HORNBY PLC
|
ANNUAL REPORT & ACCOUNTS 2003
YEAR ENDED 31 MARCH 2003
HORNBY PLC, WESTWOOD, MARGATE, KENT CT9 4JX
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003 1 Financial Highlights 
2 Chairman’s Statement
4 Chief Executive’s Report
6 Directors and Corporate Information
7 Report of the Directors
10 Corporate Governance
13 Statement of Directors’ Responsibilities
14 Remuneration Report 
20 Independent Auditors’ Report to the Members of Hornby Plc 
22 Consolidated Profit and Loss Account
23 Statement of Group Total Recognised Gains and Losses  
23 Note of Group Historical Cost Profits 
24 Consolidated Balance Sheet 
25 Company Balance Sheet  
26 Consolidated Cash Flow Statement 
28 Notes to the Financial Statements 
28 Accounting Policies
46 Notice of Annual General Meeting 
48 Five Y ear Summar y
Designed by White Design, printed by Dorling Print.
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 2003
Financial Highlights
T urnover £’000
2002
2003
28,489
34,142
Operating profit £’000
2002
2003
3,674
5,356
Profit on ordinary activities before taxation £’000
2002
2003
3,722
5,411
Equity shareholders’ funds £’000
2002
2003
13,162
15,378
Cash £’000
2002
2003
6,477
7,909
Earnings per ordinary share Basic
2002
2003
32.97p
53.32p
Earnings per ordinary share Diluted
2002
2003
32.56p
52.00p
Dividends per ordinary share
2002
2003
17.0p
25.0p
Net assets per ordinary share
2002
2003
181.4p
209.4p
1 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
2
Chairman’s Statement
DIVIDEND
The Board is recommending a final dividend of 19p.
This will bring the total dividend for the year to 25p,
an increase of 47% over 17p in the previous year.
This dividend is payable to all shareholders on the
register at Friday 25 July 2003 and will be paid on
Friday 15 August 2003.
BUSINESS REVIEW
All of the Company's distribution channels, both in
the UK and Internationally, showed good year on
year sales growth across both the Hornby and
Scalextric ranges highlighting a well-balanced
business across our two brands. Growth in the
Hornby range has come primarily from the
independent retail sector in the United Kingdom and
a particularly strong performance in Scalextric was
achieved through International sales. It is also
pleasing to report that our in-store concessions
numbered 65 as at 31 March 2003, compared to 28
a year earlier.These outlets now account for an
important part of the Company's sales and profits.
The maintenance of a year round display presence in
these stores also helps to underpin the collectable
hobby nature of both Hornby and Scalextric brands.
The Harry Potter franchise makes a continuing
contribution to Hornby sales.The success we have
enjoyed with licensed merchandise encourages us to
establish other relationships and product licences for
the future. At the 2003 International Toy Fairs, held
in the first quarter of 2003, we launched a new
Micro Scalextric range based on "The Simpsons" TV
characters, which we expect to provide good
prospects for future growth.We have also secured a
licence to produce Scalextric sets and accessories
based on "The Italian Job" film release.This film has
recently been released in the USA and is due for
release in Europe this autumn, which will coincide
with the first deliveries of our Scalextric sets.
Further development of the already successful CD-Rom
based "Hornby Virtual Railway" has continued and an
all-new version will be released during the first half
of this financial year. Innovation in this fast-growing
area for technology-related products and improved
on-screen graphics have enabled us to deliver far
greater functionality and interactivity which bodes
well for further development of the hobby.
In the United States, despite a generally difficult
trading environment, it is pleasing to see Scalextric
USA back in profit. During the year the management
team has been re-structured in order to meet the
demands of this rapidly-expanding business. Our
strategy of producing products with an American
focus, including the Ford Mustang, Chevrolet Camaro
and Ford GT40 models, has improved significantly
It is pleasing, once again, to be able to report 12 months of sustained progress in your
Company. Sales, in generally challenging global trading conditions, have increased 20% to
£34.1million. Profit before tax at £5.4million is 45% above last year's result (£3.7million),
and earnings per share are up by 62% to 53.3p.
In March of this year the Company's progress was recognised at the UK PLC Awards 2002
when it won the "Company of the Year" award.This was a strong endorsement of the
strategies that we continue to implement and was a wonderful boost to morale for
everyone in the business. both our product appeal and sales performance. On
the back of this success we have been able to attract
new retailers to our brands; during the trading year
we have opened 134 active new accounts, taking the
total as at 31 March 2003 to 455.
PROPERTY
As outlined in last year's report we still hope to be in
a position to develop a new UK headquarters for
Hornby, including a "Hornby Heritage Centre" on a
site near our current Margate facility. Our application
to redevelop our existing site was referred to the
Secretary of State last year, and the planning inquiry
took place in January.We hope to learn the final
outcome of this inquiry by the autumn of 2003.
GLOBAL CONTEXT
Since the end of the financial year two major issues
have dominated global confidence; Iraq and the SARS
virus. Uncertainties surrounding the hostilities in Iraq
drew to a speedy conclusion and despite our
outsourced production facilities being located in the
People’s Republic of China, the SARS virus is having no
impact on production levels or our current or
projected trading. Our Chinese production facilities are
both modern and efficient and management there
have taken all reasonable steps to ensure that their
business and staff are protected.
PRODUCT DEVELOPMENT
The past year has seen further development in the
success and sophistication of our product offerings
across both Hornby and Scalextric ranges.Whilst
continuing to exploit the potential of the adult
collector's market in both sectors, we have continued
to develop new products for the younger age groups
who are likely to be the Hornby and Scalextric
collectors of the future. "Bash ‘n Crash" was the
biggest selling Scalextric set in the United Kingdom in
the run-up to Christmas 2002.This was a most
encouraging performance.
In the future it remains your Company's strategy to
develop further products targeted at both adult and
toy markets across both ranges.We will continue to
ensure that the adult enthusiast's market is satisfied with
high quality, authentic detail products whilst at the same
time developing new entry points to both the Hornby
and Scalextric ranges for the younger age groups.
This balance is fundamental to our business philosophy.
As part of the programme of re-enforcing Scalextric
as the "home motorsport" for enthusiasts, we have
announced recently a strategic relationship with
another household name in motorsport, Goodwood.
Both Hornby and particularly Scalextric products will
feature at this year's Festival of Speed to be held on
11 - 13 July, and later in the year on 5 - 7 September
when Scalextric will again feature prominently at the
Goodwood Revival Motorsport meeting. I am
confident that this will further raise the profile of our
motoring heritage.
OUTLOOK
Finally, I am pleased to be able to report that,
following a most successful performance in the year
to 31 March 2003 our sales growth momentum is
now well established in both the UK and our
international target markets. I am delighted to report
that the new financial year has started well.A strong
pipeline of new product developments should ensure
the continued organic growth of the Company during
the current financial year and beyond.
I should like to thank Frank Martin our chief
executive, our directors and all our staff working on
both Hornby and Scalextric ranges for their dedicated
support and hard work.Without them, none of this
would have been possible.
Neil Johnson
5 June 2003
3
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
4
Chief Executive’s Report
Basic earnings per share rose to 53.32p.This result
includes the release of a prior year tax provision of
£189,000, following the satisfactory conclusion of
negotiations with the Inland Revenue. Basic
underlying earnings per share, after stripping out the
one-off tax provision release, rose by 54% to 50.73p
(2002 - 32.97p).
There was a net cash inflow during the year of £1.4
million. Cash at 31 March 2003 was £7.9 million
compared to £6.5 million for the previous year.The
Company continues to generate a strong cash flow,
whilst servicing a progressive dividend policy, and
maintaining a high level of expenditure on new
product development.
The Company now manufactures all of its products
in China, via third party contract manufacturers.
However some packing operations remain in the UK
where this strategy provides greater flexibility in
meeting market needs. All purchases from our
Chinese suppliers are made either in US or Hong
Kong Dollars. It is the Company’s policy to reduce
currency exposure by using forward foreign
exchange contracts of up to 12 months which will
normally match or exceed purchase order
commitments at any time.
The Company retains intellectual property rights in
its products and controls all sales of its products.
The year to 31 March 2003 marked a further step
towards the Company's goal of creating a
sustainable global hobby business capable of
generating consistently high levels of profit.The
achievement of a 16% return before tax on sales
(2002 - 13%) further demonstrates the benefits to
be derived from focused investment in creating
products with worldwide sales potential.
At Scalextric USA, a significant turnround has been
achieved. Sales in US Dollars grew by 26% to $4.9
million in the year to 31 March 2003. A profit before
tax of $101,000 was recorded, compared to a loss
before tax of $167,000 in the previous year.This
encouraging result confirms our commitment to
building a significant business in the USA.
OPERATIONAL AND FINANCIAL REVIEW
The Company’s principal business is in the development and supply of Hobby and Toy
products.The Company’s two principal brands, Hornby and Scalextric, are distributed through
a network of specialist and multiple retailers throughout the UK and overseas.
Consolidated turnover for the year to 31 March 2003 was £34.1 million, an increase of 20%
over the previous year's £28.5 million.This follows two successive years of sales growth of
16% and 15% in 2002 and 2001 respectively. Profit before tax of £5.4 million was 45% above
last year's result of £3.7 million. 5
Both of our major brands, Hornby and Scalextric,
once more achieved significant sales growth during
the year. Of the Company's overall sales increase of
£5.6 million, roughly 50% was contributed by each
of the brands.
Within the brands, both Hornby locomotives and
Scalextric cars and accessories showed particularly
strong sales growth.This confirms our strategy of
applying increasing levels of detail and authenticity to
both brands. In doing so we are clearly creating
additional demand in the hobby/collector market.
The sales growth established over the past two
years has largely been achieved within traditional
channels of distribution, both in the UK and in
International markets.The growing opportunity
represented by both our major brands is now being
recognised by further major retailers.This will result
in significantly wider distribution of our products in
the pre-Christmas period 2003, again both in the UK
and overseas.These new stockists will focus primarily
on sales of Hornby and Scalextric sets. Increased
sales of sets at Christmas will in turn lead to
additional sales of cars, locomotives and accessories
as new consumers add to their collections.
As I indicated in my report last year, we recognise
that new product development is the Company's
lifeblood.We have increased our investment in 
this area, both in terms of personnel and also in
obtaining external specialist technology skills.The
fruits of these investments will be revealed during
the course of the new financial year, in the form 
of unique new product launches in both of our
major brands.
Hornby has established a substantial momentum 
in sales and profits growth over the past two 
years.The new financial year has once again 
started strongly and we remain confident about
future prospects.
Frank Martin
5 June 2003
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
6
Directors and Corporate Information
DIRECTORS
N A Johnson
Non-Executive Chairman
F Martin
Chief Executive
N J Cosh
Non-Executive Director
J W Stansfield
Finance Director
SECRETARY
J W Stansfield, FCMA
REGISTERED OFFICE
Westwood
Margate
Kent CT9 4JX
COMPANY REGISTERED NUMBER
Registered in England No. 1547390
AUDITORS
PricewaterhouseCoopers
Orchard House
10 Albion Place
Maidstone
Kent ME14 5DZ
SOLICITORS
Berwin Leighton Paisner
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
Robert W. Baird Limited
Mint House
77 Mansell Street
London E1 8AF
REGISTRARS AND
TRANSFER AGENTS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU Report of the Directors
The directors submit their annual report together
with the audited financial statements for the year
ended 31 March 2003.
PRINCIPAL ACTIVITIES AND BUSINESS
REVIEW
The Company is a holding company and has two
operating subsidiaries: Hornby Hobbies Limited in the
United Kingdom and Scalextric USA, Inc. in the USA.
The Group is principally engaged in the development,
manufacture and distribution of hobby and interactive
home entertainment products.
The Group’s business review and future developments
are included in the Chairman’s Statement and Chief
Executive’s Report.
RESULTS AND DIVIDENDS
The results for the year ended 31 March 2003 are
set out in the Consolidated Profit and Loss Account
on page 22.Turnover for the year was £34.1million
compared to £28.5million last year. The profit on
ordinary activities after taxation for the year
amounted to £3.9million (2002 - £2.4million).
An interim dividend of 6.0p (2002 - 2.0p) per ordinary
share amounting to £437,802 (2002 - £145,146)
was paid on 24 January 2003.The Group's Short
Term Incentive Plan Trust waived its right to the
interim dividend on 46,584 ordinary shares 
(see note 12).
The directors recommend an increased final
dividend of 19.0p (2002 - 15.0p) per ordinary share
amounting to £1,395,222 (2002 - £1,088,598)
payable on 15 August 2003 to those shareholders
on the Register at 25 July 2003.
RESEARCH & DEVELOPMENT
The Board considers that research and development
into new products continues to play an important
role in the Group’s success.
All costs incurred are charged to the Profit and Loss
Account as set out in note 3.
PROPERTY VALUES
In the opinion of the directors, and given current
planning use approvals, there is no significant
difference between the book value and the current
market value of interests in land and buildings.
CHARITABLE DONATIONS
During the year the Group made donations of
£1,291 (2002 - £1,050) for charitable purposes.
DIRECTORS
The persons who were directors during the year are
listed below:
Neil A Johnson, aged 54, was originally appointed 
a non-executive director on 1 July 1998. On 
22 December 2000 Mr Johnson assumed the
responsibilities of Non-Executive Chairman.
Mr Johnson is currently Chairman of Motability
Finance Limited, CybIT PLC and Tenon Group Plc.
Frank Martin, aged 51, 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 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 48, 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 56, was appointed a 
non-executive director on 21 June 1999. He is a
non-executive director of Bradford & Bingley plc,
ICAP plc and Computacenter plc. He was previously
finance director of J.I.B. Group plc and M.A.I. plc.
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
14 to 19.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
7 Report of the Directors
continued
SUBSTANTIAL SHAREHOLDINGS
The Company has been notified that on 30 May
2003 the following parties were interested in 3 per
cent or more of the Company’s ordinary share
capital.
Shareholder Number of
Ordinary Percentage
Shares held
P J Wood Associates Limited 740,000 10.08
Electra Quoted Partners 719,030 9.79
Toscafield Limited 608,094 8.28
J J Hosking 537,840 7.32
Insight Investment Professional Funds 288,866 3.93
FINANCIAL INSTRUMENTS
The Group’s financial instruments, other than
derivatives, comprise borrowings, some cash and
liquid resources, and various items, such as trade
debtors, trade creditors, etc. that arise directly from
its operations.The Group’s financial liabilities
comprise borrowings, trade creditors, other
creditors and finance leases, the main purpose of
which is to raise finance for the Group’s operations.
The Group also has financial assets comprising cash,
trade and other debtors.
The Group also enters into derivatives transactions
(principally forward foreign currency contracts).
The purpose of such transactions is to manage the
currency risks arising from the Group’s operations.
It is, and has been throughout the period under
review, the Group’s policy that no trading in financial
instruments shall be undertaken.
The main risks arising from the Group’s financial
instruments are interest rate risk, liquidity risk and
foreign currency risk.The Board reviews and agrees
policies for managing each of these risks and they
are summarised below.These policies, established 
1 April 2000, have been reviewed and remain
unchanged.
Interest rate risk
The Group finances its operations through a mixture
of retained profits and bank borrowings.The Group
borrows, principally in sterling, at floating rates of
interest to meet short term funding requirements.
At the year end the Group had no borrowings
other than finance leases.
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 a significant proportion of its
products from the Far East in HK and US dollars.
The Group’s policy is to reduce currency exposure
arising from its purchases and anticipated orders by
using forward foreign exchange contracts of up to
12 months. All sales and other purchases originating
in the UK are denominated in sterling.
The Company has a US subsidiary. At present the
Company does not consider the balance sheet
translation exposure significant enough to warrant
matching the net currency assets with currency
borrowings.
ANNUAL GENERAL MEETING - SPECIAL
BUSINESS RESOLUTIONS
The notice of Annual General Meeting set out on
pages 46 and 47 includes special resolutions to
renew the directors' authority to allot equity
securities and the Company's authority to purchase
its own shares.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
8 Resolution Number 7 is a special 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 £150,000. If approved,
the resolution will entitle the Board to allot equity
securities having an aggregate nominal value of
£18,000 for cash, equivalent to 360,000 ordinary
shares representing 4.9 per cent of the Company’s
issued share capital as at 31 March 2003, as if
Section 89(1) of the Act conferring pre-emption
rights on shareholders did not apply. Allotments for
cash in excess of this figure on a non pre-emptive
basis will require prior shareholder approval except
in the case of a rights issue to existing shareholders.
This Section 80 authority and Section 89
disapplication will last until the end of the next
Annual General Meeting of the Company.
Resolution Number 8 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
representing less than 15 per cent of the issued
ordinary share capital of the Company at the date
of this resolution.The directors will exercise this
power only if they believe that the effect of such
purchases will be to increase earnings per share and
that to do so is in the best interests of the Company
and shareholders generally.The minimum price
which may be paid for an ordinary share is the par
value of such share, from time to time, exclusive of
expenses.The maximum price which may be paid
for an ordinary share shall be an amount equal to 
5 per cent above 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.
The authority to make market purchases will also
last until the end of the next Annual General
Meeting of the Company.
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
Hornby has agreed a variety of payment terms with
its suppliers. It is and will remain the general policy
of the Group and Company 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 2003 was 23 days
(2002 - 21 days).The Company itself does not trade
and therefore has no external trade creditors.
AUDITORS
Following the conversion of our auditors
PricewaterhouseCoopers to a Limited Liability
Partnership (LLP) from 1 January 2003, a resolution
to appoint its successor, PricewaterhouseCoopers
LLP , as auditors to the Company will be proposed 
at the Annual General Meeting.
By order of the Board
J W Stansfield
Secretary
Westwood 
Margate
Kent  CT9 4JX
5 June 2003 
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
9 Corporate Governance
COMPLIANCE WITH THE COMBINED CODE 
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.The Board
believes the 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 page 7 .
Independent Non-Executive Directors
The Board considers all 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 should
not prejudice their independence.
N J Cosh has been identified as the senior 
non-executive director through whom concerns 
can be conveyed to the Board.
Availability of Information
Executive management have a responsibility to
provide the Board with sufficient information in a
form and quality appropriate to enable it to
discharge its duties.The Board therefore expects to
receive timely information, circulated in advance, on
all issues scheduled to arise at Board meetings. On 
a regular basis these will include management
accounts indicating the performance of the business
against budget together with financial forecasts that
are updated on a monthly and quarterly basis.
Appointments to the Board
Appointments to the Board require the Board’s
authorisation.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 directors do not
consider a separate Nominations Committee is
required for a Board of this size.
The potential candidates are interviewed by either
the Chairman or the Chief Executive.Their preferred
candidate is subsequently interviewed by the 
non-executive directors. 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.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
10 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 composition is in compliance with the
Combined Code provision B.2.2 which states that
the Committee should consist exclusively of 
non-executive directors, and provision B.1.7 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.
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 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 independence and objectivity of the
auditors 
• review the appropriateness and effectiveness of
the Group’s internal controls, policies and
procedures
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.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
11 12
Corporate Governance
continued
INTERNAL CONTROL
The directors have overall responsibility for the
Group's system of internal control. Although no
system of internal control can provide absolute
assurance against material misstatement or loss, the
system is designed to provide the directors with
reasonable assurance that problems are identified on
a timely basis and are dealt with appropriately.
The key elements of the Group's system of internal
control are as follows:
Control environment
The Board has put in place an organisational
structure with clearly defined and understood lines
of responsibility and delegation of authority. The
Board promotes a strong control environment with
a strong ethical climate.
Identification of business risks
The Board has the primary responsibility for
identifying the major business risks facing the Group
and developing appropriate policies to manage
those risks.The Board has completed a risk
assessment programme in order to identify the
major business risks and has reviewed and
determined the key control objectives.
Major corporate information systems
The Group operates a comprehensive annual
planning and budgeting system in conjunction with a
three year business plan which is regularly updated
to reflect changing circumstances.The annual plans
and budgets are approved by the Board.The Board
reviews the management accounts at its monthly
meetings and financial forecasts are updated monthly
and quarterly. Performance against budget is
monitored and where any significant deviations are
identified appropriate action is taken.
Main control procedures
Management establishes control procedures in
response to each of the key risks identified.
Standard control procedures operate to ensure the
integrity of the Group's financial statements.
Monitoring system used by the Board
The Board as a whole monitors the operation of
the system of internal control through management
reviews and has reviewed the effectiveness of the
system of internal control for the 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.
Compliance with the provisions of the
Combined Code
The Company has complied throughout the year
with the Code provisions set out in Section 1 of the
Combined Code apart from Section D.3.1, which
requires the Board and the Audit Committee to
comprise at least three non-executive directors.
The Combined Code requires that the directors
review the effectiveness of the Group’s system of
internal control. 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.
GOING CONCERN
After making appropriate enquiries, the directors
have a reasonable expectation that the Group and
the Company have adequate resources to continue
in operational existence for the foreseeable future.
For this reason they continue to adopt the going
concern basis in preparing the Group's financial
statements.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003 13
Company law requires the directors to prepare
financial statements for each financial year that give a
true and fair view of the state of affairs of the
Company and the Group and of the profit or loss of
the Group for that year.The directors are required
to prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The directors confirm that suitable accounting
policies have been used and applied consistently.
They also confirm that reasonable and prudent
judgements and estimates have been made in
preparing the financial statements for the year ended
31 March 2003 and that applicable accounting
standards have been followed.
The directors are responsible for keeping proper
accounting records that disclose with reasonable
accuracy at any time the financial position of the
Company and the Group and to enable them to
ensure that the financial statements comply with the
Companies Act 1985.They are also responsible for
safeguarding the assets of the Company and the
Group and hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance
and integrity of the Company’s website. Information
published on the internet is accessible in many
countries with different legal requirements.
Legislation in the United Kingdom governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the Board
J W Stansfield
Secretary
5 June 2003
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
STATEMENT OF DIRECTORS’ RESPONSIBILITIES Remuneration Report
for the Year Ended 31 March 2003
This part of the Remuneration Report is unaudited.
The Remuneration Committee is chaired by the
non-executive Chairman and comprises the 
non-executive directors.The current members of
the Committee are N A Johnson (Chairman) and 
N J Cosh.
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 Combined
Code.The Committee’s policy is to ensure that
executive remuneration packages are sufficient to
attract, retain and motivate executive directors of
the required quality whilst avoiding paying more than
is necessary. It also endeavours to establish
performance related elements of remuneration
which align the interest of the directors with those
of the shareholders.
The Committee achieves its objectives through
remuneration packages of executive directors and
senior management that comprise the following:
• Salary and benefits
Salaries are reviewed regularly and these salaries
are changed at the time of the Group’s annual
salary review. Policies concerning other benefits
together with the Group’s company car policy are
reviewed periodically.
• Share options
The Group currently has a part approved and
part unapproved executive share option scheme
and details of options held by directors are set
out on page 17.
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.
• 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 bonuses available are
divided between a capped range of targets
established for Group profit before tax and
personal objectives. Bonuses relating to personal
objectives are only realised if Group profit
exceeds minimum targets.
• Short T erm Incentive Plan
The Company has introduced a Short Term
Incentive Plan (STIP) to reward the performance
of executive directors and senior management. A
participating employee is entitled to a conditional
award of shares (Basic Award) equal in value to
and in substitution for part of their cash bonus
which would otherwise have been payable.
Where a participant so elects the Company will
also provide an equivalent matching award
(Matching Award) of the same number of shares.
Both the Basic and Matching Awards will usually
only be vested in the participant in equal amounts
on the second, third and fourth anniversaries of
the award date subject to the participant
continuing to be employed within the Group.
Shares to satisfy both the Basic and Matching
Awards are purchased in the market by an
employee benefit trust established and funded 
by the Company.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
14 Set out below is a Performance Graph that
compares the total shareholder return performance
of Hornby with the FTSE Small Cap index, selected
because it includes UK quoted companies of a
similar size to Hornby.
The total shareholder return for the 5 year period
of 201% compares to the total return of the FTSE
Small Cap of -29%.
The targeted composition of each director's remuneration for the forthcoming year is as follows:
Non-performance Performance
Director Position Related Related
N A Johnson Non-executive Chairman 100% Nil
F Martin Chief Executive 57% 43%
J W Stansfield Finance Director 65% 35%
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.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
15
T otal Shareholder Return 1/4/1998 to 31/3/2003
50
100
150
200
250
300
350
Apr 98 Jul 98 Oct 98 Jan 99 Apr 99 Jul 99 Oct 99 Jan 00 Apr 00 Jul 00 Oct 00 Jan 01 Apr 01 Jul 01 Oct 01 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03
FTSE Small Cap
Source: Datastream Remuneration Report
continued
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
16
Executive Directors’ Contracts
The executive directors do not have fixed period
contracts.
Frank Martin, the Chief Executive, receives a salary
of £150,000 per annum effective 1 April 2003.
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.
John Stansfield, the Finance Director and Secretary,
receives a salary of £85,000 per annum effective 
1 April 2003. 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 respect of the year ended 31 March 2003 each of
the executive directors was entitled to an award of
bonus, details of which appear in the table of
directors’ emoluments.
Non-Executive Directors’ Contracts
The remuneration of the non-executive directors is
determined by the Board based on the level of fees
paid to non-executive directors of similar companies
and by considering independent external advice.
Neil Johnson, was appointed non-executive
Chairman on 22 December 2000 having initially
joined the Board on 1 July 1998. Non-executive
directors fees for his services to the Company of
£80,000 per annum effective 1 April 2003 are paid
to a third party consultancy company. Mr Johnson's
service contract dated 1 July 1998 is subject to
termination on three months notice to be given by
either the Company or Mr Johnson.
Nicholas Cosh, non-executive director, was
appointed to the Board on 21 June 1999, and
receives non-executive directors fees for his services
to the Company of £30,000 per annum effective 
1 September 2002. Mr Cosh's service contract
dated on appointment is subject to termination on
three months notice to be given by either the
Company or Mr Cosh.
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. DIRECTORS’ INTERESTS
Interests in shares
The interests of the directors in the shares of the Company at 31 March were:
Number of ordinary shares of 5p
2003 2002
N A Johnson 60,000 60,000
N J Cosh 15,000 15,000
J W Stansfield 2,156 -
All the interests detailed above are beneficial. Apart from the interests disclosed above no directors were
interested at any time in the year in the share capital of any other group company.
There has been no change in the interests set out above between 31 March 2003 and 30 May 2003.
This part of the Remuneration Report is auditable information.
Interests in share options
Details of options held by directors at 31 March are set out below:
Number of options Date from
Date 5p ordinary shares Exercise which Expiry
of grant 2003 2002 price exercisable date
F Martin 12/03/2001 29,662 29,662 147.5p 12/03/2004 12/03/2008
12/03/2001 20,338 20,338 147.5p 12/03/2004 12/03/2011
28/03/2002 200,000 200,000 384.0p 28/03/2005 28/03/2009
J W Stansfield 09/07/1997 15,844 22,344 223.0p 09/07/2000 09/07/2004
09/07/1997 - 7,656 223.0p 09/07/2000 09/07/2007
27/01/1999 30,000 30,000 163.5p 27/01/2002 27/01/2006
19/06/2002 50,000 - 417.0p 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.
J W Stansfield's options granted July 1997 and January 1999 satisfied the performance criteria for exercise
upon earnings per share exceeding 23p in the year ended 31 March 2002. 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.
50,000 share options were granted during the year to J W Stansfield, Finance Director, at an exercise price of
417p which was the average market price on the 3 days prior to the day of grant.The options satisfied the
performance criteria for exercise upon profit before interest and tax exceeding £4.0m in the year ended 
31 March 2003.
J W Stansfield exercised 14,156 share options during the year at 223p, the market price being 470p.
The market price of the Company’s shares at 31 March 2003 was 511p and the range during the year ended
31 March 2003 was 357p to 577p.
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
17 Remuneration Report
continued
Directors’ detailed emoluments
Details of individual directors’ emoluments for the year are as follows:
Salary STIP STIP Pension 2003 2002
& fees Bonus 2003 2002 Benefits contri- Total Total*
butions
££££££ £ £
Chairman:
N A Johnson 50,000 ----- 50,000 50,000
Executive:
F Martin 132,613 44,204 66,306 28,969 24,864 26,523 323,479 226,218
J W Stansfield 73,869 24,624 37,004 17,859 14,454 14,774 182,584 133,878
N B Cole (resigned) ------ - 12,093
T P Nabbs (resigned) ------ - 12,106
F Passet (resigned) ------ - 11,161
Non-executive:
N J Cosh 25,833 ----- 25,833 20,000
D A Robins (resigned) ------ - 2,500
282,315 68,828 103,310 46,828 39,318 41,297 581,896 467,956
* The 2002 total column includes pension contributions.
Salary and fees shown above includes fees paid in respect of duties as directors. Neither annual bonuses nor
benefits in kind are pensionable.
STIP 2003 includes individual Basic and Matching Awards to the Short Term Incentive Plan for the year ended
31 March 2003. STIP 2002 includes Matching Awards relating to the year ended 31 March 2002.
Benefits include motor cars, private fuel and healthcare. F Martin also received relocation assistance of £7,000.
Two directors accrue benefit from payments to defined contribution pension schemes (2002 - two).
No director waived emoluments in respect of the year ended 31 March 2003 (2002 - nil).
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
18 Short T erm Incentive Plan
At 31 March 2003, outstanding awards to directors under the Short Term Incentive Plan were as follows:
Market Value of Value of
Award Vesting Price at Number of entitlement entitlement
Director Date Dates Award Date shares 31 March 2003 31 March 2002
No. £’000 £’000
F Martin June 2002 June 2004/5/6 412p 14,062 72 58
June 2003 June 2005/6/7 * * 66 -
138 58
J W Stansfield June 2002 June 2004/5/6 412p 8,704 44 36
June 2003 June 2005/6/7 * * 37 -
81 36
* 2003 awards have been charged to the profit and loss account in the year and the STIP Trust will purchase
shares in the Company following the preliminary announcement at the prevailing market price.
Value of entitlement at 31 March 2003 based on the closing market price of the Company's shares of 511p
(2002 - 412p).
N A Johnson
Chairman
5 June 2003
HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
19 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
20
Independent Auditors’ Report to the Members of Hornby Plc
We have audited the financial statements which
comprise the consolidated profit and loss account,
the consolidated and Company balance sheets, the
consolidated cash flow statement, the statement of
Group total recognised gains and losses and the
related notes. We have also audited the disclosures
required by Part 3 of Schedule 7A to the
Companies Act 1985 contained in the directors’
remuneration report (“the auditable part”).
Respective responsibilities of directors 
and auditors
The directors’ responsibilities for preparing the annual
report and the financial statements in accordance
with applicable United Kingdom law and accounting
standards are set out in the statement of directors'
responsibilities.The directors are also responsible for
preparing the directors’ remuneration report.
Our responsibility is to audit the financial statements
and the auditable part of the directors’ remuneration
report in accordance with relevant legal and regulatory
requirements and United Kingdom Auditing Standards
issued by the Auditing Practices Board. 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 auditable
part of the directors’ remuneration report have been
properly prepared in accordance with the Companies
Act 1985.We also report to you if, in our opinion,
the directors' report is not consistent with the financial
statements, if 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 transactions is not disclosed.
We read the other information contained in the
annual report and consider the implications for our
report if we become aware of any apparent
misstatements or material inconsistencies with the
financial statements.The other information
comprises only the directors' report, the unaudited
part of the directors’ remuneration report, the
chairman's statement, the chief executives’ report
and the corporate governance statement.
We review whether the corporate governance
statement reflects the Company's compliance with the
seven provisions of the Combined Code specified
for our review by the Listing Rules of the Financial
Services Authority, and we report if it does not.We
are not required to consider whether the board's
statements on internal control cover all risks and
controls, or to form an opinion on the effectiveness
of the Company's or Group's corporate governance
procedures or its risk and control procedures. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
21
Basis of audit opinion
We conducted our audit in accordance with auditing
standards 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 auditable part of the directors’
remuneration report. It also includes an assessment of
the significant estimates and judgements made by the
directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate
to the 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 auditable part of the
directors’ remuneration report 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.
Opinion
In our opinion:
• the financial statements give a true and fair view of
the state of affairs of the Company and the
Group at 31 March 2003 and of the profit and
cash flows of the Group for the year then ended;
• the financial statements have been properly 
prepared in accordance with the Companies Act
1985; and
• those parts of the directors’ remuneration report 
required by Part 3 of Schedule 7A to the
Companies Act 1985 have been properly prepared
in accordance with the Companies Act 1985.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Maidstone
Kent
5 June 2003 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
Consolidated Profit and Loss Account
for the Year Ended 31 March 2003
2003 2002
Notes £’000 £’000
TURNOVER 2 34,142 28,489
Cost of sales (18,369) (16,206)
GROSS PROFIT 15,773 12,283
Net operating expenses 3 (10,417) (8,609)
OPERATING PROFIT 5,356 3,674
Net interest receivable 4 55 48
PROFIT ON ORDINARY ACTIVITIES
BEFORE T AXA TION 5 5,411 3,722
Tax on profit on ordinary activities 7 (1,519) (1,329)
PROFIT ON ORDINARY ACTIVITIES
AFTER T AXA TION 3,892 2,393
Dividends 8 (1,830) (1.234) 
RETAINED PROFIT
FOR THE FINANCIAL YEAR 18 2,062 1,159
A TTRIBUTED TO:
The Company (45) (41)
Subsidiary undertakings 2,107 1,200
2,062 1,159
EARNINGS PER ORDINARY SHARE 9
Basic 53.32p 32.97p
Diluted 52.00p 32.56p
All of the activities of the Group are continuing.
22 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
2003 2002
£’000 £’000
Profit for the financial year 3,892 2,393
Exchange adjustments offset in reserves (21) -
Total recognised gains for the year 3,871 2,393
Statement of Group Total Recognised Gains and Losses
for the Year Ended 31 March 2003
2003 2002
£’000 £’000
REPORTED PROFIT ON ORDINARY 
ACTIVITIES BEFORE TAXATION 5,411 3,722
Difference between the historical cost
depreciation charge and the actual depreciation
charge calculated on the revalued amount 17 17
Historical cost profit on ordinary activities
before taxation 5,428 3,739
HISTORICAL COST PROFIT FOR THE YEAR
RETAINED AFTER TAXATION AND DIVIDENDS 2,079 1,176
Note of Group Historical Cost Profits
for the Year Ended 31 March 2003
23 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
24
Consolidated Balance Sheet
at 31 March 2003
2003 2002
Notes £’000 £’000
FIXED ASSETS
Intangible assets 10 31 36
Tangible assets 11 3,569 3,625
Investments - Short Term Incentive Plan 12 192 -
3,792 3,661
CURRENT ASSETS
Stocks 13 6,150 5,535
Debtors 14 5,222 4,888
Cash at bank and in hand 7,909 6,477
19,281 16,900
CREDITORS: Amounts falling due 
within one year 15 (7,187) (6,755)
NET CURRENT ASSETS 12,094 10,145
TOTAL ASSETS LESS CURRENT LIABILITIES 15,886 13,806
CREDITORS: Amounts falling due after 
more than one year 15 (22) (16)
PROVISIONS FOR LIABILITIES AND CHARGES 16 (486) (628)
NET ASSETS 15,378 13,162
CAPITAL AND RESERVES
Called up share capital 17 367 363
Capital redemption reserve 18 55 55
Share premium account 18 4,696 4,525
Revaluation reserve 18 774 791
Other reserves 18 1,688 1,688
Profit and loss account 18 7,798 5,740
EQUITY SHAREHOLDERS’ FUNDS 18 15,378 13,162
The financial statements which comprise the consolidated profit and loss account, the consolidated and
Company balance sheets, the consolidated cash flow statement, the statement of Group total recognised gains
and losses and the related notes were approved by the Board of directors on 5 June 2003 and were signed on 
its behalf by:
F Martin
Director HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
25
Company Balance Sheet
at 31 March 2003
2003 2002
Notes £’000 £’000
FIXED ASSETS
Tangible assets 11 1,643 1,687
Investments 12 14,054 11,787
15,697 13,474
CURRENT ASSETS
Debtors 14 1,407 1,096
CREDITORS:Amounts falling due 
within one year 15 (1,717) (1,402)
NET CURRENT LIABILITIES (310) (306)
TOTAL ASSETS LESS CURRENT LIABILITIES 15,387 13,168
PROVISIONS FOR LIABILITIES AND CHARGES            16 (9) (6)
NET ASSETS 15,378 13,162
CAPITAL AND RESERVES
Called up share capital 17 367 363
Capital redemption reserve 18 55 55
Share premium account 18 4,696 4,525
Other reserves 18 13,810 11,724
Profit and loss account 18 (3,550) (3,505)
EQUITY SHAREHOLDERS’ FUNDS 15,378 13,162
The financial statements which comprise the consolidated profit and loss account, the consolidated and
Company balance sheets, the consolidated cash flow statement, the statement of Group total recognised gains
and losses and the related notes were approved by the Board of directors on 5 June 2003 and were signed on 
its behalf by:
F Martin
Director HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
26
Consolidated Cash Flow Statement
for the Year Ended 31 March 2003
2002 2001
Notes £’000 £’000 £’000 £’000
Net cash inflow from 
operating activities I 5,814 4,437
Returns on investments and 
servicing of finance 55 48
Taxation (1,662) (872)
Capital expenditure and 
financial investment
- purchase of fixed assets (1,219) (1,440)
- sale of fixed assets 60 34
- purchase of own shares (192) -
(1,351) (1,406)
Payment of deferred consideration (49) (38)
Equity dividends paid (1,524) (871)
Net cash inflow before financing 1,283 1,298
Financing
Issue of ordinary shares 175 -
Capital element of finance lease payments (17) (33)
Increase in cash in the year 1,441 1,265
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
2003 2002
Notes £’000 £’000
Increase in cash in the year 1,441 1,265
Cash outflow from decrease in lease financing 17 33
Change in net funds resulting from cash flows 1,458 1,298
New finance leases (28) -
Exchange movements (9) -
Movement in net funds in the year 1,421 1,298
Net funds at 1 April 2002 6,446 5,148
Net funds at 31 March 2003 II 7,867 6,446
2003 2002 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
27
Notes to the Cash Flow Statement
NOTE I – NET CASH FLOW FROM OPERATING ACTIVITIES
2003 2002
£’000 £’000
Operating profit 5,356 3,674
Exchange adjustments offset in reserves (7) -
Depreciation charges 1,266 1,468
Amortisation of goodwill 3 2
Profit on sale of tangible fixed assets (18) (10)
(Increase) in stocks (615) (1,295)
(Increase)/decrease in debtors (374) 67
Increase in creditors 348 512
(Decrease)/increase in sales returns provision (145) 19
Net cash inflow from operating activities 5,814 4,437
NOTE II – ANALYSIS OF NET FUNDS
Other
1 April Cash non-cash 31 March
2002 flow changes 2003
£’000 £’000 £’000 £’000
Cash at bank and in hand 6,477 1,441 (9) 7,909
Finance leases (31) 17 (28) (42)
Net funds 6,446 1,458 (37) 7,867
Analysed in Balance Sheet
Cash at bank and in hand 6,477 7,909
Finance leases
within one year (15) (20)
after one year (16) (22)
Net funds 6,446 7,867 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
28
Notes to the Financial Statements
1   ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable Accounting Standards in the 
United Kingdom. A summary of the more important accounting policies, which have been applied consistently, is 
set out below.
BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost convention, as modified by the revaluation
of certain fixed assets.
BASIS OF CONSOLIDATION
The Group financial statements consolidate the financial statements of the Company and all its subsidiaries made
up to 31 March 2003. The results of subsidiaries acquired are included in the consolidated profit and loss account
from the date control passes. Intra group sales and profits are eliminated on consolidation. Any goodwill arising on
consolidation (representing the excess of the fair value of the consideration given over the fair value of the
separable net assets acquired) is capitalised and amortised over its expected useful economic life.
The Company has taken advantage of the exemption provided by Section 230 of the Companies Act 1985 not to
present its own profit and loss account.
RESEARCH AND DEVELOPMENT
Expenditure on research and development is written off as incurred.
TANGIBLE FIXED ASSETS
Land and buildings are shown at cost or valuation less accumulated depreciation. Assets revalued prior to the issue
of FRS15 are retained at their book amounts as though they were the historical cost amounts. Other fixed assets
are shown at cost less accumulated depreciation.
Depreciation is provided at rates calculated to write off the cost or valuation, less any estimated residual value, 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
Residual value is calculated on prices prevailing at the date of acquisition or revaluation where this has taken place.
Tools and moulds are depreciated at varying rates in line with the related estimated product sales on an 
item-by-item basis up to a maximum of 4 years.
FIXED ASSET INVESTMENTS
In the Company’s financial statements investments in subsidiary undertakings are stated using the equity method of
valuation. Accordingly, subsequent increases and reductions in the value of these investments are set against other
reserves in the financial statements of the Company.The directors consider that this policy more fairly represents
the Company’s investments than carrying them at cost. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
29
STOCKS
Stocks are stated at the lower of cost and net realisable value.
Cost incurred in bringing each product to its present location and condition is based on:
Raw materials and consumables - actual purchase cost on a first in first out basis including freight and duty
where applicable.
Work in progress and finished goods - cost of actual direct materials and labour plus a proportion of manufacturing
overheads based on the normal level of activity.
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.
REVALUATION RESERVE
The surplus arising on the revaluation of freehold land and buildings is credited to the revaluation reserve, which is
not distributable. Where depreciation charges are increased following a revaluation, an amount equal to such
increase is transferred annually from this reserve to the profit and loss account.
TAXATION
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.The tax benefits arising from group relief are recognised in the financial statements of
the surrendering and recipient undertakings.
Full provision is made for the tax liability on all timing differences in accordance with FRS19. Deferred tax balances
have not been subject to discounting.
PROVISIONS
The Group provides for liabilities when it has a legal or constructive obligation due to a past event.
PENSION 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).
The amount charged to the profit and loss account in respect of the scheme is the contribution payable in the year.
Further information on pensions costs is provided in note 22.
FINANCIAL INSTRUMENTS
Foreign currency forward contracts are used to hedge significant commitments or anticipated transactions.
Gains and losses arising from these contracts are recognised when the hedged transaction occurs. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
30
Notes to the Financial Statements
continued
FOREIGN CURRENCY
Transactions and investments denominated in foreign currencies are recorded in sterling at the exchange rates
ruling at the date of the transaction. The assets, liabilities and results of foreign subsidiaries are translated into sterling
at the rates of exchange ruling at the balance sheet date. Monetary assets and liabilities denominated in foreign
currencies at the year end are reported at the rate of exchange prevailing at that date. Any gain or loss arising from
a change in exchange rates subsequent to the date of the transaction is reported in the profit and loss account as
an exchange gain or loss, with the exception of gains and losses on the retranslation of opening net foreign currency
investments in subsidiaries which are taken to reserves and recognised in the statement of total recognised gains
and losses.
TURNOVER
Group turnover is recorded at the date of despatch and comprises the invoiced value of sales (excluding VAT, sales
between group companies and trade discounts) of goods and services in the normal course of business and
royalties receivable.
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.
Rentals under operating leases are charged on a straight-line basis over the lease term.
2 SEGMENTAL INFORMATION
The directors consider there to be one class of business, being the development, manufacture and distribution of
model products.
BY ORIGIN Turnover Profit/(loss) before tax Net assets
2003 2002 2003 2002 2003 2002
£’000 £’000 £’000 £’000 £’000 £’000
United Kingdom 30,680 25,746 5,347 3,839 15,143 12,950
United States of America 3,462 2,743 64 (117) 235 212
Group 34,142 28,489 5,411 3,722 15,378 13,162
TURNOVER BY DESTINATION 2003 2002
£’000 £’000
United Kingdom 26,473 22,439
Rest of World 7,669 6,050
Group 34,142 28,489 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
31
3 OTHER OPERATING EXPENSES
2003 2002
£’000 £’000
Distribution costs 1,027 890
Selling and marketing costs 5,979 5,045
Research and development costs 711 432
Administrative costs 2,700 2,242
10,417 8,609
4 NET INTEREST RECEIVABLE
2003 2002
£’000 £’000
Interest receivable and similar income:
-  bank interest receivable 138 132
Interest payable and similar charges:
-  on overdrafts (79) (81)
-  on finance leases (4) (3) 
55 48
5   PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
2003 2002
£’000 £’000
Profit on ordinary activities before taxation is stated after charging/(crediting):
Depreciation of tangible fixed assets
- owned 1,257 1,459
- held under finance leases 9 9
Amortisation of goodwill 3 2
Operating lease rentals 66 233
Hire of plant and machinery 40 39
Profit on sale of fixed assets (18) (10)
Auditors’ remuneration
- audit fees            (Company £14,000 ; 2002 - £14,000) 57 58
- non audit fees (Company £2,000 ; 2002 - £10,000) 16 19
Staff costs (see note 6 below) 4,019 3,348
Non audit fees relate to tax services. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
32
Notes to the Financial Statements
continued
6   DIRECTORS AND EMPLOYEES
2003 2002
£’000 £’000
STAFF COSTS (including executive directors)
Wages and salaries 3,508 2,924
Social security costs 315 251
Other pension costs 196 173
4,019 3,348
AVERAGE MONTHLY NUMBER OF EMPLOYEES 2003 2002
Number Number
The average monthly number of employees, including
executive directors, in the Group during the year was:
Operations 78 83
Sales, marketing and distribution 52 51
Administration 16 16
146 150
DIRECTORS’ EMOLUMENTS
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 14 to 19 and forms part of these financial statements.
7   TAXATION
(a) Analysis of tax charge in the year 2003 2002
£’000 £’000
The taxation charge is based on the profit for the year and comprises:
Current tax
UK Corporation taxation at 30% (2002 - 30%) 1,685 1,376
Adjustments in respect of prior years (189) 146
Foreign T ax
Overseas taxation 16 (40)
Adjustments in respect of prior years 4 -
Total current tax (Note 7b) 1,516 1,482
Deferred tax
Current year 3 (2)
Adjustments in respect of prior years - (151)
Total deferred tax (Note 16) 3 (153)
Tax on profit on ordinary activities 1,519 1,329 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
33
(b) Factors affecting tax charge for the year
The tax charge for the year is lower than the standard rate of Corporation Tax in the United Kingdom (30%).
The differences are explained below:
2003 2002
£’000 £’000
Profit on ordinary activities before tax 5,411 3,722
Tax on profit on ordinary activities at the standard
rate of Corporation Tax of 30% (2002 - 30%) 1,623 1,117
Effects of:
Expenses not deductible for tax purposes 39 57
Differences between capital allowances and depreciation 39 153
Deferred tax movement not recognised - 160
Adjustments to tax charge in respect of prior years (185) (5)
Current tax charge for the year (Note 7a) 1,516 1,482
8   DIVIDENDS
2003 2002
£’000 £’000
Ordinary:
- interim paid: 6p per share (2002 - 2p per share) 438 145
- final proposed: 19p per share (2002 - 15p per share) 1,395 1,089
- adjustments (see below) (3) -
1,830 1,234
The adjustments relate to dividends that were waived relating to the prior year (£7,000) and dividends paid on
options exercised (£4,000). HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
34
Notes to the Financial Statements
continued
9   EARNINGS PER SHARE
The calculation of basic earnings per ordinary share is based on the profit attributable to ordinary shareholders for
the financial year of £3,892,000 (2002 - £2,393,000) and the weighted average number of ordinary shares in issue
during the year of 7,299,894 (2002 - 7,257,320).
2003 2002
Earnings Earnings
Earnings per share Earnings per share
£’000 pence £’000 pence
Earnings per share
Basic 3,892 53.32 2,393 32.97
Diluted 52.00 32.56
The following table shows a reconciliation of the weighted average number of shares used for calculating the basic
and diluted earnings per share.
2003 2002
Number Number
of shares of shares
Used for calculating basic earnings per share 7,299,894 7,257,320
Dilution due to share option schemes 185,147 91,356
Used for calculating diluted earnings per share 7,485,041 7,348,676 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
35
10   INTANGIBLE FIXED ASSETS
Group
2003
£’000
GOODWILL
COST
At 1 April 2002 43
Exchange adjustment (2)
At 31 March 2003 41
AGGREGATE AMORTISATION
At 1 April 2002 7
Charge for the year 3
At 31 March 2003 10
NET BOOK AMOUNT
At 31 March 2003 31
At 31 March 2002 36
The goodwill arising on the acquisition of the assets of A Day at the Races Inc. is being amortised on a 
straight-line basis over fifteen years, being the directors’ estimate of its expected useful life. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
36
Notes to the Financial Statements
continued
11   TANGIBLE FIXED ASSETS - 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 2002 2,377 5,211 233 17,284 25,105
Additions - 64 56 1,135 1,255
Exchange adjustment - (4) (2) - (6)
Disposals - (851) (53) - (904)
At 31 March 2003 2,377 4,420 234 18,419 25,450
DEPRECIATION
At 1 April 2002 690 4,880 160 15,750 21,480
Charge for the year 44 150 26 1,046 1,266
Exchange adjustment - (1) (2) - (3)
Disposals - (838) (24) - (862)
At 31 March 2003 734 4,191 160 16,796 21,881
NET BOOK AMOUNT
At 31 March 2003 1,643 229 74 1,623 3,569
At 31 March 2002 1,687 331 73 1,534 3,625
Freehold land amounting to £620,000 (2002 - £620,000) has not been depreciated.
The net book amount of tangible fixed assets includes £39,000 (2002 - £30,000) in respect of assets acquired under
finance leases, all of which relates to motor vehicles.
The amount of freehold land and buildings at 31 March is represented by:
2003 2002
£’000 £’000
Valuation in 1986 2,360 2,360
Cost 17 17
2,377 2,377
Other tangible fixed assets are stated at cost. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
37
TANGIBLE FIXED ASSETS - COMPANY
The fixed assets for the Company comprise solely of freehold land and buildings included in the table above.
The original cost and aggregate depreciation, based on cost of land and buildings included at valuation, are as follows:
2003 2002
£’000 £’000
Original cost 412 412
Depreciation based on cost (175) (167) 
237 245
12   FIXED ASSET INVESTMENTS
GROUP
Short T erm
Incentive Plan
£’000 
At 1 April 2002 -
Shares acquired in Company 192
At 31 March 2003 192
46,584 ordinary shares to the value of £192,000 were acquired in June 2002 by the Employee Benefit Trust in
accordance with the incentive plan.The Trust has waived its right to dividends.
COMPANY
The movements in the net book value of interests in subsidiary undertakings are as follows:
Interests in Loans to
subsidiary subsidiary
undertakings undertakings
at valuation at cost T otal
£’000 £’000 £’000
At 1 April 2002 11,312 475 11,787
Retained profit for the year 2,086 - 2,086
Other movements - 181 181
At 31 March 2003 13,398 656 14,054 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
38
Notes to the Financial Statements
continued
PRINCIPAL GROUP SUBSIDIARY UNDERTAKINGS
Details of the principal subsidiary undertakings of the Company, which are included in the consolidated financial
statements, are set out below. Hornby Hobbies Limited is engaged in the development, manufacture and distribution
of models. Scalextric USA, Inc. is a distributor of models.
Country of Description of Proportion of nominal 
incorporation shares held value of issued shares held:
Group Company
%%
Hornby Hobbies Limited Great Britain Ordinary £1 shares 100 100
Scalextric USA, Inc. USA Ordinary shares 100 100
13   STOCKS
Group
2003 2002
£’000 £’000
Raw materials and consumables 567 307
Work in progress 1,135 1,320
Finished goods and goods for sale 4,448 3,908
6,150 5,535
14   DEBTORS
Group Company
2003 2002 2003 2002
£’000 £’000 £’000 £’000
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade debtors 4,482 4,366 - -
Dividends receivable from subsidiary undertakings - - 1,395 1,089
Overseas Corporation tax recoverable - 40 - -
Prepayments 578 381 12 7
VAT recoverable 67 59 - -
Other debtors 95 42 - -
5,222 4,888 1,407 1,096 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
39
15   CREDITORS
Group Company
2003 2002 2003 2002
£’000 £’000 £’000 £’000
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Finance lease obligations 20 15 - -
Trade creditors 1,675 1,306 - -
UK Corporation tax payable 935 1,136 36 45
Overseas Corporation tax payable 15 - - -
PAYE and Social Security 69 69 - -
Dividends proposed 1,395 1,089 1,395 1,089
Accruals 1,889 1,525 286 268
Deferred consideration for acquisition - 49 - -
Other creditors 1,189 1,566 - -
7,187 6,755 1,717 1,402
AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR:
Finance lease obligations 22 16 - -
7,209 6,771 1,717 1,402
Finance leases are repayable as follows (excluding finance charges):
Within 1 year 20 15 - -
Between 1 - 2 years 5 16 - -
Between 2 - 5 years 17 - - -
42 31 - -
Aggregate finance lease obligations exclude future finance charges amounting to £4,000 (2002 - £1,000). HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
40
Notes to the Financial Statements
continued
16   PROVISIONS FOR LIABILITIES AND CHARGES
Group 2003 2002
£’000 £’000
Sales returns
At 1 April 622 603
Charged to profit and loss account 749 835
Utilised in year (894) (816)
At 31 March 477 622
Deferred tax
At 1 April 6 159
Transfer from/(to) profit and loss account 3 (153)
At 31 March 9 6
Total provisions at 31 March 486 628
Group
2003 2002
Not Not
Provided provided Provided provided
£’000 £’000 £’000 £’000
Provision for deferred tax comprises:
Accelerated capital allowances 93 6 (166)
Other timing differences - (20) - (18)
9 (17) 6 (184)
No deferred tax has been provided in relation to the revaluation of certain land and buildings as no liability would
arise on a sale at the revalued amount.
Company
2003 2002
Not Not
Provided provided Provided provided
£’000 £’000 £’000 £’000
Provision for deferred tax comprises:
Accelerated capital allowances 9- 6-
Other timing differences -- - (1)
9- 6 (1) HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
41
17   CALLED UP SHARE CAPITAL
2003 2002
£’000 £’000
Authorised:
10,000,000 (2002 - 10,000,000) ordinary shares of 5p each 500 500
Allotted, called up and fully paid:
7,343,276 (2002 - 7,257,320) ordinary shares of 5p each 367 363
Included in the total are 46,584 ordinary shares allotted to the directors and senior management under the
Group's Short Term Incentive Plan with a nominal value of £2,329.
Shares issued in the year are set out below:
Date issued Number of shares Exercise price
11 June 2002 10,000 163.5p
11 June 2002 15,000 223.0p
15 November 2002 18,348 163.5p
15 November 2002 29,156 223.0p
27 November 2002 13,452 223.0p
85,956
At 31 March 2003 options granted under the Company’s share option schemes were outstanding as follows:
Date granted Number of options Exercise price Period of option
2003 2002
9 July 1997 31,284 37,784 223.0p July 2000 - July 2004
9 July 1997 26,108 77,216 223.0p July 2000 - July 2007
27 January 1999 86,652 96,652 163.5p January 2002 - January 2006
27 January 1999 - 18,348 163.5p January 2002 - January 2009
12 March 2001 29,662 29,662 147.5p March 2004 - March 2008
12 March 2001 20,338 20,338 147.5p March 2004 - March 2011
28 March 2002 200,000 200,000 384.0p March 2005 - March 2009
19 June 2002 185,000 - 417.0p June 2005 - June 2009
579,044 480,000 HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
42
Notes to the Financial Statements
continued
18   RESERVES
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
GROUP 2003 2002
£’000 £’000
Profit for the financial year 3,892 2,393
Dividends (1,830) (1,234)
Exchange loss on investment (21) -
Shares issued 175 -
Net additions to shareholders’ funds 2,216 1,159
Opening shareholders’ funds 13,162 12,003
Closing shareholders’ funds 15,378 13,162
MOVEMENTS IN RESERVES
Share Capital Profit
premium redemption Revaluation Other and loss
account reserve reserve reserves account
GROUP £’000 £’000 £’000 £’000 £’000
At 1 April 2002 4,525 55 791 1,688 5,740
Retained profit for the year ---- 2,062
Amortisation of revaluation surplus - - (17) - 17
Exchange loss on investment ---- (21)
Shares issued 171 ----
At 31 March 2003 4,696 55 774 1,688 7,798
Share Capital Profit
premium redemption Other and loss
account reserve reserves account
COMPANY £’000 £’000 £’000 £’000
At 1 April 2002 4,525 55 11,724 (3,505)
Profit/(loss) for the year - - 2,086 (45)
Shares issued 171 - - -
At 31 March 2003 4,696 55 13,810 (3,550)
The net deficit carried forward on the Company's profit and loss account arises as a result of a provision for the
diminution in the value of the investment in Hornby Industries Limited. Relying on Section 275(1) of the Companies
Act 1985, the provision for diminution in value of the investment in Hornby Industries Limited is not treated 
for distribution purposes as a realised loss. In the directors' opinion therefore, at the end of the year £229,000 
(2002 - £274,000) may be considered to be distributable. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
43
19  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. Financial assets and liabilities
included in this note, other than currency disclosures, exclude provisions for liabilities and charges, short term
debtors and creditors other than finance lease obligations.
(a) Financial assets
The interest rate and currency profiles of the Group’s financial assets comprising cash at bank and in hand at 
31 March 2003 were:
Currency Floating Fixed 2003 2002
rate rate T otal T otal
£’000 £’000 £’000 £’000
Sterling 7,004 - 7,004 6,070
HK dollar 623 - 623 18
US dollar 205 - 205 380
Euro 63 - 63 -
Other 14 - 14 9
7,909 - 7,909 6,477
Sterling and cash deposits are placed in a liquidity fund with daily access. Currency cash deposits are placed on
the money market at floating bank deposit interest rates for periods of up to three months. Normally Hong
Kong and US dollars are placed on short term fixed rate deposits usually less than one month. Floating rate
financial assets attract interest at rates based on relevant national LIBOR equivalents.
(b) Financial liabilities
The Group had at 31 March 2003 fixed rate sterling finance leases, the maturity profile of which is set out in
note 15 to the financial statements.
(c) Fair values of financial assets and financial liabilities
Set out below is a comparison by category of book values and fair values of the Group’s financial assets and
liabilities at 31 March 2003.
2003 2002
Book values Fair values Book values Fair values
£’000 £’000 £’000 £’000
Cash and deposits 7,909 7,909 6,477 6,477
Forward foreign currency contracts - (14) -14
Finance leases (42) (42) (32) (32)
Deferred consideration for acquisition -- (49) (49)
The fair values of forward foreign currency contracts have been determined with reference to prices available
from the market.
The directors believe that the fair value of finance leases are not significantly different to their book values. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
44
Notes to the Financial Statements
continued
(d) Currency exposures
After taking account of the effects of forward foreign exchange contracts the Group’s currency exposures were
as follows:
Monetary liabilities
Sterling
2003 2002
£’000 £’000
Functional currency of group operation
US Dollar (957) (1,355)
(e) Borrowing facilities
The Group has undrawn committed borrowing facilities. The facilities available at 31 March 2003, in respect of
which all conditions precedent had been met, were as follows:
2003 2002
£’000 £’000
Expiring in one year or less 4,000 4,000
When utilised, the Group’s overdraft facilities attract interest at 1.125% above Barclays Bank base rate.
(f) Gains and losses on hedges
The Group enters into forward foreign currency contracts to eliminate the currency exposures that arise on
purchases denominated in foreign currencies immediately these purchases have been transacted. Changes in the
fair values of instruments used as hedges are not recognised in the financial statements  until the hedge position
matures. An analysis of these unrecognised gains and losses is as follows:
Gains Losses T otal
£’000 £’000 £’000
Unrecognised gains and losses on
hedges at 1 April 2002 17 (3) 14
Gains and losses arising:
in previous year recognised in 2002/2003 (17) 3 (14)
before 1 April 2002 not recognised in 2002/2003 - - -
in 2002/2003 not recognised in 2002/2003 9 (23) (14)
Unrecognised gains and losses
on hedges at 31 March 2003 9 (23) (14)
All the unrecognised gains and losses at 31 March 2003 are expected to be recognised in the year to 31 March 2004. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
45
20   GUARANTEES AND OTHER FINANCIAL COMMITMENTS
CAPITAL COMMITMENTS
Group
2003 2002
£’000 £’000
At 31 March commitments were:
Contracted for but not provided for 413 289
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.
21   OPERATING LEASE COMMITMENTS
At 31 March 2003 the Group had lease agreements in respect of vehicles, for which the payments extend over a
number of years.
2003 2002
£’000 £’000
Annual commitments under non-cancellable
operating leases expiring:
Within one year - 23
Within 2 to 5 years 54 17
After 5 years - -
54 40
22   PENSION ARRANGEMENTS
On 1 January 1992 the Group's defined benefit pension scheme was converted to a Group defined contribution
contracted-out money purchase scheme.With effect from 5 April 2003 the scheme ceased to be contracted-out.
The scheme is open to all permanent salaried employees aged twenty years or over employed by UK companies.
The assets of the previous final salary scheme were converted into cash and the total proceeds were allocated to
individual members by the scheme's actuaries on the basis of the value of the members' accrued benefits under the
previous scheme. The amounts allocated to the individual members were invested in either a managed fund
investment, an insured with profits insurance contract or in a building society deposit account, according to the
wishes of individual members.The level of contributions to the money purchase scheme for current members is
fixed by the Company.
The pension cost for the year was £196,000 (2002 - £173,000) representing the actual contributions payable in the
year and certain scheme administration costs.
23   RELATED PARTY DISCLOSURES
There were no contracts with the Company or any of its subsidiaries subsisting during or at the end of the 
financial year in which a director of the Company was materially interested.The Company has taken advantage of 
the exemption available to parent companies under Financial Reporting Standard number 8 (“Related Party
Disclosures”) not to disclose transactions and balances with Group entities which have been eliminated on
consolidation. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
46
Notice of Annual General Meeting
Notice is hereby given that the twenty-second Annual General Meeting of Hornby Plc will be held at Berwin
Leighton Paisner,Adelaide House, London Bridge, London EC4R 9HA on Thursday 24 July 2003 at 11.00am for the
following purposes:
ORDINARY BUSINESS
1. To receive the report of the directors and the audited financial statements for the year ended 31 March 2003.
2. That the directors’ remuneration report, as set out on pages 14 to 19 of the annual accounts be approved.
3. To declare a final dividend of 19p per ordinary share payable to the shareholders on the register at close of 
business on 25 July 2003.
4. To re-elect Mr F Martin a director of the Company.
5. To re-elect Mr J W Stansfield a director of the Company.
6. To consider the following resolution, special notice having been received of the intention to propose the 
resolution as an ordinary resolution:
THAT PricewaterhouseCoopers LLP be appointed auditors of the Company in place of the retiring auditors,
to hold office until the conclusion of the next general meeting at which accounts are laid before the Company 
and that their remuneration be fixed by the directors.
SPECIAL BUSINESS
7. To consider and if thought fit to pass the following resolution which will be proposed as a special resolution:
THAT (a) the directors be generally and unconditionally authorised for the purposes of Section 80 of the
Companies Act 1985 (the "Act") to exercise all the powers of the Company to allot relevant
securities (as defined in that Section) up to a maximum nominal amount of £150,000 provided that
such authority (unless previously revoked, varied or renewed) shall expire at the conclusion of the
Annual General Meeting of the Company next following 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 relevant securities to be allotted after such expiry and the directors may allot relevant
securities in pursuance of such offer or agreement as if the authority conferred hereby had not
expired) and shall be in substitution for any and all authorities previously conferred upon the
directors for the purposes of Section 80 of the Act;
(b) the directors be empowered pursuant to Section 95 of the Act to allot equity securities (as defined
in Section 94(2) of the Act) for cash pursuant to the authority referred to in paragraph (a) above
as if Section 89(1) of the Act did not apply to any such allotment, such power to expire at the
conclusion of the Annual General Meeting of the Company next following 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 such offer or agreement as if the power conferred
hereby had not expired) and to be limited to:
(i) the allotment of equity securities in connection with an offer of securities open for acceptance
for a period fixed by the directors or (where applicable) in accordance with the rights for the
time being attached to such shares (but subject to such exclusions or other arrangements as
the directors may deem necessary or expedient to deal with legal or practical problems under
the laws of any territory or the requirements of any regulatory body or any stock exchange in
any territory or in connection with fractional entitlements or otherwise);
(ii) the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities for cash
up to an aggregate nominal amount of £18,000. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
47
8. To consider and if thought fit to pass the following resolution which will be proposed as a special resolution:
THAT the Company be generally and unconditionally authorised pursuant to Section 166 of the Companies
Act 1985 (the "Act") to make one or more market purchases (within the meaning of Section 163(3) of the
Act) of ordinary shares of 5p each in the capital of the Company ("ordinary shares") provided that:
(a) the maximum aggregate number of ordinary shares authorised to be purchased is less than 15 per cent of
the issued share capital of the Company at the date of this resolution;
(b) 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;
(c) the maximum price which may be paid for an ordinary share shall be an amount equal to 5 per cent above
the average of the middle-market quotations for the ordinary shares 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;
(d) subject as provided in paragraph (e) below, unless previously revoked, varied or renewed, the authority
hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company next
following the date of the passing of this resolution or within eighteen months from the date of the passing
of this resolution, whichever shall be the earlier; and
(e) the Company may contract to purchase ordinary shares under the authority hereby conferred before the
expiry of such authority, which will or may be completed wholly or partly after the expiry of such authority,
and may purchase ordinary shares pursuant to any such contract as if such authority had not expired.
By order of the Board
J W Stansfield
Secretary
5 June 2003
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, only those shareholders whose names are
on the register of members of the Company no later than 11am on 22 July 2003 or, if the meeting is adjourned,
shareholders entered on the Company's register of members not later than 48 hours before the time fixed for
the adjourned meeting are entitled to attend and vote at the meeting in respect of the shares registered in their
names at that time. Subsequent changes to the register shall be disregarded in determining the rights of any
person to attend or vote at the meeting.
3. There will be available for inspection at the Registered Office of the Company during usual business hours
(Saturdays excepted), from the date of this Notice, until the date of the Annual General Meeting, a copy of each
contract of service open to inspection under Section 318 of the Companies Act 1985, whereunder the
directors are employed.These documents will also be available for inspection at the Annual General Meeting
and for fifteen minutes prior thereto. HORNBY PLC | ANNUAL REPORT & ACCOUNTS 2003
48
Five Y ear Summary
2003 2002 2001 2000 1999
£’000 £’000 £’000 £’000 £’000
Turnover 34,142 28,489 24,604 21,477 21,233
Profit after interest before
exceptional items 5,411 3,722 2,292 1,402 1,462
Exceptional items - - (797) (195) (321)
Profit on ordinary
activities before taxation 5,411 3,722 1,495 1,207 1,141
Taxation (1,519) (1,329) (520) (398) (315)
Profit on ordinary
activities after taxation 3,892 2,393 975 809 826
Assets employed:
Fixed assets 3,792 3,661 3,739 4,518 4,815
Net current assets 12,094 10,145 9,122 9,932 9,275
Creditors due after more
than one year (22) (16) (96) (148) (20)
Provisions for liabilities
and charges (486) (628) (762) (806) (799)
Net assets 15,378 13,162 12,003 13,496 13,271
Total capital employed 15,378 13,162 12,003 13,496 13,271
Earnings per share
- basic 53.3p 33.0p 11.7p 9.7p 9.9p
- diluted 52.0p 32.6p 11.7p 9.7p 9.9p
- basic before exceptional 53.3p 33.0p 18.5p 11.3p 12.5p
Dividend per share (net) 25.0p 17.0p 12.0p 7.0p 7.0p
Net assets per share 209.4p 181.4p 165.4p 161.5p 158.8p