Hornby says its turnaround is right on track - but scraps its dividend again

Rebecca Smith
Hornby's hoping investors will think it's firmly back on track
Hornby's hoping investors will think it's firmly back on track (Source: Getty)

Model railway maker Hornby is confident there'll be no derailment, despite its troubles: it said trading is in line with expectations as its turnaround plan shapes up. But it's ditched its dividend for another year.

Investors have seen the positives: shares were up eight per cent in early trading.

Read more: Back on track? Hornby shares surge as it ticks off first turnaround stage

The figures

The toymaker, which is best-known for its train sets and Airfix kits, reported a 15 per cent fall in revenue from £55.8m last year to £47.4m, but narrowed its reported loss before tax to £9.5m, from £13.5m in 2016.

Hornby said as the firm continues to deliver on its turnaround plan, the decision has "again been taken not to pay a dividend", about payouts were halted last year, saying the board continues to keep the dividend policy under review.

It reported exceptional items of £3.3m, down on last year's £7.9m, including costs, in part relating to the restructuring of the business.

Hornby said net cash at 31 March was £1.5m, compared to £7.2m net debt last year.

Trading is "in line with expectations acknowledging some variations in the timing of new product launches".

Why it's interesting

Hornby has been in the midst of a turnaround plan: today it confirmed the first stage is complete, after it reduced business scale and costs, as well as a streamlining its European operating model. The outlook ahead is rosier now the first stage of the plan has been completed, it said.

It hasn't been plain sailing, with shareholder discontent leading to calls for chairman Roger Canham to be ousted. Ian Alexander Anton had sent Hornby a letter on behalf of himself and New Pistoia, the firm's second largest shareholder, saying Hornby's five years under Canham had been "disastrous".

Directors rebuffed Anton's proposals in April, saying the turnaround plan was already picking up pace and most shareholders were supportive.

Next on the agenda will be bolstering the "strong profitability" of the Hornby, Airfix and Humbrol brands, improving Scalextric's performance, as well as growing the company's European and US business.

What the company said

Steve Cooke, Hornby's chief executive, said:

Our results to March 2017 provide solid evidence of our delivery in phase one of our turnaround plan; notably in terms of cash flow performance and gross margin improvement during the year.

We are determined to build on this progress as we move to the next phase of the turnaround plan.

We have built a sound platform for growth over the last 18 months and we are now planning to deliver sustainable profit and net cash generation into the medium term.

The current financial year has started positively and we are well placed to achieve the board's expectations for the year.

Read more: Hornby is about to hold an incredibly awkward shareholder meeting

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