Hornby Plc (LON:HRN) – the Scalextric slot car racing to model train maker which was the object of a hostile takeover by its largest shareholder – saw its shares drop today after it warned over its full-year performance, with trading in the year to date weaker than expected.
In an update ahead of today’s annual general meeting, the AIM-listed firm said: “Current trading for this financial year to date has been behind the Board's expectations in part due to softer market demand over the summer months and increased competition in the important UK Independent channel.”
READ: Hornby slams Phoenix takeover offer which it says ‘undervalues’ company
“In addition,” the group continued, “as previously indicated, some new product releases have moved into the second half of the year and there has been a reduction in the amount of promotional activity and discounted stock being offered to the market, which was a feature of the comparative period last year.”
The group said that, as a result, it is expected that trading this year will “be more heavily weighted to the second half than last year due to the relative timing of the new product releases and significant stock reduction in the first half of the previous financial year.”
Hornby concluded: “Whilst the Group still has the important Christmas trading period to come and significant opportunities remain to improve trading performance there is a risk that the shortfall in performance to date may not be recovered fully over the remainder of the financial year.”
Shares below closed offer price
In reaction to the warning, Hornby shares dropped 6% or 2p lower to 29.75p in lunchtime trading.
At the end of June, investment firm Phoenix Asset Management launched a 32.375p a share bid for Hornby having been obliged under City rules to make an offer to buy the rest of the firm after upping its stake to above 50%.
Hornby’s board “unanimously” recommended shareholders to reject the offer, although on July 17, Phoenix’s mandatory cash offer was closed with a final level of acceptances totalling around 71.5%.
Earlier this year, Hornby implemented a turnaround plan to try and turn the business around after several profit warnings in recent years.
READ: Hornby turnaround plans on track, losses narrow
On June 21, the same day Phoenix unveiled its mandatory cash, Hornby reported its full-year results for the 12 months to the end of March showing a narrowing in pre-tax losses to £9.5mln, down from £13.5mln in 2016, although revenues slipped, falling 15% to £47.4mln.