Supply problems temper Hornby forecasts

Changes to its supply chain have lead to Hornby issuing a profit warning.
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The firm has warned that annual profits are likely to be down by £2 million because of problems with its Chinese manufacturer.

The Scalextric and Airfix owner said underlying pre-tax profits for the year to March 31st could fall as low as £6.2 million, from £8.4 million a year earlier.

It suffered a £2 million sales hit as a result of delays in receiving shipments amid restructuring at its principal supplier based in China.

Chairman Neil Johnson said tackling the issue, which affected the company's model railway business, was the group's "number one priority".

While Hornby has a good relationship with the new owners of its main supplier, it said efforts over the past two years meant it was now capable of manufacturing a large proportion of its requirements from alternative sources.

It said the problems came at a time of strong demand for its ranges, with "encouraging" sales for Airfix, Humbrol and Corgi.

While earnings from US and European businesses will counteract some of the currency weakness, Hornby warned the net effect of the pound's weakness is likely to impact on its performance in the year to March 31st, 2010. The majority of the company's purchases are made in the US dollar.

Johnson added: "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."


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