End of the line looms for Hornby as profits slide shunts it towards merger

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The Independent Online

One of Britain's best-known toy names, Hornby, is facing the end of almost 100 years of independence after the company said it is considering its strategic options which could lead to takeover.

Hornby, famous for its model train sets, has finally been shunted into the sidings after a long period of under-performance. It has been hit by the continued popularity of computer games and fierce competition from larger US rivals such as Mattel and Hasbro.

Yesterday the company said it was confident that Hornby still has a robust position in the market for traditional model and hobby products. However, it said the company "could make more efficient use of its fixed overheads by participating in the trend towards sector consolidation."

Hornby, which also makes the Scalextric car racing sets, will now review its options together with its financial adviser, SG Hambro. Hornby recorded profits of £1.1m on sales of £21m last year. In the six months to November profits slid 40 per cent to just £253,000. However, yesterday the group said trading had improve, with sales in the first quarter up by 24 per cent on last year. The shares closed up 28.5p yesterday at 172.5p, valuing the company at just £14.4m.

If Hornby passes into foreign ownership it will become the latest in a long line of British toys companies to do so. JW Spear, the Scrabble maker, was bought by Hasbro as was Waddington's, best known for Monopoly and Cluedo. Matchbox and Corgi are owned by Mattel and Meccano is part of a French group.

Hornby is one of the most historic names in British toymaking. It traces its roots back to 1901, when Frank Hornby, a Liverpool clerk, invented Meccano, the construction toy for budding engineers.

In 1920 he created the first clockwork train set. Five years later he invented the famous Hornby Dublo electric models which took their name from the "OO" gauge of the tracks. Scalextric arrived in 1957.

But the company has hit the buffers on several occasions as the toy market became more competitive. It fell into receivership in 1971 when it was part of Lines Brothers, which also made Airfix. It became part of Dunbee Combex Marx but that too went under.

Hornby was eventually bought out by its management in 1982 and floated on the stock market in 1986. Since then it has almost gone off the rails on several occasions. In recent years the company has moved almost all its production to China to compete to lower its costs.

Likely buyers for Hornby could include Hasbro and Mattel. However, a merger with another traditional toy company is a possibility. Candidates could include Merklin of Germany, which also makes train sets.