Hornby shares driven lower after warning on sterling's slump

Hornby, the train-set maker, warned yesterday that it may be forced to increase prices if sterling does not recover from its recent slump.

The 102-year-old company said the pound's dramatic fall against the dollar would squeeze margins in the coming year as it alerted investors full-year results would be at the low end of expectations. Hornby shares fell 20 per cent to 76.5p, their lowest in more than six years.

Hornby, which also produces Airfix kits, Scalextric motor racing and Corgi toy cars, said customers had already absorbed one round of price rises, but that continued weakness for the pound could force it to lift them again.

"Unless sterling strengthens from its current rate, we would anticipate a material erosion to our margins in the year to 31 March 2010," Hornby said in a trading update. The company buys 90 per cent of its products in currencies linked to the dollar and sells only a quarter in dollars or euros.

Hornby said strong trading in late December and early January was unable to make up for low consumer and retailer demand in the run-up to Christmas. The company added it was operating within its banking facilities and had excellent relations with its bankers.

Sterling, which was above $2 in March, sank to a 23-year low below $1.40 last week as fearsgrew for the British economy and the country's banking sector.

Analysts at Altium Securities cut their earnings forecasts for each of the next two years by a quarter and warned the company may come under pressure to cut its dividend. Yesterday's share fall was the biggest for at least 10 years.

Hornby, whose toy trains include the Hogwarts Express from the Harry Potter books, said potential for growth in Italy, Spain, and France could limit the damage caused by sterling's weakness. The company said demand in Europe had been encouraging, but that sales had been constrained by supply problems.

The toy maker suffered delays and unreliable service in the autumn from its biggest supplier in China, which was weighed down by debts and management changes. Hornby said the supplier had been acquired, stabilising its supply base.

Hornby's chairman, Neil Johnson, said: "We are pleased with the performance of the group in what was generally a difficult pre-Christmas period.

"Strong demand in the early weeks of 2009 gives us further confidence that our hobby-based businesses will continue to demonstrate their defensive characteristics in what is likely to continue to be a challenging economic climate."

Most of Hornby's products are sold to adults who are avid collectors. The company said this gave it some protection against the recession, because the collectors were prepared to sacrifice other spending instead of missing out on a new toy or model.

The company was founded by Frank Hornby as Meccano Ltd in 1907 and started producing motorised toy trains in 1920. Hornby became a public company in 1986.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map