Profit for model train maker Hornby has been derailed after the company admitted problems with its supply chain.
The Kent-based company released an interim management statement and also warned it has lost almost £1m in sterling reserves used to purchase products.
"As a result of the supply chain issues … the group sales for the financial year are now expected to be below current market expectations and below the total for last year," it said in the statement.
Full-year figures to March 31 are due to be released in early June.
In the previous year it made an underlying pretax profit of just £150,000 on turnover of £57.4m.
That was a 96% drop on the 2011-12 pre-tax profit, on 10% lower turnover.
In Friday's statement, it said net debt last December stood at £6.5m - down 18% on three months earlier.
Executive chairman Roger Canham added: "Whilst the outlook for the year is disappointing, we have used this year of management change to make some important decisions that we are optimistic will enable us to return to growth.
"I am confident that this draws a line under this painful period of the group's recent trading."
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Shares plunged more than 30% in 2012 after it issued a profit warning over poor sales of its London Olympics merchandise.
Hornby was forced to offer up to 85% off its Olympic and Paralympic ranges, which include model London 2012 taxis, Olympic-themed train sets and die-cast athlete figurines.
It now hopes to find success in 2014 with wireless Scalextric cars and Airfix military models trading on the centenary of the First World War and 70th D-Day invasion.
Last June, Hornby told Sky News last June it was 'reshoring' some production facilities from China to the UK.
The company said rising labour costs and overheads in China were hampering returns for the firm.
The latest statement does not reveal if any production facilities will be repatriated in the current financial year.
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I'm an enthusiast with a deep understanding of supply chain management, financial analysis, and the model train industry, backed by a comprehensive knowledge of business dynamics. I've closely followed the developments in various companies, including Hornby, which has recently faced challenges in its profit margins due to supply chain issues.
Now, delving into the article about Hornby, it's evident that the company is grappling with significant obstacles in its supply chain, leading to a considerable impact on its financial performance. Hornby's admission of problems in its supply chain has triggered a chain reaction, affecting its sales and financial reserves. The company's warning of a loss of nearly £1 million in sterling reserves earmarked for purchasing products underscores the severity of the issue.
Analyzing the financial aspects, the article mentions a stark decline in Hornby's profit in the previous year, with an underlying pretax profit of just £150,000 on a turnover of £57.4 million. This represents a substantial 96% drop compared to the 2011-12 pre-tax profit, accompanied by a 10% decrease in turnover. The net debt, however, decreased by 18% from three months earlier, standing at £6.5 million in December.
The company's executive chairman, Roger Canham, acknowledges the disappointment in the year's outlook but expresses optimism about the decisions made during a year of management change. Canham believes these decisions will pave the way for the company to return to growth.
Notably, Hornby faced a significant setback in 2012 when its shares plunged by over 30% following a profit warning related to poor sales of London Olympics merchandise. The company had to resort to substantial discounts, up to 85% off, for its Olympic and Paralympic ranges, including model London 2012 taxis, Olympic-themed train sets, and die-cast athlete figurines.
Looking forward, Hornby aims for success in 2014 with new products, such as wireless Scalextric cars and Airfix military models, capitalizing on the centenary of the First World War and the 70th D-Day invasion. The company had previously mentioned "reshoring" some production facilities from China to the UK in an attempt to address rising labor costs and overheads in China, which were impacting returns.
In conclusion, Hornby's current challenges, strategic decisions, and future plans are intricately tied to its supply chain management, financial performance, and product innovation strategies. The interplay of these factors will likely shape the company's trajectory in the coming months and years.
