Trading Update

RNS Number : 1629Z

Hornby PLC

16 September 2015

 



Hornby Plc ("Hornby" or "the Group")

AGM TRADING STATEMENT

Hornby Plc ("Hornby"), the international hobby products Group, issues the following trading statement ahead of the Group's Annual General Meeting being held today.  As stated previously, Hornby is currently implementing a strategic plan to reorganise the Group.  The turnaround plan is continuing to make good progress to re-position the Group to create a platform from which to deliver sustainable, long-term improvement in performance. 

Operational Change

We are now in a critical period of major operational change and improvement. At the beginning of July the stage one roll out of an Enterprise Resource Planning (ERP) system (Microsoft Dynamics AX) began in the UK business, to upgrade the IT platform.  This upgrade and investment will greatly improve our stock management processes and our ability to drive sales.

The new system will also be rolled out across our European businesses in the second half of the year and this will enable delivery of very significant cost savings and wider operational benefits for the group. Firstly it will enable a major simplification of our supply chain through the closure of existing warehouses in France, Germany, Spain and Italy and the routing of all stock through a single UK warehouse at Hersden, Kent. Secondly, it will allow the European businesses to be rationalised to focus on sales generation. The European change is scheduled to start during October and is currently on plan to be completed by the end of the financial year and to start to deliver the expected benefits.

Business Performance

The UK ERP implementation has as expected, had its challenges. As the system was introduced, trading was impacted throughout July and August, against a backdrop of a weaker general retail environment.  This was in line with our expectations, but we are pleased with how the system has bedded down and encouragingly run rate volumes have since improved.  They are now back to levels which are higher than last year. UK trading is now also benefitting from manufacturing production being ahead of plan in trains and Scalextric. Key new products for the Christmas trading season include the Hornby Silver Jubilee Collection Limited Edition Set and the Scalextric James Bond 'Spectre' Set.

In contrast, European sales are currently being impacted by ongoing problems with supply of international model rail. We are working hard to overcome these issues and we are confident that supplies of these products will improve in time.

Financial Position

Following the receipt of proceeds from the successful placing of 15,789,474 new Ordinary Shares at a price of 95 pence each, net debt was £3.9m at 31 August 2015. This compares to net debt of £7.5m at 31 March 2015.

Outlook

As usual the pre-Christmas trading period will have a significant impact on the full year financial outturn. Trading disruption from the new system implementation was expected and combined with European supply problems this will result in half year group revenue being lower than the prior year. However, in line with our expectations for the turnaround of the business, UK revenue at the half year is expected to show modest year on year growth. While it is difficult to forecast accurately the full extent of further expected disruption during the ongoing roll out we are confident that the full year financial result will show progress on last year.

Our approach is to tackle the change head on, as planned during this financial year, in order to deliver the transformation required to create a robust platform for significant growth next year and beyond.

Richard Ames, Chief Executive Officer, commented:

"We have made good progress on the planned restructuring and implementation of the new ERP system to help us manage our Group stock. We are a couple of weeks from our half year end and look forward to updating the market on our progress in more detail with our interim figures on 26 November 2015.  The Group is now looking ahead to the important Christmas trading period.  Early indications from our customers are positive and we have an exciting pipeline of new products that are being well received.  Despite the challenges of managing the Group's planned turnaround strategy, we are confident that Hornby will emerge as a stronger and more robust business."

-ends-

Date: 16 September 2015

Enquiries:

Hornby Plc                                                          01843 233500

Richard Ames, Chief Executive

Steve Cooke, Group Finance Director

www.hornby.com

Broker Profile                                                   020 73763 3400

Simon Courtenay

Numis Securities Limited                               020 7260 1000

Rupert Krefting, Adrian Trimmings

 

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