Hornby expects to suffer a £2m loss this year after problems at the model train set maker’s European business hit sales, prompting its second profit warning in two months.
The company, which also produces Airfix kits and Corgi cars, has been reorganising its European operation to improve deliveries, revamp computer systems and bring in new management. It said in September that it was struggling to get products on to shelves in major markets such as Italy and France from new suppliers in China.
Disruption to sales will be greater than expected and group revenue and profits for this year will be lower than forecast, Hornby said on Tuesday, in an unscheduled statement two weeks before its first-half results.
Analysts at Numis, Hornby’s house broker, had expected a pre-tax profit of £1.7m for the year ending in March, already down from £2m in September.
Hornby appeared to have turned a corner last year, swinging from a loss to a profit after years of Chinese supplier problems that forced a series of profit warnings. It has now issued two such warnings in succession after alerting investors to problems in September.
The Kent-based company suffered poor summer trading in the UK caused by disruption from installing a new computer system, but since early September sales in Britain have risen by 9% from a year ago.
With Christmas approaching, new products including Scalextric James Bond Spectre slot car racing sets are selling well in Britain, Hornby said. But the UK recovery was not enough to make up for disruption in Europe.
“The impact of the European restructuring on the group’s financial performance will mean that the revenue and profit for the current financial year will be lower than market expectations, but will recover next year,” the company said.
“As a result, it is expected that there will now be an underlying group loss before tax for the full financial year of £2m. The loss could be lower than this depending on how long it will take the new teams in the international businesses to recover their performance levels.”
Hornby said once immediate problems are sorted out, it will have revamped antiquated systems. Its shares fell by 6% in early trading, but were down by 1% at 96p later on Tuesday morning.
Numis said: “While the disruption the group has experienced this year is clearly disappointing, we believe the changes being made are moving the business on to much firmer foundations.”
