Toy-maker Hornby, which has been working hard to modernise its supply chain, has warned in a trading statement that disappointing sales since Christmas will hit profits.
“The group has made significant progress in implementing changes to its business model to modernise product sourcing, improve management of the supply chain, upgrade the logistics, warehousing, stock control processes and accelerate the distribution routes to customers. This, together with the rollout of the new ERP system, has required major investment and resulted in disruption which has had a significant impact on the trading performance of the business,” it said.
In the UK, Hornby, whose brands also include Scalextric, Airfix and Corgi, saw strong sales in the run up to Christmas – up 17 per cent on last year. But it said that trading in the new year had been down on 12 months ago.
“As disclosed at our interims, there has been a significant reorganisation of the management and distribution operations of the European subsidiaries. The impact of this has been that trading in the international businesses was disrupted last autumn as the restructuring took place. Hornby is now through the main period of major disruption. Improved sales in the last two months have reflected the changes that have been made to the logistics, stock handling and distribution operations and like-for-like sales across December and January combined were up five per cent. Despite this being the first positive like for like sales performance this financial year, this is still significantly behind the board’s previous expectations.”
The group now expects to report an underlying pre-tax loss for the year in the range of £5.5m – £6.0m. There is a now a risk that it will breach its banking covenant and it is in discussion with its lender.
Chief executive Richard Ames said: “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.”