Hornby solving China problems

Announcing its half year results for the period ended 30 September, the company whose brands now include Airfix models, Humbrol paints and Corgi die cast toys, said trading conditions had been more difficult than in previous years and this, coupled with the supply constraints in its Chinese-sourced model railway business, resulted in sales for the half year being £24.2 million, marginally below the equivalent period last year (£24.5m). Pre-tax profit at £1.8 million was below last year's £2.7 million and impacted by a £1.3 million increase in overheads associated mainly with the £8.5 million acquisition of Corgi. In China, Hornby has been experiencing some difficulties as a result of raw material and other input costs and this had led to some disruption in the supply chain. Now, price rises have been agreed and there has been a marked improvement in availability of supply, the company said, adding that it expected to see a significant improvement in performance in the second half. Chief executive Frank Martin said: "The retail markets are undoubtedly more challenging. However the hobby sector has distinctive defensive characteristics, which will help us in a more difficult economic environment. Accordingly, we remain confident that the combination of our experienced management team and our strong brand portfolio will enable us to continue to drive the business forward. In the shorter term run up to Christmas, we expect sales of Scalextric to be boosted by our McLaren and James Bond "Quantum of Solace" licensed products and the proposed launch of an Airfix kit featuring McLaren and Lewis Hamilton. "We have integrated the Corgi acquisition successfully. We are delighted that the business is performing well. Encouragingly, both Airfix and Humbrol brands acquired in 2006, continue to grow. We are sure that all three of these brands will continue to deliver excellent opportunities for growth.”