Hornby turnaround plan 'proceeding as expected', says chief executive
Toymaker Hornby said plans to shore up its flagging performance were on track as it presses ahead with a sweeping structural overhaul.
The Scalextric-to-Airfix firm said underlying Christmas trading was "healthy" and January sales were "solid" despite annual group revenue slumping 25% over the festive season.
Shares soared 12% in morning trading on the London Stock Exchange after the firm said it was "well-positioned" on its journey back to profitability.
Hornby, best-known for its model railways, warned in November that annual revenues would plummet by around a quarter as it trims costs by shutting concession sites and shifting European staff to the UK.
Chief executive Steve Cooke said the company was "in the midst of a transformational year", but the turnaround plan was "proceeding as expected".
"The restructuring of our UK operations is complete and we are well-advanced with our initiatives in Europe," he said.
"Our improved financial position is evidence of the success of the first stage of the turnaround. Hornby is well-positioned to continue its transition to profitability and higher cash generation."
The firm said UK revenues dropped 21% during key Christmas trading, but all sales channels had met, or exceeded, expectations.
Moves to reinforce relationships with independent retailers were also bearing fruit, with sales in this area lifting 4% year-on-year over the period.
But the company said it expects to continue trading at a loss as it "reshapes and streamlines the business" throughout the current financial year.
As part of the turnaround plan, the group said it had sold its Margate site for £2.25 million, which will deliver a profit of around £900,000.
It plans to lease back part of the site for the Hornby Visitors Centre and shop.
A string of profit warnings have caused Hornby's shares to plummet over the past year, with its stock price plunging around 60% since December 2015.
In November, Hornby said turnover had dropped 2% to £21.9 million in the six months to September, with pre-tax losses widening to £4.7 million from £4.5 million for the half year.