Hornby: Model railway maker’s losses off track due to slower Christmas demand
The maker of iconic model railway’s Hornby saw losses mount in its half year results, amid a slower ramp up in demand headed into Christmas and inflationary pressure.
Group pre-tax losses came in at £5.1m, greater than a prior year loss of £2.9m, as higher costs hit the bottom line.
Underlying overheads increased 17 per cent year-on-year to £14.6m, which the company said reflected a jump in minimum wages and “general inflationary increases.”
Group revenue rose slightly to £23.8m, an increase of six per cent, but the growth was offset buy Hornby’s large and growing debt pile, which nearly tripled to £14.6m.
That debt was in part down to the purchase of a 25 per cent stake in the wargame manufacturer Warlord Games in July, for £1.25m, and increased spending ahead of the festive period.
Olly Raeburn, Hornby Chief Executive, said: “In a year of structural, strategic and operational change, we are starting to see critical improvements in many areas of the business.”
“Whilst topline revenue is growing, and remains in line with management guidance for the full year, there is a cost increase associated with what’s being implemented. We head into the key Christmas trading period with a strong order book, a full calendar of promotional activity and a strong team in place.”
Higher interest rates and inflation have led to a slower lead up to the busy Christmas period, hitting retailers growth, although recent positive inflation readings have provided some hope.
The company, which produces a range of toys including Scalextric sets and Airfix, has also suffered from supply chain delays, resulting in 12 to 18 month wait times for products after the initial order.
“This was an unavoidable reality, combined with the normal stock build for forthcoming peak trading, means that our overall stock holding in the business at the half year remains at similar levels to the start of the year,” a statement read.
Hornby retained its guidance for revenue growth. The model maker is targeting a return to profitability from next year onwards.