Hornby announced today that it was clearing the decks of some of its products as part of a turnaround plan.
In its preliminary results for the year to March, the collectibles company revealed that revenue had dropped to £55.8m, down four per cent on the prior year's £58.1m.
Meanwhile, reported losses before tax had widened to £13.5m, down further on last year's £0.2m. The company's underlying loss position, which does not include items such as amortisation, had also worsened, dropping to £5.7m from a profit of £1.6m.
As with the year before, the company is not paying a dividend.
Shares in the company were trading down 0.2 per cent at 31.75p at time of writing.
Why it's interesting
As part of its turnaround plan, Hornby revealed that it would be renewing its focus to a smaller number of products and reducing its product line by around 40 per cent throughout the rest of 2016, having concluded that many core parts of its business were still stable and profitable.
The company also noted that, during its year to March, around half of the its product lines accounted for roughly 90 per cent of its profits.
Hornby also announced that it was looking to raise £8m through a share issue.
What Hornby said
"Last year was difficult and disappointing as we faced significant challenges during the continued turnaround and improvement of the business," said Steve Cooke, Hornby chief executive, who stepped up into the role following the departure of Richard Ames earlier this year. "We were pleased with the progress made in modernising many of our systems and processes, but much of the change last year resulted in substantial unplanned disruption which had a significant adverse impact on trading performance.
"The board has now completed a thorough review, which has identified that many core parts of the group are stable, profitable and cash generative, driven by iconic brands with strong market positions. The review has also identified areas that require fundamental change.
"The turnaround plan is intended to return the business to sustainable profitability and cash generation."
Roger Canham, executive chairman, added:
We have undertaken and completed a comprehensive review of the business led by Steve Cooke. This has led to the development of a clear plan to turnaround the business, to move it back to a position of sustainable profit and cash generation and to identify the necessary investment required. This will result in a smaller, more focused business concentrated on our major UK brands and a streamlined European operating model which will be run out of the UK.
Investors are likely watching carefully to see if the new streamlined business can help the company bounce back into profit.