Hornby Warns On Annual Loss And Banking Covenants After Weak January

LONDON (Alliance News) - Hobby products company Hornby PLC on Wednesday said it will suffer a ...

Alliance News 10 February, 2016 | 9:21AM
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LONDON (Alliance News) - Hobby products company Hornby PLC on Wednesday said it will suffer a "substantially wider" trading loss than previously forecast in its financial year after experiencing lower-than-expected sales in both the UK and internationally.

Shares in Hornby were trading down 44% at 45.50 pence on Wednesday morning following the announcement, setting a new 52-week low of 44.00p in earlier trade.

The company, known for its model train sets and miniature cars, said a strong sales performance in the UK in November and December, when it saw like-for-likes grow 17%, was reversed by a disappointing response to January product promotions, combined with poor underlying sales.

As a result, year-on-year revenue growth in January was substantially below expectations, and while February and March are expected to improve, overall revenue will not reach previously anticipated levels, Hornby said.

Meanwhile, following a reorganisation of the management and distribution operations at the group's European subsidiaries, trading at the international business was disrupted last autumn. While sales in December and January improved, with like-for-likes up 5% over those two months, the growth was still significantly behind the board's previous expectations.

Hornby said it now expects to report a substantially wider trading loss than previously forecast in its full year to the end of March, which will also take a hit from a GBP1.0 million write-off following a full stock take at the warehouse in Hersden and balance sheet review relating to the reorganisation in Europe.

The disappointing UK sales performance is expected to result in a GBP2.5 million to GBP3.0 million decline in trading profit. The group's underlying pretax loss is now expected to be in the range of GBP5.5 million to GBP6.0 million, which it said represents a "substantial setback" in its recovery plan for the business. In the previous year, Hornby recorded a pretax loss of GBP184,000.

As a result of this, Hornby said there is a risk it may breach a covenant of its banking facility in March and that it is currently in discussions with its lender.

The group added that it is analysing the causes and consequences arising from the poor start to the new calendar year.

"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," Chief Executive Richard Ames said in a statement.

By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Hornby PLC 36.20 GBX 0.00 -
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