Pre-Close Trading Update & Ch

RNS Number : 7630P

Hornby PLC

30 March 2009

 



Hornby Plc ('Hornby' or the 'Company')

Pre-Close Statement

Hornby Plc, the international models and collectibles group, has today announced a trading update for the year ended 31 March 2009. The Company anticipates announcing its preliminary results on 5 June 2009.

Trading Update

Consistent with our Trading Update at the end of January and despite the difficult economic climate, consumer demand for our portfolio of famous brands has remained strong in all our key markets during the final quarter of the financial year. In particular our Airfix, Humbrol and Corgi ranges have achieved encouraging sales levels. Our model railway sales in the UK and Europe have continued to be constrained in the final weeks of the financial year by supply chain issues. These issues are set out more fully below. As a result of these factors, sales for the year are expected to be c. £61million, 10% ahead of the prior year. Whilst this is positive growth, our sales were held back by around c. £2.0 million compared to our previous internal forecast, as a result of delays in receiving shipments. Underlying pre-tax profit has been impacted and is now expected to be in a range between £6.2 million and £6.4 million compared to £8.4 million in the previous year.

The Board will review the level of final dividend payable for the year ended 31 March 2009, prior to the publication of the Preliminary Results in June 2009.

Supply Chain

We have previously reported on the difficulties experienced by Sanda Kan, our principal supplier in China. At the time of our January Trading Update, we reported that Sanda Kan had been purchased by a well-resourced Hong Kong based company. The acquisition took place early in January 2009 and since then the new owners have focussed on restructuring and integrating the Sanda Kan operations, resulting in disruption to customer service. This has had a material negative impact on the trading performance of Hornby in the final weeks of the financial year. Whilst we have established a positive relationship with the new owners and continue to work closely with them to resolve these supply issues, we have also been developing alternative sources over the past two years in order to enable us to diversify our model railways supply base. As a result, we are now satisfied that a number of these alternative sources are capable of manufacturing a substantial proportion of our requirements if necessary. 

Strategy Update

Our strategy to build a broadly based European hobby business continues to offer substantial growth opportunities. Sales of the Airfix, Humbrol and Corgi brands have continued to grow and despite difficult trading conditions, the lower price points offered in these ranges will provide year-round sales. In mainland Europe, demand for our model railway products also continues to grow. The well publicised difficulties experienced by some of our European competitors will provide further opportunities to grow our business organically. We have the brands and related business building blocks in place to take advantage of these opportunities. 

Appointment of Financial Adviser and Broker

We are pleased to announce the appointment of Numis Securities Limited as our Financial Adviser and sole Corporate Broker with immediate effect. 

Outlook

Despite the general economic background, we continue to experience good demand for our products. Our new ranges, launched at the International toy fairs in January and February have been well received. In view of the weakness of Sterling versus the US Dollar, we have raised our prices in order to mitigate as far as possible the impact on our margins. Although earnings from our US and European businesses will also help to counter-act the effects of Sterling weakness, as previously indicated, the net effect is likely to impact on our performance in the year to 31 March 2010. The Company is well placed compared to many in its peer group and there remains substantial scope for revenue growth in the year ahead. 

Chairman, Neil Johnson commented:

'I would like to assure shareholders that our number one priority is to address the supply chain issues in China. The Group's strategy to build a broadly based hobby business across a variety of geographic and product sectors continues to consolidate our already strong position in our market. 

'We are realistic that the new financial year will be a tough year in the retail environment but we remain upbeat about our prospects for the future. We have the strength of brands, the reputation and the skill set to weather the current climate and to maintain and grow our position in the ever exciting and diverse hobby market.'

-ends -

Date: 31st March 2009

For further information contact:

Hornby Plc	City Profile
Neil Johnson, Chairman	Simon Courtenay
Frank Martin, Chief Executive	William Attwell
Andrew Morris, Group Finance Director Tel: [phone]	Tel: [phone]  Email: [e-mail]
Web: www.hornby.com

 

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