Finance Director and Company Secretary on 
4 December 1996. Mr Stansfield’s conditions of
employment include a notice period of one year to
be given by the Company and of six months to be
given by Mr Stansfield.
Nicholas J Cosh, aged 59, was appointed a non-
executive director on 21 June 1999. He is Chairman
of Kiln plc and a non-executive director of Bradford
& Bingley plc, ICAP plc and Computacenter plc.
He was previously finance director of J.I.B. Group plc
and M.A.I. plc. Mr Cosh retires by rotation under
article 97 of the Articles of Association and offers
himself for re-election at the forthcoming Annual
General Meeting.
The interests of the directors in the shares of the
Company and in options granted over such shares
are disclosed in the Remuneration Report on pages
18 to 23.
The number of Board meetings held during the year
and attendance by the directors is set out on page 13.
SUBSTANTIAL SHAREHOLDINGS
The Company has been notified that at close of
business on 26 May 2006 the following parties were
interested in 3 per cent or more of the Company’s
ordinary share capital.
Shareholder Number of
Ordinary Percentage
Shares held
P J Wood Associates Limited 4,012,500 10.68
Standard Life Investments 3,678,292 9.79
Electra Quoted Partners 2,995,150 7.97
Insight Investment Professional Funds 2,236,843 5.95
J J Hosking 1,664,200 4.43
DWS Investment GMBH 1,600,000 4.26
J M Finn Nominees Limited 1,259,740 3.35
FINANCIAL INSTRUMENTS
The Group’s financial instruments, other than
derivatives, comprise borrowings, some cash and
liquid resources, and various items, such as trade
debtors, trade creditors, etc. that arise directly 
from its operations. The Group’s financial liabilities
comprise borrowings, trade creditors, other
creditors and finance leases, the main purpose of
which is to raise finance for the Group’s operations.
The Group also has financial assets comprising cash,
trade and other debtors.
The Group also enters into derivatives transactions
(principally forward foreign currency contracts).
The purpose of such transactions is to manage the
currency risks arising from the Group’s operations.
It is, and has been throughout the period under
review, the Group’s policy that no trading in financial
instruments shall be undertaken.
The main risks arising from the Group’s financial
instruments are interest rate risk, liquidity risk and
foreign currency risk. The Board reviews and agrees
policies for managing each of these risks and they
are summarised below. These policies, established 
1 April 2000, have been reviewed and remain
unchanged.
Interest rate risk
The Group finances its operations through a mixture
of retained profits and bank borrowings. The Group
borrows, principally in sterling, at floating rates of
interest to meet short term funding requirements.
At the year end the Group's only borrowings were
finance leases and bank overdrafts.
Liquidity risk
The Group only requires borrowings at certain times
of the year. The short term flexibility required is
achieved by overdraft facilities.
Foreign currency risk
The Group purchases substantially all of its products
from the Far East in HK and US dollars.The Group’s
policy is to reduce currency exposure arising from
its purchases and anticipated orders by using
forward foreign exchange contracts of up to 12
months. All sales and other purchases originating in
the UK are denominated in sterling.
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The Company has subsidiaries in the USA, Spain,
Italy and France. At present the Company does not
consider the balance sheet translation exposure
significant enough to warrant matching the net
currency assets with currency borrowings.
ANNUAL GENERAL MEETING - SPECIAL
BUSINESS RESOLUTIONS
The notice of Annual General Meeting set out on
pages 73 and 74 includes special resolutions to renew
the directors' authority to allot equity securities and
the Company's authority to purchase its own shares.
Resolution Number 9 is an ordinary resolution which
would give the Board authority within the meaning
of Section 80 of the Companies Act 1985 to allot
equity securities of the Company up to an aggregate
nominal value of £124,000 representing approximately
33 per cent, of the Company's issued share capital
as at 2 June 2006. This authority will expire on 
25 July 2011. The directors do not have any present
intention of exercising the authority granted by this
resolution except in connection with the Company's
option schemes.
Resolution Number 10 is a special resolution which
will entitle the Board to allot equity securities having
an aggregate nominal value of £18,000 for cash,
equivalent to 1,800,000 Ordinary Shares representing
approximately 4.8 per cent of the Company's issued
share capital as at 2 June 2006, as if Section 89(1) of
the Act conferring pre-emption rights on shareholders
did not apply. This authority also allows the directors,
within the same aggregate limit, to sell for cash, shares
that may be held by the Company in treasury. This
authority will last until the end of the next Annual
General Meeting of the Company or if earlier, on
expiry of 15 months from the date of passing this
resolution. The directors do not have any present
intention of exercising the authority granted by this
resolution.
Resolution Number 11 is a special resolution which
would give the Board authority under Section 166
of the Companies Act 1985 to make one or more
market purchases (within the meaning of Section
163(3) of that Act) of its own shares up to a
maximum of 3,750,000 shares representing less than
10 per cent of the issued ordinary share capital of
the Company at the date of this resolution. The
directors will exercise this power only if they believe
that the effect of such purchases will be to increase
earnings per share and that to do so is in the best
interests of the Company and shareholders generally.
The minimum price which may be paid for an
ordinary share is the par value of such share, from
time to time, exclusive of expenses. The maximum
price which may be paid for an ordinary share shall
be the higher of (i) an amount equal to 105 per
cent of the average of the middle-market quotations
for an ordinary share as derived from the London
Stock Exchange Daily Official List for the five dealing
days immediately preceding the day on which the
purchase is made, exclusive of expenses and (ii) the
higher of the last independent trade and the highest
current independent bid on the London Stock
Exchange Daily Official List. The authority to make
market purchases will last until the end of the next
Annual General Meeting of the Company or, if
earlier, on expiry of 18 months from the date of
passing this resolution. Shares purchased under this
authority will be cancelled, or, if the directors
consider appropriate, held in treasury. The directors
do not have any present intention of exercising the
authority granted by this resolution.
PERSONNEL POLICIES
It is the policy of the Group to follow equal
opportunity employment practices and these include
the full consideration of employment prospects for
the disabled.
Applications for employment by disabled persons
are always fully considered, bearing in mind the
aptitudes of the applicant concerned. It is the policy
of the Group that the training, career development
and promotion of disabled persons should, as far as
possible, be identical with that of other employees.
Arrangements are made, wherever possible, for
retraining employees who become disabled, to enable
them to perform work identified as appropriate to
their aptitudes.
The Group places importance on the contributions
to be made by all employees to the progress of the
Group and aims to keep them informed by the use
of formal and informal meetings.
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12
Report of the Directors
continued
CREDITOR PAYMENT POLICY
The Group has agreed a variety of payment terms
with its suppliers. It is and will remain the general
policy of the Group that payments to a supplier are
made in accordance with the general conditions of
purchase agreed with that supplier, providing the
supplier complies with all relevant terms and conditions
and also that the invoice is presented in a timely fashion.
The average creditor payment period for the main
trading subsidiary at 31 March 2006 was 26 days
(2005 - 31 days). The Company itself does not
trade and therefore has no external trade creditors.
AUDITORS
A resolution to re-appoint the auditors,
PricewaterhouseCoopers LLP , will be proposed at
the forthcoming Annual General Meeting.
By order of the Board
J W Stansfield
Secretary
Westwood 
Margate
Kent  CT9 4JX
2 June 2006 
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Corporate Governance
COMPLIANCE WITH THE COMBINED CODE
In July 2003 a new code,The Combined Code on
Corporate Governance, was issued by the Financial
Reporting Council (the 2003 FRC Combined Code).
The 2003 FRC Combined Code applies for reporting
years beginning on or after 1 November 2003.
The maintenance of effective corporate governance
remains a key priority for the Board and the statement
below describes how the directors have applied the
principles of corporate governance and complied
with Section 1 of the Combined Code throughout
the year subject to the exceptions mentioned below.
The Board
The Board has ultimate responsibility and
accountability for the Group’s operations.
During the year the Board comprised the Chairman,
Chief Executive, Finance Director and a non-
executive director.
During the year 12 Board meetings were held. The
directors attended as follows:
Board of Directors Attendance
N A Johnson 12
F Martin 12
J W Stansfield 12
N J Cosh 12
The Board believes its current structure is appropriate
for the scale of the business and to enable the Group
to be managed efficiently.
The Board has adopted a formal schedule of matters
specifically reserved to it for decisions including the
determination of strategy, the approval of business
plans, budgets, acquisitions and disposals, major capital
purchases, Board appointments, accounting policies
and treasury arrangements. The Board also delegates
specific responsibilities to committees as described
below. The Board meets monthly and monitors
progress against plan at each meeting.
The directors have the authority of the Board to obtain
external legal or other independent professional
advice in the furtherance of their duties at the
Company’s expense. All directors have access to the
advice and services of the Company Secretary, who 
is responsible for ensuring Board procedures are
followed and applicable rules and regulations are
complied with. The executive directors have all
received appropriate training for their appointment
to the Board of a listed company. The non-executive
directors bring a broad expertise to the Board.
N A Johnson and N J Cosh are both experienced
company directors. Biographical details of each
director are shown on pages 9 and 10 .
The Board has formal and informal procedures to
monitor its performance both as individuals at annual
appraisals and as a Board.
Chairman and Chief Executive
The roles of the Chairman and Chief Executive are
separate and there is a clear division of responsibility.
The Chairman is considered independent and
responsible for leading the Board and ensuring its
effectiveness. The Chairman and the Board are
satisfied that effective communication, principally by
the Chief Executive and Group Finance Director, is
undertaken with the shareholders.
The Chief Executive is responsible for running the
business and ensuring that accurate, timely and clear
information is presented at monthly Board meetings
or when appropriate.
Independent Non-Executive Directors
The Board considers both of the non-executive
directors who served during the year to be
independent of management and free from any
business or other relationship which could interfere
with the exercise of their independent judgement.
The Board believes that their interest in receiving fees
as directors and as being shareholders does not
prejudice their independence.
The 2003 FRC Combined Code requires at least half
the Board, excluding the Chairman, to comprise non-
executive directors. This requirement is not met due
to the size and composition of Hornby Plc's Board.
N J Cosh has been identified as the senior independent
non-executive director through whom shareholder and
stakeholder concerns can be conveyed to the Board.
Availability of Information
Executive management have a responsibility to provide
the Board with sufficient information in a form and
quality appropriate to enable it to discharge its duties.
The Board therefore expects to receive timely
information, circulated in advance, on all issues
scheduled to arise at Board meetings. On a regular
basis these will include management accounts
indicating the performance of the business against
budget together with financial forecasts that are
updated on a monthly and quarterly basis.
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14
Nominations Committee
Appointments to the Board require the Board’s
authorisation and are conducted by the Nominations
Committee comprising the Chairman, executive and
non-executive directors.
The Nominations Committee held no meetings in
the year as no appointments were necessary. The
Board believes it is appropriate that all directors are
members of the Nomination Committee and although
non-executives do not constitute a majority the
Chairman has the casting vote. The non-executives
not forming a majority of the Nominations Committee
is an area where the requirements of the 2003 FRC
Combined Code are not met.
The Chief Executive and executive directors approve
a job specification, review comparative terms of
remuneration and may appoint an external consultant
to prepare a short list of potential candidates.
The potential candidates are interviewed by either the
Nominations Committee or a panel appointed by that
Committee. An appointment requires final approval
by the Board prior to an offer being forwarded.
The Company’s Articles of Association currently
require one third of the directors to retire by rotation
at each Annual General Meeting. Mr Johnson and 
Mr Cosh, who offer themselves for re-election at the
forthcoming Annual General Meeting have served as
non-executive directors for longer than two three-
year terms. In accordance with the Combined Code,
the non-retiring directors have conducted a
particularly rigorous review of Mr Johnson's and 
Mr Cosh's contribution to the Board and confirmed
that they continue to be effective directors and to
demonstrate commitment to the role.
Remuneration Committee
The Remuneration Committee comprises the non-
executive directors. The current members of the
committee are N A Johnson (Chairman) and N J Cosh.
The Committee normally meets twice per annum but
more frequently if required.
During the year two Remuneration Committee
meetings were held. The Committee members
attended as follows:
Remuneration Committee Attendance
N A Johnson 2
N J Cosh 2
The composition is in compliance with the 2003 FRC
Combined Code provision B.2.1 which states that the
Committee should consist exclusively of independent
non-executive directors, and provision B.1.6 which
requires setting notice or contract periods at, or
reducing them to, one year or less.
Details of directors’ contracts are provided in the
Remuneration Report.
The Committee is responsible for establishing formal
and transparent procedures for determining policy on
executive remuneration and advising the Board on
executive remuneration and in particular for ensuring
that executive remuneration packages are sufficient
to attract, retain and motivate executive directors of
the required quality whilst avoiding paying more than
necessary. It also endeavours to establish performance
related elements of remuneration which align the
interests of the directors with those of the shareholders.
No director is involved in deciding his own remuneration.
Relations with Shareholders
The Company communicates regularly with its
institutional shareholders and encourages
communication with private investors through the
Annual General Meeting.
The executive directors update major shareholders
at institutional visits and analyst presentations
immediately after the interim and final announcements.
The Chairman attends a selection of these meetings.
The meetings facilitate open discussion and direct
face-to-face contact and the views of shareholders
are reported to the Board by the Chairman and
Chief Executive.
The senior independent non-executive director also
welcomes direct discussions with shareholders.
The Board uses the Annual General Meeting as an
occasion for communication with its shareholders. All
proxy votes are counted by the Company's registrars
and the voting on each resolution is made available to
the meeting. Directors of the Company and the UK
subsidiary attend the meeting to respond to specific
questions.
Corporate Governance
continued
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Audit Committee
The Audit Committee comprises the non-executive
directors. The current members of the Committee
are N J Cosh (Chairman) and N A Johnson. The
Board considers that N J Cosh and N A Johnson have
recent and relevant experience.
During the year two Audit Committee meetings were
held. The Committee members attended as follows:
Audit Committee Attendance
N  J Cosh 2
N A Johnson 2
The Committee has written terms of reference,
which set out clearly its authority and duties. These
include the following:
 review of the interim and full year results and the
Annual Report and Accounts
 review the scope and results of the audit and its
cost effectiveness
 review the external auditors' appointment
including remuneration and terms of engagement
 review the independence and objectivity of 
the auditors 
 review the appropriateness and effectiveness 
of the Group’s internal controls, policies and 
procedures
The Committee considered the requirement of an
internal audit function but believed it would be
inappropriate for the Group at this stage given its size.
The position is reviewed annually.
The Committee meets at least twice a year and the
meetings are usually attended by the Chief Executive,
Finance Director and the Group’s auditors.
On occasions the auditors provide non-audit services
particularly in regard to potential acquisitions. The
Board considers alternative providers if practical and
seek assurances regarding independence and ensure
alternative personnel to the audit team are involved.
Informal arrangements exist for staff of the Group 
to raise concerns, in confidence, about possible
improprieties in matters of financial reporting or
other matters. During the year, the Audit Committee
reviewed these arrangements and deemed them
adequate given the size of the Group.
INTERNAL CONTROL
The directors have overall responsibility for the
Group's system of internal control. Although no
system of internal control can provide absolute
assurance against material misstatement or loss, the
system is designed to provide the directors with
reasonable assurance that problems are identified on
a timely basis and are dealt with appropriately.
The key elements of the Group's system of internal
control are as follows:
Control environment
The Board has put in place an organisational structure
with clearly defined and understood lines of
responsibility and delegation of authority. The Board
promotes a strong control environment with a strong
ethical climate.
Identification of business risks
The Board has the primary responsibility for
identifying the major business risks facing the Group
and developing appropriate policies to manage those
risks. The Board has completed a risk assessment
programme in order to identify the major business
risks and has reviewed and determined the key
control objectives.
Business risks
 UK Market Dependence
The UK market represents a significant part of
Group revenue; 66% in 2006 (2005 - 75%). In
order to reduce the exposure to the UK market
the Board’s strategy continues to be to expand
overseas sales. The acquisitions of the brands
Electrotren, Rivarossi, Lima and Jouef have
provided the Group significant market shares of
the model railway markets in Spain, Italy, France
and Germany to facilitate European expansion.
 Foreign Exchange
The Group purchases goods in Hong Kong 
dollars and is therefore exposed to exchange rate
fluctuations. The Group hedges the short-term
exposure by establishing forward currency
purchases at fixed rates up to twelve months
ahead. It is deemed impractical to hedge
exchange rate movements beyond that period.
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16
 Overseas Suppliers
The Group purchases goods, in the main, from
third-party Chinese suppliers. The Group is
developing supply from four alternative Chinese
manufacturers and investigating potential Indian
suppliers.
 Competition
The Group has competition in both the model
railway and slot racing markets but in the majority
of markets the Group enjoys market domination
through the strength of existing and acquired
brands mentioned above. Brands are all important
in the models sector. In addition market entry
capital cost is prohibitive to a new entrant even
for individual models but especially as they would
need to offer an entire branded system.
Major corporate information systems
The Group operates a comprehensive annual planning
and budgeting system in conjunction with a three
year business plan which is regularly updated to reflect
changing circumstances. The annual plans and budgets
are approved by the Board. The Board reviews the
management accounts at its monthly meetings and
financial forecasts are updated monthly and quarterly.
Performance against budget is monitored and where
any significant deviations are identified appropriate
action is taken.
Main control procedures
Management establishes control procedures in
response to each of the key risks identified. Standard
control procedures operate to ensure the integrity of
the Group's financial statements.
Monitoring system used by the Board
The Board as a whole monitors the operation of the
system of internal control through management
reviews and reviews the effectiveness of the system
of internal control each year. The Board has adopted
a schedule of matters which are required to be
brought to it for decision in order to ensure that it
maintains full and effective control over appropriate
strategic, financial, organisational and compliance
issues, including procedures for seeking and obtaining
approval for major transactions and capital purchases.
The Board reviewed the effectiveness of the system
of internal controls in April 2006 and considered it
appropriate for the size of the Group.
Compliance with the provisions 
of the Combined Code
The 2003 FRC Combined Code requires that the
directors review the effectiveness of the Group’s
system of internal controls. In September 1999 the
Institute of Chartered Accountants in England and
Wales (ICAEW) published guidance for directors on
the scope, extent, nature and review of internal
control. The Board confirms that an on-going process
for identifying, evaluating and managing the Group’s
significant risks has operated throughout the year and
up to the date of approval of the Annual Report.
Corporate Social Responsibility
The Board considers the social, environmental and
ethical matters pertinent to the Group, and will review
items of significance where appropriate. The risk
assessment procedures in place are designed to
highlight any key areas of concern including health
and safety considerations, employee recruitment and
retention and environmental issues, and controls put
in place as necessary.
The Group commissions independent external audits
of Far Eastern suppliers annually to ensure their
compliance with the International Council of  T oy
Industries (ICTI) Code of Business Practices to include
child and forced labour, working conditions, hours of
work, pay, non-discrimination and health and safety.
GOING CONCERN
After making appropriate enquiries, the directors
have a reasonable expectation that the Group and
the Company have adequate resources to continue
in operational existence for the foreseeable future.
For this reason they continue to adopt the going
concern basis in preparing the Group's and
Company's financial statements.
Corporate Governance
continued
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
The directors are responsible for preparing the Annual
Report, the Directors' Remuneration Report and
the financial statements in accordance with applicable
law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The directors are responsible for preparing financial
statements for each financial year which give a true
and fair view, in accordance with IFRSs as adopted
by the European Union, of the state of affairs of the
Company and the Group and of the profit or loss 
of the Company and Group for that period. In
preparing those financial statements, the directors
are required to:
 select suitable accounting policies and then apply
them consistently;
 make judgements and estimates that are 
reasonable and prudent;
 state whether the financial statements comply
with IFRSs as adopted by the European Union;
and
 prepare the financial statements on the going 
concern basis unless it is inappropriate to presume
that the Group will continue in business.
The directors confirm that they have complied with
the above requirements in preparing the financial
statements.
The directors are responsible for keeping proper
accounting records that disclose with reasonable
accuracy at any time the financial position of the
Company and Group and to enable them to ensure
that the financial statements and the Directors'
Remuneration Report comply with the Companies
Act 1985 and Article 4 of the IAS Regulation. They
are also responsible for safeguarding the assets of
the Company and the Group and hence for taking
reasonable steps for the prevention and detection
of fraud and other irregularities.
The directors are responsible for the maintenance
and integrity of the corporate and financial
information included on the Company's website.
Legislation in the United Kingdom governing the
preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
STATEMENT AS TO DISCLOSURE 
OF INFORMATION TO AUDITORS
So far as the directors are aware, there is no
relevant audit information (as defined by Section
234ZA of the Companies Act 1985) of which the
Company's auditors are unaware, and each director
has taken all the steps that he ought to have taken
as a director in order to make himself aware of any
relevant audit information and to establish that the
Company's auditors are aware of that information.
By order of the Board
J W Stansfield
Secretary
2 June 2006
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF 
THE ANNUAL REPORT,THE DIRECTORS' REMUNERATION REPORT 
AND THE FINANCIAL STATEMENTS
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18
Remuneration Report
for the Year Ended 31 March 2006
This part of the Remuneration Report is unaudited.
The Remuneration Committee is chaired by the
Chairman and comprises the non-executive directors.
The current members of the Committee are N A
Johnson (Chairman) and N J Cosh.
Directors' service contracts and the Short Term
Incentive Plan (STIP) were established through
consultation with the Group's lawyers, Berwin
Leighton Paisner LLP .
REMUNERATION POLICY
The Remuneration Committee is responsible for
devising and implementing a remuneration policy for
executive directors which complies with the
principles set out in Section 1 of the 2003 FRC
Combined Code. The Committee’s policy is to
ensure that executive remuneration packages are
sufficient to attract, retain and motivate executive
directors of the required quality whilst avoiding
paying more than is necessary. It also endeavours to
establish performance related elements of
remuneration which align the interest of the
directors with those of the shareholders.
The Committee achieves its objectives through
remuneration packages of executive directors and
senior management that comprise the following:
 Salary and benefits
Salaries are reviewed regularly and these salaries
are changed at the time of the Group’s annual
salary review. Policies concerning other benefits
together with the Group’s company car policy
are reviewed periodically.
 Share options
The Group currently has a part approved and
part unapproved executive share option scheme
and details of options held by directors are set
out on page 21.
The options are 100% exercisable subject to the
achievement of certain performance criteria.
In respect of awards made up to and including
January 1999 the target criteria were based on
earnings per share and thereafter the target
criteria were based on profit before interest and
tax. No award vests unless target criteria have
been met.
No further options may be granted under this
scheme after 7 August 2006.The Remuneration
Committee is considering either renewing or
replacing the scheme as part of the Company’s
overall remuneration policy. Once a decision 
has been made, proposals will be put to 
the shareholders for approval.
 Pensions
The executive directors and senior managers are
members of defined contribution pension
schemes and annual contributions are calculated
by reference to basic salaries with neither annual
bonuses nor awards under the share incentive
schemes taken into account in calculating the
amounts due.
 Performance-related bonus scheme
IIn addition to salaries, executive directors and
senior management participate in a discretionary
performance-related bonus scheme. Performance
targets are designed to both stretch and encourage
individuals whilst aligning their interests with that
of the Group. The total bonuses available are
divided between a capped range of targets
established for Group profit before tax (four fifths)
and personal objectives (one fifth). Bonuses
relating to personal objectives are only realised if
Group profit exceeds minimum targets.
 Short T erm Incentive Plan
The Company has introduced a Short Term
Incentive Plan (STIP) to reward the performance
of executive directors and senior management. A
participating employee is entitled to a conditional
award of shares (Basic Award) equal in value to
and in substitution for part of their cash bonus
which would otherwise have been payable.
Where a participant so elects the Company will
also provide an equivalent matching award
(Matching Award) of the same number of shares.
Both the Basic and Matching Awards will usually
only be vested in the participant in equal amounts
on the second, third and fourth anniversaries of
the award date subject to the participant continuing
to be employed within the Group. Shares to
satisfy both the Basic and Matching Awards are
purchased in the market by an employee benefit
trust established and funded by the Company.
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Set out below is a Performance Graph that
compares the total shareholder return performance
of Hornby Plc with the FTSE Small Cap index,
selected because it includes UK quoted companies
of a similar size to Hornby Plc.
The total shareholder return for the 5 year period
of 747% compares to the total return of the 
FTSE Small Cap of 41%.
The targeted composition of each director's remuneration for the forthcoming year is as follows:
Non-performance Performance
Director Position Related Related
N A Johnson Chairman 100% Nil
F Martin Chief Executive 46% 54%
J W Stansfield Finance Director 63% 37%
N J Cosh Non-executive Director 100% Nil
In accordance with the Articles of Association the Board determines the remuneration of the 
non-executive directors.
T otal Shareholder Return 1/4/2001 to 31/3/2006
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
Apr 01 Sep 01 Jan 02 Jul 02 Dec 02 May 03 Oct 03 Mar 04 Jul 04 Dec 04 May 05 Oct 05 Mar 06
Hornby FTSE Small Cap Source: Datastream
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20
Remuneration Report
continued
Executive Directors’ Contracts
The executive directors do not have fixed 
period contracts.
Frank Martin, the Chief Executive, receives a salary
of £206,000 per annum effective 1 April 2006 and
participates in the Company's performance-related
bonus scheme. Mr Martin is entitled to a bonus up
to a maximum of 100% of base salary; four fifths is
determined upon the achievement of a target
Group profit before tax and one fifth is divided
between several personal objectives. As a
participant in the Company's STIP , Mr Martin can
waive up to 50% of eligible bonus and the Company
matches the waived amount to purchase shares as
described earlier. Mr Martin's service contract dated
26 February 2001 includes a notice period of one
year to be given by the Company and of six months
to be given by Mr Martin. In lieu of giving notice the
Company may terminate the agreement on payment
of a lump sum (subject to tax and national
insurance) equal to the salary and other benefits to
which he is entitled under this agreement.
John Stansfield, the Finance Director and Secretary,
receives a salary of £128,750 per annum effective 
1 April 2006 and participates in the Company's
performance-related bonus scheme. Mr Stansfield is
entitled to a bonus up to a maximum of 50% of
base salary; four fifths is determined upon the
achievement of a target Group profit before tax and
one fifth is divided between several personal
objectives. As a participant in the Company's STIP ,
Mr Stansfield can waive up to 50% of eligible bonus
and the Company matches the waived amount to
purchase shares as described earlier. Mr Stansfield's
service contract dated 16 July 1999 includes a notice
period of one year to be given by the Company and
of six months to be given by Mr Stansfield. In lieu of
giving notice the Company may terminate the
agreement on payment of a lump sum (subject to
tax and national insurance) equal to the salary and
other benefits to which he is entitled under this
agreement.
In respect of the year ended 31 March 2006 each of
the executive directors was entitled to an award of
bonus, details of which appear in the table of
directors’ emoluments.
Non-Executive Directors’ Contracts
The remuneration of the non-executive directors is
determined by the Board based on the level of fees
paid to non-executive directors of similar companies
and by considering independent external advice.
Neil Johnson, was appointed Chairman on 
22 December 2000 having initially joined the Board
on 1 July 1998. Non-executive directors fees for his
services to the Company of £80,000 per annum
effective 1 April 2003 are paid to a third party
consultancy company. Mr Johnson's service contract
dated 13 February 2006 is subject to termination on
three months notice to be given by either the
Company or Mr Johnson. In lieu of giving notice the
Company may terminate the agreement on payment
of a lump sum (subject to tax and national insurance)
equal to the salary to which he is entitled under this
agreement.
Nicholas Cosh, non-executive director, was appointed
to the Board on 21 June 1999, and receives non-
executive directors fees for his services to the
Company of £30,000 per annum effective 
1 September 2002. Mr Cosh's service contract
dated on appointment is subject to termination on
three months notice to be given by either the
Company or Mr Cosh. In lieu of giving notice the
Company may terminate the agreement on payment
of a lump sum (subject to tax and national insurance)
equal to the salary to which he is entitled under this
agreement.
None of the non-executive directors receives any
pension or discretionary bonus from the Company
nor do they participate in the executive share
option scheme.
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DIRECTORS’ INTERESTS
Interests in shares
The interests of the directors in the shares of the Company in the year were:
Number of 1p ordinary shares
At 1 April 2005 Options exercised STIP vested Disposals At 31 March 2006
N A Johnson 50,000 - - - 50,000
F Martin 75,125 - 39,175 (37,175) 75,125
J W Stansfield 65,000 50,000 23,272 (53,272) 85,000
N J Cosh 75,000 - - - 75,000
All the interests detailed above are beneficial. Apart from the interests disclosed above no directors were
interested at any time in the year in the share capital of any other group company.
There has been no change in the interests set out above between 31 March 2006 and 26 May 2006.
This part of the the Remuneration Report is auditable information.
Interests in share options
Details of options held by directors at 31 March are set out below:
Number of options Date from
Date 1p ordinary shares Exercise which Expiry
of grant 2006 2005 price exercisable date
F Martin 12/03/2001 148,310 148,310 29.5p 12/03/2004 12/03/2008
28/03/2002 1,000,000 1,000,000 76.8p 28/03/2005 28/03/2009
J W Stansfield 27/01/1999 - 50,000 32.7p 27/01/2002 27/01/2006
19/06/2002 250,000 250,000 83.4p 19/06/2005 19/06/2009
F Martin's options granted March 2001 and March 2002 satisfied the performance criteria for exercise upon
profit before interest and tax exceeding £2.2m and £4.0m respectively in the year ended 31 March 2003.
Options granted June 2002 satisfied the performance criteria for exercise upon profit before interest and tax
exceeding £4.0m in the year ended 31 March 2003.
J W Stansfield exercised 50,000 share options during the year at 32.7p, the market price being 165.0p,
realising a gain of £66,150.
The market price of the Company’s shares at 31 March 2006 was 205.0p and the range during the year
ended 31 March 2006 was 165.0p to 241.0p.
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22
Remuneration Report
continued
Directors’ detailed emoluments
Details of individual directors’ emoluments charged in the year are as follows:
Salary Pension 2006 2005
& fees Bonus STIP Benefits contri- Total T otal*
butions
££ £ £ £ £ £
Chairman:
N A Johnson 80,000 - - - - 80,000 80,000
Executive:
F Martin 200,000 37,600 75,200 11,251 40,000 364,051 410,060
J W Stansfield 125,000 11,750 23,500 9,981 25,000 195,231 212,043
Non-executive:
N J Cosh 30,000 - - - - 30,000 30,000
435,000 49,350 98,700 21,232 65,000 669,282 732,103
* The 2005 total column includes pension contributions which were £30,000 for F Martin and £20,000 for
J W Stansfield.
Salary and fees shown above includes fees paid in respect of duties as directors. Neither annual bonuses nor
benefits in kind are pensionable.
STIP includes individual Basic and Matching Awards to the Short T erm Incentive Plan for the year ended 31 March 2006.
Benefits include motor cars and healthcare.
Two directors accrue benefit from payments to defined contribution pension schemes (2005 - two).
No director waived emoluments in respect of the year ended 31 March 2006 (2005 - nil).
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Short T erm Incentive Plan
At 31 March 2006, outstanding awards to directors under the Short Term Incentive Plan were as follows:
Market Value of Value of
Award Vesting Price at Number of entitlement entitlement
Director Date Dates Award Date shares 31 March 2006 31 March 2005
No. £’000 £’000
F Martin June 2002 June 2005/6 82.4p 23,440 48 111
June 2003 June 2005/6/7 140.4p 31,480 65 111
June 2004 June 2006/7/8 215.5p 46,395 95 109
June 2005 June 2007/8/9 221.0p 62,434 128 138
June 2006 June 2008/9/10 * * 75 -
411 469
J W Stansfield June 2002 June 2005/6 82.4p 14,510 30 69
June 2003 June 2005/6/7 140.4p 17,533 36 62
June 2004 June 2006/7/8 215.5p 19,950 41 47
June 2005 June 2007/8/9 221.0p 22,621 46 50
June 2006 June 2008/9/10 * * 23 -
176 228
* 2006 awards have been charged to the profit and loss account in the year and the STIP Trust will purchase
shares in the Company following the preliminary announcement at the prevailing market price.
On 21 June 2005, 23,435 shares of the 2002 Award and 15,740 shares of the 2003 Award were vested to 
F Martin.
On 21 June 2005, 14,505 shares of the 2002 Award and 8,767 shares of the 2003 Award were vested to 
J W Stansfield.
Value of entitlement at 31 March 2006 is based on the closing market price of the Company's shares of
205.0p (2005 - 236.0p).
N A Johnson
Chairman
2 June 2006
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24
Independent Auditors’ Report to the Members of Hornby Plc
We have audited the Group and Parent Company
financial statements (the "financial statements") of
Hornby Plc for the year ended 31 March 2006
which comprise the Group and Parent Company
Income Statements, the Group and Parent Company
Balance Sheets, the Group and Parent Company
Cash Flow Statements and the related notes. These
financial statements have been prepared under the
accounting policies set out therein. We have also
audited the information in the Directors'
Remuneration Report that is described as having
been audited.
Respective responsibilities of directors 
and auditors
The directors’ responsibilities for preparing the
Annual Report, the Directors' Remuneration Report
and the financial statements in accordance with
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European
Union are set out in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the financial statements
and the part of the Directors’ Remuneration Report
to be audited in accordance with relevant legal and
regulatory requirements and International Standards
on Auditing (UK and Ireland). This report, including
the opinion, has been prepared for and only for the
Company’s members as a body in accordance with
Section 235 of the Companies Act 1985 and for no
other purpose. We do not, in giving this opinion,
accept or assume responsibility for any other
purpose or to any other person to whom this report
is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the
financial statements give a true and fair view and
whether the financial statements and the part of the
Directors’ Remuneration Report to be audited have
been properly prepared in accordance with the
Companies Act 1985 and Article 4 of the IAS
Regulation. We report to you whether in our
opinion the information given in the Directors'
Report is consistent with the financial statements.
We also report to you if, in our opinion, the
Company has not kept proper accounting records, if
we have not received all the information and
explanations we require for our audit, or if
information specified by law regarding directors'
remuneration and other transactions are not
disclosed.
We review whether the Corporate Governance
Statement reflects the Company's compliance with
the nine provisions of the 2003 FRC Combined
Code specified for our review by the Listing Rules of
the Financial Services Authority, and we report if it
does not.We are not required to consider whether
the Board's statements on internal control cover all
risks and controls, or to form an opinion on the
effectiveness of the Group's corporate governance
procedures or its risk and control procedures.
We read other information contained in the Annual
Report and consider whether it is consistent with
the audited financial statements. The other
information comprises only the Directors' Report,
the unaudited part of the Directors' Remuneration
Report, the Chairman's Statement, the Chief
Executive's Report and the Corporate Governance
Statement. We consider the implications for our
report if we become aware of any apparent
misstatements or material inconsistencies with the
financial statements. Our responsibilities do not
extend to any other information.
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Basis of audit opinion
We conducted our audit in accordance with
International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the
financial statements and the part of the Directors’
Remuneration Report to be audited. It also includes
an assessment of the significant estimates and
judgements made by the directors in the preparation
of the financial statements, and of whether the
accounting policies are appropriate to the Group's
and Company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to
obtain all the information and explanations which
we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance
that the financial statements and the part of the
Directors’ Remuneration Report to be audited are
free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our
opinion we also evaluated the overall adequacy of
the presentation of information in the financial
statements and the part of the Directors'
Remuneration Report to be audited.
Opinion
In our opinion:
 the financial statements give a true and fair view,
in accordance with IFRSs as adopted by the
European Union, of the state of the Group's and
the Parent Company's affairs as at 31 March 2006
and of the Group's and the Parent Company's
profit and cash flows for the year then ended;
 the financial statements and the part of the
Directors' Remuneration Report to be audited
have been properly prepared in accordance with
the Companies Act 1985 and Article 4 of the IAS
Regulation; and
 the information given in the Directors' Report is
consistent with the financial statements.
Separate opinion in relation to IFRSs
As explained in Note 1 of the Group financial
statements, the Group in addition to complying with
its legal obligations to comply with IFRSs as adopted
by the European Union, has also complied with the
IFRSs as issued by the International Accounting
Standards Board.
In our opinion the Group financial statements give a
true and fair view, in accordance with IFRSs, of the
state of the Group's affairs as at 31 March 2006 and
of its profit and cash flows for the year then ended.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Gatwick
2 June 2006
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26
Group and Company Income Statement
for the Year Ended 31 March 2006
Group                             Company
2006 2005 2006 2005
Notes £’000 £’000 £’000 £’000
REVENUE 2 44,113 45,006 957 962
Cost of sales (20,820) (22,613) - -
GROSS PROFIT 23,293 22,393 957 962
Distribution costs (1,504) (1,312) - -
Selling and marketing costs (9,924) (9,508) - -
Administrative expenses (3,354) (3,910) (463) (881)
Other operating (expenses)/income (217) 51 (9) 46
GROUP OPERATING PROFIT 2 8,294 7,714 485 127
Finance income 3 30 47 8,098 2,349
Finance costs 3 (160) (176) (730) (376)
PROFIT BEFORE TAXATION 4 8,164 7,585 7,853 2,100
Taxation 5 (2,306) (1,993) 51 42
PROFIT FOR THE YEAR AFTER TAXATION   24 5,858 5,592 7,904 2,142
EARNINGS PER ORDINARY SHARE
Basic 7 15.64p 15.06p
Diluted 7 15.08p 14.38p
All of the activities of the Group are continuing. The results of the acquisition of MKD s.r.l.'s assets during the year
are set out in the acquisition note (note 27).
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Group                            Company
2006 2005 2006 2005
Notes £’000 £’000 £’000 £’000
ASSETS
NON-CURRENT ASSETS
Goodwill 8 8,116 7,751 - -
Intangible assets 9 1,608 1,418 - -
Property, plant and equipment 10 5,539 5,096 1,513 1,558
Investments 11 -- 28,587 30,032
Deferred tax assets 20 369 366 95 98
15,632 14,631 30,195 31,688
CURRENT ASSETS
Inventories 12 8,227 7,526 - -
Trade and other receivables 13 9,325 7,199 137 79
Cash and cash equivalents 14 829 1,860 53 35
18,381 16,585 190 114
LIABILITIES
CURRENT LIABILITIES
Borrowings 18 (124) (23) - -
Trade and other payables 15 (6,914) (7,637) (263) (385)
Provisions 16 (300) (369) - -
Current tax liabilities 17 (1,542) (1,100) (88) (57)
(8,880) (9,129) (351) (442)
NET CURRENT ASSETS/(LIABILITIES) 9,501 7,456 (161) (328)
NON-CURRENT LIABILITIES
Borrowings 18 (39) (80) - -
Deferred tax liabilities 20 (231) (235) (231) (235)
Other non-current liabilities 18 - - (4,201) (11,242)
(270) (315) (4,432) (11,477)
NET ASSETS 24,863 21,772 25,602 19,883
SHAREHOLDERS' EQUITY
Share capital 21 376 373 376 373
Share premium 23 5,050 4,906 5,050 4,906
Other reserves 25 1,743 1,743 19,200 18,677
Retained earnings 24 17,694 14,750 976 (4,073)
TOTAL EQUITY 26 24,863 21,772 25,602 19,883
The financial statements on pages 26 to 29 were approved by the Board of directors on 2 June 2006 and were
signed on its behalf by:
F Martin
Director
Group and Company Balance Sheet
for the Year Ended 31 March 2006
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28
Group and Company Cash Flow Statement
for the Year Ended 31 March 2006
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash generated from/(utilised in) operations 7,546 9,222 274 25
Interest received 30 47 287 -
Interest paid (160) (176) (730) (376)
Tax paid (1,939) (2,557) (1) (102)
Net cash generated from/(utilised in)
operating activities 5,477 6,536 (170) (453)
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchase of trade assets and related costs (1,072) (5,971) (25) (5,971)
Proceeds from sale of property,
plant and equipment 23 227 - -
Purchase of property, plant and equipment (2,545) (2,220) - (2)
Dividends received - - 7,811 2,349
Net cash (utilised in)/generated from
investing activities (3,594) (7,964) 7,786 (3,624)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares 147 112 147 112
Purchase of own shares by STIP (364) (278) - -
Finance lease capital payments (23) (30) - -
Dividends paid to Company's shareholders (2,697) (2,349) (2,697) (2,349)
Proceeds from repayment of loans
to subsidiary undertakings - - 1,993 -
Proceeds of loans from subsidiary undertakings - - - 6,281
Repayment of loans from subsidiary undertakings - - (7,041) -
Net cash utilised in financing activities (2,937) (2,545) (7,598) 4,044
Effect of exchange rate movements (60) 27 - -
Net (decrease)/increase in cash and cash equivalents (1,114) (3,946) 18 (33)
Cash and cash equivalents at beginning of the year 1,860 5,806 35 68
CASH AND BANK OVERDRAFTS AT END OF YEAR 746 1,860 53 35
CASH AND CASH EQUIVALENTS CONSIST OF:
Cash and cash equivalents 829 1,860 53 35
Bank overdrafts (83) - - -
CASH AND CASH EQUIVALENTS AT END OF YEAR 746 1,860 53 35
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Notes to the Cash Flow Statement
Cash Flow from Operating Activities
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Profit for the financial year 5,858 5,592 7,904 2,142
Taxation 2,306 1,993 (51) (42)
Interest payable 160 176 730 376
Interest receivable (30) (47) (287) -
Dividends receivable - - (7,811) (2,349)
Amortisation of intangible assets 97 33 - -
Depreciation 2,075 1,850 45 44
Profit on disposal of tangible fixed assets (11) (29) - -
Share based payments 158 (84) 9 (46)
Gain on financial derivatives (38) - - -
Decrease in provisions (69) (158) - -
(Increase)/decrease in inventories (219) 258 - -
Increase in trade and other receivables (2,058) (1,171) 24 (26)
(Decrease)/increase in trade and other payables (683) 809 (289) (74)
CASH GENERATED FROM/(UTILISED IN)
OPERATIONS                                                              7,546 9,222       274 25
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30
Notes to the Financial Statements
ACCOUNTING POLICIES
Accounting policies for the year ended 31 March 2006
The principal accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
BASIS OF PREPARATION
The financial information for the year ended 31 March 2006 has been prepared in accordance with International
Accounting Standards ('IAS') and International Financial Reporting Standards ('IFRS') as adopted by the European
Union ('EU') and also as issued by the International Accounting Standards Board, International Financial Reporting
Interpretations Committee ('IFRIC') interpretations and with those parts of the Companies Act 1985 applicable to
companies reporting under IFRS.
References to IFRS throughout refer to the application of International Accounting Standards and International
Financial Reporting Standards.
Hornby Plc consolidated and Company financial statements were prepared in accordance with UK Generally
Accepted Accounting Principles ('UK GAAP') until 31 March 2005. In preparing Hornby Plc 2005 consolidated and
Company financial information, management has amended certain accounting, valuation and consolidation methods
applied in the UK GAAP financial statements to comply with IFRS. The comparative figures in respect of the year
ended 31 March 2005 have been restated to reflect these adjustments, except as described in the accounting
policies. Exceptions, taken under IFRS1 'First Time Adoption of International Financial Reporting Standards' are set
out in note 33.
Reconciliations and descriptions of the effect of the transition from UK GAAP to IFRS on the Group’s equity and
its net income and cash flows are provided in note 33.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use
of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may
differ from those estimates.
BASIS OF CONSOLIDATION
The Group financial statements consolidate the financial statements of the Company and all its subsidiaries as at
31 March each year prepared under IFRS using consistent accounting policies.The results of subsidiaries acquired
are included in the consolidated profit and loss account from the date control passes. Intra group sales are
eliminated on consolidation.
REVENUE RECOGNITION
Revenue comprises the fair value of the sale of goods and services, net of value added tax, rebates and discounts
and after eliminating sales within the Group. Revenue is recognised as follows:
(a) Sales of goods 
Sales of goods are recognised when a Group entity has delivered products to the customer; the customer has
accepted the products; and collectability of the related receivables is reasonably assured.
(b) Sales of services
Sales of services are recognised in the accounting period in which the services are rendered, by reference to
completion of the specific transaction, assessed on the basis of the actual service provided as a proportion of the
total services to be provided.
1
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(c) Royalty income
Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements.
(d) Sales returns 
The Group establishes a sales returns provision at the period end that reduces income in anticipation of customer
returns of goods sold in the period.
SEGMENTAL REPORTING
The Group's primary reporting format is geographical segments and secondary format is business segment.
A geographical segment is a component of the Group that operates within a particular economic environment and
is subject to risks and returns that differ from those components operating in other economic environments.
A business segment is a component of the Group that provides a group of related products and is subject to risks
and returns that are different from those of other business segments.
Operating profit of each segment includes revenue and expenses directly attributable to or able to be allocated on
a reasonable basis. Segment assets and liabilities are those operating assets and liabilities directly attributable to or
can be allocated on a reasonable basis.
BUSINESS COMBINATIONS
Goodwill arising on a business combination before 1 April 2004, the date of transition to IFRS, is not subject to
amortisation but tested for impairment on an annual basis. The carrying value of goodwill is reduced by any
impairment amount recorded. Intangible assets arising on a business combination subsequent to 1 April 2004, are
separately identified and valued, and subject to amortisation over their estimated economic lives.
GOODWILL
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill recognised under UK GAAP prior
to 1 April 2004, the date of transition to IFRS, is stated at net book value as at this date. Goodwill on business
combinations recognised subsequent to 1 April 2004 is tested annually for impairment and carried at cost less
accumulated impairment losses.
INTANGIBLES
(a) T rade names
Trade names are capitalised at fair value as at the date of acquisition. They are carried at their fair value less
accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the straight-line
method to allocate the fair value of trade names over their estimated economic life of 20 years.
(b) Existing customer relationships
Existing customer relationships are capitalised at fair value as at the date of acquisition. They are carried at their fair
value less accumulated amortisation and any accumulated impairment losses. Amortisation is calculated using the
straight-line method to allocate the fair value of customer relationships over their estimated economic life of 10 years.
(c) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to
the design and testing of new products) are recognised as intangible assets when it is probable that the project will
be a success, considering its commercial and technological feasibility, and costs can be measured reliably. Other
development expenditures are recognised as an expense as incurred.
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32
Notes to the Financial Statements
continued
PROPERTY, PLANT AND EQUIPMENT
Land and buildings are shown at cost or valuation less accumulated depreciation. Assets revalued prior to the transition
to IFRS use this valuation as deemed cost at this date. Other fixed assets are shown at cost less accumulated depreciation.
Depreciation is provided at rates calculated to write off the cost or valuation of each asset, on a straight-line basis
(with the exception of tools and moulds) over its expected useful life, as follows:
Freehold buildings       - 30 to 50 years
Plant and equipment  -   5 to 10 years
Motor vehicles           -   4 years
Freehold land is not depreciated.
Tools and moulds are depreciated at varying rates in line with the related estimated product sales on an item-by-
item basis up to a maximum of 4 years.
IMPAIRMENT OF NON-CURRENT ASSETS
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation are reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable. An impairment loss is recognised for the amount by which
the asset's carrying value exceeds its recoverable amount, which is considered to be the higher of its value in use
and fair value less costs to sell. In order to assess impairment, assets are grouped into the lowest levels for which
there are separately identifiable cash flows (cash-generating units). Cash flows used to assess impairment are
discounted using appropriate rates taking into account the cost of equity and any risks relevant to those assets.
INVESTMENTS
In the Company’s financial statements, investments in subsidiary undertakings are stated using the equity method
of valuation. Accordingly, subsequent increases and reductions in the value of these investments are set against
other reserves in the financial statements of the Company. The directors consider that this policy more fairly
represents the Company’s investments than carrying them at cost.
SHORT TERM INCENTIVE PLAN
The Short Term Incentive Plan (STIP) investment is carried at the cost of the shares acquired less the cost of the
shares vested. This investment in own shares is presented as a deduction from shareholders' funds.
The matched element of the STIP which has a condition of employment attached to it is spread over the vesting
period of the shares and recognised in the income statement over this period.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out
(FIFO) method. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct
costs and related production overheads (based on normal operating capacity).
Net realisable value is based on anticipated selling price less further costs expected to be incurred to completion
and disposal. Provisions are made against those stocks considered to be obsolete or excess to requirements on
an item-by-item basis.
There are no significant differences between balance sheet and replacement cost values. For these purposes
replacement cost is based upon latest invoice prices before the balance sheet date.
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TRADE RECEIVABLES
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision
for impairment. A provision for impairment is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of receivables. The amount of the provision is
recognised in the income statement.
TAXATION INCLUDING DEFERRED TAX
Corporation tax, where payable, is provided on taxable profits at the current rate.
The taxation liabilities of certain group undertakings are reduced wholly or in part by the surrender of losses by
fellow group undertakings.
Deferred tax is provided on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised. The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income
tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the balance sheet date. Tax relating to items recognised directly in equity are recognised in equity and
not in the income statement.
PROVISIONS
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events
and it is more likely than not that an outflow of resources will be required to settle the obligation and the amount
has been reliably estimated. The expense relating to any provision is presented in the income statement net of any
reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the balance sheet date. If material, provisions are determined by discounting the expected future
cash flows of the Group at rates that reflect current market assessments of the time value of money.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash in hand, deposits at all banks, other liquid investments with original
maturities of three months or less and bank overdrafts. Bank overdrafts or loans where there is no right of set off
are shown within borrowings in current or non-current liabilities on the Balance Sheet as appropriate.
SHARE-BASED PAYMENT
The Group operates an executive share option scheme. For all grants of share options and awards, the fair value
as at the date of grant is calculated using an appropriate option pricing model and the corresponding expense is
recognised over the vesting period. The Company has taken advantage of the transitional provisions of IFRS 2
'Share Based Payments' in respect of equity-settled awards and has applied IFRS 2 only to equity settled awards
granted after 7 November 2002 that had not vested before 1 January 2005.
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34
Notes to the Financial Statements
continued
EMPLOYEE BENEFIT COSTS
During the year the Group operated a defined contribution money purchase pension scheme under which it pays
contributions based upon a percentage of the members’ basic salary. The scheme is administered by trustees either
appointed by the Company or elected by the members (to constitute one third minimum).
Contributions to defined contribution pension schemes are charged to the income statement according to the year
in which they are payable. Further information on pensions costs and the scheme arrangements is provided in note 29.
SHARE CAPITAL AND SHARE PREMIUM
Ordinary shares issued are shown as share capital at nominal value. The premium received on the sale of shares
in excess of the nominal value is shown as share premium within shareholders' equity. Dividends approved on
shares are recognised in the period they are paid.
RESEARCH AND DEVELOPMENT
Expenditure on research and development is written off as incurred.
LEASES
The Group enters into operating and finance leases.
Assets held under finance leases are initially reported at the fair value of the asset with an equivalent liability
categorised as appropriate under creditors due within or after one year. The assets are depreciated over the
shorter of the lease term and their useful economic lives. Finance charges are allocated to accounting periods over
the period of the lease to produce a constant rate of return on the outstanding balance. Rentals are apportioned
between finance charges and the reduction of the liability, and allocated to net interest.
Assets under operating leases are charged on a straight-line basis over the lease term.
FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group's operations expose it to a variety of financial risks that include the effects of changes in foreign currency
exchange rates, market interest rates and its liquidity position. The Group has in place a risk management
programme that seeks to limit adverse effects on the financial performance of the Group by using foreign currency
financial instruments. In addition other instruments are used to manage the Group's interest rate exposure.
(a) Foreign exchange risk
The Group is exposed to foreign exchange risks against Sterling primarily on transactions in Hong Kong dollars. It
enters into forward currency contracts to hedge the cash flows of its product sourcing operation (ie it buys HK
dollars forward in exchange for Sterling) and looks forward 6-12 months on a rolling basis at forecasted purchase
volumes. The policy framework requires hedging between 80 per cent and 100 per cent of anticipated import
purchases that are denominated in HK dollars.
(b) Interest rate risk
The Group has interest bearing assets and liabilities and maintains these at both fixed and floating rates of interest
to manage the Group's exposure to interest rate fluctuations.
(c) Credit risk
The Group has some significant concentrations of credit risk within retail customers. Policies have been
implemented that require appropriate credit checks on potential customers before sales commence and on
potential suppliers before orders can be raised. The Group operates trade credit insurance to cover the majority
of customers where available.
(d) Liquidity risk
The Group Treasury function is required to ensure the Group has sufficient committed debt facilities to cover its
liquidity requirements for at least the next 12 months.
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DERIVATIVE FINANCIAL INSTRUMENTS
From 1 April 2004 to 31 March 2005 
In accordance with IFRS 1, 'First Time Adoption of International Financial Reporting Standards', the Group has
elected not to apply IAS 32, 'Financial Instruments: Disclosure and Presentation', and IAS 39, 'Financial Instruments:
Recognition and Measurement' to the period ended 31 March 2005. The Group has continued to adopt UK GAAP
in the accounting for and disclosure of financial instruments in that period.
The derivative instruments used by the Group to manage its currency risk are forward rate contracts. Forward
currency contracts entered into with respect to trading transactions were accounted for under UK GAAP as
hedges, with the instruments impact on profit not recognised until the underlying transaction was recognised in the
profit and loss account. The notional amounts of interest rate swaps and forward currency contracts were not
recorded on the balance sheet.
From 1 April 2005 onwards
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
re-measured at their fair value. The Group documents at the inception of the transaction the relationship between
hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various
hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of
whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values of
the hedged items.
(a) Fair value hedge 
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the
income statement, together with any changes in the fair value of the hedged asset or liability that are attributable
to the hedged risk.
(b) Derivatives that do not qualify for hedge accounting
Certain derivative instruments are not considered effective and do not qualify for hedge accounting. Such
derivatives are classified as at fair value through the income statement, and changes in the fair value of derivative
instruments that do not qualify for hedge accounting are recognised immediately in the income statement.
FAIR VALUE ESTIMATION
The fair values of short-term deposits, loans and overdrafts with a maturity of less than one year are assumed to
be approximate to their book values.
The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the
balance sheet date.
FOREIGN CURRENCY
Transactions and investments denominated in foreign currencies are recorded in sterling at the exchange rates
ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated
at the exchange rates ruling at the balance sheet date and any exchange differences are taken to the income
statement.
On consolidation, income statements and cash flows of foreign subsidiaries are translated into pounds sterling using
average rates that existed during the accounting period. The balance sheets of foreign subsidiaries are translated
into pounds sterling at the rates of exchange ruling at the balance sheet date. Gains or losses arising on the
translation of opening and closing net assets are recognised in the statement of changes in equity.
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36
Notes to the Financial Statements
continued
SEGMENTAL REPORTING
The primary reporting format for segmental purposes is geographic, as this is the basis on which the Group is organised
and managed. Transactions with and balances to the other segments have been identified above and eliminated.
Hornby's secondary segment is business and as the Group operates on a single business segment, further analysis is
not required here.
The Company is a holding company operating in the UK with its results given in the Company Income Statement on
page 26 and its assets and liabilities given in the Company Balance Sheet on page 27. Other Company information is
provided in the other notes to the accounts.
T otal
Rest of Reportable Intra
Year ended 31 March 2006 UK USA Europe Segment Group Group
£’000 £’000 £’000 £’000 £’000 £’000
Revenue      - External 34,196 2,952 6,965 44,113 - 44,113
- Other segments 3,301 - 566 3,867 (3,867) -
Operating profit 7,747 94 453 8,294 - 8,294
Interest expense - External (151) - (9) (160) - (160)
- Other segments - (30) (551) (581) 581 -
Interest income  - External 13 3 14 30 - 30
- Other segments 581 - - 581 (581) -
Profit/(loss) before tax 8,190 67 (93) 8,164 - 8,164
Taxation (2,307) (16) 17 (2,306) - (2,306)
Profit/(loss) for the year 5,883 51 (76) 5,858 - 5,858
Segment assets 32,400 990 15,483 48,873 (14,860) 34,013
Less inter company debtors (14,403) - (457) (14,860) 14,860 -
Total assets 17,997 990 15,026 34,013 - 34,013
Segment liabilities 7,618 916 15,476 24,010 (14,860) 9,150
Less inter company creditors (13) (899) (13,948) (14,860) 14,860 -
Total liabilities 7,605 17 1,528 9,150 - 9,150
Other segment items
Capital expenditure 1,800 42 1,719 3,561 - 3,561
(including acquisitions)
Depreciation 1,779 9 287 2,075 - 2,075
Amortisation of intangible assets - - 97 97 - 97
Impairment of trade receivables 73 17 8 98 - 98
Short T erm Incentive Plan 
- shares vested 138 - - 138 - 138
2
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
T otal
Rest of Reportable Intra
Year ended 31 March 2005 UK USA Europe Segment Group Group
£’000 £’000 £’000 £’000 £’000 £’000
Revenue      - External 39,572 2,488 2,946 45,006 - 45,006
- Other segments 2,229 - - 2,229 (2,229) -
Operating profit 7,411 (38) 341 7,714 - 7,714
Interest expense - External (143) (15) (18) (176) - (176)
- Other segments - (21) (327) (348) 348 -
Interest income  - External 41 - 6 47 - 47
- Other segments 348 - - 348 (348) - 
Profit/(loss) before tax 7,657 (74) 2 7,585 - 7,585
Taxation (1,871) 20 (142) (1,993) - (1,993)
Profit/(loss) for the year 5,786 (54) (140) 5,592 - 5,592
Segment assets 29,520 929 12,435 42,884 (11,668) 31,216
Less inter company debtors (11,631) - (37) (11,668) 11,668 -
Total assets 17,889 929 12,398 31,216 - 31,216
Segment liabilities 8,633 981 11,498 21,112 (11,668) 9,444
Less inter company creditors (9) (956) (10,703) (11,668) 11,668 -
Total liabilities 8,624 25 795 9,444 - 9,444
Other segment items
Capital expenditure 2,082 43 6,188 8,313 - 8,313
(including acquisitions)
Depreciation 1,590 9 251 1,850 - 1,850
Amortisation of intangible assets - - 33 33 - 33
Impairment of trade receivables 56 37 - 93 - 93
Short T erm Incentive Plan 
- shares vested 64 - - 64 - 64
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38
Notes to the Financial Statements
continued
FINANCIAL COSTS - NET
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Interest expense:
Interest paid on bank borrowings (155) (165) - -
Interest paid on inter company borrowings - - (730) (376)
Interest paid on finance leases (5) (11) - -
Interest and similar charges payable (160) (176) (730) (376)
Interest income:
Bank interest 30 47 - -
Interest received on inter company loans - - 287 -
Dividend received - - 7,811 2,349
Interest receivable 30 47 8,098 2,349
Finance (costs)/income - net (130) (129) 7,368 1,973
3
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PROFIT BEFORE TAXATION
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
The following items have been included
in arriving at profit before taxation:
Staff costs (note 28) 5,225 5,476 473 524
Inventories:
- Cost of inventories recognised as an
expense (included in cost of sales) 20,487 19,546 - -
- Write down 3 392 - -
Depreciation of property, plant and equipment:
- Owned assets 2,055 1,830 44 44
- Under finance leases 20 20 - -
Amortisation of intangibles 97 33 - -
Profit on disposal of assets (11) (29) - -
Other operating lease rentals payable:
- Plant and machinery 77 60 - -
- Property 125 10 - -
Repairs and maintenance expenditure on
property, plant and equipment 124 168 - -
Research and development expenditure 98 93 - -
Net exchange (gains)/losses on foreign currency
borrowings less deposits (289) 14 - -
Impairment of trade receivables 98 93 - -
Services provided by the Group's auditor and network firms
During the year the Group (including its overseas subsidiaries) obtained the following services from the Group's
auditor at cost as detailed below:
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Audit services
- Statutory audit 104 78 36 20
- Audit - related regulatory reporting 36 5 25 -
Tax services
- Compliance services 28 14 7 -
- Advisory services 8 20 8 20
Other services not covered above 73 95 11 37
249 212 87 77
Other services related to providing legal services and due diligence relating to acquisitions.
4
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40
Notes to the Financial Statements
continued
TAXATION
Analysis of tax charge in the year
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Current tax
- current year 2,265 2,090 (49) (4)
- adjustments in respect of prior years 14 (76) (1) -
- overseas taxation 35 122 - -
2,314 2,136 (50) (4)
Deferred tax (note 20)
- current year (8) (143) (1) (38)
Total tax charge/(credit) to the Income Statement 2,306 1,993 (51) (42)
Tax on items charged to equity:
Deferred tax credit on stock options (1) (14) - -
The tax for the year is lower (2005 - lower) than the standard rate of corporation tax in the UK (30%).
Any differences are explained below:
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Profit before taxation 8,164 7,585 7,853 2,100
Profit on ordinary activities multiplied by rate of
Corporation tax in UK of 30% (2005 - 30%) 2,449 2,276 2,356 630
Effects of:
Adjustment to tax in respect of prior years 14 (76) (1) -
Income not taxable - - (2,406) (672)
Expenses deductible for tax purposes (264) (316) - -
Impact of overseas losses not recognised 126 116 - -
Prior year movement on deferred tax (19) (7) - -
Total taxation 2,306 1,993 (51) (42)
5
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DIVIDENDS
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Final paid 5.0p per share in relation to year ended 1,845 1,612 1,845 1,612
31 March 2005 (2005 - paid 4.4p per share in relation 
to year ended 31 March 2004)
Interim paid 2.3p per share in relation to year ended 852 737 852 737
31 March 2006 (2005 - paid 2.0p per share
in relation to year ended 31 March 2005)
2,697 2,349 2,697 2,349
In addition, the directors are proposing a final dividend in respect of the financial year ending 31 March 2006 of 5.4p
per share which will absorb an estimated £2.0m of shareholders' funds.
It will be paid on 18 August 2006 to shareholders who are on the register of members on 28 July 2006.
EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year, excluding those held in the employee share trust
(note 11) which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares that have satisfied the appropriate performance criteria at
31 March 2006.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
2006 2005
Weighted Weighted
average average
number of Per-share number Per-share
Earnings shares amount Earnings shares amount
£’000 000’s pence £’000 000’s pence
Basic EPS
Earnings attributable to
ordinary shareholders 5,858 37,447.2 15.64 5,592 37,141.5 15.06
Effect of dilutive securities
Options 1,394.9 1,746.8
Diluted EPS 5,858 38,842.1 15.08 5,592 38,888.3 14.38
6
7
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42
Notes to the Financial Statements
continued
GOODWILL
GROUP £’000
COST
At 1 April 2005 7,751
Additions 305
Exchange adjustment 60
At 31 March 2006 8,116
AGGREGATE IMPAIRMENT
At 1 April 2005 and 31 March 2006 -
Net book amount at 31 March 2006 8,116
GROUP £’000
COST
At 1 April 2004 4,017
Additions 3,778
Exchange adjustment 5
Intangibles fair value adjustment (49)
At 31 March 2005 7,751
AGGREGATE IMPAIRMENT
At 1 April 2004 and 31 March 2005 -
Net book amount at 31 March 2005 7,751
Goodwill arising on business combinations prior to the transition to IFRS on 1 April 2004 is carried at cost and tested
annually for impairment. This includes goodwill arising on the acquisition of the assets of A Day at the Races Inc. in
prior years and the acquisition of Electrotren S.A. on 31 March 2004 where £3,990,000 goodwill was recognised.
Business combinations subsequent to 1 April 2004 have had their intangible assets separately identified and any remaining
goodwill capitalised in accordance with IFRS 3 'Business Combinations'. Goodwill is tested annually for impairment.
On 15 December 2004 the purchase of trade and certain assets from Lima S.p.A by Hornby italia s.r.l created
£3,778,000 of goodwill (note 27).
On 31 December 2005 the purchase of trade and certain assets from MKD s.r.l. by Hornby France S.A.S. created
£305,000 of goodwill (note 27).
Annual impairment reviews performed have not identified any impairment of goodwill.
8
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
The goodwill has been allocated to cash-generating units and a summary of carrying amounts of goodwill by
geographical segments (representing groups of cash-generating units) at 31 March 2006 is as follows:
Rest of
UK USA Europe T otal
GROUP £’000 £’000 £’000 £’000
19 7 8,090 8,116
Goodwill allocated to the above cash-generating units of the Group have been measured based on synergies each
geographical segment is expected to gain from the business combination.
The key assumptions in the value in use calculation:
 Budgeted revenue growth was based on expected levels of activity given results to date, together with growth
based upon internal improvements, marketing initiatives, and expected economic and market conditions.
 Budgeted operating profit was calculated based upon management's expectation of operating costs appropriate
to the growing business.
 The relative risk adjusted (or "beta") discount rates applied to reflect the risk inherent in hobby based product
companies. In determining the risk adjusted discount rate, management have applied an adjustment for risk of such
companies in the industry to all other sectors on average determined using the betas of comparable hobby based
product companies.
The forecasts are based on approved budgets for the year ending 31 March 2007. Subsequent cash flows have been
increased in line with historic local territory gross domestic product. The cash flows were discounted using a pre-
tax discount rate of around 14%.
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44
Notes to the Financial Statements
continued
INTANGIBLES
GROUP Customer Rent Free
Brands Lists Period T otal
ACQUIRED INTANGIBLE ASSETS £’000 £’000 £’000 £’000
COST
At 1 April 2005 1,326 97 28 1,451
Acquisitions 24 238 - 262
Exchange adjustments 19 6 - 25
At 31 March 2006 1,369 341 28 1,738
AMORTISATION
At 1 April 2005 17 2 14 33
Charge for period 67 16 14 97
At 31 March 2006 84 18 28 130
Net book amount at 31 March 2006 1,285 323 - 1,608
Net book amount at 31 March 2005 1,309 95 14 1,418
COST
At 1 April 2004 - - - -
Acquisitions 1,309 96 27 1,432
Exchange adjustments 17 1 1 19
At 31 March 2005 1,326 97 28 1,451
AMORTISATION
At 1 April 2004 - - - -
Charge for period 17 2 14 33
At 31 March 2005 17 2 14 33
Net book amount at 31 March 2005 1,309 95 14 1,418
Net book amount at 31 March 2004 -- - -
All amortisation charges in the year have been charged through cost of sales.
The following useful lives have been determined for the intangible assets acquired:
Brand names 20 years
Customer lists 10 years
Rent free period 0.5 years
Acquired intangible assets have been valued according to discounted incremental operating profit expected to be
generated from each of them over their useful lives.
The Company has no intangible assets.
9
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PROPERTY, PLANT AND EQUIPMENT
GROUP Freehold Plant
land and and Motor Tools &
buildings equipment vehicles moulds T otal
£’000 £’000 £’000 £’000 £’000
COST OR VALUATION
At 1 April 2005 2,816 4,917 288 22,327 30,348
Exchange adjustment 6 14 - 12 32
Additions at cost - 406 9 2,074 2,489
Acquisitions - 4 18 1 23
Disposals - (103) (7) - (110)
At 31 March 2006 2,822 5,238 308 24,414 32,782
ACCUMULATED DEPRECIATION
At 1 April 2005 866 4,439 157 19,790 25,252
Exchange adjustment 1 7 - 6 14
Charge for the year 51 146 35 1,843 2,075
Disposals - (91) (7) - (98)
At 31 March 2006 918 4,501 185 21,639 27,243
Net book amount at 31 March 2006 1,904 737 123 2,775 5,539
At 31 March 2005 1,950 478 131 2,537 5,096
GROUP
COST OR VALUATION
At 1 April 2004 2,804 4,787 286 20,120 27,997
Exchange adjustment 12 9 - 11 32
Adjustment
*
-25 - - 25
Additions - 279 40 2,023 2,342
Acquisitions - 173 - 173 346
Disposals - (356) (38) - (394)
At 31 March 2005 2,816 4,917 288 22,327 30,348
ACCUMULATED DEPRECIATION
At 1 April 2004 811 4,418 153 18,179 23,561
Exchange adjustment 1 6 - 5 12
Adjustment
*
-25 - - 25
Charge for the year 54 156 34 1,606 1,850
Disposals - (166) (30) - (196)
At 31 March 2005 866 4,439 157 19,790 25,252
Net book amount at 31 March 2005 1,950 478 131 2,537 5,096
At 31 March 2004 1,993 369 133 1,941 4,436
* The adjustment relates to the inclusion of a fully depreciated asset in Electrotren S.A.
Freehold land amounting to £786,000 (2005 - £786,000) has not been depreciated.
10
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46
Notes to the Financial Statements
continued
PROPERTY, PLANT AND EQUIPMENT continued
Assets held by the Group under finance leases have the following net book amount:
2006 2005
£’000 £’000
Cost 154 153
Aggregate depreciation (78) (51)
Net book amount 76 102
Assets held by the Group under finance leases are motor vehicles.
The Group has taken advantage of the exemption under IFRS 1 to use the valuation of certain land and buildings at
the date of transition as deemed cost. All other assets are stated at cost.
COMPANY Freehold Plant
land and and
buildings equipment T otal
£’000 £’000 £’000
COST OR VALUATION
At 1 April 2005 and 31 March 2006 2,377 2 2,379
ACCUMULATED DEPRECIATION
At 1 April 2005 821 - 821
Charge for the year 44 1 45
At 31 March 2006 865 1 866
Net book amount at 31 March 2006 1,512 1 1,513
At 31 March 2005 1,556 2 1,558
COMPANY Freehold Plant
land and and
buildings equipment T otal
£’000 £’000 £’000
COST OR VALUATION
At 1 April 2004 2,377 - 2,377
Additions - 2 2
At 31 March 2005 2,377 2 2,379
ACCUMULATED DEPRECIATION
At 1 April 2004 777 - 777
Charge for the year 44 - 44
At 31 March 2005 821 - 821
Net book amount at 31 March 2005 1,556 2 1,558
At 31 March 2004 1,600 - 1,600
The Company does not hold any assets under finance leases.
10
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INVESTMENTS
GROUP - SHORT TERM INCENTIVE PLAN
(See note 26)
2006 2005
£’000 £’000
At 1 April 630 416
Shares acquired in Company 364 278
Shares vested (138) (64)
At 31 March 856 630
Details of the Short Term Incentive Plan are given in the Directors' Remuneration Report on pages 18 to 23.
164,861 ordinary shares to the value of £364,000 were acquired in June 2005 by the Employee Benefit Trust in
accordance with the incentive plan.
On 21 June 2005, the second third of the 2002 allocation (77,635 ordinary shares) were vested and the first third
of the 2003 allocation (53,169 ordinary shares) were vested.
At 31 March 2006, a total of 477,957 (2005 - 443,900) ordinary shares are held by the Trust and allotted to the
directors and senior management under the plan with a nominal value of £4,780 and a market value of £979,812.
The costs of the plan are borne by Hornby Plc. The Trust has waived its right to dividends.
COMPANY
The movements in the net book value of interests in subsidiary undertakings are as follows:
Interests in Loans to
subsidiary subsidiary
undertakings undertakings
at valuation at cost Total
£’000 £’000 £’000
At 1 April 2005 24,895 5,137 30,032
Acquisitions (note 27) 25 - 25
Retained profit for the year 523 - 523
Other movements - (1,993) (1,993)
At 31 March 2006 25,443 3,144 28,587
At 1 April 2004 20,994 958 21,952
Acquisitions (note 27) 1,382 - 1,382
Retained profit for the year 2,519 - 2,519
Other movements - 4,179 4,179
At 31 March 2005 24,895 5,137 30,032
11
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48
Notes to the Financial Statements
continued
INVESTMENTS continued
PRINCIPAL GROUP SUBSIDIARY UNDERTAKINGS
Details of the principal subsidiary undertakings of the Company, which are included in the consolidated financial
statements, are set out below. Hornby Hobbies Limited, Electrotren S.A. and Hornby Italia s.r.l. are engaged in the
development, design, sourcing and distribution of models. Scalextric USA, Inc. and Hornby France S.A.S. are
distributors of models.
Country of Description of Proportion of nominal 
incorporation shares held value of issued shares held
Group Company
%%
Hornby Hobbies Limited Great Britain Ordinary £1 shares 100 100
Scalextric USA, Inc. USA Ordinary shares 100 100
Electrotren S.A. Spain Ordinary shares 100 100
Hornby Italia s.r.l. Italy Ordinary shares 100 100
Hornby France S.A.S. France Ordinary shares 100 100
INVENTORIES
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Materials 297 438 - -
Work in progress 666 864 - -
Finished goods 7,264 6,224 - -
8,227 7,526 - -
TRADE AND OTHER RECEIVABLES
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
CURRENT:
Trade receivables 8,516 6,614 - -
Less: provision for impairment of receivables (245) (246) - -
Trade receivables - net 8,271 6,368 - -
Overseas Corporation tax recoverable 132 64 126 44
Other receivables 425 108 - -
Prepayments 497 659 11 35
9,325 7,199 137 79
NON-CURRENT:
Deferred tax asset (note 20) 369 366 95 98
369 366 95 98
Deferred tax assets have not been subject to discounting.
Concentrations of credit risk with respect to trade receivables are limited due to the Group's customer base
being large and unrelated. Due to this, management believe there is no further credit risk provision required in
excess of the normal provision for doubtful receivables.
11
12
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CASH AND CASH EQUIVALENTS
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Cash at bank and in hand 829 1,860 53 35
TRADE AND OTHER PAYABLES
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
CURRENT:
Trade payables 2,718 3,120 - 1
Other taxes and social security 907 295 10 10
Other payables 1,681 2,320 - -
Accruals 1,608 1,902 253 374
6,914 7,637 263 385
PROVISIONS
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
Sales returns
At 1 April 369 527 - -
Charged to profit and loss account 826 1,086 - -
Utilised in year (895) (1,244) - -
300 369 - -
CURRENT TAX LIABILITIES
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
UK Corporation tax liability 1,504 963 88 57
Overseas Corporation tax liability 38 137 - -
1,542 1,100 88 57
14
15
16
17
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50
Notes to the Financial Statements
continued
FINANCIAL LIABILITIES - BORROWINGS
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
CURRENT:
Bank loans and overdrafts 83 - - -
Finance lease obligations 41 23 - -
124 23 - -
Group                            Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
NON-CURRENT:
Finance lease obligations 39 80 - -
Loan from subsidiary undertaking - - 4,201 11,242
39 80 4,201 11,242
The Group has a £5,000,000 overdraft facility at 31 March 2006 (2005 - £5,000,000) that attracts interest at1%
above Barclays Bank base rate.
FINANCIAL INSTRUMENTS
The Group’s policies and strategies in relation to risk and financial instruments are explained in the Directors’
Report. Accounting policies used to account for financial instruments are detailed in note1.
Assets                             Liabilities
GROUP 2006 2005 2006 2005
Carrying values of derivative financial instruments £’000 £’000 £’000 £’000
Forward foreign currency contracts - - (2,881) (2,717)
The Company does not have any derivative financial instruments.
In accordance with IAS39, "Financial instruments: Recognition and measurement", the Group has reviewed all
contracts for embedded derivatives that are required to be separately accounted for if they do not meet certain
requirements set out in the standard. No embedded derivatives have been identified.
As explained under note 33, the Group has taken advantage of the exemption under IFRS1 "First Time Adoption of
International Financial Reporting Standards" and applied IAS39 and IAS32 "Financial Instruments: Disclosure and
Presentation" from 1 April 2005. In accordance with IAS39, derivatives held by the Group have to be carried at fair
value. The Group's derivatives at 1 April 2005 included forward foreign currency contracts only. The effect of the
changes in policy was to reduce shareholders' equity by £38,000 (note 26).
The forward foreign currency hedges in place from 1 April 2005 could not be included as effective hedges under
IAS39 as appropriate documentation was not in place. Accordingly, the fair value of these derivative financial
instruments was not recognised in the balance sheet.
18
19
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
Notes to the Financial Statements
continued
The fair value of these derivatives is based on discounted future cash flows with gains and losses passing through
the income statement as hedge accounting is not available. Amounts recorded in the income statement were:
2006 2005
£’000 £’000
Loss in year - (38)
Net fair values of derivative financial instruments
The net fair values of derivative financial instruments at the balance sheet date were:
GROUP 2006 2005
£’000 £’000
Forward foreign currency contracts 2,881 2,717
There were no derivatives outstanding at the balance sheet date that were designated as fair value hedges (2005 - nil).
Fair values of non-derivative financial assets and liabilities
Where market values are not available, fair values of financial assets and financial liabilities have been calculated by
discounting expected future cash flows at prevailing interest rates and by applying year-end exchange rates. The fair
value of short term borrowings approximate to book value are shown below:
GROUP 2006 2005
Book value Fair value Book value Fair value
£’000 £’000 £’000 £’000
Primary financial instruments held or
issued to finance the Group's operations:
Long term borrowings (note 17) (39) (39) (80) (80)
Short term borrowings (note 17) (124) (124) (23) (23)
Trade and other payables (note 15) (6,914) (6,914) (7,637) (7,637)
Trade and other receivables (note 13) 8,828 8,828 6,540 6,540
Cash at bank and in hand (note 14) 829 829 1,860 1,860
COMPANY 2006 2005
Book value Fair value Book value Fair value
£’000 £’000 £’000 £’000
Primary financial instruments held or
issued to finance the Group's operations:
Long term borrowings (note 17) 4,201 4,201 11,242 11,242
Trade and other payables (note 15) (263) (263) (385) (385)
Trade and other receivables (note 13) 126 126 44 44
Cash at bank and in hand (note 14) 53 53 35 35
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52
Notes to the Financial Statements
continued
FINANCIAL INSTRUMENTS continued
Maturity of non-current financial liabilities
GROUP 2006 2005
Finance Finance
leases leases
£’000 £’000
Between one and two years (note 18) 39 41
Between two and five years (note 18) - 39
39 80
COMPANY 2006 2005
Debt Debt
£’000 £’000
More than five years (note 18) 4,201 11,242
Bank deposits attract interest within 0.5% of the ruling market rate.
Borrowing facilities
The Group has the following undrawn committed borrowing facilities available at 31 March 2006 in respect of which
all conditions precedent had been met:
Floating Fixed 2006 2005
rate rate T otal T otal
£’000 £’000 £’000 £’000
Expiring within one year 5,000 - 5,000 5,000
The facilities expiring within one year represent an overdraft facility which is subject to review in April each year.
This facility was reduced to £3 million in April 2006, however an increased facility to £7 million between August and
December 2006 has been authorised by the Group's principal bankers.
When utilised, the overdraft facility attracts interest at 1% above the Barclays Bank base rate.
The minimum lease payments under finance leases fall due as follows:
GROUP 2006 2005
£”000 £’000
Not later than one year 43 28
Later than one year but not more than five 40 83
83 111
Future finance charges on finance leases (3) (8)
Present value of finance lease liabilities 80 103
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DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30% (2005 - 30%).
The movement on the deferred tax account is as shown below:
Group                             Company
2006 2005 2006 2005
£’000 £’000 £’000 £’000
At 1 April (131) 26 (137) (175)
Charge/(credit) to profit and loss account (6) (143) 1 38
Equity (1) (14) - -
(138) (131) (136) (137)
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to
deferred tax assets because it is probable that those assets will be recovered.
No deferred tax is provided for tax liabilities which would arise on the distribution of profits retained by subsidiaries
because there is currently no intention that such profits will be remitted.
The movements in deferred tax assets and liabilities during the year are shown below.
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is
intention to settle the balances net.
Deferred tax liabilities Accelerated
capital
Revaluation allowances T otal
GROUP AND COMPANY £’000 £’000 £’000
At 1 April 2005 222 13 235
(Credit)/charge to profit and loss account (5) 1 (4)
At 31 March 2006 217 14 231
Accelerated Short-term
capital incentive Share
allowances plan options Other T otal
Defered tax assets £’000 £’000 £’000 £’000 £’000
GROUP
At 1 April 2005 (63) (248) (29) (26) (366)
(Credit)/charge to profit and loss account (21) (34) 28 23 (4)
Charged to equity - 1 - - 1
At 31 March 2006 (84) (281) (1) (3) (369)
Net deferred tax asset
At 31 March 2006 (138)
At 31 March 2005 (131)
20
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54
Notes to the Financial Statements
continued
DEFERRED TAX continued
Short-term
incentive
plan Other T otal
Deferred tax assets £’000 £’000 £’000
COMPANY
At 1 April 2005 (97) (1) (98)
(Credit)/charge to profit and loss account (1) 4 3
At 31 March 2006 (98) 3 (95)
Net deferred tax liability
At 31 March 2006 136
At 31 March 2005 137
The deferred tax liability arising on the revaluation of freehold land and buildings in 1986 cannot be offset against
deferred tax assets. Therefore, the deferred tax asset and deferred tax liability at 31 March 2006 and 31 March 2005
have been recognised separately.
GROUP 2006 2005
Not Not
Recognised recognised Recognised recognised
£’000 £’000 £’000 £’000
Deferred tax comprises:
Accelerated capital allowances (70) (84) (50) (63)
Other timing differences (68) (3) (81) (25)
(138) (87) (131) (88)
COMPANY 2006 2005
Not Not
Recognised recognised Recognised recognised
£’000 £’000 £’000 £’000
Deferred tax comprises:
Accelerated capital allowances (14) - (13) -
Other timing differences (122) - (124) -
(136) - (137) -
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CALLED UP SHARE CAPITAL
2006 2005
GROUP AND COMPANY £’000 £’000
Authorised:
50,000,000 (2005 - 50,000,000) ordinary shares of 1p each 500 500
Allotted, called up and fully paid:
2006                                    2005
Ordinary shares of 1p each Number of Number of
shares £’000 shares £’000
At 1 April 37,308,530 373 36,959,100 370
Allotted under share option schemes 275,000 3 349,430 3
At 31 March 37,583,530 376 37,308,530 373
Shares issued in the year for cash are set out below:
Date issued Number of shares Exercise price
28 June 2005 37,500 83.4p
12 July 2005 37,500 83.4p
17 August 2005 37,500 32.7p
31 August 2005 37,500 83.4p
11 November 2005 75,000 32.7p
25 January 2006 50,000 32.7p
275,000
At 31 March 2006 options granted under the Company’s share option schemes were outstanding as follows:
Date granted Number of options Exercise price Period of option
2006 2005
09 July 1997 67,260 67,260 44.6p July 2000 - July 2007
27 January 1999 - 162,500 32.7p January 2002 - January 2006
12 March 2001 148,310 148,310 29.5p March 2004 - March 2008
28 March 2002 1,000,000 1,000,000 76.8p March 2005 - March 2009
19 June 2002 812,500 925,000 83.4.p June 2005 - June 2009
09 June 2004 - 250,000 218.0p June 2007 - June 2011
09 June 2005 550,000 - 201.0p June 2008 - June 2012
2,578,070 2,553,070
The total number of options outstanding as at the date of this document represent approximately 6.9% of the issued
share capital of the Company.
If Resolution 11 is passed at the Annual General Meeting and the Company were to exercise the full authoritt to
buy-back approximately 10% of the issued ordinary shares of the Company, such options would represent 7.6% of
the issued share capital of the Company.
21
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
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56
SHARE BASED PAYMENTS
Hornby Plc operates two share based plans. The Share Option Scheme ('SOS') and the Short T erm Incentive Plan ('STIP') .
SOS awards
The SOS awards are a reward of share options that vest after 3 years and must be exercised in a 4-year exercise window.
The awards are subject to a performance measure of Profits before Interest and Tax ('PBIT') or Profit before Tax
('PBT') as disclosed by the Group's accounts for any of the years ended 31 March 2006, 31 March 2007, 31 March 2008
or 31 March 2009 excluding (i) any profit or loss in relation to property transactions, (ii) any exceptional items and
(iii) any profits or losses arising from businesses acquired by the Group after the date of grant of the Option. Some
awards are subject to achieving a PBIT that is equal to or greater than £8 million other to PBT being equal to or
greater than £9 million.The awards are equity settled.
STIP awards
The STIP is a reward of shares to executive directors and senior management.
Vesting of the awards occurs in equal amounts on the second, third and fourth anniversaries of the award date provided
that the participant remains employed by the Group.These awards are not subject to any performance conditions.The
awards are equity settled.
Both plans are subject to continued employment. To the extent that such shares in both plans are to be purchased
by employees below fair value, a charge calculated in accordance with IFRS2 'Share Based Payments' is included
within other operating expenses in the income statement. This charge amounted to £231,822 in the year ended 
31 March 2006 (2005 - £112,536).
The Group has taken advantage of the exemption allowed under IFRS1 regarding IFRS2 'Share based payments' and only
applied this standard to equity settled awards made since 7 November 2002.
Activity relating to share options for the year ended 31 March 2006 and 31 March 2005 was as follows:
2006 2005
Weighted Weighted
average average
Number exercise price Number exercise price
Outstanding at 1 April 2,553,070 86.6p 2,652,500 67.0p
Granted 550,000 201.0p 250,000 218.0p
Forfeited (250,000) 218.0p --
Exercised (275,000) 53.4p (349,430) 32.0p
Expired -- --
Outstanding at 31 March 2,578,070 101.8p 2,553,070 86.6p
Options were exercised at various times during the year. The weighted average share price was 206.6p (2005 - 248.1p).
22
Notes to the Financial Statements
continued
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The following table summarises information relating to the number of shares under option and those which were exercisable
at 31 March 2006.
Exercisable
weighted
average
Weighted exercise
average Options Options price for
remaining exercisable exercisable options
Total shares contractual at 31 March at 31 March exercisable
under option life 2006 2005 at 31 March
Range of exercise prices Number Months Number Number 2006
£0.20 - £0.30 148,310 24 148,310 148,310 29.5p
£0.30 - £0.40 - - - 162,500 -
£0.40 - £0.50 67,260 16 67,260 67,260 44.6p
£0.70 - £0.80 1,000,000 36 1,000,000 1,000,000 76.8p
£0.80 - £0.90 812,500 39 812,500 - 83.4p
£2.00 - £2.10 550,000 75 - - 201.0p
2,578,070 2,028,070 1,378,070 74.9p
The following table summarises the key assumptions used:
2006   2005
SOS STIP SOS STIP
Weighted average fair value (p) 57.9p 181.6p 66.1p 161.8p
Options pricing model used Black Scholes - Black Scholes -
Weighted average share price (p) 201.0p - 218.0p -
Weighted average exercise price (p) 201.0p - 218.0p -
Basis of expected volatility (%) 30% - 35% -
Range of risk-free rates (%) 4.2% - 5.3% -
Range of expected option term (years) 54 54
Expected dividends (per year, %) 2.8% 3.1% 2.8% 3.4%
Assumptions on expected volatility and expected option term have been made on the basis of historical data,
wherever available, for the period corresponding with the vesting period of the option. Best estimates have been
used where historical data is not available in this respect.
The Group reported a provision for National Insurance and other social security taxes of £40,092 (2005 - £26,041)
in respect of liabilities arising from the above share-based payment transactions.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
57
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58
Notes to the Financial Statements
continued
SHARE PREMIUM ACCOUNT
GROUP AND COMPANY £’000
At 1 April 2004 4,797
Premium on shares issued during the year under share option schemes 109
At 1 April 2005 4,906
Premium on shares issued during the year under share option schemes 144
At 31 March 2006 5,050
RETAINED EARNINGS
Group Company
£’000 £’000
At 1 April 2005 after adoption of IAS32 and IAS39 (note 26) 14,712 (4,073)
Profit for the year 5,858 7,904
Dividends paid (note 6) (2,697) (2,697)
Share-based payments 158 9
Exchange adjustments (111) (167)
Shares purchased (364) -
Shares vested 138 -
At 31 March 2006 17,694 976
Group Company
£’000 £’000
At 1 April 2004 11,779 (3,825)
Profit for the year 5,592 2,142
Dividends paid (note 6) (2,349) (2,349)
Share based payments (84) (46)
Exchange adjustments 26 5
Shares purchased (278) -
Shares vested 64 -
At 31 March 2005 14,750 (4,073)
23
24
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59
OTHER RESERVES
Capital
redemption Other
reserve reserves T otal
GROUP £’000 £’000 £’000
At 1 April 2004, 31 March 2005 and 31 March 2006 55 1,688 1,743
Capital
redemption Other
reserve reserves T otal
COMPANY £’000 £’000 £’000
At 1 April 2004 55 16,103 16,158
Increase in underlying assets of subsidiary undertakings - 2,519 2,519
At 31 March 2005 55 18,622 18,677
Increase in underlying assets of subsidiary undertakings - 523 523
At 31 March 2006 55 19,145 19,200
STATEMENT OF CHANGES IN EQUITY 
Years ended 31 March 2006 and 31 March 2005
Capital
Share Share redemption Other Retained T otal
capital premium reserve reserves earnings* equity
GROUP £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 April 2004 370 4,797 55 1,688 11,779 18,689
Profit for the period - - - - 5,592 5,592
Issue of shares 3 109 - - - 112
Share-based payments - - - - (84) (84)
Exchange adjustment offset in reserves - - - - 26 26
Purchase of own shares - - - - (278) (278)
Shares vested - - - - 64 64
Dividends - - - - (2,349) (2,349)
Balance at 31 March 2005 373 4,906 55 1,688 14,750 21,772
Adoption of IAS32 and IAS39 - - - - (38) (38)
Balance at 1 April 2005 373 4,906 55 1,688 14,712 21,734
Profit for the period - - - - 5,858 5,858
Issue of shares 3 144 - - - 147
Share-based payments - - - - 158 158
Exchange adjustment offset in reserves - - - - (111) (111)
Purchase of own shares - - - - (364) (364)
Shares vested - - - - 138 138
Dividends - - - - (2,697) (2,697)
Balance at 31 March 2006 376 5,050 55 1,688 17,694 24,863
* Attributable to equity shareholders of the Company.
Retained earnings includes £723,000 at 31 March 2006 (2005 - £740,000) which is not distributable and relates to
a 1986 revaluation of land and buildings.
25
26
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60
Notes to the Financial Statements
continued
STATEMENT OF CHANGES IN EQUITY continued
Capital
Share Share redemption Other Retained T otal
capital premium reserve reserves earnings* equity
COMPANY £’000 £’000 £’000 £’000 £’000 £’000
Balance at 1 April 2004 370 4,797 55 16,103 (3,825) 17,500
Profit for the period - - - - 2,142 2,142
Issue of shares 3 109 - - - 112
Share-based payments - - - - (46) (46)
Exchange adjustment offset in reserves - - - - 5 5
Increase in underlying assets of 
subsidiary undertakings - - - 2,519 - 2,519
Dividends - - - - (2,349) (2,349)
Balance at 1 April 2005 373 4,906 55 18,622 (4,073) 19,883
Profit for the period - - - - 7,904 7,904
Issue of shares 3 144 - - - 147
Share-based payments - - - - 9 9
Exchange adjustment offset in reserves - - - - (167) (167)
Increase in underlying assets of 
subsidiary undertakings - - - 523 - 523
Dividends - - - - (2,697) (2,697)
Balance at 31 March 2006 376 5,050 55 19,145 976 25,602
* Attributable to equity shareholders of the Company.
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ACQUISITIONS
During the year ended 31 March 2005, the Company incorporated a new Italian company, Hornby Italia s.r.l., and
injected EUR 2,000,000 (£1,382,000) of equity capital into this new subsidiary. On 15 December 2004 Hornby Italia
acquired the trade and certain assets from Lima S.p.A. for EUR 8,000,000 in cash. Stamp duty, notary fees, legal fees
and employee related costs of EUR 642,000 were incurred by Hornby Italia and capitalised. Acquisition expenses
of £94,000 were expensed to profit.
The table below sets out the Group's assessment of the fair values of the assets acquired. No adjustments have been
made to the provisional fair values reported in the year ended 31 March 2005 following a review of the carrying
values of assets. Adjustments have been made in respect of the transition to IFRS to separately identify intangible
assets (note 9).
Provisional Adjustments
fair value in respect of Fair value
(UK GAAP) IFRS transition to the Group
£’000 £’000 £’000
Intangible assets:
- customer lists - 96 96
- brand names - 1,309 1,309
- rent free period - 27 27
Property, plant and equipment 346 - 346
Inventories 415 - 415
Net assets acquired 761 1,432 2,193
Goodwill (note 8) 3,778
Consideration - satisfied by cash 5,971
On 23 December 2005, the Company incorporated a new French company, Hornby France S.A.S., and injected 
EUR 37,000 (£25,000) of equity capital into this new subsidiary. On 31 December 2005 Hornby France acquired
the trade and certain assets of their French distributor MKD s.r.l. for EUR 1,450,000. Stamp duty and legal fees of
EUR 111,000 were incurred by Hornby France and capitalised in non-current assets.
The table below sets out the Group's assessment of the fair values of the assets acquired. Adjustments have been
made in respect of the transition to IFRS to separately identify intangible assets.
Provisional Adjustments
fair value in respect of Fair value
(UK GAAP) IFRS transition to the Group
£’000 £’000 £’000
Intangible assets:
- customer lists - 238 238
- brand names - 24 24
Property, plant and equipment 23 - 23
Inventories 482 - 482
Net assets acquired 505 262 767
Goodwill (note 8) 305
Consideration - satisfied by cash 1,072
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2006
27
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62
Notes to the Financial Statements
continued
ACQUISITIONS continued
In its last financial year to 31 December 2005, MKD made a profit before exception items and tax of EUR 162,000.
Since the date of acquisition, Hornby France's results to 31 March 2006 were as follows:
£’000
REVENUE 919
Cost of sales (571)
GROSS PROFIT 348
Distribution costs (52)
Selling and marketing costs (149)
Administrative expenses (66)
Other operating (expenses)/income (7)
GROUP OPERATING PROFIT 74
Finance costs (17)
PROFIT BEFORE TAXATION 57
Taxation (19)
PROFIT FOR THE PEROD AFTER TAXATION 38
If Hornby France had been included in the Group from the start of the financial year it is expected that revenue 
and profits would have been approximately four times those given above for the first quarter's trading.
EMPLOYEES AND DIRECTORS
GROUP 2006 2005
£’000 £’000
Staff costs for the Group during the year:
Wages and salaries 4,415 4,449
Social security costs 432 751
Other pension costs (note 29) 378 246
Redundancy and compensation for loss of office - 30
5,225 5,476
Average monthly number of people (including executive directors) employed by the Group:
2006 2005
Number Number
Operations 83 82
Sales, marketing and distribution 61 65
Administration 35 24
179 171
Key management compensation:
2006 2005
£’000 £’000
Salaries, short-term benefits and STIP 1,331 1,360
Post-employment benefits 123 101
Termination benefits - 30
1,454 1,491
28
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EMPLOYEES AND DIRECTORS continued
COMPANY 2006 2005
£’000 £’000
Staff costs for the Company during the year:
Wages and salaries 381 434
Social security costs 52 60
Other pension costs (note 29) 40 30
473 524
Average monthly number of people (including executive directors) employed by the Company:
2006 2005
Number Number
Sales, marketing and distribution 1 1
Administration 3 3
4 4
Key management compensation:
2006 2005
Number Number
Salaries and short-term benefits 324 380
Post-employment benefits 40 30
364 410
A detailed numerical analysis of directors' remuneration and share options showing the highest paid director and the
number of directors accruing benefits under money purchase pension schemes, is included in the Remuneration
Report on pages 18 and 23 and forms part of these financial statements.
PENSION COMMITMENTS
The Group operates a defined contribution money purchase pension scheme. Following a review of the Company
Pension Scheme, the Company and Trustees decided it would be more appropriate to provide future employee
pension benefits by way of a Group Personal Pension Plan. Contributions to the existing Scheme therefore ceased
at 31 March 2005 and on 1 April 2005 a replacement Stakeholder Group Personal Pension Plan was set up through
the Friends Provident Insurance Group.
Alexander Forbes Financial Services Limited were appointed as Independent Financial Advisers to work in liaison
with both the Principal Employer and the Trustees in putting in place the new Plan and making arrangement for the
existing Scheme to be wound up.
Members of the old scheme can choose to place contributions to date in a Buyout or to transfer funds and future
contributions into a selection of funds managed by Friends Provident.
The contribution basis for both employees and the Company in the new Plan remain the same as in the existing scheme.
The level of contributions to the Group Personnal Pension Plan for current members is fixed by the Company.
The Group pension cost for the year was £378,000 (2005 - £246,000) representing the actual contributions payable
in the year and certain scheme administration costs. the company pension cost for the year was £40,000 (2005 -
£30,000).
29
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64
Notes to the Financial Statements
continued
FINANCIAL COMMITMENTS
CAPITAL COMMITMENTS Group
2006 2005
£’000 £’000
At 31 March commitments were:
Contracted for but not provided for 998 801
The Company does not have any capital commitments.
CONTINGENT LIABILITIES
The Company and its subsidiary undertakings are, from time to time, parties to legal proceedings and claims, which
arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings and
claims, either individually or in aggregate, will have a material adverse effect upon the Group's financial position.
OPERATING LEASE COMMITMENTS
The total of future minimum lease payments in respect of non-cancellable plant and motor vehicle operating leases
are as follows:
2006 2005
GROUP £’000 £’000
Leases expiring:
Within one year 6 16
Within 2 to 5 years 714 162
Over 5 years - 435
720 613
The Company had no operating lease commitments during 2006 (2005 - nil).
RELATED PARTY DISCLOSURES
There were no contracts with the Company or any of its subsidiaries subsisting during or at the end of the financial
year in which a director of the Company was materially interested. The Company has taken advantage of the
exemption available to parent companies under IAS 24 'Related party disclosures' not to disclose transactions and
balances between Group entities that have been eliminated on consolidation.
FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
The Group has applied IFRS 1 'First Time Adoption of International Financial Reporting Standards' for its initial
implementation of IFRS. The Group's date of transition to IFRS is 1 April 2004 and comparative information in the
financial statements has been restated to reflect the Group's adoption of IFRS except where otherwise required or
permitted by IFRS 1.
IFRS 1 requires an entity to comply with each IFRS effective at the reporting date for its first financial statements
prepared under IFRS. As a general rule, IFRS 1 requires such standards to be applied retrospectively. However, the
standard permits several optional exemptions from full retrospective application. The Group has elected to take
advantage of the following exemptions:-
30
31
32
33
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The Group has adopted IFRS 3 'Business Combinations' to the extent that it applies to acquisitions after 1 April 2004.
Acquisitions before that date have been recorded under previous accounting rules as the Group has taken
advantage of the exemption permitted in IFRS 1. All goodwill has been tested for impairment in accordance with our
accounting policy.
The Group has taken advantage of the exemption in IFRS1 regarding cumulative translation differences.
Accordingly, the cumulative translation differences for all foreign operations are deemed to be nil at the date of
transition to IFRS.
The Group has applied the exemptions in IAS 32 'Financial Instruments: Disclosure and Presentation' and IAS 39
'Financial Instruments: Recognition and Measurement', and applied these standards from 1 April 2005 only.
The Group has taken advantage of the exemptions allowed in IFRS 1 regarding IFRS 2 'Share-based payments'.
The Group has applied the exemptions for share-based payments granted on or before 7 November 2002.
The Group considers the land and buildings revaluation performed under UK GAAP as comparable to the fair
value at the date of the transition to IFRS. Accordingly, the Group has elected to use this valuation as deemed
cost at the date of transition to IFRS, and stated the property at valuation, net of accumulated depreciation.
Main impacts of International Financial Reporting Standards
Outlined below are those International Financial Reporting Standards which have an impact upon the financial
information of Hornby Plc. Details of adjustments are set out in the reconciliations to UK GAAP below.
IFRS 3 - 'Business Combinations'
The standard deals with accounting for business combinations including goodwill and intangible assets. The Group's
previous policy under UK GAAP was to amortise goodwill, which has now ceased, and to test for impairment,
normally on an annual basis, when there is an indication that the carrying value of an asset might not be recoverable.
Where appropriate, in respect of business combinations completed after the date of transition to IFRS, separately
identified intangible assets have been valued and are subject to amortisation.
IAS 12 - 'Income Taxes'
This standard requires entities to provide for deferred taxation based on temporary differences between the
carrying amount of assets and liabilities and their tax base. Consequently, the Group has made additional provision
for deferred taxation on tax deductible amortisation on purchased goodwill and deferred tax adjustments in respect
of share-based payments.
IAS 21 - 'The Effects of Changes in Foreign Exchange Rates'
Income statements and cash flows of foreign subsidiaries are reported in sterling using average rates of exchange
that existed during the accounting period rather than the closing rates at the end of the accounting period as was
previously permitted by UK GAAP .
IAS 10 - 'Events after the balance sheet date'
The standard does not permit dividends declared after the balance sheet date to be recognised as a liability.
Consequently, under IFRS, the Group no longer makes provision for dividends not approved by the period end.
Actual dividends paid in the period are charged to shareholders' equity.
IFRS 2 - 'Share-based Payments'
Previously the cost of awards to employees (including conditional rights) was charged to the income statement over
the period to which the employees' performance related. Historically, provision has been made for the cost of
awards based on the share price ruling at grant date. Under IFRS 2, share awards are measured at fair value at grant
date and recognised as an expense over the vesting period. The impact of this standard on the financial statements
of the Group is a small reduction in the charge to the income statement for the year ended 31 March 2005 and an
equivalent increase in shareholders' funds, net of deferred tax. Additionally there is a small reduction in the
cumulative charge to retained earnings at the date of transition to IFRS.
Continues overleaf
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continued
Reconciliation of IFRS Income Statement
GROUP Year ended
31 March 2005
£’000
Profit for the period under UK GAAP 5,156
Share-based payments 84
Amortisation of goodwill reversal 297
Amortisation of intangible assets reversal 35
Amortisation of intangible assets (33)
Financial derivatives -
Taxation 53
Profit for the period under IFRS 5,592
COMPANY Year ended
31 March 2005
£’000
Profit for the period under UK GAAP 2,750
Share-based payments 46
Dividends (649) 
Taxation (5)
Profit for the period under IFRS 2,142
Notes to the Financial Statements
continued
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Reconcilliation of profit - UK GAAP to IFRS
GROUP Year ended 31 March 2005
Effect of
UK GAAP IFRS IFRS
£’000 £’000 £’000
REVENUE 45,006 - 45,006
Cost of sales (22,613) - (22,613)
GROSS PROFIT 22,393 - 22,393
Distribution costs (1,312) - (1,312)
Selling and marketing costs (9,508) - (9,508)
Administrative expenses (4,242) 332 (3,910)
Other operating income - 51 51
GROUP OPERATING PROFIT 7,331 383 7,714
Finance income 47 - 47
Finance costs (176) - (176)
PROFIT BEFORE TAXATION 7,202 383 7,585
Taxation (2,046) 53 (1,993)
PROFIT FOR THE YEAR 5,156 436 5,592
COMPANY Year ended 31 March 2005
Effect of
UK GAAP IFRS IFRS
£’000 £’000 £’000
REVENUE 962 - 962
Cost of sales - - -
GROSS PROFIT 962 - 962
Administrative expenses (881) - (881)
Other operating income - 46 46
GROUP OPERATING PROFIT 81 46 127
Finance income 2,998 (649) 2,349
Finance costs (376) - (376)
PROFIT BEFORE TAXATION 2,703 (603) 2,100
Taxation 47 (5) 42
PROFIT FOR THE YEAR 2,750 (608) 2,142
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FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
continued
Reconciliation of Balance Sheet - UK GAAP to IFRS
At 1 April 2004 At 31 March 2005
Effect of Effect of
UKGAAP IFRS IFRS UKGAAP IFRS IFRS
GROUP £’000 £’000 £’000 £’000 £’000 £’000
ASSETS
NON-CURRENT ASSETS
Goodwill 4,017 - 4,017 7,503 248 7,751
Intangible assets - - - 1,367 51 1,418
Property, plant and equipment 4,436 - 4,436 5,096 - 5,096
Deferred tax assets 240 (28) 212 344 22 366
8,693 (28) 8,665 14,310 321 14,631
CURRENT ASSETS
Inventories 7,369 - 7,369 7,526 - 7,526
Trade and other receivables 5,977 - 5,977 7,199 - 7,199
Cash and cash equivalents 5,806 - 5,806 1,860 - 1,860
19,152 - 19,152 16,585 - 16,585
LIABILITIES
CURRENT LIABILITIES
Borrowings - (30) (30) - (23) (23)
Trade and other payables (8,443) 1,656 (6,787) (9,525) 1,888 (7,637)
Provisions (527) - (527) (369) - (369)
Current tax liabilities (1,443) - (1,443) (1,100) - (1,100)
(10,413) 1,626 (8,787) (10,994) 1,865 (9,129)
NET CURRENT ASSETS 8,739 1,626 10,365 5,591 1,865 7,456
NON-CURRENT LIABILITIES
Borrowings (103) - (103) (80) - (80)
Deferred tax liabilities - (238) (238) - (235) (235)
(103) (238) (341) (80) (235) (315)
NET ASSETS 17,329 1,360 18,689 19,821 1,951 21,772
SHAREHOLDER EQUITY
Share capital 370 - 370 373 - 373
Share premium 4,797 - 4,797 4,906 - 4,906
Other reserves * 2,500 - 2,500 2,483 - 2,483
Retained earnings 9,662 1,360 11,022 12,059 1,951 14,010
TOTAL EQUITY 17,329 1,360 18,689 19,821 1,951 21,772
*The revaluation reserve included in other reserves under UK GAAP now forms part of retained earnings under IFRS.
Notes to the Financial Statements
continued
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69
IFRS Adjustments
GROUP At At
1 April 2004 31 March 2005
£’000 £’000
Goodwill - per UK GAAP 4,017 7,503
Amortisation written back - 297
Lima intangibles fair value adjustment - (49)
4,017 7,751
Goodwill amortisation relating to acquisitions prior to 1 April 2004 and charged to profit since that date have been
reversed. Goodwill relating to Lima assets acquired was reduced and reallocated to intangible assets.
Intangible assets - per UK GAAP - 1,367
Amortisation written back - 35
Lima intangibles fair value adjustment - 49
Amortisation of fair value - (33)
- 1,418
Intangible assets amortisation relating to acquisitions prior to 1 April 2004 and charged to profit since that date have
been reversed.
Intangible assets relating to Lima assets acquired increased upon fair valuing.
Intangible assets relating to acquisitions post 31 March 2004 are amortised over their useful life.
* Shown in the 31 March 2005 Report and Accounts within goodwill.
Deferred tax assets - per UK GAAP 240 344
Accelerated capital allowances 20 76
Short term incentive plan (73) (108)
Share options -29
Pensions 15 14
Trade discount 3 3
General provisions 7 8
212 366
Borrowings - per UK GAAP - -
Finance lease commitments < 1 year (30) (23)
(30) (23)
Finance lease capital commitments due in less than one year.
Trade and other payables - per UK GAAP (8,443) (9,525)
Finance lease commitments transferred to borrowings 30 23
Dividend reversal 1,626 1,865
(6,787) (7,637)
Dividends accrued but not declared, proposed or approved are reversed.
*
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FIRST TIME ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
continued
At At
1 April 2004 31 March 2005
£’000 £’000
Deferred tax liabilities - per UK GAAP - -
Decelerated capital allowances (11) (13)
Revaluation (227) (222)
(238) (235)
Retained earnings - per UK GAAP 9,662 12,059
Dividend reversal 1,626 2,588
Dividend payment - (723)
Amortisation of goodwill reversal - 297
Amortisation of intangibles reversal - 35
Amortisation of intangibles fair value - (33)
Deferred taxation (266) (213)
11,022 14,010
There are no material differences between the cash flow statements presented under IFRS and the cash flow
statements previously presented under UK GAAP .
Notes to the Financial Statements
continued
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At 1 April 2004 At 31 March 2005
Effect of Effect of
UKGAAP IFRS IFRS UKGAAP IFRS IFRS
COMPANY £’000 £’000 £’000 £’000 £’000 £’000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 1,600 - 1,600 1,558 - 1,558
Investments 21,952 - 21,952 29,733 299 30,032
Deferred tax assets - 63 63 - 98 98
23,552 63 23,615 31,291 397 31,688
CURRENT ASSETS
Trade and other receivables 1,705 (1,696) 9 2,467 (2,388) 79
Cash and cash equivalents 68 - 68 35 - 35
1,773 (1,696) 77 2,502 (2,388) 114
LIABILITIES
CURRENT LIABILITIES
Trade and other payables (2,090) 1,626 (464) (2,250) 1,865 (385)
Current tax liabilities (119) - (119) (57) - (57)
(2,209) 1,626 (583) (2,307) 1,865 (442)
NET CURRENT ASSETS (436) (70) (506) 195 (523) (328)
NON-CURRENT LIABILITIES
Other non-current liabilities (5,371) - (5,371) (11,242) - (11,242)
Deferred tax liabilities - (238) (238) - (235) (235)
(5,371) (238) (5,609) (11,242) (235) (11,477)
NET ASSETS 17,745 (245) 17,500 20,244 (361) 19,883
SHAREHOLDER EQUITY
Share capital 370 - 370 373 - 373
Share premium 4,797 - 4,797 4,906 - 4,906
Other reserves 16,158 - 16,158 18,378 299 18,677
Retained earnings (3,580) (245) (3,825) (3,413) (660) (4,073)
TOTAL EQUITY 17,745 (245) 17,500 20,244 (361) 19,883
71
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continued
IFRS Adjustments
COMPANY At At
1 April 2004 31 March 2005
£’000 £’000
Deferred tax assets - per UK GAAP - -
Short term incentive plan 63 97
General provisions - 1
63 98
Trade and other receivables - per UK GAAP 1,705 2,467
Deferred tax assets (70) (113)
Dividend reversal (1,626) (2,275)
979
Deferred tax asset transferred to non-current assets or liabilities.
Dividends accrued but not declared, proposed or approved are reversed.
Trade and other payables - per UK GAAP (2,090) (2,250)
Dividend reversal 1,626 1,865
(464) (385)
Dividends accrued but not declared, proposed or approved are reversed.
Deferred tax liabilities - per UK GAAP - -
Decelerated capital allowances (11) (13)
Revaluations (227) (222)
(238) (235)
Retained earnings - per UK GAAP (3,580) (3,413)
Dividend debtor reversal (1,626) (2,275)
Dividend accrual reversal 1,626 1,865
Deferred taxation (245) (250)
(3,825) (4,073)
There are no material differences between the cash flow statements presented under IFRS and the cash flow
statements under UK GAAP .
Notes to the Financial Statements
continued
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73
Notice of Annual General Meeting
Notice is hereby given that the twenty-fifth Annual General Meeting of Hornby Plc will be held at Berwin Leighton
Paisner LLP , St Magnus House, 3 Lower Thames Street, London EC3R 6HA on Tuesday 25 July 2006 at 11.00am for
the following purposes:
ORDINARY RESOLUTIONS
1. T o receive the accounts and reports of the directors and the auditors for the financial year ended 31 March 2006.
2. T o approve the directors' remuneration report for the financial year ended 31 March 2006, as set out on pages
18 to 23 of the annual accounts and reports.
3. To declare a final dividend of 5.4p per ordinary share payable to the holders of ordinary shares registered at
the close of business on 28 July 2006.
4. To re-elect Mr N A Johnson, who retires by rotation as a director.
5. To re-elect Mr N J Cosh, who retires by rotation as a director.
6. T o re-appoint PricewaterhouseCoopers LLP , the retiring auditors, to hold office until the conclusion of the next 
annual general meeting at which accounts are laid before the Company.
7. To authorise the directors to agree the auditors' remuneration.
8. That the Company be authorised:
(a) to make donations to European Union ("EU'') political organisations not exceeding a total of £10,000; and
(b) to incur EU political expenditure not exceeding a total of £10,000, during the period from the date of the 
passing of this resolution up to and including the conclusion of the Company's next AGM or, if earlier, the expiry
of 15 months from the date of the passing of this resolution.
9. THAT in place of the equivalent authority given to the directors at the last AGM (but without prejudice to the
continuing authority of the directors to allot relevant securities pursuant to an offer or agreement made by the
Company before the expiry of the authority pursuant to which such offer or agreement was made), the directors
be authorised in accordance with section 80 of the Companies Act 1985 (the "Act'') to allot relevant securities (as
defined in section 80(2) of the Act) of the Company up to an aggregate nominal amount of £124,000. This
authority will expire on 25 July 2011 but will permit the Company to make an offer or agreement before expiry of
the authority which would or might require relevant securities to be allotted after 25 July 2011 and the directors
may allot such securities pursuant to such offer or agreement as if this authority had not expired.
SPECIAL RESOLUTIONS
10. THAT:
(a) the directors be empowered pursuant to section 95 of the Act to allot equity securities for cash, pursuant to
the authority given to the directors for the purposes of section 80 of the Act, as if section 89(1) of the Act did
not apply to any such allotment, provided that this power shall be limited to the allotment of equity securities:
(i)   in connection with an offer of such securities by way of rights issue; and
(ii) otherwise than under sub-paragraph (a)(i) above up to an aggregate nominal amount of £18,000,
and shall expire at the conclusion of the Company's next AGM following the date of the passing of this
resolution, or, if earlier, on the expiry of 15 months from the date of the passing of this resolution, save that the
Company may, before such expiry make an offer or agreement which would or might require equity securities
to be allotted after such expiry and the directors may allot equity securities in pursuance of any such offer or
agreement as if the power had not expired;
(b) subsections 94(2) to 94(7) of the Act apply for the interpretation of this resolution and in this resolution
"rights issue'' means an offer of equity securities open for acceptance for a period fixed by the directors to
holders of relevant shares or relevant employee shares on the register on a fixed record date in proportion as
nearly as may be to their respective holdings, but subject to such exclusions or other arrangements as the
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Notice of Annual General Meeting
continued
directors may deem necessary or expedient to deal with fractional entitlements and/or legal or practical
difficulties under the laws of, or the requirement of any recognised regulatory body or any stock exchange in,
any territory; and
(c) this power applies in relation to a sale of shares which is included as an allotment of equity securities by
virtue of section 94(3A) of the Act as if all references in this resolution to any such allotment included any such
sale and as if in the first paragraph of the resolution the words "pursuant to the authority conferred on the
directors for the purposes of section 80 of the Act'' were omitted in relation to such sale.
11. THAT: the Company be generally and unconditionally authorised to make market purchases (within the
meaning of section 163(3) of the Act) of ordinary shares of 1p each in the capital of the Company ("Shares''),
subject to the following conditions:
(a) the maximum number of Shares which may be purchased is 3,750,000 Shares;
(b)   the minimum price which may be paid for each Share is 1p;
(c)   the maximum price which may be paid for each Share is the higher of:
(i) an amount equal to 105% of the average of the middle market quotations of a Share as derived from
the London Stock Exchange Daily Official List for the five business days immediately preceding the day on
which the Share is contracted to be purchased; and
(ii) the higher of the last independent trade and the highest current independent bid on the London
Stock Exchange Daily Official List; and
(d) this authority will expire at the close of the next AGM of the Company or, if earlier, 18 months from the
date on which this resolution is passed (except in relation to the purchase of Shares, the contract for which
was concluded before the expiry of this authority and which might be executed wholly or partly after that
expiry).
By order of the Board
J W Stansfield
Secretary
2 June 2006
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NOTES
1. A member is entitled to appoint a Proxy, who need not be a Member of the Company, to attend and vote
instead of him. A form of proxy is enclosed.To be valid a form of proxy and the authority (if any) under which
it is signed must be lodged with the Company’s registrars not later than 48 hours before the time of the
meeting or adjourned meeting. Completion of a form of proxy will not preclude a member from attending and
voting at the meeting in person.
2. Under Regulation 41 of the Uncertified Securities Regulations 2001, only those shareholders whose names are
on the register of members of the Company no later than 11am on 23 July 2006 or, if the meeting is adjourned,
shareholders entered on the Company’s register of members not later than 48 hours before the time fixed for
the adjourned meeting are entitled to attend and vote at the meeting in respect of the shares registered in
their names at that time. Subsequent changes to the register shall be disregarded in determining the rights of
any person to attend or vote at the meeting.
3. There will be available for inspection at the Registered Office of the Company during usual business hours
(Saturdays excepted), from the date of this Notice, until the date of the Annual General Meeting, a copy of
each contract of service open to inspection under Section 318 of the Companies Act 1985, whereunder the
directors are employed.These documents will also be available for inspection at the Annual General Meeting
and for fifteen minutes prior thereto.
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Five Y ear Summary
2006 2005 2004 2003 2002
IFRS IFRS UK GAAP UK GAAP UK GAAP
£’000 £’000 £’000 £’000 £’000
Turnover 44,113 45,006 38,970 34,142 28,489
Profit on ordinary activities before taxation 8,164 7,585 6,469 5,411 3,722
Taxation (2,306) (1,993) (1,974) (1,519) (1,329)
Profit on ordinary activities after taxation 5,858 5,592 4,495 3,892 2,393
Assets employed:
Non-current assets 15,632 14,631 8,453 3,600 3,661
Net current assets 9,806 7,825 9,506 12,094 10,145
Creditors due after more than one year (44) (80) (103) (22) (16)
Deferred tax liabilities (231) (235) - - -
Provisions for liabilities and charges (300) (369) (527) (486) (628)
Net assets 24,863 21,772 17,329 15,186 13,162
Total capital employed 24,863 21,772 17,329 15,186 13,162
Earnings per share
- basic 15.6p 15.1p 12.2p 10.7p 6.6p
- diluted 15.1p 14.4p 11.6p 10.4p 6.5p
Dividend per share (net) 7.7p 7.0p 6.0p 5.0p 3.4p
Net assets per share 66.2p 58.4p 46.9p 41.4p 36.3p
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