Hornby blames past leadership for sales drop as full-year losses widen
The news sent Hornby shares down more than 17% in morning trading.
Hornby shares plunged after the ailing toymaker reported wider full-year losses, blaming former leadership for poor decisions that caused its iconic brands to “fall from grace”.
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The company – best known for its model railways and Scalextric car race tracks – reported pre-tax losses of £10.1 million for the year to March 31, having grown from losses of £9.5 million a year earlier.
That was against a near-25% drop in revenue to £35.7 million, while it took a £2.3 million hit on restructuring and refinancing costs for 2017.
The company pointed the finger at previous leadership for making poor decisions that have continued to knock sales.
Hornby said group sales for the 10 weeks to June 8 have been “lower than we expected”, as it suffered the lagged effect of “insufficient investment in tooling in the past, coupled with late placing of purchase orders with suppliers”.
The company added there was also a backlog of stock at its retailers linked to previous plans to bring sales forward through discounting.
It warned that those backlogs will “take time to work through”.
The news sent shares down more than 17% in morning trading.
Chief executive and interim chairman Lyndon Davies – who took the reins late last year – tried to assure investors that Hornby was moving forward.
He said: “I do not wish to dwell on the mistakes of the past, but please do not think I take them lightly.
“I have drawn on all my experience in assessing Hornby’s current position and formulating my views on the future direction.
“I have a great deal of passion for these iconic brands and it has pained me to see them fall from grace.
“You, as shareholders, have had to bear the brunt of it, and so I do not feel the need to reopen those wounds you know so well.”
The company cheered an improvement in gross margins, which it said were five percentage points higher compared with the same period last year thanks to a shift away from discounting.
Mr Davies said: “In the first seven months that I have been at Hornby, we have assessed our position and confronted the reality of the situation in which we find ourselves.
“Tough decisions have now been taken and we are currently laying down the foundations for our future success.
“There is a new energy in the business and I am excited with our plans as we re-engage across both domestic and international markets with these well-loved brands.”