Hornby Shares Hit The Buffers On Sales Woes

Shares (Berlin: DI6.BE - news) in model rail specialist Hornby (Berlin: 1878572.BE - news) have lost more than half their value after the company warned on its recent trading performance.

The firm, which owns the Scalextric brand, had been looking forward to a strong Christmas and sale promotion period having resolved problems with a new internal IT platform.

But it admitted that while November and December had been strong - with like-for-like sales rising 17% - it had endured a subdued start to the New Year with a "disappointing response" to January product promotions.

It said sales for the month were "substantially below expectations" and it could no longer maintain its forecasts for February and March.

The company - which also has the Airfix and Corgi brands in its stable - said it was writing off the value of its stock by £1m and also warned that annual losses could be deeper than previously indicated.

Its shares closed 62% lower after its trading update.

Hornby's statement said: "The group is now expecting to report an underlying loss before tax in the range of £5.5m - £6m, which represents a substantial setback in our recovery plan for the business.

"As a result the directors consider there to be a risk that the group will breach a covenant of their banking facility in March 2016."

It added that it was currently in discussions with its lenders.

Hornby has invested heavily in its backroom functions including distribution, stock control and delivery processes to help it better manage costs and business efficiency.

Disruption caused by the changes has also hampered its efforts to grow sales overseas.

Richard Ames, the company's chief executive, said of the profit warning: "This has been a real year of change at Hornby.

"Undoubtedly this is a disappointing result, but we have a strong portfolio of brands that we are determined to see flourish.

"The feedback from customers at the recent international toy fairs was encouraging and we are facing the future where, with the right platform, we can build value for our shareholders and drive the group's recovery."