Shares in model enthusiasts' favourite Hornby nose-dived over five per cent this morning after announcing static sales and falling profit margins.
Six month revenues fell from £22.3m to £21.9m, which led to an underlying loss of £3.6m, slightly more than the £3.4m loss in the same period last year.
However, losses could have been worse as they include £1.1m of foreign currency gains, compared with £0.2m over the same period in 2015.
Profit margins – the amount of profit made per unit sold – fell from 41 per cent to 36 per cent.
Net debt is considerably lower at £2.1m compared with £5.7m at the end of September 2015.
Why it's interesting
Hornby has had a busy 2016 both financially and operationally.
The Kent-based firm successfully raised £7.6m of equity funding in June, which enabled it agree a new financing package with lenders. A similar £10m facility is in place, but, in news that will please its bankers, the amount drawn is considerably less.
Operationally, the plan is to cull a lot of the Hornby's less profitable product lines.
In news that may not be music to the ears of the niche Airfix or Scaletrix collectors, the firm said it managed to reduce the number of lines by a whopping 40 per cent.
After Christmas last year, Hornby was lumbered with bundles of stock after failing to shift it during the festive period. This led to a costly write-down of what it had in its warehouse and predicated challenging conversations with lenders that led to banking covenants being waived.
What the company said
Chief exec Steve Cooke, who took over as part of a new leadership team in April 2016 said:
We are making good progress with the Hornby turnaround. We are delivering the structural changes to reduce business scale and costs and to streamline the European operating model. We are currently focussed on the Christmas trading period as well as ongoing stock reduction initiatives.
We have listened carefully to our core independent customers and responded positively to their concerns with new trading terms and a commitment to rebuild our relationship with them.
The group has traded steadily during the first half of the year but revenue is expected to decline significantly year on year in the second half as the planned rationalisation of product lines, channels and certain international brands takes effect.