Hornby current trading 'robust', turnaround plan going well

AIM-listed train set maker Hornby said on Tuesday that current trading was “robust” and the group’s turnaround plan is progressing well.

In an update for the period from 25 November 2016 to 5 February 2017, Hornby – which has recently issued a string of profit warnings – said the structural changes to its UK business are complete and the group is at an advanced stage in transferring key European operations to the UK, a move it expects to be done and dusted by the end of the financial year.

In addition, the company said the rationalisation of the product range and associated reduction in capital expenditure were delivered in line with its plans, with new catalogues for the 2017 product range already launched to a warm reception.

The closure of the concession channel is proceeding as planned and Hornby sad it has continued to steadily reduce group stock levels while taking care not to disrupt core sales through existing channels. At the end of December, stocks were £11.2m versus £15.5m the year before, while net debt was £2.7m compared to £6.4m in 2015.

As previously announced, revenue is expected to drop by around 20-25% this financial year due to the rationalisation of the business. Group revenue fell 25% year-on-year over Christmas and UK revenue was down 21%, in line with expectations.

Hornby said underlying Christmas trading was healthy and the January sales period was solid, with all sales channels performing in line with or better than its expectations. In particular, sales to independent retailers were robust, with positive growth of 4% year-on-year.

The group said that as previously announced, the current financial year is a period of transition as the business is streamlined, meaning full-year revenue will drop significantly and Hornby will make a loss. However, it remains confident of meeting the board's expectations.

Chief executive Steve Cooke said: "We are in the midst of a transformational year and our turnaround plan is proceeding as expected. The restructuring of our UK operations is complete and we are well advanced with our initiatives in Europe. 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."

At 0820 GMT, the shares were up 12% to 35p.