A miserable Christmas has forced Hornby, the maker of models and toys, to issue a profit warning that sent its shares down by a tenth.
The company, known for its miniature trains, Scalextric toy racing cars and Airfix military models, admitted that the “underlying loss after tax is likely to be larger than the board’s expectations” after it ended discounting to large retailers and experienced late deliveries over the festive period.
Demand for its traditional toys has faltered as technology-led alternatives have gained popularity. The shares have lost 80 per cent of their value since 2015 and closed at 21¼p last night, 33 per cent lower than this time last year.
Its roots date back to 1901 when Frank Hornby received a patent for his Meccano construction toy. Hornby listed on the London Stock Exchange in 1996 but, as a result of its troubles, is now majority-owned by Phoenix Asset Management, a turnaround specialist.
Last year the Margate-based group said it would stop giving discounts on large sales to “maximise the long-term value of its brands” and to rebuild its relationships with independent retailers, which form the biggest part of its sales.
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While it claimed to have “overwhelming support” from independent customers, the toymaker said that “rebuilding the trust in the pricing architecture takes time and some of our retail partners are taking longer than others to accept the new approach”.
In October, Hornby appointed the majority owner of a smaller rival toymaker as its chief executive.
Lyndon Davies, who founded Oxford Diecast in 1993, said the new management team introduced last year had reduced fixed costs by £1.7 million and further progress was likely to be made.
He said the Christmas period had been “tough” and warned of more volatility, adding: “We are determined to weather the storm and come out the other side with stronger brands, loyal customers, a leaner cost base and a better foundation from which to build a profitable and growing business.
“We are starting to see evidence of positive momentum in the pre-orders for our new product ranges, as well as old retail partners re-engaging, following the end of the discount era.”