Half Yearly Report

HAYNES PUBLISHING GROUP P.L.C.

INTERIM RESULTS FOR THE 6 MONTHS ENDED

30 November 2010

Haynes Publishing Group P.L.C. is the worldwide market leader in the production and sale of automotive and motorcycle repair manuals. Every Haynes manual is based on a complete vehicle strip-down and rebuild in our workshops, so that the instructions to our customers are inherently practical and easy to follow.

Through its Dutch subsidiary Vivid Holding BV, the Haynes Group is a leading European supplier of digital technical information to the motor trade, thereby broadening the Group's business to include professional as well as DIY mechanics and enthusiasts.

The Haynes Group also publishes many other DIY titles as well as an extensive array of books about motor sport, vehicles and general transport.

Cautionary Statement:

This report contains certain forward-looking statements with regard to the financial condition and results of the operations of Haynes Publishing Group P.L.C. These statements and forecasts involve risk factors which are associated with, but are not exclusive to, the economic and business circumstances occurring from time to time in the countries and sectors in which the Group operates. These forward-looking statements are made only as at the date of this announcement. Nothing in this announcement should be construed as a profit forecast. Except as required by law, Haynes Publishing Group P.L.C. has no obligation to update the forward-looking statements or to correct any inaccuracies therein.

INTERIM STATEMENT

Business overview

During the six months to 30 November 2010 the Haynes Group, has once again, delivered a solid trading performance in what continue to be difficult market conditions, with pre-tax profits in line with last year and net cash 59% ahead of November 2009.

In the US, market conditions in the automotive aftermarket remain challenging. Nevertheless, recognising the difficult environment in which we are operating, our focus has been on working closely with our key customers to implement new sales and marketing initiatives which we are confident will provide benefits to the business going forward. In the UK and Europe, softer trading conditions at the start of the period in both our UK automotive and general publishing markets impacted sales, but stronger trading in both markets towards the end of the first half helped to recover some of the earlier shortfall. While in The Netherlands, revenue from Vivid, in local currency, ended the six month period 2% behind the prior year.

On 1 September 2010 I was pleased to announce the appointment of Alex Kwarts to the Main Board. As one of the founders' of Vivid Holding BV, Alex has over 23 years of IT experience specialising in the development of IT and web based products and Alex brings to the table a set of skills which are both relevant and complimentary to the future strategic development plans for the Haynes Group.

Financial review

Income statement

Overall Group revenue ended the six months to 30 November 2010 down 2% on the prior period at £15.70 million (2009: £15.95 million). Revenue in local currency from the North American and Australian operation was down 1% on last year, but with an average US Dollar exchange rate against Sterling for the period of $1.56 against $1.64 last year, reportable US revenue was up 5%. In the UK and Europe, revenue ended the period 9% lower than last year, as stronger UK sales in the second quarter were unable to recover the shortfalls experienced during the first three months of the period and the impact of a weaker Sterling against the Euro reduced revenue from Vivid by £0.1 million.

During the first six months of the current financial year, Group advertising expenditure returned to more normal levels following the 50th Anniversary promotional activity in 2009/10. In addition, the UK & European operations incurred lower expenditure on restructuring costs of £0.14 million. As a result, Group operating profit ended the period 1% down on last year at £2.96 million (2009: £3.00 million).

With net finance costs of £0.22 million (2009: £0.24 million), which primarily relates to the interest charge on pension scheme liabilities net of the expected return on pension scheme assets, the Group's pre-tax profit ended the six month period at £2.74 million (2009: £2.75 million) giving a basic earnings per share of 11.3p (2009: 11.7p).

Balance sheet and cash flow

During the period the Group investment in capital equipment was £0.34 million (2009: £0.29 million) which primarily related to new production equipment for the US print facility, customer display racks and IT hardware.

As at 30 November 2010, the net deficit on the Group's US and UK retirement benefit schemes was £12.14 million (31 May 2010: £14.02 million). The reduction in the deficit of £1.88 million arises from a number of factors but most notably a small increase in the UK discount rate from 5.45% to 5.50% and a reduction in the UK inflation forecast from 3.5% to 3.35% which helped reduce the present value of the scheme liabilities by £1.07 million to £33.18 million (31 May 2010: £34.25 million) and an increase of 4% in the value of the scheme's assets to £21.04 million (31 May 2010: £20.23 million).

In July 2010, the UK Government announced its proposal to link indexation of pensions within private sector pension schemes to the Consumer Prices Index ("CPI"), rather than the Retail Prices Index ("RPI"). Our calculations allow for the expected impact of these proposals on the UK pension scheme, resulting in a reduction to pension liabilities of around £0.63 million (this amount has been recognised in the Consolidated Statement of Comprehensive Income).

The net cash inflow before tax generated from operations during the six month period was £3.85 million (2009: £4.82 million) which represented 130% of Group operating profit (2009: 161%). At the end of the period the Group's net cash was £3.76 million, an increase of £1.40 million over last year (2009: £2.36 million).

Interim dividend

The Board is declaring an interim dividend of 6.2 pence per share (2009: 6.2 pence).

The payment of the interim dividend will be made on 20 April 2011 to shareholders on the register at the close of business on 8 April 2011, the shares being declared ex-dividend on 6 April 2011.

Operational review

North America and Australia

Revenue in local currency from the North American and Australian operations ended the period marginally down on last year at $13.76 million (2009: $13.85 million). However, with Sterling weaker against the US Dollar during the period, reportable US revenue after translation to Sterling was ahead of last year by 5% at £8.85 million (2009: £8.46 million).

A restructuring of the sales team in June 2010 has helped to re-focus the operation leading to new sales and marketing initiatives with key customers, most notably in relation to their display and title selection of Haynes products. We strongly believe that these new initiatives, when implemented, will benefit both the retailers and the Haynes Group. Also, at the beginning of the period, we re-negotiated terms with a major customer of the US. Following the implementation of the new terms, reportable revenue from this customer has fallen by $0.55 million, but has been offset by a corresponding reduction in advertising expense so that there has been no impact on overall profitability.

In Australia, the new management team continues to make good progress. A closer working relationship with key customers has helped to grow the retail presence of Haynes manuals and increase revenue by 6% in this territory over the prior period.

In local currency, segmental profit before interest in the North American & Australian business was in line with the prior period. However, after translation to Sterling, segmental profit ended the period up 5% at £1.62 million (2009: £1.54 million).

UK and Europe

In our UK automotive manuals division, trading during the first part of the financial year softened, leading to a shortfall in first quarter revenue of 12%. Nevertheless, a new sales initiative with a key customer to accelerate the lead time between the publication date and the title appearing in store, coupled with stronger second quarter sales to our Scandinavian customer base, helped second quarter sales marginally exceed the second quarter sales last year and reduce the overall shortfall during the six month period to 6%.

In our UK general publishing division, heavy returns from key retailers and aggressive discounting during the first quarter characterised a very difficult market place and led to revenue in the first quarter being down 12% against the prior period. Despite this difficult backdrop, a strong second quarter publishing programme including the popular official 2010 Formula 1 TM and 2010 MotoGP Season Reviews and the release of the Wallace and Gromit Cracking Contraptions and USS Enterprise manuals, helped to recover some of the shortfall from the first quarter, with overall revenue in this division ending the six month period 4% down on last year.

In the Netherlands, revenue from Vivid ended the period in local currency 2% down on the prior year, but with an average Euro exchange rate against Sterling during the period of €1.19 (2009: €1.13), reportable revenue after translation to Sterling was down 7%. During the second quarter, Vivid restructured its UK data division by consolidating its data operations in Romania which resulted in a small one-off restructuring cost in its UK operation, but will lead to cost efficiencies for the Group going forward.

The impact of the above factors left UK & European segmental revenue down 9% at £6.85 million (2009: £7.49 million). With lower overheads of £0.17 million and lower restructuring costs of £0.14 million against the prior year, segmental profit before interest was 11% ahead of last year at £0.96 million (2009: £0.86 million).

Future outlook

The Group continues to face challenges in its key geographical markets whether in the form of tighter inventory control by retailers or the delay of new contracts for our digital professional products in Europe. Nevertheless, we continue to make progress in our important US market and the new sales and marketing initiatives we are putting in place with key customers are expected to bring future benefits to the Group, albeit with an initial cost of investment in supplying the new customer display racking.

In the UK, the public spending cuts and the increase in VAT will undoubtedly put pressure on consumers' disposable incomes and impact on consumer confidence. However, our automotive repair manuals and growing range of more general DIY titles are aimed to help consumers save money by doing the work themselves and we will continue to identify new channels and new sales opportunities to spread the message of 'See Haynes See How'. Elsewhere in the UK and Europe, the Vivid team are currently working on the translation of a new product 'Vivid SmartFIXTM' which will provide professional mechanics with specific information on known vehicle technical issues. The data is based on technical service bulletins produced by manufacturers and links to over 450,000 repair reports.

In summary, the Group is in a strong financial position. All parts of the business are profit making, we have positive cash flow, we are free of borrowings and we have strong banking relationships in our main geographical markets. These factors place the business on a solid platform from which to move forward and take advantage of growth opportunities as they arise.

Responsibility statement

Pages 17 and 18 of the Annual Report 2010 provide details of the serving Executive and Non-Executive Directors. On 1 September 2010 Mr Alex Kwarts joined the Board as an Executive Director and on 9 September 2010 Mr A Garner resigned as a Non-Executive Director. Apart from these two changes there have been no other changes to the Board during the six months to 30 November 2010. A statement of the Directors' responsibilities is contained on page 35 of the Annual Report 2010. A copy of the Annual Report 2010 can be found on the Haynes website www.haynes.co.uk/investor.

The Board confirms that to the best of its knowledge the condensed set of financial statements gives a true and fair view of the assets and liabilities, financial position and profit of the Group and has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by the Disclosure and Transparency Rules as issued by the Financial Services Authority, namely:

J H C Haynes

Chairman of the Board

20 January 2011

Consolidated Income Statement (unaudited)

Consolidated Statement of Comprehensive Income (unaudited)

Consolidated Balance Sheet (unaudited)

Consolidated Statement of Changes in Equity (unaudited)

Consolidated Cash Flow Statement (unaudited)

Notes to the Interim Results

1. Basis of accounting

The interim financial statements for the six months ended 30 November 2010 and 30 November 2009 and for the twelve months ended 31 May 2010 do not constitute statutory accounts for the purposes of Section 434 of the Companies Act 2006. The Annual Report and Financial Statements for the year ended 31 May 2010 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statements for the year ended 31 May 2010 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under sections 498(2) or 498(3) of the Companies Act 2006. 

The 30 November 2010 statements were approved by the Board of Directors on 20 January 2011 and although not audited are subject to a review by our auditors.

The financial information has been prepared in accordance with the Disclosure and Transparency rules of the Financial Services Authority and in compliance with International Accounting Standard (IAS) 34 'Interim Financial Reporting' as endorsed by the European Union.

The interim financial statements have been prepared in accordance with the accounting policies set out in the 2010 Annual Report and which the Group expects to follow in its next Annual Report. During the period under review, the new standards, amendments to standards and interpretations which apply to the Group for the first time in this financial year have been reviewed by management. At the present time management do not believe that the new standards, amendments to standards or interpretations will have a material impact on the Group's financial statements for the financial year ended 31 May 2011.

Summarised below are details of the new standards, significant amendment to standards and interpretations which have been issued by the IASB and IFRIC but not adopted by the Group during the period as application is not mandatory in the current financial year :

2. Revenue

3. Segmental analysis

For management and internal reporting purposes, the Group is organised into two geographical operating segments as follows:

The UK and European business with headquarters in Sparkford, Somerset has subsidiaries in the Netherlands, Italy, Spain, Romania and Sweden. Its core business is the publication and supply of automotive repair and technical information to the professional automotive and DIY aftermarkets.

The North American and Australian business with headquarters near Los Angeles, California publishes DIY Repair Manuals for Cars and Motorcycles under the Haynes and Chilton brands, in both the English and Spanish languages. It also has a branch operation in Sydney, Australia which publishes similar products under both the Haynes and Gregory's brands.

The above two operating segments are each organised and managed separately and are treated as distinct operating and reportable segments in line with the provisions of IFRS 8. The identification of the two operating segments is based on the reports reviewed by the chief operating decision maker, which form the basis for operational decision making.

Inter-segmental sales are charged at the prevailing market rates in a manner similar to transactions with third parties.

The following adjustments have been made in the segmental tables below to reconcile the internal reports as reviewed by the chief operating decision maker to the financial information as reported under IFRS in the Group Financial Statements:

Analysis of geographic operating segments

4. Finance income

5. Finance costs

6. Taxation

The tax charge for the six months ended 30 November 2010 has been based on an estimate of a full year effective tax rate of 32.8% (30 November 2009: 30.4% / 31 May 2010: 34.7%).

The Finance Act (No 2) 2010, which had been substantively enacted at the balance sheet date, reduces the main rate of UK corporation tax from 28% to 27% from 1 April 2011. An adjustment has been made to the Group's UK deferred tax balances to reflect the change in the UK tax rate.

7. Earnings per share

The calculation of the basic and diluted earnings per share is based on the following:-

* The profit after tax excludes a loss of £4,000 (2009: profit of £6,000) attributable to non-controlling interests.

As at 30 November 2010, 31 May 2010 and 30 November 2009 there were no outstanding options on either of the Company's two classes of shares and there is no difference between the earnings used in the basic and diluted earnings per share calculation.

8. Dividends

An interim dividend of 6.2p per share (2009: 6.2p) amounting to £1,013,795 (2009: £1,013,795) has been declared during the period but has not been reflected in the interim accounts. The payment of the interim dividend will be made on 20 April 2011 to shareholders on the register at the close of business on 8 April 2011, the shares being declared ex-dividend on 6 April 2011.

9. Analysis of the changes in net funds

10. Retirement benefit obligation

The Group operates a number of different retirement programmes in the countries within which it operates. The principal pension programmes are a contributory defined benefit scheme in the UK and a non contributory defined benefit plan in the US. The assets of all schemes are held independently of the Group and its subsidiaries.

During the period the financial position of the above pension arrangements have been updated in line with the anticipated annual cost for current service, the expected return on scheme assets, the interest on scheme liabilities and cash contributions made to the schemes.

The last full IAS 19 actuarial valuation was carried out by a qualified independent actuary as at 31 May 2010 and this valuation has been updated by the Scheme's actuaries on an approximate basis to 30 November 2010.

The movements in the retirement benefit obligation were as follows:-

11. Exchange rates

The foreign exchange rates used in the financial statements to consolidate the overseas subsidiaries are as follows (local currency equivalent to £1):

12. Property, plant and equipment

As at 30 November 2010 the Group had capital expenditure, contracted but not provided for of £15,000 (2009: £533,000).

13. Intangible assets

14. Related party transactions

During the six months to 30 November 2010 there were no new material related party transactions or material changes to the related party transactions as reported in the Annual Report 2010.

15. Principal risks and uncertainties

The principal risks and uncertainties facing the Group during the second half of the financial year are outlined in the Interim Statement and summarised below:

The Board considers that the above, along with the principal risks and uncertainties which were discussed at more length in the Annual Report 2010 under the following headings and page references, continue to be the major risks and uncertainties facing the Group:

A copy of the Annual Report 2010 can be found on the Group's corporate website www.haynes.co.uk/investor.

16. Other information

A copy of this half-year report will be distributed to all shareholders and will also be available to members of the public from the Company's registered office at Sparkford, Near Yeovil, Somerset BA22 7JJ. A copy of the interim report will also be available on the Group's corporate website at www.haynes.co.uk/investor.

INDEPENDENT REVIEW REPORT TO HAYNES PUBLISHING GROUP P.L.C.

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 November 2010 which comprises a consolidated income statement, consolidated statement of comprehensive income and expense, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting its responsibilities in respect to half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 November 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

BDO LLP

Chartered Accountants and Registered Auditors

Southampton

United Kingdom

20 January 2011

BDO LLP is a limited liability partnership registered in England and Wales (with registered number 0C305127).