Hornby on the right track

Hornby's largest Chinese supplier transferred model railway production to a factory with no experience in the business and, unsurprisingly, 10 per cent of ordered product wasn't delivered. Add to that heavy discounting of London 2012 stock and the group's the gross profit margin fell 5.7 percentage points to 42.6 per cent, with the underlying pre-tax profit having plummeted 97 per cent to £0.15m.

UK trading was difficult and product launch delays made matters worse - model railway sales fell 26 per cent. Meanwhile, disappointing Olympic sales led to a £1.3m loss and distracted from the core business. The result was a 5 per cent UK sales slide, with underlying profit having slumped 59 per cent to £1.4m. Although there was success with a number new products, including the Flying Scotsman. Meanwhile, a 30 per cent shortfall in orders in Europe sent sales tumbling 29 per cent, leading to a £1.2m loss there. However, the Chinese supply chain has now been diversified, while some production is being repatriated to the UK - the management team is also being restructured.

Broker Numis Securities expects adjusted pre-tax profit of £1.8m in 2014, giving EPS of 3.5p (from 0.48p in 2013).