Hornby heads off the rails as shares slide

Negotiations are taking place after the company issued a fourth profit warning in three years

Negotiations are now taking place between Hornby and its lenders, after the company issued a fourth profit warning in three years (Getty)

Shares in Hornby more than halved in value yesterday after the beleaguered model railway company warned that its full-year losses would be deeper than expected.

Negotiations are now taking place between Hornby and its lenders, after the company issued a fourth profit warning in three years.

Richard Ames, its chief executive, said a turnaround and major investment plan he launched last year was not working, as sales in January sank as customers were not interested in the toy-maker’s promotions.

Of most concern was the revelation that a banking covenant could be breached next month, sending Hornby’s shares down 50p, or 62 per cent, to 31.75p – their lowest level to date, valuing the entire company at just £17.4m.

Major investment, intended to shore up the company’s troublesome supply chain, and a raft of new products, including Corgi Thunderbirds models and wooden toy Hornby trains, gave a slight improvement in November and December.

Sales at Hornby, which also owns Airfix models and Scalextric, jumped 17 per cent in the two months leading up to Christmas, but the company admitted the improvements “masks some volatility within the period”.

It added: “Subsequent trading since the start of the new year has been in stark contrast, with a disappointing response to January product promotions,” leaving sales substantially below expectations with little sign of recovery.

A full stock check in the last few months also resulted in a £1m write down, meaning full year losses are expected to be between £5.5m and £6m, which was described as a “substantial setback” in the recovery plan for the business.