Model maker Hornby in £4.5m loss as IT system hits the buffers

Toy company sinks back into the red following supply chain and technical issues

A classic Hornby train set (Getty)

The toy and model maker Hornby insisted that its years of underperformance, supply chain problems and profits warnings were finally behind it – as it revealed a massive slump into the red once again.

Bosses had already issued a profits warning last month, but the extent of the problems were laid bare as Hornby’s latest figures showed a six-month loss of £4.5m, compared with a £520,000 profit in the same period a year ago. The Margate-based company, which owns the Hornby train, Scalextric, Airfix and Corgi brands, said sales in July and August suffered most as supply chain issues hit the business hard, particularly in its international markets.

A new computer and stock-management system led to most of the problems, leaving shelves empty and pushing down profit margins as stores were forced to offer old stock at knockdown prices.

Supply chain issues remain as the company continues to shake up its Chinese links, which have caused several profits warnings over the years as Hornby became overreliant on one wayward supplier.

Sales in the six months to the end of September dipped by 8 per cent to £22.3m after massive falls in the UK of 45 per cent in July and 8 per cent in August. The company admitted there has been “notable disruption” but added that improvements in September had helped UK sales to rise by 9 per cent. Overseas, the problems were more widespread, with sales during the half-year dropping by 25 per cent.

However, the chief executive Richard Ames, insisted: “We are at an important stage in Hornby’s transformation. We have pulled forward our reorganisation plan for our European operations, which has contributed to further trading disruption but which accelerates our overall plan.We are confident that these changes will give us the platform from which we can drive our business forward.”

Four international warehouses were shut and senior managers in Italy, France and Spain were shown the door. The company said: “These changes have contributed to very significant trading disruption, though they will also result in higher levels of cost savings this year.”

Bosses hope that an 80th anniversary set of silver LNER railway locomotives and a Scalextric racing car set linked to the James Bond film Spectre will be best-sellers this Christmas. The company said it had also cashed in on the re-release of the Corgi Aston Martin “Goldfinger DB5” after the former Top Gear presenter, James May, called it the car of the century.

Hornby added that it had completed a refinancing and achieved savings of £15m by leaving the main FTSE 100 stock market and rejoining the junior AIM market.