Hornby loss widens but turnaround plan progressing well

Model train maker Hornby reported a widening of its pre-tax loss in the six months to the end of September as revenue declined but said its turnaround plan was progressing well.

The company – which outlined plans to turn the business around back in June following a string of profit warnings – reported a pre-tax loss of £4.7m versus a £4.5m loss the year before as group revenue fell to £21.9m from £22.3m and UK distribution costs increased.

Chief executive Steve Cooke 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 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."

Hornby also said on Thursday that sterling’s weakening versus the dollar since the UK’s vote to leave the European Union could have a material effect on the group’s future results as it purchases goods in US dollar and sells in pounds, euro and USD.

The company said it continues to hedge short-term exposures by establishing forward currency purchases using fixed rate and participating forward contracts up to twelve months ahead.

But it also said it would look to recover the increased purchasing costs by lifting prices “alongside many other businesses in the industry”.

At 0933 GMT, the shares were down 5.7% to 29.48p.