Weak demand knocks Hornby profits off track

Toy firm Hornby has admitted its profits have been knocked off track by weak demand for train sets and Scalextric racing cars over Christmas.

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".

Hornby has taken steps to broaden the price range of its products but warned that profits for the year to March 31 will be below current City hopes.

Chairman Neil Johnson added: "It is proving extraordinarily difficult to predict sales accurately in these turbulent markets."

It is the second year in a row that Hornby has endured disappointing Christmas trading, following the previous year's freezing weather.

However, 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.

Mr Johnson added: "In anticipation of continuing difficult trading conditions, we have adapted our business to offer a wider range of products at lower price points in categories complementary to our core business."

Hornby's shares slumped 19% in the wake of the profits warning.

Numis Securities cut its profits forecast for this year by £2 million to £5 million and for the following year to £6.5 million from £8.2 million, despite the likely benefit of strong sales of Olympics-related merchandise.

Analyst Andrew Wade added: "While this has clearly been a challenging period, Hornby continues to make strategic progress."

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

PA