HORNBY PLC
|
ANNUAL REPORT & ACCOUNTS 2007
YEAR ENDED 31 MARCH 2007
HORNBY PLC, WESTWOOD, MARGATE, KENT CT9 4JX
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007 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
18 Statement of Directors’ Responsibilities
19 Remuneration Report 
26 Independent Auditors’ Report to the Members of Hornby Plc 
28 Group and Company Income Statement
29 Group and Company Balance Sheet 
30 Statement of Changes in Equity
32 Group and Company Cash Flow Statement 
33 Notes to the Cash Flow Statement
34 Notes to the Financial Statements  
34 Accounting Policies
75 Notice of Annual General Meeting 
80 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 PLC | ANNUAL REPORT & ACCOUNTS 2007
Financial Highlights
Revenue £’000
2006
2007
44,113
46,911
Operating profit £’000
2006
2007
8,005
8,221
Profit before taxation £’000
2006
2007
8,164
7,662
Profit before taxation - adjusted
*
£’000
2006
2007
7,972
8,118
T otal equity £’000
2006
2007
24,863
27,845
Cash and bank overdrafts £’000
2006
2007
0
0
746
(627)
Earnings per ordinary share Basic 
2006
2007
15.64p
14.64p
Earnings per ordinary share Diluted 
2006
2007
15.08p
14.11p
Earnings per ordinary share - adjusted
*
Basic 
2006
2007
15.36p
15.58p
Earnings per ordinary share - adjusted
*
Diluted 
2006
2007
14.81p
15.02p
Dividends per ordinary share
2006
2007
7.7p
8.1p
Net assets per ordinary share
* Profit before taxation and earnings per share are before amortisation of intangibles and foreign exchange
translation adjustments on inter company loans (see notes 1 and 7).
2006
2007
66.2p
73.6p
1 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
2
Chairman’s Statement
Sales in all of our International subsidiaries also
improved in the second half of the financial year
with the result that for the full year Group sales
increased by 6% to £46.9 million.  Pre-tax profit
prior to amortisation and foreign exchange
translation adjustments on inter company loans
increased slightly to £8.1million (2006 - £8.0 million)
(see note 1).  Basic earnings per share were 14.64p
(2006 - 15.64p) but basic earnings per share before
the effect of amortisation of intangibles and foreign
exchange translation adjustments on inter company
loans, a non-cash item, increased by 1.4% to 15.58p
(2006 - 15.36p).  
Underlying these results there are also a number of
encouraging trends.  Notably all of our international
subsidiaries, for which a comparative period exists,
showed improved performance and profits.  The
process of transferring to China the production of
the acquired businesses has continued apace, and we
enter the new financial year with a growing portfolio
of high quality products at attractive price points
available for sale in the main European markets.
As part of our strategy to diversify and strengthen
the Group’s revenue streams into complementary
product categories we acquired the Humbrol and
Airfix brands and associated assets from the receiver
of Humbrol Limited in November 2006 for a total
consideration of £2.29 million, in addition to
acquiring stock valued at £327,000.  This strategic
move represents a major opportunity for the 
Group.  All assets are now under our direct control
and we have set up manufacturing relationships 
with suppliers in the UK, China and have broadened
our supplier network into India.     
DIVIDEND
The Board is recommending an increase in the final
dividend to 5.6p per ordinary share.  This will be paid
to shareholders on the register at 29 June 2007 and
will be paid on 17 August 2007.
Taken together with the interim dividend of 2.5p,
this gives a total dividend for the year of 8.1p, an
increase of 5.2% over the dividend of 7.7p declared
in the previous financial year.  This marks the seventh
consecutive year of dividend growth.  The Board
believes that it is appropriate to continue the
upward progression of dividend payments,
established in recent years, based on the strongly
cash-generative nature of the business and the belief
that much of the capital and acquisition investment
we have made in recent years underpins the long-
term future progression of the business.
REVIEW OF THE BUSINESS
After the first half of the financial year, in which
sales compared to the previous year fell by 3%, due
primarily to weaker consumer demand in the UK,
our largest market, it was encouraging to see sales
in the second half increase by 13% compared to
I am delighted once again to report an encouraging performance for 
the year.  As we reported at the time of the Interim results, sales in our main
market the UK were lower during the first half of the financial year.  
I am therefore pleased to report that the improvement in sales that we
experienced in the Autumn of 2006, continued through the Christmas period and
into the final quarter of the financial year.  This resulted in sales for 
the full year in our UK subsidiary Hornby Hobbies Limited in line with 
the previous year.   3
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
the corresponding period last year.  Strong
consumer demand for our products in the UK
market prior to Christmas, resulted in low retailer
stocks in January, allowing us to maximise sales 
in the final quarter of the financial year.
In particular, sales of the Scalextric Sport Digital
System (SSD) gathered strong momentum in 2006,
both in the UK and overseas.  SSD has further
consolidated its reputation worldwide as the system
of choice for digitally controlled slot-car racing,
combining easy compatibility with existing systems
and an excellent record of reliability.  We continue
to believe that, over time, the market will move
decisively towards digital control. Hornby is well
placed to take advantage of this shift in the market.
Deliveries of the Hornby Digital Control System 
for model railways commenced just before
Christmas and initial deliveries of the flagship “Elite”
digital controller arrived on the market in March
2007.  As planned we extended the launch of 
this system via our European subsidiaries at the
Nurnberg Toy Fair in February.  We expect an
increasing proportion of our model railway products
to be sold as digital-enabled over the coming years. 
INTERNATIONAL SUBSIDIARIES
The UK market for model railways represents 
only c.10% of the total European market.  The major
manufacturers in Europe continue to experience
difficulties as a result of their continuing focus on
manufacturing in Europe.  Although some of these
manufacturers are now beginning to move some
production into lower cost economies, this process
will be long, arduous and expensive to complete.
Hornby however now has a network of low-
overhead subsidiaries throughout the major
European markets, which have begun to
demonstrate, in the year to 31 March 2007, their
ability to increase sales and profits significantly. 
The European subsidiaries in total contributed
operating profits of £1,115,000 to the Group result
on sales of £9.7 million, compared to £453,000 
in the previous year on sales of £7.0 million.  This
includes £134,000 of operating   losses whilst setting
up our German business which was acquired in
September 2006.  We expect Hornby Deutschland
to make a positive contribution to profits in the 
new financial year.  All other European subsidiaries
posted increased profits in the year.
We acquired the assets of Heico-Modell, for a
nominal consideration, via a newly formed subsidiary
Hornby Deutschland, in September 2006.  Market
reaction to our recently introduced products in
Germany has been good, although we recognise that
there are strong competitor brands in the market. In
this connection, the re-launch of our Arnold “N” scale
brand has been favourably received.  It appears that
there are a significant number of Arnold enthusiasts
who were unable to buy, due to lack of product
availability during the difficult times prior to our
acquisition of the Lima assets, which included Arnold. 
In Spain, Electrotren, now renamed Hornby España,
had an excellent year, making a substantially
improved contribution to Group profits.  This was
achieved by a greater proportion of sales being
made in model railways, arising from an increased
programme of product introductions, and greater
volumes being achieved per model introduced.  
This pattern of increased demand was experienced
in the UK after production was moved to China
some years ago.  It appears that the consumer is 
at first uncertain as to whether quality and detail 
can be maintained. However experience then shows
that there is in fact a significant improvement in
these areas, resulting in increases in volume demand.
We expect this trend to continue, and we are
beginning also to observe the same positive 
changes in consumer perception and demand 
in our other European subsidiaries.   HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
4
Chairman’s Statement 
continued
In Hornby Italia, sales and profits increased
substantially as production in China gathered
momentum.  After some initial market uncertainty, 
as we have experienced both in the UK and in
Spain, the consumer now recognises the
improvements in quality and detail that have been
achieved and demand has increased accordingly.
However we are still at a relatively early stage in this
process, and we can therefore expect a continuing
trend of increased sales and profits in Hornby Italia. 
Hornby France also achieved significantly higher 
sales and profits.  The strength of the Jouef brand in
France is, if anything, greater than we had anticipated.
Retailers and consumers have been delighted with
our reinvigoration of this iconic French brand and
demand has grown accordingly.
Sales in Scalextric USA, now renamed Hornby
America, were up by 8% at $5.6 million, producing 
a profit before tax of $82,000 (2006 - $116,000)
but upon translation into Sterling, due to a
weakened US$, sales were £2.83 million (2006 -
£2.95 million) and profit before tax of £42,000
(2006 - £67,000).   However the result this year
was adversely affected by the closure costs of the
Scalextric Race World retail store in Tacoma.  This
store was set up on a trial basis two years ago.  
It has incurred losses since the start.  At the outset
we determined to trade for a minimum of two
years in order to allow sales to develop. In the
event sales have not been sufficient to generate
profits, although we have learnt some valuable
lessons in respect of product format and in-store
merchandising, that have already been implemented
in our range development and presentation.  
In 2007 the store incurred a $68,000 trading loss
and closure costs of $42,000.  In the absence of 
the store, Scalextric USA profits before tax would
have been $192,000 (2006 - $180,000).  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. 
PRODUCT DEVELOPMENT
Our product development programme continues 
to be the engine room of our business and we have
increased further our resources in this area, to cope
with the additional demands of our subsidiaries and
also the newly acquired Humbrol and Airfix brands.
OUTLOOK
Our strategy of expanding the geographical reach 
of the Group by acquiring model railway businesses
in Europe has proven to be successful and has laid
the foundations for a broadly based model and
hobby group with strong defensive attributes.  Thus,
in a year in which sales in our main UK market were
broadly in line with the previous year, Group sales
increased by 6%.  The acquisition of the Humbrol
and Airfix brands now allows us to take further
advantage of our distribution network and product
development skills. 
We have made a good start to the new financial
year in all subsidiaries and markets.  As we continue
to rebuild sales and distribution of the Humbrol 
and Airfix brands, and growth in sales of our model
railway and slot-racing brands continues, we look
forward to resuming significant and sustainable sales
and profit progression.
Neil Johnson
Chairman
15 June 2007 5
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Chief Executive’s Report
OPERATIONAL AND FINANCIAL REVIEW
The Group’s principal business is the development and supply of Hobby and Toy 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, Lima, Jouef, Rivarossi and MKD.  During the year the brands
Heico, Airfix, Humbrol and Young Scientist were added to the Group’s portfolio.
Consolidated sales for the year to 31 March 2007 were £46.9 million, an increase of 6% compared 
to the previous year’s £44.1 million. 
Profit before tax of £8.1 million, before accounting for amortisation of intangibles and foreign exchange
translation differences on inter company loans, was 2% above last year’s result of £8.0 million (see note 1).
After accounting for amortisation and foreign exchange translation differences on inter company loans, 
which are a non-cash adjustment, pre tax profits were £7.7 million (2006 - £8.2 million).
Basic underlying earnings per share, were 14.64p, a decrease of 6% (2006 - 15.64p).
The overdraft at 31 March 2007 was £627,000
compared to £746,000 cash the previous year.  
The reduction in the year-end cash position is in
part due to the acquisition of Heico Modell (Heico)
and the acquisition of the assets of the Airfix and
Humbrol business (Airfix), which the Group has
funded from cash flow.  Total consideration for these
two acquisitions was £2.29 million plus inventory
valued at £327,000.  This contributed to a net cash
outflow during the year of £1.4 million.
The Group manufactures the majority 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 16.3% on sales 
(2006 - 18.5%) was achieved despite the effect 
of incremental costs in relation to the integration 
of the Heico and Airfix business into the Group.
As at the half-year, sales in the UK were below the
previous year.  However we experienced a strong
recovery in consumer demand in the second half,
thus achieving full year UK sales 3% above the
previous year.  Sales via our in-store concessions
(108 at 31 March 2007 compared to 116 the
previous year) performed well.  Total concessions
sales totalled £5.8 million, an increase of 8% over 
the £5.4 million in the previous year.  This is despite
a reduction in the number of concessions as a result
of a number of the existing concessions ceasing to
trade during the year.
Scalextric USA changed its trading name to Hornby
America Inc. on 12 December 2006.  This change
was made in order to reflect more accurately the
product categories in which Hornby America now
trades, notably in response to the introduction of
model railway products, both from Hornby UK 
and Hornby Italia, via the Rivarossi brand. 
Hornby America achieved a positive trading 
result for the year.  Sales increased to $5.6 million
compared to $5.1 million in the previous year.
Despite the continued effects of a weak US 
Dollar an underlying trading profit of $82,000  HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
6
Chief Executive’s Report 
continued
was recorded, compared to a profit of $116,000 
in the previous year.  However the reported profit
before tax was reduced as a result of continued
trading losses in the trial retail store, Scalextric Race
World, located near Tacoma.  Following a two year
trial, we took the decision to close the store in
February 2007.  Trading losses for the year and
closure costs amounted to $110,000.  In the
absence of the store Hornby America profit before
tax would have been $192,000 (2006 - $180,000).
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 £450,000
arose on sales from Hornby Hobbies Limited to
Hornby America, thus making Hornby America 
a substantial net contributor to Group profit. 
I am pleased to report that Hornby America has
recently opened a trading account with a number
of mass-market retailers in the USA.  The main
product initially to be supplied is the Micro
Scalextric “Transformers” set.  This set is 
produced under licence from Hasbro Inc.
Our subsidiaries in Continental Europe made good
progress in the financial year to 31 March 2007.
Overall, sales increased by 39% to £9.7 million.  
An operating profit of £1,115,000 was generated
compared to £453,000 in the previous year.  Each 
of the subsidiaries which traded for the full year,
Hornby España, Hornby Italia and Hornby France,
made an operating profit.  This has been an
important development year for our operations 
in Europe. We now see our European subsidiaries
beginning to fulfil their potential.  We expect further
significant sales and revenue growth over the coming
years.  Our subsidiary in Germany, acquired in
September 2006 and now trading as Hornby
Deutschland made a small loss in the year.  We
expect Hornby Deutschland to grow significantly
over the next few years and to become a substantial
contributor to group profit.
In November 2006 we acquired from the receivers
of Humbrol Limited the assets of Humbrol, Airfix
and the Young Scientist brand for a consideration 
of £2.29 million plus inventory valued at £327,000.
These businesses have been successfully integrated
into the existing Hornby UK infra-structure with
relatively small increases in fixed overhead.
Production of the majority of the product range 
has now recommenced and we are experiencing
strong demand from markets around the world
which were starved of these products since
Humbrol passed into Administration in August 
2006.  We are confident that with Hornby’s product
development, distribution strength and financial
resources we can rebuild the Humbrol and Airfix
volumes significantly over the coming years. 
The Scalextric Sport Digital System (SSD) continues
to establish itself as the market leader in digitally
controlled slot racing.  Our strategy of introducing
lower priced entry-level sets into the SSD range 
has been successful in attracting new users into this
category.  Interestingly however the higher priced
digital sets sold out first in the pre-Christmas period.
This gives confidence that the consumer is willing to
pay a substantial premium for this new technology. 
First shipments of the Hornby Digital Control
system for model railways took place just before
Christmas in the form of entry-level sets.  This was
followed up in March 2007 by shipments of the
“Elite” control system.  We expect these technology
driven developments to continue to convert model
railway users to digital control over the coming
years, thus raising our average selling prices and
increasing our margins. 
Against the background of a difficult first half we are
encouraged to be able to report a strong recovery in
the UK and significant sales and profits growth in our
main overseas subsidiaries.  We expect this trend to
continue, and with the addition of incremental sales
arising from the acquisition of Humbrol and Airfix we  7
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
are expecting a year of strong sales and profits growth
in the current financial year to 31 March 2008.
Our strategy of expansion by acquisition in Europe
has been justified further in these results.  With the
added benefit of incremental product categories in
model kits and accessories the Group continues to
strengthen its position in the world hobby market.
Frank Martin
15 June 2007    HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
8
Directors and Corporate Information
DIRECTORS
N A Johnson
C hairman
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
Dresdner Kleinwort
30 Gresham Street
London EC2P 2XY
REGISTRARS AND 
TRANSFER AGENTS
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
West Yorkshire  HD8 0LA 9
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Report of the Directors
The directors submit their annual report together
with the audited financial statements for the year
ended 31 March 2007.  
PRINCIPAL ACTIVITIES AND BUSINESS
REVIEW
The Company is a holding company with a Spanish
branch and has 6 operating subsidiaries:  Hornby
Hobbies Limited in the United Kingdom, Hornby
America Inc. in the USA, Hornby España S.A in Spain,
Hornby Italia s.r.l. in Italy, Hornby France S.A.S. in
France and Hornby Deutschland GmbH in Germany.
Hornby Deutschland GmbH was established to
acquire the trade and certain assets of Heico-Modell
on 1 September 2006.  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 2007 are 
set out in the Group Income Statement on page 28.
Turnover for the year was £46.9 million compared to
£44.1 million last year.  The profit on ordinary activities
after taxation for the year amounted to £5.5 million
(2006 - £5.9 million).  The position of the Group is 
set out in the Group Balance Sheet on page 29. 
An interim dividend of 2.5p (2006 - 2.3p) per
ordinary share amounting to £931,254 (2006 -
£852,278) was paid on 26 January 2007.  The
Group’s Short Term Incentive Plan Trust waived 
its right to the interim dividend on 370,868 
ordinary shares (see note 11).  
The directors recommend an increased final
dividend of 5.6p (2006 - 5.4p) per ordinary share
amounting to £2,119,084 (2006 - £2,029,511)
payable on 17 August 2007 to those shareholders
on the Register at 29 June 2007.
This represents a total dividend paid and proposed
in respect of the year ended 31 March 2007 of 8.1p
per ordinary share (2006 - 7.7p).
PRINCIPAL RISKS AND UNCERTAINTIES
The principal business risks and uncertainties facing
the Group are set out in the Corporate Governance
Statement on page 16.
KEY PERFORMANCE INDICATORS (KPIS)
The directors are of the opinion that the KPIs are
revenues, gross margins, operating profit, earnings
per share and cash generation, the information 
for which is available in these financial statements.  
In addition, the Group maintains a rolling 3 year
internal strategy plan.  The plan targets individual
subsidiaries for growth in sales and profits.  The
Board monitors progress against plan on a regular
basis, adjusting future objectives annually in line 
with current circumstances.
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 in the year have been 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 amount and the current
market value of interests in land and buildings. 
CHARITABLE DONATIONS
During the year the Group made donations of
£11,250 (2006 - £12,480) for charitable purposes.
DIRECTORS
The persons who were directors during the year 
are listed below:
Neil A Johnson, aged 58, 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 non-executive Chairman of Motability
Finance Limited, CybIT PLC and Auto-Logic
Holdings plc.
Frank Martin, aged 55, 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 and Group Marketing Director of  HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
10
Report of the Directors
continued
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.  Mr Martin retires 
by rotation under article 97 of the Articles of
Association and offers himself for re-election 
at the forthcoming Annual General Meeting.
John W Stansfield, aged 52, 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.  Mr Stansfield retires 
by rotation under article 97 of the Articles of
Association and offers himself for re-election 
at the forthcoming Annual General Meeting.
Nicholas J Cosh, aged 60, was appointed a non-
executive director on 21 June 1999.  He is Chairman of
Kiln Limited and a non-executive director of Bradford
& Bingley plc and ICAP plc.  He was previously finance
director of J.I.B. Group plc and M.A.I. plc.
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
19 to 25.
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 25 May 2007 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
Standard Life Investments 5,083,570 13.43
P J Wood Associates Limited 4,012,500 10.60
Electra Quoted Partners 2,995,150 7.92
Insight Investment Professional Funds 2,336,202 6.17
Legal & General 2,114,077 5.59
J J Hosking 1,664,200 4.40 
DWS Investment GmbH 1,488,753 3.93
J M Finn Nominees Limited 1,192,612 3.15
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 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 Hong Kong 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. 11
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
The Company has subsidiaries in the USA, Spain,
Italy, France and Germany.  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 is important
and requires your immediate attention.  If you are 
in any doubt as to what action to take in relation 
to the Annual General Meeting, you should consult
appropriate independent advisers.
The notice of Annual General Meeting set out 
on pages 75 and 77 includes ordinary and special
resolutions to adopt a new executive share option
plan and 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
authorising the Board to implement a new executive
share option plan.  The Company’s existing executive
share option plan expired in August 2006.  Following
a review, the Remuneration Committee has
recommended that a new plan be adopted.  The new
plan is similar to the old plan but has been updated
to take account of changing legislation and practice.  
A summary of the new plan is set out on pages 
78 and 79.  The performance conditions will be
determined by the Remuneration Committee at the
time of grant.  In respect of any options granted this
year the performance target will be based on the
achievement of profit before tax targets which the
Remuneration Committee will establish having regard
to market expectations of profit before tax.
Resolution Number 10 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 15 June 2007.  This authority will
expire on 26 July 2012.  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 11 is a special resolution which
will entitle the Board to allot equity securities up to
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 15 June 2007,
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 12 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 as at 15 June 2007.  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
purchase of ordinary shares by the Company under
this authority would be effected by a purchase in 
the market.  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. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
12
Report of the Directors
continued
Your directors believe that the proposals in
Resolutions 9 to 12 are in the best interests of
both the Company and its shareholders as a
whole.  Accordingly, the directors unanimously
recommend that you vote FOR all of these
resolutions, as they intend to do so in respect 
of their own beneficial holdings.
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.
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 2007 was 37 days
(2006 - 26 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
15 June 2007  13
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Corporate Governance
COMPLIANCE WITH THE COMBINED CODE 
The current Combined Code on Corporate
Governance was issued by the Financial Reporting
Council (the 2003 FRC Combined Code) in July
2003.  The 2003 FRC Combined Code applies for
reporting years beginning on or after 1 November
2003.  In June 2006 the Financial Reporting Council
(‘FRC’) released an updated version, the ‘Combined
Code (2006)’.  This is the outcome of the FRC’s
2005 review of the existing Code, with early
adoption encouraged on a voluntary basis for
reporting years beginning on or after 1 November
2006.  Hornby Plc plans to adopt the 2006 Code
for the year ending 31 March 2008.
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 non-
executive 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 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. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
14
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.
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 Martin
and Mr Stansfield, offer themselves for re-election 
at the forthcoming Annual General Meeting.  In
accordance with the Combined Code, the non-
retiring directors have conducted a particularly
rigorous review of Mr Martin’s and Mr Stansfield’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
Corporate Governance
continued 15
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
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.
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,
whilst noting an intention to enhance procedures 
in some areas in response to the growth in the 
size and number of overseas businesses.
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 Audit Committee reviews the effectiveness 
of the Group’s systems of internal control on an
ongoing basis during the year and no significant
weaknesses have been identified.  However, the
Committee recognises that as the Group continues
to grow, internal controls both in the UK and
overseas will need to be reviewed and updated 
in order to ensure any weaknesses are remedied.
The process of reviewing the internal controls of 
the Group for effectiveness, ensuring significant risks
are identified and managed, is in accordance with 
the 2005 Turnbull Guidance.
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. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
16
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; 61% in 2007 (2006 - 66%).  
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, Jouef, Airfix
and Humbrol have provided the Group significant
market shares of the model railway and model
markets in UK, 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.
From 25 October 2006 certain forward foreign
currency hedges could be included as effective
hedges under IAS39 ‘Financial Instruments:
Recognition and Measurement’ as appropriate
documentation was in place.  However, 
the Group is exposed to foreign currency
transactions on inter Group loans, which 
are intended to be hedged as appropriate 
over the coming year.
■ 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 the model railway,
slot racing, model kits and paint markets but in
the majority of those 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.  
Control procedures operate to ensure the integrity
of the Group’s financial statements, designed to
meet the Group’s requirements and risks identified
in each area of the business.  Control procedures
are documented where appropriate and reviewed
by management and the Board on an ongoing 
basis to ensure control weaknesses are mitigated.
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 reviews the effectiveness of the 
system of internal controls on a continuous basis
and considers it appropriate for the size of the
Group.  The review comprises regular scrutiny 
of monthly accounts and reports prepared by
individual subsidiary companies.  The Board also
regularly reviews and formalises financial authority
limits throughout the Group.
Corporate Governance
continued 17
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
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.  This process is in accordance 
with T urnbull guidance.
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 Toy 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
are satisfied 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. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
18
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 ensuring the 
operation of systems of internal control and 
for taking responsible steps to safeguard 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
15 June 2007
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT 
OF THE ANNUAL REPORT, THE DIRECTORS’ REMUNERATION 
REPORT AND THE FINANCIAL STATEMENTS  19
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Remuneration Report
for the Year Ended 31 March 2007
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 Company’s executive share option scheme
expired last August.  Details of options held by
directors are set out on page 23.
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.
The Remuneration Committee has decided that 
a new executive share option plan should be put 
to shareholders for approval at this year’s Annual
General Meeting.  A summary of the proposed 
plan is set out on pages 78 and 79.  
■ 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
In 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 range 
of targets established for Group profit before 
tax (four fifths) and personal objectives (one
fifth).  The maximum bonuses are capped to 
a pre-defined proportion of salary.  Bonuses
relating to personal objectives are only realised 
if Group profit exceeds minimum targets.
■ Short T erm Incentive Plan 
The Company has 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 up to 50% 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. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
20
Remuneration Report
continued
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 356% compares to the total return of the FTSE
Small Cap of 77%.
The targeted composition of each director’s remuneration for the forthcoming year is as follows:
Director Position Non-performance Performance
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 1/4/2002 to 31/3/2007
0
100
200
300
400
500
Apr 02 Aug 02 Jan 03 Jul 03 Nov 03 Apr 04 Sep 04 Feb 05 Jul 05 Dec 05 May 06 Oct 06 Mar 07
Hornby FTSE Small Cap Source: Datastream 21
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Executive Directors’ Contracts
The executive directors do not have fixed 
period contracts.
Frank Martin, the Chief Executive, receives a salary
of £212,180 per annum effective 1 April 2007 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 Company
Secretary, receives a salary of £132,612 per annum
effective 1 April 2007 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 2007 neither
of the executive directors was entitled to an award
of bonus.
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 £90,000 per annum
effective 1 April 2007.  80% is paid to a third party
consultancy company and 20% treated as earnings.
Mr Johnson’s service contract dated 13 February
2006 and March 2007 amendment is subject to
termination on six 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 £40,000 per annum
effective 1 April 2007.  Mr Cosh’s service contract
dated on appointment and March 2007 amendment
is subject to termination on six 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.  HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
22
Remuneration Report
continued
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 2006 Options exercised STIP vested Disposals At 31 March 2007
N A Johnson 50,000 - - - 50,000
F Martin 75,125 - 54,645 (38,645) 91,125
J W Stansfield 85,000 - 29,927 (29,927) 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.
On 6 June 2007 F Martin and J Stansfield purchased 20,000 and 10,000 shares respectively.
There have been no other changes in the interests set out above between 31 March 2007 and 15 June 2007. 23
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
This part of the Remuneration Report contains information which has been subject to audit.
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 2007 2006 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 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.
The directors above did not exercise any share options during the year and thus no gains were realised
(2006 - J Stansfield realised a gain of £66,150).
The market price of the Company’s shares at 31 March 2007 was 295.0p and the range during the year
ended 31 March 2007 was 186.0p to 305.0p. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
24
Remuneration Report
continued
Directors’ detailed emoluments
Details of individual directors’ emoluments charged in the year are as follows:
Pension
Salary contri- 2007 2006
& fees Benefits butions T otal T otal*
£££ £ £
Chairman:
N A Johnson 80,000 - - 80,000 80,000
Executive:
F Martin 206,000 12,571 41,200 259,771 364,051
J W Stansfield 128,750 10,088 25,750 164,588 195,231
Non-executive:
N J Cosh 30,000 - - 30,000 30,000
444,750 22,659 66,950 534,359 669,282
* The 2006 total column includes pension contributions which were £40,000 for F Martin and £25,000 
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 no individual Basic and Matching Awards to the Short Term Incentive Plan for the year 
ended 31 March 2007 as no bonuses were payable in the current year.
Benefits include motor cars and healthcare.
Two directors accrue benefit from payments to defined contribution pension schemes (2006 - two).
No director waived emoluments in respect of the year ended 31 March 2007 (2006 - nil). 25
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Short T erm Incentive Plan
At 31 March 2007, outstanding awards to directors under the Short Term Incentive Plan were as follows:
Market Value of Value of
Award Vesting price at Number entitlement entitlement
Director Date Dates Award Date of shares 31 March 2007 31 March 2006
No. £’000 £’000
F Martin June 2002 June 2006 82.4p - - 48
June 2003 June 2006/7 140.4p 15,740 47 65
June 2004 June 2006/7/8 215.5p 30,930 91 95
June 2005 June 2007/8/9 221.0p 62,434 184 128
June 2006 June 2008/9/10 266.0p 28,271 83 75
405 411
J W Stansfield June 2002 June 2006 82.4p - - 30
June 2003 June 2006/7 140.4p 8,766 26 36
June 2004 June 2006/7/8 215.5p 13,300 39 41
June 2005 June 2007/8/9 221.0p 22,621 67 46
June 2006 June 2008/9/10 266.0p 8,835 26 23
158 176
On 5 December 2006, 23,440 shares of the 2002 Award, 15,740 shares of the 2003 Award and 15,465
shares of the 2005 Award were vested to F Martin.
On 5 December 2006, 14,510 shares of the 2002 Award, 8,767 shares of the 2003 Award and 6,650 shares
of the 2004 Award were vested to J W Stansfield.
Value of entitlement at 31 March 2007 is based on the closing market price of the Company’s shares of
295.0p (2006 - 205.0p).
N A Johnson
Chairman
15 June 2007 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
26
Independent Auditors’ Report to the Members of Hornby Plc
We have audited the Group and Parent Company
Financial Statements (‘financial statements’) of
Hornby Plc for the year ended 31 March 2007
which comprise the Group and Parent Company
Income Statements, the Group and Parent Company
Balance Sheets, the Group and Parent Company
Statement of Changes in Equity, 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, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We also report to you whether in our opinion 
the information given in the Directors’ Report 
is consistent with the financial statements.
In addition we 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 is not disclosed.
We review whether the Corporate Governance
Statement reflects the Company’s compliance with
the nine provisions of the Combined Code (2003)
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 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.
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 27
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
judgments 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
■ 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 2007 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, as regards 
the Group financial statements, Article 4 of the
IAS Regulation; and
■ the information given in the Directors’ Report 
is consistent with the financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
Gatwick
15 June 2007 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
28
Group and Company Income Statement
for the Year Ended 31 March 2007
Group Company
2007 2006 2007 2006
Restated*
Notes £’000 £’000 £’000 £’000
REVENUE 2 46,911 44,113 1,006 957
Cost of sales (21,438) (21,412) - -
GROSS PROFIT 25,473 22,701 1,006 957
Distribution costs (1,678) (1,504) - -
Selling and marketing costs (10,760) (9,924) - -
Administrative expenses (3,506) (3,354) (502) (463)
Foreign exchange (losses)/gains 4 (888) 303 - -
Other operating expenses 4 (420) (217) (55) (9)
OPERATING PROFIT 2 8,221 8,005 449 485
Finance income 3 7 319 3,254 8,098
Finance costs 3 (566) (160) (245) (730)
PROFIT BEFORE TAXATION 4 7,662 8,164 3,458 7,853
Taxation 5 (2,149) (2,306) (59) 51
PROFIT FOR THE YEAR ATTRIBUTABLE
TO EQUITY HOLDERS 5,513 5,858 3,399 7,904
EARNINGS PER ORDINARY SHARE
Basic 7 14.64p 15.64p
Diluted 7 14.11p 15.08p
All of the activities of the Group are continuing.  The results of the acquisition of certain assets of Heico-Modell
and Humbrol Limited (in administration) during the year are set out in the acquisition note (note 23).
* See note 1. 29
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Group Company
2007 2006 2007 2006
Notes £’000 £’000 £’000 £’000
ASSETS
NON-CURRENT ASSETS
Goodwill 8 9,206 8,116 - -
Intangible assets 9 2,321 1,608 - -
Property, plant and equipment 10 7,458 5,539 1,471 1,513
Investments 11 - - 29,324 28,587
Deferred tax assets 20 421 369 118 95
19,406 15,632 30,913 30,195
CURRENT ASSETS
Inventories 12 8,441 8,227 - -
Trade and other receivables 13 10,087 9,325 79 137
Cash and cash equivalents 14 329 829 50 53
18,857 18,381 129 190
LIABILITIES
CURRENT LIABILITIES
Borrowings 18 (1,005) (124) - -
Derivative financial instruments 15 (202) - - -
Trade and other payables 15 (7,216) (6,914) (149) (263)
Provisions 16 (293) (300) - -
Current tax liabilities 17 (1,291) (1,542) (147) (88)
(10,007) (8,880) (296) (351)
NET CURRENT ASSETS/(LIABILITIES) 8,850 9,501 (167) (161)
NON-CURRENT LIABILITIES
Borrowings 18 (53) (39) - -
Deferred tax liabilities 20 (358) (231) (226) (231)
Other non-current liabilities 18 - - (4,087) (4,201)
(411) (270) (4,313) (4,432)
NET ASSETS 27,845 24,863 26,433 25,602
SHAREHOLDERS’ EQUITY
Share capital 21 378 376 378 376
Share premium 5,236 5,050 5,236 5,050
Other reserves 1,795 1,743 19,200 19,200
Retained earnings 20,436 17,694 1,619 976
TOTAL EQUITY 27,845 24,863 26,433 25,602
The financial statements on pages 28 to 33 were approved by the Board of directors on 1 June 2007 and were
signed on its behalf by:
F Martin
Director
Group and Company Balance Sheet
at 31 March 2007 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
30
Statement of Changes in Equity
Years ended 31 March 2007 and 31 March 2006
Capital
Share Share redemption Other Retained T otal
capital premium reserve reserves earnings equity
£’000 £’000 £’000 £’000 £’000 £’000
GROUP
Balance at 1 April 2005 373 4,906 55 1,688 14,712 21,734
Exchange adjustment offset in reserves
recognised directly in equity - - - - (111) (111)
Profit for the year - - - - 5,858 5,858
Total recognised income for the year - - - - 5,747 5,747
Issue of shares 3 144 - - - 147
Share based payments - - - - 158 158
Purchase of own shares for EBT - - - - (364) (364)
Shares vested from EBT - - - - 138 138
Dividends - - - - (2,697) (2,697)
3 144 - - (2,765) (2,618)
Balance at 31 March 2006 376 5,050 55 1,688 17,694 24,863
Exchange adjustment offset in reserves - - - - 8 8
Cash flow hedges - - - - (133) (133)
Net expense recognised directly in reserves - - - - (125) (125)
Profit for the year - - - - 5,513 5,513
Total recognised income for the year - - - - 5,388 5,388
Issue of shares 2 186 - - - 188
Share based payments - - - - 237 237
Deferred tax on share based payments - - - 52 - 52
Purchase of own shares for EBT - - - - (177) (177)
Shares vested from EBT - - - - 231 231
Dividends - - - - (2,937) (2,937)
2 186 - 52 (2,646) (2,406)
Balance at 31 March 2007 378 5,236 55 1,740 20,436 27,845
Retained earnings includes £706,000 at 31 March 2007 (2006 - £723,000) which is not distributable and relates
to a 1986 revaluation of land and buildings.  31
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Capital
Share Share redemption Other Retained T otal
capital premium reserve reserves earnings equity
£’000 £’000 £’000 £’000 £’000 £’000
COMPANY
Balance at 1 April 2005 373 4,906 55 18,622 (4,073) 19,883
Exchange adjustment offset in reserves
recognised directly in equity - - - - (167) (167)
Profit for the year - - - - 7,904 7,904
Total recognised income for the year - - - - 7,737 7,737
Issue of shares 3 144 - - - 147
Share based payments - - - - 9 9
Increase in underlying assets 
of subsidiary undertakings - - - 523 - 523
Dividends - - - - (2,697) (2,697)
3 144 - 523 (2,688) (2,018)
Balance at 1April 2006 376 5,050 55 19,145 976 25,602
Exchange adjustment offset in reserves
recognised directly in equity - - - - 109 109
Profit for the year - - - - 3,416 3,416
Total recognised income for the year - - - - 3,525 3,525
Issue of shares 2 186 - - - 188
Share based payments - - - - 55 55
Dividends - - - - (2,937) (2,937)
2 186 - - (2,882) (2,694)
Balance at 31 March 2007 378 5,236 55 19,145 1,619 26,433 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
32
Group and Company Cash Flow Statement
for the Year Ended 31 March 2007
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 10,372 7,546 546 274
Interest received 7 30 80 287
Interest paid (224) (160) (245) (730)
Tax paid (2,213) (1,939) 43 (1)
Net cash generated from/(utilised in) 
operating activities 7,942 5,477 424 (170)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of trade assets and related costs (2,653) (1,072) (163) (25)
Proceeds from sale of property,
plant and equipment 33 23 - -
Purchase of property, plant and equipment (3,657) (2,545) (1) -
Dividends received - - 3,174 7,811
Net cash (utilised in)/generated from
investing activities (6,277) (3,594) 3,010 7,786
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of ordinary shares 188 147 188 147
Repayment of loans (192) - - -
Purchase of own shares by 
Short Term Incentive Plan (177) (364) - -
Finance lease capital payments (47) (23) - -
Dividends paid to Company’s shareholders (2,937) (2,697) (2,937) (2,697)
Proceeds from repayment of loans
to subsidiary undertakings - - - 1,993
Loans to subsidiary undertakings - - (688) -
Repayment of loans from 
subsidiary undertakings - - - (7,041)
Net cash utilised in financing activities (3,165) (2,937) (3,437) (7,598)
Effect of exchange rate movements 127 (60) - -
Net (decrease)/increase in 
cash and cash equivalents (1,373) (1,114) (3) 18
Cash and cash equivalents 
at beginning of the year 746 1,860 53 35
CASH, CASH EQUIVALENTS AND 
BANK OVERDRAFTS AT END OF YEAR (627) 746 50 53
CASH, CASH EQUIVALENTS AND 
BANK OVERDRAFTS CONSIST OF:
Cash and cash equivalents 329 829 50 53
Bank overdrafts (956) (83) - -
CASH, CASH EQUIVALENTS AND 
BANK OVERDRAFTS AT END OF YEAR (627) 746 50 53 33
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Notes to the Cash Flow Statement
Cash Flow from Operating Activities
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Profit for the financial year 5,513 5,858 3,399 7,904
Taxation 2,149 2,306 59 (51)
Interest payable 224 160 245 730
Interest receivable (7) (30) (80) (287)
Dividends receivable - - (3,174) (7,811)
Amortisation of intangible assets 114 97 - -
Depreciation 2,114 2,075 43 45
Loss/(profit) on disposal of tangible fixed assets 21 (11) - -
Share based payments 237 158 55 9
Loss/(gain) on financial derivatives 69 (38) - -
Decrease in provisions (7) (69) - -
Decrease/(increase) in inventories 184 (219) - -
(Increase)/decrease in trade and other receivables (814) (2,058) 4 24
Increase/(decrease) in trade and other payables 575 (683) (5) (289)
CASH GENERATED FROM OPERATIONS 10,372 7,546 546 274 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
34
Notes to the Financial Statements
ACCOUNTING POLICIES
Accounting policies for the year ended 31 March 2007
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 2007 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. The consolidated financial statements have been prepared under the historical cost
convention, as modified by the revaluation of certain non-current assets and financial liabilities (including derivative
instruments and share based payments) at fair value.
The preparation of financial statements in conformity with IFRS 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 and are prepared under IFRS using consistent accounting policies.  The results of subsidiaries
acquired are included in the consolidated income statement from the date the Group has the power to govern
the financial and operating policies of the entity.  Intra group sales are eliminated on consolidation.
Standards, amendments and interpretations effective in 2006 but not relevant 
The following standards, amendments and interpretations to published standards are mandatory for accounting
periods beginning on or after 1 April 2006 but they are not relevant to the Group’s operations: 
■ IAS 21 (Amendment), Net investment in a foreign operation.
■ IAS 39 (Amendment), Cash flow hedge accounting of forecast intragroup transactions.
■ IAS 39 (Amendment), The fair value option. 
■ IAS 39 and IFRS 4 (Amendment), Financial guarantee contracts.
■ IFRS 1, (Amendment), First-time adoption of international financial reporting standards and IFRS 6,
(Amendment), exploration for and evaluation of mineral resources;
■ IFRS 6, Exploration for and evaluation of mineral resources;
■ IFRIC 4, Determining whether an arrangement contains a lease;
■ IFRIC 5, Rights to interests arising from decommissioning, restoration and environmental rehabilitation funds; 
and 
■ IFRIC 6, Liabilities arising from participating in a specific market - Waste electrical and electronic equipment. 
1 35
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following interpretations to existing standards have been published that are mandatory for the Group’s
accounting periods beginning on or after 1 May 2006 or later periods but which the Group has not early adopted:
■ IFRIC 8, Scope of IFRS 2 (effective from annual periods beginning on or after 1 May 2006). IFRIC 8 requires
consideration of transactions involving the issuance of equity instruments - where the identifiable consideration
received is less than the fair value of the equity instruments issued - to establish whether or not they fall within
the scope of IFRS 2. The Group will apply IFRIC 8 from 1 January 2007, but it is not expected to have any impact
on the Group’s accounts.
■ IFRIC 10, Interim Financial Reporting and Impairment (effective for annual periods beginning on or after 
1 November 2006).  IFRIC 10 prohibits the impairment losses recognised in an interim period on goodwill and
investments in equity instruments and in financial assets carried at cost to be reversed at a subsequent balance
sheet date.  The Group will apply IFRIC 10 from 1 January 2007 but it is not expected to have any impact on
the Group’s accounts.
■ IFRIC 11, IFRS 2 - Group and treasury share transactions (effective for annual periods commencing on or after 
1 March 2007).  IFRIC 11 gives Clarification on how to account for share-based payment arrangements where
an entity receives goods or services as consideration for its own equity instruments.  It also gives guidance on
how to account for share-based payment arrangements in a subsidiary that has an obligation to provide its
employees with parent equity instruments for the services it receives from its employees.
Interpretations to existing standards that are not yet effective and not relevant for the Group’s operations 
■ IFRIC 7, Applying the restatement approach under IAS 29, Financial reporting in hyperinflationary economies
(effective from 1 March 2006). IFRIC 7 provides guidance on how to apply the requirements of IAS 29 
in a reporting period in which an entity identifies the existence of hyperinflation in the economy of its
functional currency, when the economy was not hyperinflationary in the prior period.  As none of the Group
entities has a currency of a hyperinflationary economy as it functional currency, IFRIC 7 is not relevant to the
Group’s operations.
■ IFRIC 9, Reassessment of embedded derivatives (effective for annual periods beginning on or after 1 June 2006).
IFRIC 9 requires an entity to assess whether an embedded derivative is required to be separated from the host
contract and accounted for as a derivative when the entity first becomes a party to the contract.  Subsequent
reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash
flows that otherwise would be required under the contract, in which case reassessment is required. IFRIC 9 is not
relevant to the Group’s operations because none of the terms of the Group’s contracts have been changed.
2006 Restatement
The directors are constantly reviewing accounting policies and classification for appropriateness and believe that
foreign exchange translation adjustments are more appropriately shown within operating expenses other than year
end foreign exchange translation adjustments of inter company currency loans that are more appropriately included
in finance income.  In 2006 these were included in cost of sales.  Accordingly foreign exchange gains of £592,000,
previously included in cost of sales, have been reallocated to operating expenses (£303,000) and finance income
(£289,000). HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
36
Notes to the Financial Statements
continued
Reconciliation of non statutory information used in the Chairman’s Statement to statutory information.
Group
2007 2006
£’000 £’000
Operating profit 8,221 8,005
Add back amortisation 114 97
Operating profit before amortisation 8,335 8,102
Finance income 7 30
Finance cost (excluding foreign exchange) (224) (160)
Profit before amortisation and foreign 
exchange on inter company loans 8,118 7,972
Amortisation (114) (97)
Profit before foreign exchange 
on inter company loans 8,004 7,875
Foreign exchange on inter company loans (342) 289
Profit before tax 7,662 8,164
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) Royalty income 
Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreements. 
(c) 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 37
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
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 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 
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 15-20 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. 
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 historical 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.
T ools 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, for example goodwill, 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 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
38
Notes to the Financial Statements
continued
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 at cost. Investments
revalued using the equity method of valuation prior to the transition to IFRS use their valuation as deemed cost at
this date.
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.
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.
TRADE PAYABLES
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
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 39
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
enacted at the balance sheet date.  Tax relating to items recognised directly in equity are recognised in equity and
not in the income statement.
KEY AREAS OF JUDGEMENT
The Group makes estimates and assumptions concerning the future.  The resulting accounting estimates will, by
definition, seldom equal the related actual results.  The estimates and assumptions that may have an element of risk
causing an adjustment to the carrying amounts of assets and liabilities within the next financial year include
provisions for stock obsolescence, customer returns and doubtful debts.
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.
SHORT TERM INCENTIVE PLAN
The Short Term Incentive Plan (STIP) investment is carried at the cost of the shares held.  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 recorded at fair value and
spread over the vesting period of the shares and recognised in the income statement over this period.
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 25. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
40
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.
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.
BORROWING COSTS
Borrowing costs are written off as incurred.
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.  
DERIVATIVE FINANCIAL INSTRUMENTS
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, 41
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair
values of the hedged items.
(a) Cash flow hedge 
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges
are recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income
statement within operating expenses.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects
profit or loss (for instance when the forecast purchase that is hedged takes place). The gain or loss relating to the
effective portion of forward foreign exchange contracts hedging import purchases is recognised in the income
statement within ‘cost of sales’. However, when the forecast transaction that is hedged results in the recognition of
a non-financial asset (for example, inventory) the gains and losses previously deferred in equity are transferred from
equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately
recognised in cost of goods sold in case of inventory. 
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. 
(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 denominated in foreign currencies are recorded in pounds sterling at the exchange rates ruling at the
date of the transaction.  Foreign exchange gains and losses resulting from such transactions are recognised in the
income statement, except when deferred in equity as qualifying cash flow hedges.  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.
Foreign exchange gains/losses relating to foreign currency loans are shown with finance income/costs.  Other foreign
exchange adjustments are included within operating profit and shown separately as part of operating
income/expenses.
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.
DIVIDEND DISTRIBUTION
Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the
period in which the dividends are approved by the Company’s shareholders. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
42
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 28 and its assets and liabilities given in the Company Balance Sheet on page 29.  Other Company information
is provided in the other notes to the accounts.
T otal
Rest of Reportable Intra
Year ended 31 March 2007 UK USA Europe Segment Group Group
£’000 £’000 £’000 £’000 £’000 £’000
Revenue - External 34,399 2,829 9,683 46,911 - 46,911
- Other segments 2,964 - 2,046 5,010 (5,010) -
Operating profit 7,036 70 1,115 8,221 - 8,221
Interest expense - External (190) - (34) (224) - (224)
- Other segments (79) (29) (667) (775) 775 -
Foreign exchange (342) - - (342) - (342)
Interest income - External 1 1 5 7 - 7
- Other segments 775 - - 775 (775) -
Profit before tax 7,201 42 419 7,662 - 7,662
Taxation (1,822) (8) (319) (2,149) - (2,149)
Profit for the year 5,379 34 100 5,513 - 5,513
Segment assets 35,434 1,037 16,982 53,453 (15,113) 38,340
Less inter company debtors (14,397) - (716) (15,113) 15,113 -
Total assets 21,037 1,037 16,266 38,340 - 38,340
Segment liabilities 7,949 977 16,722 25,648 (15,153) 10,495
Less inter company creditors (34) (954) (14,165) (15,153) 15,153 -
Total liabilities 7,915 23 2,557 10,495 - 10,495
Other segment items
Capital expenditure 2,725 2 1,403 4,130 - 4,130
(including acquisitions)
Depreciation 1,578 11 518 2,107 - 2,107
Amortisation of intangible assets 14 - 100 114 - 114
Short Term Incentive Plan - charge 
to Income Statement (note 22) 232 - - 232 - 232
All transactions between Group companies are on normal commercial terms and an arms length basis.
2 43
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
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 7,458 94 453 8,005 - 8,005
Interest expense - External (151) - (9) (160) - (160)
- Other segments - (30) (551) (581) 581 -
Foreign exchange 289 - - 289 - 289
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 Term Incentive Plan - charge 
to Income Statement (note 22) 232 - - 232 - 232
All transactions between Group companies are on normal commercial terms and an arms length basis. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
44
Notes to the Financial Statements
continued
FINANCE (COSTS)/INCOME - NET
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Finance cost:
Interest paid on bank borrowings (216) (155) - -
Interest paid on inter company borrowings - - (245) (730)
Interest paid on finance leases (8) (5) - -
Foreign exchange losses on foreign 
denominated inter company loans (342) - - -
(566) (160) (245) (730)
Finance income:
Bank interest 7 30 - -
Interest received on inter company loans - - 80 287
Dividend received - - 3,174 7,811
Foreign exchange gains on foreign 
denominated inter company loans - 289 - -
7 319 3,254 8,098
Finance (cost)/income - net (559) 159 3,009 7,368
3 45
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
PROFIT BEFORE TAXATION
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
The following items have been included
in arriving at profit before taxation:
Staff costs (note 24) 6,034 5,383 446 482
Inventories:
- Cost of inventories recognised as an
expense (included in cost of sales) 24,880 20,487 - -
- Write down (release)/charge (216) 3 - -
Depreciation of property, plant and equipment:
- Owned assets 2,095 2,055 43 44
- Under finance leases 19 20 - -
Loss/(profit) on disposal of assets 21 (11) - -
Other operating lease rentals payable:
- Plant and machinery 90 77 - -
- Property 164 125 - -
Repairs and maintenance expenditure on
property, plant and equipment 189 124 - -
Research and development expenditure 841 856 - -
Foreign exchange losses/(gains):
- On transactions and year end retranslation 888 (303) - -
Impairment of trade receivables 55 98 - -
Other operating expenses:
- Movement on fair value of ineffective hedge 69 - - -
- Share based payment charge 237 120 55 9
- Intangible amortisation 114 97 - -
420 217 55 9
4 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
46
Notes to the Financial Statements
continued
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
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Audit services
- Fees payable to the Company auditor for the audit 
of parent company and consolidated accounts 43 38 25 23
Non audit services
- Fees payable to the Company’s auditor for
other services
The auditing of accounts of associates of the
Company pursuant to legislation
(including that of countries and territories outside
Great Britain) 90 102 5 38
Services relating to taxation 21 36 9 15
All other services 68 73 62 11
222 249 101 87
Other services related to providing legal services and due diligence relating to acquisitions.
TAXATION
Analysis of tax charge in the year
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Current tax
- current year 1,747 2,265 70 (49)
- adjustments in respect of prior years - 14 - (1)
- overseas taxation 275 35 - -
2,022 2,314 70 (50)
Deferred tax (note 20)
- current year 75 (8) (11) (1)
- overseas taxation 52 - - -
127 (8) (11) (1)
Total tax charge/(credit) to the Income Statement 2,149 2,306 59 (51)
Tax on items charged to equity:
Deferred tax credit on share based payments (52) (1) (17) -
5 47
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
The tax for the year is lower (2006 - lower) than the standard rate of corporation tax in the UK (30%).  Any differences
are explained below:
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Profit before taxation 7,662 8,164 3,458 7,853
Profit on ordinary activities multiplied by rate of
Corporation tax in UK of 30% (2006 - 30%) 2,299 2,449 1,037 2,356
Effects of:
Adjustment to tax in respect of prior years - 14 - (1)
Income not taxable - - (946) (2,406)
Expenses deductible for tax purposes (245) (264) (32) -
Difference on overseas rates of tax 51 - - -
Impact of overseas losses not recognised 44 126 - -
Prior year movement on deferred tax - (19) - -
Total taxation 2,149 2,306 59 (51)
DIVIDENDS
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Final paid 5.4p per share in relation to 2,006 1,845 2,006 1,845
year ended 31 March 2006 (2006 - paid 5.0p per
share in relation to year ended 31 March 2005)
Interim paid 2.5p per share in relation to 931 852 931 852
year ended 31 March 2007 (2006 - paid 2.3p per
share in relation to year ended 31 March 2006)
2,937 2,697 2,937 2,697
In addition, the directors are proposing a final dividend in respect of the financial year ending 31 March 2007 
of 5.6p per share which will absorb an estimated £2.1m of shareholders’ funds.
It will be paid on 17 August 2007 to shareholders who are on the register of members on 29 June 2007.
6 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
48
Notes to the Financial Statements
continued
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 2007.
Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.
2007 2006
Weighted Weighted
average average
number of Per-share number of Per-share
Earnings shares amount Earnings shares amount
£’000 000’s pence £’000 000’s pence
Basic EPS
Earnings attributable to
ordinary shareholders 5,513 37,647 14.64 5,858 37,447 15.64
Effect of dilutive securities
Options 1,418 1,395
Diluted EPS 5,513 39,065 14.11 5,858 38,842 15.08
The calculation of adjusted earnings per ordinary share is based on profit after tax adjusted for amortisation 
of intangibles of £114,000 (2006 - £97,000) and foreign exchange translation adjustments on inter company
loans after tax of £239,400 (2006 - £202,300).
7 49
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
GOODWILL
GROUP £’000
COST
At 1 April 2006 8,116
Additions 1,201
Exchange adjustments (111)
At 31 March 2007 9,206
AGGREGATE IMPAIRMENT
At 1 April 2006 and 31 March 2007 -
Net book amount at 31 March 2007 9,206
GROUP £’000
COST
At 1 April 2005 7,751
Additions 305
Exchange adjustments 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
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 1 September 2006 the purchase of trade and certain assets from Heico-Modell by Hornby Deutschland GmbH
created £162,000 of goodwill (note 23).
On 9 November 2006 the purchase of trade and certain assets from Humbrol Limited (in administration) by Hornby
Hobbies Limited created £1,033,000 of goodwill (note 23).
Annual impairment reviews performed have not identified any impairment of goodwill.
8 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
50
Notes to the Financial Statements
continued
The goodwill has been allocated to cash-generating units and a summary of carrying amounts of goodwill by
geographical segments (representing cash-generating units) at 31 March 2007 is as follows:
Rest of
UK USA Europe T otal
GROUP £’000 £’000 £’000 £’000
1,081 6 8,119 9,206
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 2008.  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% which management believe is appropriate for all territories. 51
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
INTANGIBLES
GROUP Brands Customer Rent free Total
lists period
ACQUIRED INTANGIBLE ASSETS £’000 £’000 £’000 £’000
COST
At 1 April 2006 1,369 341 28 1,738
Acquisitions 584 288 - 872
Exchange adjustments (29) (16) - (45)
At 31 March 2007 1,924 613 28 2,565
AMORTISATION
At 1 April 2006 84 18 28 130
Charge for period 73 41 - 114
At 31 March 2007 157 59 28 244
Net book amount at 31 March 2007 1,767 554 - 2,321
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 the 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
All amortisation charges in the year have been charged through other operating expenses.
The following useful lives have been determined for the intangible assets acquired:
Brand names 15-20 years
Customer lists 10 years
Rent free period 0.5 years
Brand names have been valued on a “relief from royalty” basis.
Customer lists have been valued according to “discounted incremental operating profit expected to be generated
from each of them over their useful lives”.
Rent free period has been valued over the outstanding rental period.
The Company has no intangible assets.
9 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
52
Notes to the Financial Statements
continued
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 2006 2,822 5,238 308 24,414 32,782
Exchange adjustments (12) (24) (1) (38) (75)
Additions at cost 15 722 98 2,845 3,680
Acquisitions - 37 13 400 450
Disposals - (40) (66) - (106)
At 31 March 2007 2,825 5,933 352 27,621 36,731
ACCUMULATED DEPRECIATION
At 1 April 2006 918 4,501 185 21,639 27,243
Exchange adjustments (2) (11) - (18) (31)
Charge for the year 52 194 44 1,824 2,114
Disposals - (16) (37) - (53)
At 31 March 2007 968 4,668 192 23,445 29,273
Net book amount at 31 March 2007 1,857 1,265 160 4,176 7,458
At 31 March 2006 1,904 737 123 2,775 5,539
10 53
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
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 - 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
Freehold land amounting to £786,000 (2006 - £786,000) has not been depreciated.
Assets held by the Group under finance leases have the following net book amount:
2007 2006
£’000 £’000
Cost 156 154
Aggregate depreciation (59) (78)
Net book amount 97 76
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. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
54
Notes to the Financial Statements
continued
PROPERTY, PLANT AND EQUIPMENT continued
COMPANY Freehold Plant
land and and
buildings equipment T otal
£’000 £’000 £’000
COST OR VALUATION
At 1 April 2006 2,377 2 2,379
Additions at cost - 1 1
At 31 March 2007 2,377 3 2,380
ACCUMULATED DEPRECIATION
At 1 April 2006 865 1 866
Charge for the year 43 - 43
At 31 March 2007 908 1 909
Net book amount at 31 March 2007 1,469 2 1,471
At 31 March 2006 1,512 1 1,513
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
The Company does not hold any assets under finance leases.
10 55
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
INVESTMENTS
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 2006 25,443 3,144 28,587
Acquisitions (note 23) 163 - 163
Other movements - 574 574
At 31 March 2007 25,606 3,718 29,234
At 1 April 2005 24,895 5,137 30,032
Acquisitions (note 23) 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
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, Hornby España S.A. and Hornby Italia s.r.l. are engaged 
in the development, design, sourcing and distribution of models.  Hornby America Inc., Hornby France S.A.S. and
Hornby Deutschland GmbH 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
Hornby America Inc. USA Ordinary shares 100 100
Hornby España 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
Hornby Deutschland GmbH Germany Ordinary shares 100 100
11 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
56
Notes to the Financial Statements
continued
INVENTORIES
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Materials 393 297 - -
Work in progress 539 666 - -
Finished goods 7,509 7,264 - -
8,441 8,227 - -
TRADE AND OTHER RECEIVABLES
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
CURRENT:
Trade receivables 9,366 8,516 - -
Less:  provision for impairment of receivables (163) (245) - -
Trade receivables - net 9,203 8,271 - -
Overseas Corporation tax recoverable 72 132 72 126
Other receivables 203 425 - -
Prepayments 609 497 7 11
10,087 9,325 79 137
NON-CURRENT:
Deferred tax asset (note 20) 421 369 118 95
421 369 118 95
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.
CASH AND CASH EQUIVALENTS
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Cash at bank and in hand 329 829 50 53
12
13
14 57
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Notes to the Financial Statements
continued
TRADE AND OTHER PAYABLES
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
CURRENT:
Trade payables 3,455 2,718 - -
Other taxes and social security 1,192 907 12 10
Other payables 1,365 1,681 - -
Accruals 1,406 1,608 137 253
7,418 6,914 149 263
PROVISIONS 
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
Sales returns
At 1 April 300 369 - -
Charged to profit and loss account 789 826 - -
Utilised in year (796) (895) - -
293 300 - -
CURRENT TAX LIABILITIES
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
UK Corporation tax liability 1,002 1,504 147 88
Overseas Corporation tax liability 289 38 - -
1,291 1,542 147 88
15
16
17 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
58
Notes to the Financial Statements
continued
FINANCIAL LIABILITIES - BORROWINGS
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
CURRENT:
Bank loans and overdrafts 956 83 - -
Finance lease obligations 49 41 - -
1,005 124 - -
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
NON-CURRENT:
Finance lease obligations 53 39 - -
Loan from subsidiary undertaking - - 4,087 4,201
53 39 4,087 4,201
The Group has a £3,000,000 overdraft facility at 31 March 2007 (2006 - £5,000,000) increasing to £7,000,000
August-December that attracts interest at 1% 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 note 1. 
Assets Liabilities
GROUP 2007 2006 2007 2006
Carrying values of derivative financial instruments £’000 £’000 £’000 £’000
Forward foreign currency contracts - - (202) -
The Company does not have any derivative financial instruments.
The forward foreign currency hedges in place from 1 April 2005 to October 2006 could not be included as effective
hedges under IAS39 ‘Financial instruments: Recognition and measurement’ as appropriate documentation was not in
place.  Certain forward foreign currency hedges in place from 25 October 2006 could be included as effective
hedges under IAS39 as appropriate documentation was in place.
The hedged forecast transactions denominated in foreign currency are expected to occur at various dates during
the next 12 months. Gains and losses recognised in reserves in equity on forward foreign exchange contracts as of
31 March 2007 are recognised in the income statement in the period or periods during which the hedged forecast
transaction affects the income statement, which is within 6 months from the balance sheet date. 
18
19 59
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
Of the total fair value above of £202,000 (2006 - nil), £133,000 (2006 - nil) has been effectively hedged at 31 March
2007 and therefore charged to reserves in accordance with IAS39.  The balance of £69,000 (2006 - nil) was the
ineffective hedged portion and was included within operating expenses.
In accordance with IAS39, 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.
At 31 March 2007 outstanding forward currency contracts were as follows:
2007 2006
000’s 000’s
Hong Kong $ 60,500 25,225
US$ 5,334 1,750
Euro € - 290
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 2007 2006
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 18) (53) (53) (39) (39)
Short term borrowings (note 18) (1,005) (1,005) (124) (124)
Trade and other payables (note 15) (7,418) (7,418) (6,914) (6,914)
Trade and other receivables (note 13) 9,478 9,478 8,828 8,828
Cash at bank and in hand (note 14) 329 329 829 829
COMPANY 2007 2006
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 18) 4,087 4,087 4,201 4,201
Trade and other payables (note 15) (149) (149) (263) (263)
Trade and other receivables (note 13) 72 72 126 126
Cash at bank and in hand (note 14) 50 50 53 53 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
60
Notes to the Financial Statements
continued
FINANCIAL INSTRUMENTS continued
Maturity of non-current financial liabilities
GROUP 2007 2006
Finance Finance
leases leases
£’000 £’000
Between one and two years (note 18) 12 39
Between two and five years (note 18) 41 -
53 39
COMPANY 2007 2006
Debt Debt
£’000 £’000
More than five years (note 18) 4,087 4,201
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 2007 in respect of which
all conditions precedent had been met:
Floating Fixed 2007 2006
rate rate T otal T otal
£’000 £’000 £’000 £’000
Expiring within one year 3,000 - 3,000 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 2007 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 2007 2006
£’000 £’000
Not later than one year 55 43
Later than one year but not more than five 56 40
111 83
Future finance charges on finance leases (8) (3)
Present value of finance lease liabilities 103 80
19 61
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 30%
(2006 - 30%).
The movement on the deferred tax account is as shown below:
Group Company
2007 2006 2007 2006
£’000 £’000 £’000 £’000
At 1 April (138) (131) 136 137
Charge/(credit) to profit and loss account 127 (6) (11) (1)
Credit to equity (52) (1) (17) -
(63) (138) 108 136
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.
Group Company
Deferred tax liabilities Accelerated Accelerated
capital Humbrol capital
Revaluation allowances intangibles Overseas T otal Revaluation allowances T otal
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 1 April 2006 217 14 - - 231 217 14 231
(Credit)/charge to profit
and loss account (5) 74 6 52 127 (5) - (5)
At 31 March 2007 212 88 6 52 358 212 14 226
At 1 April 2005 222 13 - - 235 222 13 235
(Credit)/charge to profit
and loss account (5) 1 - - (4) (5) 1 (4)
At 31 March 2006 217 14 - - 231 217 14 231
Of the total deferred tax liability of £358,000, £11,000 was due within one year for the Group (2006 - £5,000) and
£5,000 for the Company (2006 - £5,000).
20
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
61 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
62
DEFERRED TAX continued
Group Company
Accelerated Short-term Short-term
capital incentive Share incentive
allowances plan options Other T otal plan Other T otal
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
Deferred tax assets
GROUP
At 1 April 2006 (84) (281) (1) (3) (369) (98) 3 (95)
Charge/(credit) to profit
and loss account 84 (11) (76) 3 - (3) (3) (6)
Credit to equity - (29) (23) - (52) (17) - (17)
At 31 March 2007 - (321) (100) - (421) (118) - (118)
At 1 April 2005 (63) (248) (29) (26) (366) (97) (1) (98)
(Credit)/charge to profit
and loss account (21) (34) 28 23 (4) (1) 4 3
Charge to equity - 1 - - 1 -- -
At 31 March 2006 (84) (281) (1) (3) (369) (98) 3 (95)
Net deferred tax asset
At 31 March 2007 (63)
At 31 March 2006 (138)
Net deferred tax liability
At 31 March 2007 108
At 31 March 2006 136
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 2007 and 31 March 2006
have been recognised separately.
20
Notes to the Financial Statements
continued 63
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
2007 2006
Not Not
GROUP Recognised recognised Recognised recognised
£’000 £’000 £’000 £’000
Deferred tax comprises:
Accelerated capital allowances 88 - (70) -
Other timing differences (203) - (68) -
Overseas taxation 52 - --
(63) - (138) -
2007 2006
Not Not
COMPANY Recognised recognised Recognised recognised
£’000 £’000 £’000 £’000
Deferred tax comprises:
Accelerated capital allowances 14 - 14 -
Other timing differences 94 - 122 -
108 - 136 -
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
63 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
64
CALLED UP SHARE CAPITAL
2007 2006
GROUP AND COMPANY £’000 £’000
Authorised:
50,000,000 (2006 - 50,000,000) ordinary shares of 1p each 500 500
Allotted, called up and fully paid:
2007 2006
Ordinary shares of 1p each Number of Number of
shares £’000 shares £’000
At 1 April 37,583,530 376 37,308,530 373
Allotted under share option schemes 257,260 2 275,000 3
At 31 March 37,840,790 378 37,583,530 376
Shares issued in the year for cash are set out below:
Date issued Number of shares Exercise price 
15 June 2006 37,500 83.4p
08 January 2007 37,500 83.4p
30 January 2007 67,260 44.6p
30 January 2007 77,500 83.4p
20 March 2007 37,500 83.4p
257,260
At 31 March 2007 options granted under the Company’s share option schemes were outstanding as follows:
Date granted Number of options Exercise price Period of option
2007 2006
09 July 1997 - 67,260 44.6p July 2000 - July 2007
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 622,500 812,500 83.4p June 2005 - June 2009
09 June 2005 550,000 550,000 201.0p June 2008 - June 2012
2,320,810 2,578,070
The total number of options outstanding as at the date of this document represent approximately 6.1% of the issued
share capital of the Company.
If Resolution 12 is passed at the Annual General Meeting and the Company were to exercise the full authority 
to buy-back approximately 10% of the issued ordinary shares of the Company, such options would represent 6.8%
of the issued share capital of the Company.
21
Notes to the Financial Statements
continued 65
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
SHARE BASED PAYMENTS
Hornby Plc operates two share based plans.  The Share Option Scheme (‘SOS’) and the Short Term 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, others 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 IFRS 2 ‘Share Based Payments’ is included within
other operating expenses in the income statement.  This charge amounted to £232,162 in the year ended 31 March
2007 (2006 - £231,822).  
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 2007 and 31 March 2006 was as follows:
2007 2006
Weighted Weighted
average average
Number exercise price Number exercise price
Outstanding at 1 April 2,578,070 101.8p 2,553,070 86.6p
Granted -- 550,000 201.0p
Forfeited -- (250,000) 218.0p
Exercised (257,260) 73.3p (275,000) 53.4p
Outstanding at 31 March 2,320,810 105.0p 2,578,070 101.8p
Options were exercised at various times during the year.  The weighted average share price was  278.4p (2006 - 206.6p).
22
65 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
66
SHARE BASED PAYMENTS continued
The following table summarises information relating to the number of shares under option and those which were
exercisable at 31 March 2007.
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 2007 2006 at 31 March
Range of exercise prices Number Months Number Number 2007
£0.20 - £0.30 148,310 12 148,310 148,310 29.5p
£0.40 - £0.50 - - - 67,260 -
£0.70 - £0.80 1,000,000 24 1,000,000 1,000,000 76.8p
£0.80 - £0.90 622,500 27 622,500 812,500 83.4p
£2.00 - £2.10 550,000 63 250,000 - 201.0p
2,320,810 2,020,810 2,028,070 90.7p
The following table summarise the key assumptions used:
2007 2006
SOS STIP SOS STIP
Weighted average fair value (p) 57.9p 197.6p 57.9p 181.6p
Options pricing model used Black Scholes - Black Scholes -
Weighted average share price (p) 201.0p - 201.0p -
Weighted average exercise price (p) 201.0p - 201.0p -
Basis of expected volatility (%) 30% - 30% -
Range of risk-free rates (%) 4.2% - 4.2% -
Range of expected option term (years) 54 54
Expected dividends (per year, %) 2.8% 2.9% 2.8% 3.1%
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 £30,428 (2006 -
£32,903) in respect of liabilities arising from the above share-based payment transactions.
22
Notes to the Financial Statements
continued 67
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
GROUP - SHORT TERM INCENTIVE PLAN
2007 2006
£’000 £’000
At 1 April 856 630
Shares acquired in Company 177 364
Shares vested (231) (138)
At 31 March 802 856
Details of the Short Term Incentive Plan are given in the Directors’ Remuneration Report on pages 19 to 25.
66,766 ordinary shares to the value of £177,595 were acquired in December 2006 by the Employee Benefit Trust
in accordance with the incentive plan.  
On 5 December 2006, the final third of the 2002 allocation (77,650 ordinary shares) the 2nd third of the 2003
allocation (53,169 ordinary shares) and the 1st third of the 2004 allocation (43,035 ordinary shares) were vested.
At 31 March 2007, a total of 370,868 (2006 - 477,957) ordinary shares are held by the Trust and allotted to the
directors and senior management under the plan with a nominal value of £3,709 (2006 - £4,780) and a market
value of £1,094,061 (2006 - £979,812).  The costs of the plan are borne by Hornby Plc.  The Trust has waived its
right to dividends.
67 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
68
Notes to the Financial Statements
continued
Notes to the Financial Statements
continued
ACQUISITIONS
HEICO-MODELL
In August 2006, the Company incorporated a new German company, Hornby Deutschland GmbH and injected
EUR 25,000 (£17,000) of equity capital and EUR 175,000 (£117,000) of share premium into this new subsidiary.  
On 1 September 2006 Hornby Deutschland acquired the trade and certain assets from Heico-Modell for nil
consideration.  Legal fees of £29,360 were incurred by Hornby Plc and capitalised in non-current assets.
Property, plant and equipment and inventories have been adjusted to fair value in the year.
The table below sets out the Group’s assessment of the fair values of the assets acquired.  Adjustments have been
made to separately identify intangible assets acquired (see note 9).
Provisional Adjustments Fair value
fair value Adjustments in respect of to the
(UK GAAP) to fair values IFRS transition Group
£’000 £’000 £’000 £’000
Intangible assets:
- customer lists - - 7 7
- brand names - - 7 7
Property, plant and equipment 21 29 - 50
Inventories 127 (56) - 71
Trade and other receivables 8 - - 8
Cash and cash equivalents 1 - - 1
Trade and other payables (277) - - (277)
Net assets acquired (120) (27) 14 (133)
Goodwill (note 8) 162
Consideration - satisfied by cash (legal fees) 29
23 69
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
69
In its last financial year to 31 December 2005, Heico-Modell made a loss before tax of EUR 63,543.  Since the date
of acquisition, Hornby Deutschland’s results to 31 March 2007 were as follows:
£’000
REVENUE 269
Cost of sales (216)
GROSS PROFIT 53
Distribution costs (18)
Selling and marketing costs (127)
Administrative expenses (42)
Other operating expenses (1)
OPERATING PROFIT (135)
Finance costs (8)
PROFIT BEFORE TAXATION (143)
Taxation -
PROFIT FOR THE PEROD AFTER TAXATION (143)
If Hornby Deutschland had been included in the Group from the start of the financial year it is expected that revenue
and losses would have been approximately twice those given above for the first half’s trading.
HUMBROL/AIRFIX
On 9 November 2006 Hornby Hobbies Limited acquired the trade and certain assets of Humbrol Limited 
(in administration) for £2,250,000 and inventories for £327,000.  Legal fees of £41,191 were incurred by Hornby
Plc 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
fair value in respect of to the
(UK GAAP) IFRS transition Group
£’000 £’000 £’000
Intangible assets:
- customer lists - 281 281
- brand names - 577 577
Property, plant and equipment 400 - 400
Inventories 327 - 327
Net assets acquired 727 858 1,585
Goodwill (note 8) 1,033
Consideration - satisfied by cash 2,618
Hornby Hobbies Limited acquired a part of the Humbrol Limited assets and therefore historical trading performance
is not available in relation to the assets acquired.  The Humbrol assets have been fully integrated into Hornby Hobbies
Limited and it is not possible to extract meaningful trading results of the assets since acquisition to 31 March 2007.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
70
Notes to the Financial Statements
continued
ACQUISITIONS continued
HORNBY FRANCE
During the year ended 31 March 2006, 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
fair value in respect of to the
(UK GAAP) IFRS transition 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
In 2007 £6,000 of additional legal costs were incurred with regard to Hornby France which resulted in additional
goodwill of £6,000 being recognised in the year.
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 (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.
23 71
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
EMPLOYEES AND DIRECTORS
GROUP 2007 2006
£’000 £’000
Staff costs for the Group during the year:
Wages and salaries 4,616 4,415
Share based payments 235 141
Social security costs 872 449
Other pension costs (note 25) 299 378
Redundancy and compensation for loss of office 12 -
6,034 5,383
Average monthly number of people (including executive directors) employed by the Group:
2007 2006
Number Number
Operations 80 83
Sales, marketing and distribution 74 61
Administration 44 35
198 179
Key management compensation:
2007 2006
£’000 £’000
Salaries and short-term benefits 1,315 1,331
Share based payments 216 134
Post-employment benefits 126 138
1,657 1,603
Key management comprise the individuals involved in major strategic decision making and includes all Group and
subsidiary directors.
The directors did not exercise any share options during the year and thus no gains were realised (2006 - J Stansfield
realised a gain of £66,150).
24 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
72
Notes to the Financial Statements
continued
EMPLOYEES AND DIRECTORS continued
COMPANY 2007 2006
£’000 £’000
Staff costs for the Company during the year:
Wages and salaries 290 381
Share based payments 47 8
Social security costs 67 53
Other pension costs (note 25) 42 40
446 482
Average monthly number of people (including executive directors) employed by the Company:
2007 2006
Number Number
Sales, marketing and distribution 1 1
Administration 3 3
4 4
Key management compensation:
2007 2006
£’000 £’000
Salaries and short-term benefits 250 324
Share based payments 47 8 
Post-employment benefits 42 40
339 372
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 19 and 25 and forms part of these financial statements.
The directors did not exercise any share options during the year and thus no gains were realised (2006 - J Stansfield
realised a gain of £66,150).
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.
25
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
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 Personal Pension Plan for current members is fixed by the Company.
The Group pension cost for the year was £299,000 (2006 - £378,000) representing the actual contributions payable in
the year and certain scheme administration costs. The Company pension cost for the year was £42,000 (2006 - £40,000).
FINANCIAL COMMITMENTS
CAPITAL COMMITMENTS Group
2007 2006
£’000 £’000
At 31 March commitments were:
Contracted for but not provided for 779 998
The Company does not have any capital commitments.
The commitments relate to the acquisition of property, plant and equipment.
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
falling due are as follows:
2007 2006
GROUP £’000 £’000
Not later than one year 260 249
Later than one year but not more than five years 356 471
616 720
The Company had no operating lease commitments during 2007 (2006 - nil).
26
27 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
74
Notes to the Financial Statements
continued
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 Group has taken advantage of the exemption
available under IAS 24 ‘Related party disclosures’ not to disclose transactions and balances between Group entities
that have been eliminated on consolidation.
The Company received management fees from subsidiaries of £1,006,000 (2006 - £957,000).
At the year-end balances due from subsidiaries to the Company amounted to £3,522,000 (2006 - £2,774,000) and
due to subsidiaries from the Company amounted to £178,000 (2006 - nil).
POST BALANCE SHEET EVENTS
Following the 2007 Budget the Chancellor has announced that as of 1 April 2008 the rate of corporation tax will
be cut from 30% to 28%.  This charge will impact on future corporation tax charges and the value of deferred
tax for both the Group and the Company.  These changes are expected to be enacted in the 2007 and 2008
Finance Acts.
The Chancellor also announced a reduction in the rate of capital allowance deductions available, which from 1 April
2008 will reduce from 25% to 20% of the tax written down value of qualifying assets.
The industrial buildings allowance, which constitutes a 4% annual deduction on the cost of qualifying buildings for
corporation tax purposes will be phased out starting from 1 April 2008, where the deduction will amount to 3% of
the qualifying building cost.  This reduction will fall by 1% annually and will result in no industrial buildings allowances
being available from 1 April 2011.
28
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HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
If you have sold or otherwise transferred your holding of ordinary shares in Hornby Plc, you should
immediately send this document together with the accompanying form of proxy to the stockholder,
bank or other agent through whom the sale or transfer was effected for transmission to the purchaser
or transferee.
Notice is hereby given that the twenty-sixth Annual General Meeting of Hornby Plc (the “Company”) will be held
at Berwin Leighton Paisner LLP , St Magnus House, 3 Lower Thames Street, London EC3R 6HA on Thursday 26 July
2007 at 11.00am for the following purposes:
ORDINARY RESOLUTIONS
1. To receive the accounts and reports of the directors and the auditors for the financial year ended 31 March
2007.
2. T o approve the directors’ remuneration report for the financial year ended 31 March 2007, as set out on pages
19 to 25 of the annual accounts and reports.
3. To declare a final dividend of 5.6p per ordinary share payable to holders of ordinary shares registered at the
close of business on 29 June 2007.
4. To re-elect Mr F Martin, who retires by rotation, as a director.
5. To re-elect Mr J W Stansfield, 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 the Hornby Share Option Plan (2007), the main features of which are summarised on pages 78 and 79
of the Company’s Annual Report and Accounts for the year ended 31 March 2007 be approved and adopted
and that the directors be authorised to do all acts and things which they may consider necessary to establish
and carry the same into effect.
10. 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 2012 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
26 July 2012 and the directors may allot such securities pursuant to such offer or agreement as if this authority
had not expired.
Notice of Annual General Meeting HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
76
SPECIAL RESOLUTIONS
11. 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 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.
12. 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
Notice of Annual General Meeting
continued 77
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
(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
15 June 2007
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.  T o 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, as amended, only those shareholders
whose names are on the register of members of the Company no later than 11.00am on 24 July 2007 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, and a copy of the draft rules of the Hornby Share Option Plan (2007).  These
documents will also be available for inspection at the Annual General Meeting and for fifteen minutes prior
thereto. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
78
Summary of Proposed Hornby Share Option Plan (2007)
(See Resolution 9)
The Hornby Share Option Plan (2007) (“Plan”) comprises of two parts, namely the Hornby Approved Share Option
Plan (2007) (“Approved Part”) and the Hornby Unapproved Share Option Plan (2007) (“Unapproved Part”).  
The Approved Part will be submitted to HM Revenue & Customs for approval under the provisions of the Income
Tax (Earnings and Pensions) Act 2003.  The principal terms of the Plan are as follows:
Administration
The Plan will be administered and the grant of options supervised by the Remuneration Committee.
Eligibility
The Board may select employees and directors of the Company and of its subsidiaries to whom options may be
granted over ordinary shares.
Option exercise price
The option exercise price per ordinary share will not be less than  the middle market price averaged over the three
dealing days immediately preceding the date of grant as derived from the Daily Official List of the London Stock
Exchange or in the case of an option to subscribe, the nominal value of the ordinary share if higher.
Performance conditions
The extent to which options may be exercised will depend on the achievement of a specified performance condition
which measures performance over a minimum three year performance period.  The Remuneration Committee will
determine the appropriate performance conditions before any option grant.
Grant of options
Options may normally only be granted within 42 days of the adoption of the Plan and thereafter within 42 days after
the announcement by the Company of its interim or final results each year.  Options may be granted outside these
periods if the Board considers that there are sufficiently exceptional circumstances to justify the grant of options at
that time.  No payment is required for the grant of an option.  
Individual limit
A participant may not be granted in any calendar year options over ordinary shares having a market value on grant
of more than twice his basic salary (or such higher amount as the Board may in exceptional circumstances determine).
Benefits under the Plan are not pensionable.
Exercise of options
In normal circumstances, an option may only be exercised after the expiry of the performance period and not later
than ten years from its grant, but only to the extent that the performance condition has been satisfied.
An option will normally lapse if the participant ceases employment.  Where, however, a participant ceases to be an
employee by reason of injury, disability, redundancy, or a disposal of the company or business in which he works or,
in the case of the Approved Part, retirement, he will have six months from the date of leaving within which to
exercise his vested options.  Those options which have not vested at the date of leaving can be exercised for six
months following the expiry of the performance period to the extent that the performance target has been satisfied
but only in respect of that proportion which corresponds to the proportion of the performance period which had
elapsed at the date the participant left.
If a participant dies, his vested options may be exercised within twelve months after his death.  Those options which
have not vested can also be exercised within twelve months of death, notwithstanding that the performance period
has not expired, to the extent that the Board considers that the performance condition would have been satisfied
but again only on a time apportioned basis. 79
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
If a participant ceases employment for cause, both his vested and unvested options lapse.
If a participant ceases employment for any other reason, vested options may be exercised within six months 
of leaving and unvested options will lapse save to the extent the Board otherwise determines (save that unvested
options may not be exercised to a greater extent than if the participant had left due to injury, disability etc).
On a takeover or winding up, unvested options may only be exercised to the extent that the Board considers that
the performance condition would have been satisfied but again only on a time apportioned basis.
When options granted under the Unapproved Part are exercised the Company will account through the PAYE
system for the income tax and national insurance contributions (if any) due on the option gain.  Participants will be
required to reimburse the Company or authorise the company to sell sufficient ordinary shares to meet this income
tax liability and, if so determined by the Board, any liability for employer’s national insurance contributions. 
Terms of options and issue of ordinary shares
Options are neither transferable nor assignable.  As soon as practicable after the exercise of an option granted over
unissued ordinary shares, the appropriate number of ordinary shares will be allotted and issued to the participant.
The ordinary shares allotted will rank pari passu with all other issued ordinary shares of the Company save that they
will not rank for any dividend or other rights attaching to such shares by reference to a record date prior to their
issue.  Existing ordinary shares may be used to satisfy the exercise of an option.
Variation of capital
In the event of a variation of share capital including a capitalisation issue or rights issue or any consolidation, sub-division
or reduction of capital of the Company the number and option price of ordinary shares subject to options shall be
adjusted in such manner as the auditors of the Company confirm in their opinion is fair and reasonable.
Amendment and termination
The Board may make amendments, but no amendment may be made which would adversely affect any rights already
acquired by a participant.  No alteration to the advantage of participants may be made to provisions relating to the
persons to whom options may be granted, the limits on the total number of ordinary shares over which options
may be granted, the limits on the number of options which may be granted to any participant, the adjustments to
be made in the event of a variation of share capital and the periods or circumstances in which options may be
exercised without the prior approval of the Company in general meeting (except for minor alterations to benefit
the administration of the Plan, to take account of a change in legislation or to obtain or maintain favourable tax,
exchange control or regulatory treatment for participants or any member of the group).
No option may be granted more than ten years after the Plan has been adopted.
Limits on share capital
In any ten year period the number of unissued ordinary shares placed under option under the Plan and any other
share option plans of the Company and subscribed pursuant to any other employees’ share plans of the Company
shall not exceed in aggregate 10 per cent. of the Company’s issued ordinary share capital. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007
80
Five Y ear Summary
2007 2006 2005 2004 2003
IFRS IFRS IFRS UK GAAP UK GAAP
£’000 £’000 £’000 £’000 £’000
Turnover 46,911 44,113 45,006 38,970 34,142
Profit on ordinary activities before taxation 7,662 8,164 7,585 6,469 5,411
Taxation (2,149) (2,306) (1,993) (1,974) (1,519)
Profit on ordinary activities after taxation 5,513 5,858 5,592 4,495 3,892
Assets employed:
Non-current assets 19,406 15,632 14,631 8,453 3,600
Net current assets 9,143 9,801 7,825 9,506 12,094
Creditors due after more than one year (53) (39) (80) (103) (22)
Deferred tax liabilities (358) (231) (235) - -
Provisions for liabilities and charges (293) (300) (369) (527) (486)
Net assets 27,845 24,863 21,772 17,329 15,186
Total capital employed 27,845 24,863 21,772 17,329 15,186
Earnings per share
- basic 14.6p 15.6p 15.1p 12.2p 10.7p
- diluted 14.1p 15.1p 14.4p 11.6p 10.4p
Dividend per share (net) 8.1p 7.7p 7.0p 6.0p 5.0p
Net assets per share 73.6p 66.2p 58.4p 46.9p 41.4p    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
18 Statement of Directors’ Responsibilities
19 Remuneration Report 
26 Independent Auditors’ Report to the Members of Hornby Plc 
28 Group and Company Income Statement
29 Group and Company Balance Sheet 
30 Statement of Changes in Equity
32 Group and Company Cash Flow Statement 
33 Notes to the Cash Flow Statement
34 Notes to the Financial Statements  
34 Accounting Policies
75 Notice of Annual General Meeting 
80 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 PLC
|
ANNUAL REPORT & ACCOUNTS 2007
YEAR ENDED 31 MARCH 2007
HORNBY PLC, WESTWOOD, MARGATE, KENT CT9 4JX
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2007