China supply chain problems cost Hornby £2m

In a trading update for the year ended 31 March, the models and collectibles group announced that its Airfix, Humbrol and Corgi ranges in particular had achieved encouraging sales levels. However, model railway sales in the UK and Europe had continued to be constrained by supply chain issues with its Chinese supplier. Hornby’s main Chinese supplier Sanda Kan was purchased by a Hong Kong based company in January 2009 and since then the new owners had been restructuring and integrating the Sanda Kan operations, resulting in disruption to customer service. Hornby said that although it had established a positive relationship with the new owners and continued to work with them to resolve the supply issues, it had also been developing alternative sources over the past two years in order to diversify the model railways supply base. A number of these alternative sources were now capable of manufacturing a substantial proportion of required production if necessary. Chairman, Neil Johnson assured shareholders that Hornby’s number one priority was to address the supply chain issues in China. He went on: “We are realistic that the new financial year will be a tough year in the retail environment but we remain upbeat about our prospects for the future." Sales for the year are expected to be around £61 million, 10% ahead of the prior year, but Hornby believes the delay in shipments from China had cost it around around £2 million and now expected pre-tax profit to be between £6.2 million and £6.4 million compared to £8.4 million in the previous year.