For two years Hornby has been bedevilled by supply problems in China. It unwisely relied on one main supplier who ran into financial difficulties. Now, however, there are three suppliers (including the revamped original one) and the company is talking to a fourth.
Sales in the half year to end- September could have been £2m more with perfect supplies. But there has been a big logistics improvement, as indicated by the latest European trading figures, where sales increased 50 per cent to £6.9m while underlying losses in Spain fell from £539,000 to £160,000. Hornby also reports a maiden profit in Germany, which is by far the largest model railway market in Europe - although Italian profits fell.
UK sales were up modestly, but better margins increased profits by £171,000 to £1.4m. Losses fell in the US, following a reorganisation, but sales were a miserable £983,000 ahead of next year's launch of a range of Star Wars Scalextric products.
Value investors should also note that the two big brands, Hornby and Scalextric, have no value on the balance sheet.
For the year as a whole broker Numis forecasts sales up from a depressed £63.4m to £71.8m but it has slightly reduced the profits rise from an adjusted £4.4m to £7m (rather than £7.4m) due to uncertain Christmas demand which has been compounded by retailers ordering later. But 2012-13 should be a good year as Hornby will be selling 100 different London Olympics mementoes.
HORNBY (HRN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 135.375p | MARKET VALUE: | £51.4m | |
| TOUCH: | 133.75-137p | 12-MONTH HIGH: | 162.5p | LOW:105p |
| DIVIDEND YIELD: | 3.7% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 97p* | NET DEBT: | 40% | |
| Half-year to 30 Sept | Turnover (£m) | Pre-tax profit (£000) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 25.5 | 528 | 0.80 | 1.7 |
| 2011 | 28.4 | 959 | 1.36 | 1.7 |
| % change | +11 | +82 | +70 | - |
Ex-div: 14 Dec Payment: 27 Jan Leisure equipment. *Including intangibles of £17.8m, or 47p a share. | ||||
