Hornby cuts divi

Hornby. best known for its model train sets and Scalextric racing kits, has cut its dividend after a tough year, and is now also looking for a new Chairman.

The company, which said earlier this year after a profit warning that underlying profit before tax for the year to March 31st would not be less than £4.5m just about kept that promise.

Pre-tax profit before amortisation of intangibles and net of foreign exchange adjustments on inter-company loans was £4.5m, up £4.4m the previous year. Broker WH Ireland had pencilled in a figure of £4.8m for pre-tax profits.

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Statutory profit before tax dipped to £4.0m from £4.1m the year before, while turnover for the year was up 1.7% to £64.4m from £63.4m the year before. WH Ireland had hoped for sales of £68m.

Sales in the UK were down 4% at £45.5m from £47.3m the year before, despite sales of model train sets holding up. Sales of Scalextric went into reverse while Airfix sales were slightly below the previous year.

Sales via Hornby's European subsidiaries in total were 21% above the previous year at £16.2m (2011: £13.4m). US sales rose in dollar terms to $4.4m from $4.2m but were unchanged in sterling terms at £2.7m.

Gross profit margin improved to 48.3% from 46.2% the year before, while the underlying profit before tax margin held steady at 7.0%.

The increase in gross profit margin was primarily a result of changes in the product mix of sales in favour of higher margin model railway products. Overheads increased year on year, due largely to the effect of variable selling costs increasing in Hornby's UK concessions and European subsidiaries as a result of higher levels of sales, and with incremental promotional activity associated with the London 2012 Games.

Net debt at the end of the period was £6.3m, up from £6.1m at the end of March 2011.

"We are pleased that sales of our London 2012 merchandise are gathering momentum. We expect this unique licence opportunity to contribute positively to profits in the short term and, through the increased distribution that we gain as a result of our involvement with London 2012, to provide an ongoing legacy benefit in substantially increasing our presence in mass market retail outlets," said Frank Martin, Chief Executive of Hornby.

After more than a decade in the chair, company Chairman Neil Johnson is to step down from the board no later than the time of next year's annual general meeting.

There are also to be changes to the group's dividend policy, with the board recommending that half of retained earnings should be paid out in the form of dividends. What this means for the financial year just ended is a full year dividend of 3.7p, down from 5.0p the year before.

"There is no doubt that there will continue to be pressure on consumer confidence for some time to come. However, we continue to innovate and to seek new commercial opportunities in order to counter the effects of the macro-economic climate in which we are operating," Martin said.

JH