The company said sales are in line with expectations and its turnaround strategy is making progress.
Hornby has reported a reduced annual loss, as pre-tax losses for the year to the end of March narrowed to £3.4m from £5.3m a year ago. Revenue increased 15% to £37.8m, and the underlying pre-tax loss shrank to £3.2m from £4.4m.
COO Tim Mulhall commented: “Our journey towards returning to health continues. In a static worldwide market, I’m proud the team have delivered a 15% increase in sales, whilst seeing a narrowing in losses. The turnaround continues.”
The company has pursued a strategy of avoiding heavy discounting and has seen Hornby’s gross profit margin increase to 44.1% from 40.9% a year earlier. Overheads rose to £19.4m from £18m, due to increased recruitment and expenditure to improve revenue. Sales have been in line with expectations since the end of March, and more customers shopping directly online has resulted in stronger margins than expected.
Hornby noted that retail customers have had more time to spend on their hobbies during the lockdown period, and many have renewed their enthusiasms. Some of the £15m raised from shareholders in March has been used to focus on digital services to attract more customers.
CEO Lyndon Davies said: “During this time we have found many new and returning customers purchasing our products. Families have been building plastic kits together, bringing out their old railway systems and dusting off their slot car racing sets. People have come back and have started to stoke the fire of the hobby in the younger generation again. A lot of these customers have come back to find us online, and it is now up to us to keep them engaged.”
The company is continuing to implement its turnaround strategy, despite the impending Brexit uncertainty and the current Covid-19 situation, working towards “getting the group back to sustainable profitability and beyond”. Lyndon added: “We are wary of how the government’s responses to the virus will affect consumer confidence and spending. We will be delivering a very strong product range, but we remain cautious about how consumers will behave post the lockdown.”
Tim Mulhall expressed his pride in Hornby’s performance: “Today, we see people reacting to the global pandemic by turning to the familiar, to seek comfort and solace. In this, the 100th Birthday of Hornby Trains, very few great brands are as cherished and loved by so many. We have moved from considering how to survive and keep our people safe, to how to keep new products on track, and finally how to deliver on the challenge people set us – to keep them entertained and stimulated during these strange times. We’d not have done this without the great people throughout our company – thank you all. Our brands’ founders over 100 years ago would be proud.”