Hornby Hits The Rails Over Supply Chain Woes

Profit for model train maker Hornby (LSE: HRN.L - news) has been derailed after the company admitted problems with its supply chain.

The Kent-based company released an interim management statement and also warned it has lost almost £1m in sterling reserves used to purchase products.

"As a result of the supply chain issues … the group sales for the financial year are now expected to be below current market expectations and below the total for last year," it said in the statement.

Full-year figures to March 31 are due to be released in early June.

In the previous year it made an underlying pretax profit of just £150,000 on turnover of £57.4m.

That was a 96% drop on the 2011-12 pre-tax profit, on 10% lower turnover.

In Friday's statement, it said net debt last December stood at £6.5m - down 18% on three months earlier.

Executive chairman Roger Canham added: "Whilst the outlook for the year is disappointing, we have used this year of management change to make some important decisions that we are optimistic will enable us to return to growth.

"I am confident that this draws a line under this painful period of the group's recent trading."

Shares plunged more than 30% in 2012 after it issued a profit warning over poor sales of its London Olympics merchandise.

Hornby was forced to offer up to 85% off its Olympic (BSE: OLPCL.BO - news) and Paralympic ranges, which include model London 2012 taxis, Olympic-themed train sets and die-cast athlete figurines.

It now hopes to find success in 2014 with wireless Scalextric cars and Airfix military models trading on the centenary of the First World War and 70th D-Day invasion.

Last June, Hornby told Sky News last June it was 'reshoring' some production facilities from China to the UK.

The company said rising labour costs and overheads in China were hampering returns for the firm.

The latest statement does not reveal if any production facilities will be repatriated in the current financial year.

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