Hornby makes efficiency push with warning of near-25% drop in full-year revenues
Embattled model train company Hornby has warned full-year revenues will drop nearly 25% as it charges on with turnaround plans to scale back its business.
The group - whose brands include Scalextric, Airfix and Corgi - said it has already halved the number of concession sites to date, with the rest set to shut in the new year as part of an efficiency drive to return the company to profit.
Hornby said: "By focusing on the most profitable and cash generative areas of our business, the intention is to reduce activity levels in order to return to profitability."
It said staff cuts as a result of structural changes to the business are expected to contribute £2 billion in annual cost savings, but Hornby did not provide the number of jobs cut to date in its interim report.
The company added: "We expect full-year revenue to fall by around a quarter year-on-year as a result of this planned reduction in the scale of the business."
Hornby said it saw turnover drop 2% from £22.3 million to £21.9 million in the six months to September, and saw pre-tax losses widen to £4.7 million from £4.5 million last year.
Chief executive Steve Cook said: "The group has traded steadily during the first half of the year but revenue is expected to decline significantly year on year in the second half as the planned rationalisation of product lines, channels and certain international brands takes effect.
"We remain confident of meeting the board's financial targets for this financial year."
The Kent-based company said it does not plan to revive dividend payments.
The group has seen its shares plummet over the past year after a string of profit warnings, with its stock price plunging over 65% since December 2015.
Hornby is cutting its product line by 40% as part of its turnaround plan, and will focus its European business on its most profitable model rail brands.
The move is expected to reduce full year revenue from its international business by a third.
Mr Cook said: "We are making good progress with the Hornby turnaround. We are delivering the structural changes to reduce business scale and costs and to streamline the European operating model.
"We are currently focussed on the Christmas trading period as well as ongoing stock reduction initiatives."
The company has been settling in under new leadership, after its former chief executive Richard Ames stepped down in February following another profit warning.
Mr Cook took the reins in April after 11 months as chief financial officer, promising "fundamental change" at the business.