Hornby to break even as sales run out of steam

Shares of toy train maker Hornby plunged after it warned it will not meet full year expectations and expects to only break even in the current financial year following disappointing sales of Olympics merchandise.

The group, which produced a string of Olympic themed toy train sets and a chrome finish model of the Olympic Velodrome, said macro-economic factors continue to depress consumer spending and retailers continue to buy cautiously.

"Sales of London 2012 merchandise were lower than forecast. Whilst, prior to the Games, major account listings for our products were strong, and consumer purchases were encouraging, the major retailers had also purchased substantial quantities of London 2012 merchandise from other licensees," the group said in a statement.

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"Faced with lower than expected sales, the major retailers resorted to deep price discounting. The consequence of this for Hornby was that retailers lost confidence in many categories of London 2012 merchandise, and repeat orders for our products were cancelled," it explained.

As well as weaker than expected demand for London 2012 merchandise, business was also adversely impacted by supply disruptions.

As a result Hornby beleives it will not achieve its forecasts for the current financial year and, therefore, anticipate results will be approximately break-even for the financial year ending 31st March 2013.

The group warned that disruption to shipments from its major supplier in China will be substantial for the remainder of the financial year.

Net debt at 31st August 2012 was £7.8m compared to £14.3m a year earlier.

CJ