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Hornby Crashes – Set to Breach Banking Covenant

It has taken Hornby (HRN) a long time getting there but at long last its board and management has driven it off the rails and that is no mean achievement for a company with some of the worlds most famous brands. Is there any hope for a company specialising in toy trains, whose  Chief Executive can seriously say that the company will create shareholder value with the “right platform”.  Is he unable to see the pun in that or that Hornby is nowhere near a platform, never mind the right one.

For the past 5 years or so Hornby has lurched from one crisis to another leaving a trail of unbroken promises behind it.

True, this Christmas it did manage to improve sales with a rise of 17% in November and December but from the New Year, trading has been a disaster with poor sales and a disappointing reaction to product promotion.  Even worse, management does not appear to know why and it seems to have spectacularly failed to anticipate the collapse. It certainly offers no explanations.

In fact management can not even bring itself to admit to a fall in sales.  Instead it resorts to a claim that there has been “negative growth.”  Any growth even if it is negative is better than calling it a fall.

In today’s trading update the company still witters on about the changes to its business model and its transformation plans for the company. Well they  certainly have transformed it.

January sales were substantially below expectation. The full year trading loss will be wider than expected and will be in the region of £5.5 to 6m.  They even managed to lose stock, leading to a write off of £1m. That is a lot of toy trains.

The result of this self imposed mayhem is that in March it expects to breach its banking covenant.  It is of course now in discussion with its bankers.

The present board and management have proved themselves incapable of managing a company which should and could be one of the UK’s success stories. Let us hope that investors and bankers force the company to take the necessary action.

Buy a holiday villa in Greece;   http://www.hiddengreece.net

 

 

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