Weak demand knocks Hornby’s profits off track

TOY firm Hornby yesterday admitted its profits have been hit by weak demand for train sets and Scalextric racing cars over Christmas, sending its shares into reverse.

The group, which also owns the Airfix and Corgi brands, blamed fragile consumer confidence and caution among retail stockists for its UK festive sales coming in below the level of a year ago.

In particular, it said sales of more expensive ranges such as Hornby and Scalextric sets were “affected adversely”.

The firm has taken steps to broaden the price range of its products but warned that profits for the year to the end of March would be below previous City expectations.

It is hopeful that its range of products for the Olympics, which feature models of London taxis and buses, will boost demand.

Other new products this year include Scalextric Star Wars products based on the Lucasfilm series of movies and a range of collectable Corgi die cast vehicles aimed at the £1.99 price point.

Analysts at Numis said the group’s product pipeline “remains strong” but cut their recommendation on the shares to “add” from “buy” amid a “challenging consumer outlook”.

The broker also trimmed its profits forecast for this year by £2 million to £5m and for the following year to £6.5m from £8.2m. Analyst Andrew Wade added: “While this has clearly been a challenging period, Hornby continues to make strategic progress.”

It is the second year in a row that the toy-maker has endured disappointing festive trading, following the previous year’s freezing weather.

Hornby chairman Neil Johnson said: “We recognise that trading conditions will continue to be challenging for the foreseeable future. In anticipation, we have adapted to offer a wider range of products at lower prices in categories complementary to our core business.”

The firm has recently overhauled its supply chain following difficulties in China and seen a major lift in sales in continental Europe, including Germany.