Hornby shares derailed as Christmas sales disappoint
Fewer discounts and late stock deliveries led to festive sales coming in below expectations.
Shares in Hornby plummeted after the troubled toymaker warned that poor Christmas trading will contribute to bigger-than-expected full-year losses.
Hornby, best known for its model railways and Scalextric car race tracks, said fewer discounts and late stock deliveries had led to its festive sales coming in “below management expectations”.
“These factors had an equal impact up on the under-performance of the business,” the firm said.
“We now have some visibility into the outcome for the full year and, because of the revenue shortfall, the underlying loss after tax is likely to be larger than the board’s expectations.”
Shares fell 13.5% to 20.5p in morning trading as investors digested the news.
Hornby added that it has made significant progress on a cost-cutting drive, reducing fixed overheads by £1.7 million.
Despite the gloom, interim boss Lyndon Davies struck an upbeat tone as he attempts a turnaround of the group.
“We remain committed to the strategy that was outlined in the half-year results.
“We are already starting to see evidence of positive momentum in the pre-orders for our new product ranges that were announced at the beginning of the year, as well as old retail partners re-engaging following the end of the discount-era.
“The design and production cycles are long in this business and, whilst we are excited about the products we have in the pipeline, it will take time for the new products to come through and for the trust with our customers to be fully rebuilt.”
Hornby has been grappling with falling sales amid major upheaval at the group.
In November, the firm confirmed plans to raise £12 million through a fresh equity placing meant to help shore up its balance sheet.
It was announced alongside half-year results, which showed a 22% drop in group revenue from £21.9 million to £17 million and a further widening of its statutory loss from £4.7 million to £5.7 million.
Net debt more than doubled over the period to £4.7 million from £2.1 million a year earlier.
It came amid a management shake-up, with the company announcing in October that interim chairman David Adams was stepping down to take up another appointment, having just been appointed to the role in June.
Mr Davies added: “The change in strategy has meant that the Christmas trading period was tough and there is likely to be some more volatility as we find out how off-peak trading performs for the first time in years without discounting.
“Despite this, we are determined to weather the storm and come out the other side with stronger brands, loyal customers, a leaner cost base and a better foundation from which to build a profitable and growing business.”
The group is now majority-owned by Phoenix Asset Management, which has said it intends to “increase its understanding of Hornby and its longer-term strategy for delivering further earnings growth following the completion of its turnaround strategy, by entering into further discussions with its management and the board of Hornby”.