Half Yearly Report

HAYNES PUBLISHING GROUP P.L.C.

INTERIM RESULTS FOR THE 6 MONTHS ENDED

30 November 2012

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 and photographs are inherently practical, accurate and easy to follow.

Through HaynesPro we are a leading European supplier of digital technical information to the motor trade. The Group's business now includes both professionals as well as DIY mechanics and enthusiasts.

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

1 Like-for-like net funds of £5.9 million excludes the impact of the purchase of 1.2 million ordinary shares for £2.4 million and placed in treasury during February/March 2012

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

Over the six months to 30 November 2012 we have continued the development of our multimedia consumer offering to enable content delivery via various digital platforms and channels. Last year we launched the Group's first 50 digital manuals in the US, delivered through a cloud based platform developed entirely in-house. This was followed in June 2012 by our top 50 selling UK titles. We now have over 200 of our US and UK automotive and motorcycle manuals available in a digital format, and the first 50 Australian manuals will go online shortly. In October 2012, we launched our first general publishing titles in an eBook format, which were also developed entirely in-house. The revenue from the online manuals has already covered the costs of developing both digital product sets.

In September 2012, the Group rebranded 'Vivid', which has over forty thousand professional repair shop users throughout Europe, as 'HaynesPro'. The name change will help extend the Haynes brand into a wider European market place, while facilitating the extension of our professional offering to markets where Haynes manuals are already well established.

Over the past eighteen months we have experienced some very challenging conditions for our traditional print products in both the US and UK markets. In particular, a slowdown in sales to a small number of key retailers has had a negative impact on revenue and profit. We are encouraged by recent discussions with some of these retail partners and early signs of their willingness to return to a practice of offering discounts, seasonal promotions and to review merchandising. We have seen sales to some of our smaller retailers, in particular those with an online presence, grow and, whilst in absolute terms their sales growth does not compensate for the lost revenue from the key retailers, it does point to an active DIY market.

We are also encouraged by the performance of HaynesPro, which continues to enjoy revenue growth and market penetration in Europe, whilst also having a significant role in helping the Haynes Group develop its new multimedia digital platforms.

As mentioned in our pre-interim close statement, we are currently undergoing a consumer-focused strategic review of the business. We expect to conclude this review by the start of the new financial year in June 2013.

Financial review

Income statement

Overall Group revenue ended the six month period 7% down on last year at £13.3 million (2011: £14.3 million).

Revenue from our North American & Australian operations, in local currency, ended the period 6% down on last year, as stronger sales in the second quarter helped to partially offset the softer trading at the beginning of the period when revenue was reduced by 11%.

In the UK & Europe, revenue ended the six month period 9% down on the prior year. Weaker sales of the UK's automotive manuals and general publishing titles led to a shortfall against the prior year of 16%. Strong revenue growth in the UK & Europe by HaynesPro, where local revenue was up 17%, helped to partially offset this shortfall, although with an average Sterling exchange rate during the period against the Euro of €1.25 (2011: €1.14) the reportable increase in Sterling was lower at 7%.

Lower revenue from the US and UK automotive manuals, which have a higher margin for the Group than general publishing, coupled with a higher HaynesPro development cost amortisation charge of £0.2 million, has led to a reduction in the Group's gross margin of 2.5 percentage points to 56.6% (2011: 59.1%). This is the fifth and final year of the incremental increase in HaynesPro development costs amortisation.

In our last Annual Report, we mentioned that we were experiencing upward pressure on raw material prices. So far we have absorbed these increases into our cost of goods rather than passing them on to our customers. We commented that if this trend continued into the new financial year we would have little option but to revisit this position. It is disappointing to note that this trend has continued during the first six months of the current financial year and management continues to closely monitor the situation.

A tight control over operational expense budgets coupled with a reduction in central costs has helped to reduce Group overheads by 5% over the prior year. With net finance costs, which primarily relate to the interest charge on pension scheme liabilities net of the expected return on pension scheme assets, in line with last year at £0.1 million (2011: £0.1 million), the Group's pre-tax profits ended the period at £1.2 million (2011: £1.8 million), down 33%, but ahead of the latest broker forecast.

Because a larger proportion of Group profit was generated from the North America & Australia operations, there has been an increase in the effective Group tax rate during the period to 32.3% (2011: 30.6%) leaving basic earnings per share of 5.2 pence (2011: 7.5 pence).

Operational review

North America and Australia

The financial year started slowly with local currency revenue in the first quarter 11% down on the previous year. In the second quarter trading improved slightly, most notably in Australia, where a first quarter revenue shortfall of 6% was turned around to leave revenue in the Australian business 32% ahead at the half year. Overall, this helped North America & Australian revenue end the six month period 6% down on last year at $10.8 million (2011: $11.5 million). A strong contributing factor for the improvement in the Australian sales has been the move by key retailers to new face out display racking.

After translation to Sterling, North America & Australian revenue ended the period at £6.8 million (2011: £7.2 million), down 6%.

As mentioned in previous reports the weaker sales over the last eighteen months have largely been due to a small number of key retailers. We are, therefore, encouraged by recent discussions, in particular relating to new marketing and sales initiatives which we strongly believe could help revitalise sales of our US automotive manuals.

Shortly before the end of the calendar year, the US business strengthened its sales team through the recruitment of a new Vice President of Sales. He has considerable experience in the automotive aftermarket, and is proactively driving new initiatives to add sales.

US management continues to maintain a tight control over expenditure and over the last six months has seen overheads reduce by a further 2% against the prior period. Nevertheless, the reduction in high margin revenue has adversely impacted on profitability, with reportable segmental profit, before interest, ending the period at £0.6 million (2011: £0.9 million).

UK and Europe

Trading in the first quarter was disappointing, particularly the 21% reduction in revenue of our general publishing titles which came against a trend of recent year-on-year sales growth. Sales in the UK during the second quarter were stronger than the first quarter, but were unable to overturn the shortfall against the prior year, with the automotive division ending the six month period 12% down on last year and the general publishing division down 19%.

In contrast, the revenue growth of HaynesPro during the first quarter continued into the second half of the period, helped by recent contract gains and contract extensions, and in local currency ended the period 17% ahead of the prior year. After translation to Sterling this growth was 7%.

UK & European segmental revenue ended the period at £6.5 million (2011: £7.1 million). The lower UK revenue along with the incremental increase in HaynesPro development cost amortisation of £0.2 million had a direct impact on the UK & European segmental profit and although UK & European overheads ended the period 3% lower than last year, segmental profit before interest ended the period at £0.2 million (2011: £0.7 million).

Balance sheet and cash flow

In June 2012, the Group purchased new freehold offices in Bucharest at a cost of €0.5 million to accommodate the growing digital technical team in Romania. This move has reduced establishment costs for the Romanian operation and has provided sufficient space to allow for future growth. Aside from the property purchase, overall capital expenditure was lower than previous periods at £0.1 million. The Group's inventory balances, excluding the impact of exchange rates, ended the period 2% lower at £13.1 million while the £1.5 million reduction in trade and other debtors against last November reflects the lower UK and US sales.

The Group's net cash inflow from continuing operations before tax during the period was £2.2 million (2011: £3.6 million) which represented 181% of Group operating profit (2011: 191%). The Group's net cash balances ended the period at £3.5 million (2011: £5.0 million). However, cash on a like-for-like basis, excluding the impact of the treasury shares purchased in the second half of the last financial year for £2.4 million, was ahead of the prior year by 18% at £5.9 million.

As at 30 November 2012, the net deficit on the Group's two retirement benefit schemes as reported in line with IAS 19 was £9.5 million (31 May 2012: £10.0 million). The combined total assets of the schemes increased by £1.2 million to £26.4 million (31 May 2012: £25.2 million) while the total liabilities increased by £0.7 million to £35.9 million (31 May 2012: £35.2 million).

Interim dividend

The Group has consistently communicated its intention to grow through acquisitions, geographical expansion and organic growth. In addition, as previously reported, a strategic review is currently underway using independent consultants and there are a number of potential initiatives under consideration within the Group. Therefore, the Board feels it is appropriate at this time of economic uncertainty to conserve cash within the business.

Accordingly, the Board is declaring an interim dividend of 3.5 pence per share (2011: 6.2 pence). The Board is currently using a target dividend cover of 1.5 times. The interim dividend will be paid on 10 April 2013 to shareholders on the register at the close of business on 22 March 2013. The shares will be declared ex-dividend on 20 March 2013.

Future outlook

This has been a challenging period, particularly for the Group's automotive manual and general publishing operations. Although on-board diagnostics have added to the complexity of cars, as long as cars have moving parts there will be tasks that drivers can undertake which will help to maintain their vehicle in a safe, roadworthy and legal condition while at the same time saving money.

Through our extensive technical database along with our enhanced in-house IT, web development and language translation skills we are ideally placed to develop new multimedia products that assist drivers in maintaining and servicing their vehicles. We also expect to see increased interest in our products from younger customers as our manuals become more interactive with advanced online functionality.

The Group is committed to further growth of the HaynesPro business. We will continue to invest in the development of appropriate technologies and functionality to ensure that we can offer HaynesPro customers leading edge, value added service provision.

The consumer-focused strategic review we are undertaking will focus on our key brand strengths and enable us to concentrate our activities on those areas of the business which offer the greatest growth and profit potential. Despite the current challenges we have a healthy balance sheet and strong cash flow, and we are well placed to take the necessary action to drive the business forward.

Responsibility statement

Pages 14 and 15 of the Annual Report 2012 provide details of the serving Executive and Non-Executive Directors and there have been no changes during the six months to 30 November 2012. A statement of the Directors' responsibilities is contained on page 33 of the Annual Report 2012. A copy of the Annual Report 2012 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

30 January 2013

Consolidated Income Statement (unaudited)

Consolidated Statement of Comprehensive Income (unaudited)

1See Note 1 Restatement of prior years

Consolidated Balance Sheet (unaudited)

1 See Note 1 Restatement of prior years

Consolidated Statement of Changes in Equity (unaudited)

1 See Note 1 Restatement of prior years 

Consolidated Cash Flow Statement (unaudited)

Notes to the Interim Results

1. Accounting policies - Basis of accounting

The interim financial statements for the six months ended 30 November 2012 and 30 November 2011 and for the twelve months ended 31 May 2012 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 2012 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 2012 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 2012 statements were approved by the Board of Directors on 30 January 2013 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 2012 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 2013.

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 :

Restatement of prior years

As reported in our Annual Report 2012, in the US, the Group provides a supplemental executive retirement plan (SERP) to compensate certain executives for contributions that would have been made under the qualified defined benefit plan if not for limitations imposed by the Internal Revenue Code on the defined benefit scheme. Prior to 31 May 2012, no deferred tax asset was recognised on the contributions made into the scheme which are disallowed for corporation tax relief in the computations notwithstanding that, upon death, retirement or termination of the employment of the executives, the US subsidiary will be entitled to tax relief based on the cash surrender value of the policies provided to the executive. At each financial year end a deferred tax asset in relation to the tax recovery that will benefit the US subsidiary in future periods should be recognised. Accordingly, an appropriate amount was included for the financial year ended 31 May 2012 and has been recognised in the current period and a retrospective adjustment has been applied to the prior interim period. The impact of the restatement on the 30 November 2011 figures is shown below :

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 in both a printed and digital format.

The North American and Australian business with headquarters near Los Angeles, California publishes DIY repair manuals for cars and motorcycles in both a printed and digital format. The business publishes titles 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 adjustments below have been made in the segmental tables which follow 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

1 See Note 1 Restatement of prior years

4. Finance income

5. Finance costs

6. Taxation

The tax charge for the six months ended 30 November 2012 is based on an estimate of a full year effective tax rate of 32.3% (30 November 2011: 30.6% / 31 May 2012: 31.6%). The increase in the effective tax rate reflects the larger mix of profits from overseas operations where the tax rates are higher than in the UK.

7. Earnings per share

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

[1]  Adjusted to exclude a profit of £4,000 (2011: £2,000) attributable to non-controlling interests.

[2] In February/March 2012 the Company purchased 1,240,000 of its ordinary shares for placing in treasury.

As at 30 November 2012, 31 May 2012 and 30 November 2011 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 3.5p per share (2011: 6.2p) amounting to £528,904 (2011: £936,915) 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 10 April 2013 to shareholders on the register at the close of business on 22 March 2013, the shares being declared ex-dividend on 20 March 2013.

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 2012 and this valuation has been updated by the Scheme's actuaries on an approximate basis to

30 November 2012.

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

The Group had no capital expenditure which had been contracted but had not been provided for as at 30 November 2012 (2011: £nil).

13. Intangible assets

14. Related party transactions

During the six months to 30 November 2012 there were no new material related party transactions or material changes to the related party transactions as reported in the Annual Report 2012.

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 2012 under the following headings and page references, continue to be the major risks and uncertainties facing the Group :

A copy of the Annual Report 2012 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 2012 which comprises a consolidated income statement, consolidated statement of comprehensive income, 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 2012 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

30 January 2013

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