Toymaker Hornby did not receive more than ten per cent of the product it ordered last year because of supply chain disruption.
In its annual results, the company described last year as “one of challenging economic conditions in all of our major markets that were exacerbated by continuing disruptions to the model railway supply chain and the distractions of what was a disappointing venture into London 2012 branded products”.
Across the group, it said: “More than ten per cent of product ordered was not delivered during the year with our European subsidiaries faring worse than the UK business. The UK business was also impacted by the sales of London 2012 product, which although totalling just short of £5m produced an overall loss of £1.3m. The combined impact of these factors has been a sharp decline in revenue and profits.”
Hornby sources the majority of its products in China and India, via third-party contract manufacturers.
“During the year model railway supplies from the group’s largest supplier in China, reduced considerably after their decision to close down the main factory supplying Hornby and transfer activity to another that didn’t have the experience of producing our products,” the group said.
“We have mitigated this risk by diversifying production to new suppliers while continuing to work with existing suppliers to help strengthen these existing relationships. This supplier is now expected to contribute less than 15 per cent of total production in 2013. This is from a historical peak of 75 per cent and 35 per cent earlier in 2012.”
[asset_ref id=”539″]Sales of model railways declined by around 26 per cent in the year, largely due to the supply chain disruption and the consequent delays to the launch of new locomotives.
The group said: “This in turn had a knock-on effect on sales of other items in the range. However we did have success with the majority of our new product introductions that were not affected by the supply chain disruption. These included a refurbished Flying Scotsman, a Diamond Jubilee celebratory set and a more modern ‘2-bil’, which sold out quickly after launch.”
For the year to 31st March, Hornby reported sales of £57.4m – down from £64.4m the year before. It produced a loss before tax of £3.4m compared to a profit of £4m the year before.
Chairman Roger Canham said: “Historically supply shortages have affected some parts of the group more than others and our current focus is to ensure that the supply risk across product groups and market geographies is much more balanced.
“Over the coming months our priority will be to focus on improving the execution of our core business, so that over time we can demonstrate high-quality and sustainable long-term revenue and earnings growth, combined with a disciplined approach to capital allocation.”
Hornby’s brands include: Scalextric, Airfix, Humbrol, and Corgi as well as Hornby model railways.