Hornby has warned that its revenue will be lower than last year owing to a shortage of stock arriving on time and in full in the first half of the year.
Nevertheless, it said in a trading update for the year to 31st March, underlying margins had improved and reduction in overheads had continued.
The company, whose brands also include Scalextric, Airfix and Corgi, has been working to improve the infrastructure in its overseas supply chain to make it function more efficiently.
The company made an operating loss of £9.9 million in the year to 31st March 2018. In the company’s annual report for the year, chief executive Lyndon Davies said: “We must guarantee that we get the right amount of product to the market at the right time and at the right cost. When this works efficiently we will greatly improve our sales performance.”
Davies went on to highlight the problems the company faced: “We have a lack of new product arriving in the UK and therefore can’t meet the demand. This is because of two main reasons:
– Order quantities were very low per item because of cash constraints and a lack of understanding about which designs would sell better than others.
– Not only were orders placed late, but the vitally important technical specifications were also supplied late to our manufacturers.
The solution here is to pull forward the planning deadlines by six months and choose the right manufacturing partners for the long run. Considering the complexity of our design and ordering cycles it will take time, but the aim is for the new schedule to be fully operational and firing on all cylinders for the financial year ending 31 March 2020.
In the 2019 trading update, Hornby said: “Our underlying margins have improved and the reduction in overheads has continued. The focus on doing more with less through continued cost-cutting and efficiency improvements has resulted in a significantly lower underlying Group loss compared to last year. The loss is in line with the board’s expectations despite the reduced product availability and lower sales in the first half of the year.
“This is a real achievement under the circumstances and we are grateful to our passionate and hardworking staff who are working tirelessly to get the Group back to profitability.
“As previously explained, we are rebuilding trust with our customers and suppliers. This takes time, but the initial signs are encouraging as we move into the first full year where all the new products and marketing strategies have been designed by the new management team.”