Hornby rallies as CEO Richard Ames steps down after profit warning

Shares in model train maker Hornby rallied on Monday after Richard Ames stepped down as chief executive officer with immediate effect following the company’s third profit warning in five months last week.

Chairman Roger Canham will move to take over as executive chairman and will lead the group for the foreseeable future.

Shares in the company tanked on Wednesday after it said it expected to report an underlying pre-tax loss of £5.5m to £6m for the year to March.

This was much wider than the £2m loss it mentioned back in November and marked the company’s third profit warning in five months.

The group pointed to a £1m write-off at its warehouse in Hersden, and said the disappointing sales performance experienced in the New Year was expected to result in a trading profit deterioration of between £2.5m and £3m, with around half due to UK performance.

As a result of the wider full year loss expected, the company said there was a risk it might breach a covenant of its banking facility in March.

Hornby said that although like-for-like sales in the UK were up 17% overall year-on-year in the key November and December period, trading since the start of the year had seen a disappointing response to January product promotions.

Richard Ames said at the time: "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."

The AIM-listed group said it was analysing the causes and consequences arising from the poor start to the new calendar year and would update the market on the board's progress and its expectations for the outlook in due course.

At 1235 GMT, Hornby shares were up 33.4% to 32.67p.