Hornby issues profit warning from unexpected foreign exchange hit

ICONIC railway model maker Hornby, has issued its third profit warning in less than two years after it warned that unexpected foreign exchange movements would drag it to a worse-than-expected £1.2m loss.

In a trading update, the maker of Airfix and Scalextric revealed that despite trading in line with expectation at an operating level, it suffered a further £0.2m foreign exchange loss, since the £1m it predicted in its January update.

The loss relates to its exit from its trading agreement with a long-standing major supplier of model railway products. Previous supply chain delays had caused the business to suffer losses on the sterling value of currency held to purchase its products.

“With the main obstacle to an improved and efficient supply chain out of the way, we expect a gradual improvement in its reliability and quality. As a result we look forward to improved trading next year,” Hornby said in the trading update.

Net debt at the end of March 2014 is now expected to be around £7.3m compared to £6.5m at the end of December 2013 and £2.1m at 31 March 2013, the company said, adding, it is expects to conclude negotiations of new banking facilities by the time results for the year to 31 March are announced in June.