Hornby has been offered new breathing space by its bank to secure a new finance deal despite a fresh slump in sales.
The company behind model railway sets and Scalextric maker said that poor sales in the first three months of 2018 meant it had breached the terms of its loans agreement with Barclays, but the bank was not taking any action.
Hornby’s new chief executive, Lyndon Davies, said the 117-year old company was in the final stages of negotiating a new, larger loan facilitywith another lender. The agreement is expected to be in place by June this year.
Shares at Hornby have shed a fifth of their value in the past 12 months and on Tuesday closed at 23p, valuing the company at £30.7m.
Davies was appointed by the company’s majority shareholder, Phoenix Asset Management, which took control last year.
Hornby made a loss before tax of £9.5m in the year ended March 2017. One of Davies’ first actions has been to stop the discounting he said had been damaging the firm’s brands, but admitted that the tactic would result in lower fourth quarter profits compared to a year prior.
“As the dust settles on the changes to the strategy, morale is starting to build in our hardworking staff and some trust is coming back with our retailers and customers,” said Davies.
“While we have managed to make a lot of progress in the first few months, there is still much more to do in terms of reducing costs, streamlining processes and adding routes to market.”