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Hornby in talks regarding financing facility with new lenders as sales and profits remain depressed

The hobbies group said: “There was an improvement in sales towards the end of the financial year as some of the European product started to arrive, but as expected, the Group sales and profits were lower than last year”

Airfix model
Hornby added a lack of discounting coupled with late deliveries of product has continued to affect its sales rate

Hornby Plc (LON:HRN) has revealed it is in the final stages of discussions regarding a financing facility with new lenders to support its changed strategy as sales and profits remain depressed.

In a fourth-quarter trading update, the international hobby products group said it expects to have the facilities in place ahead of its full-year results, which are expected to be announced in mid-June 2018.

READ: Hornby crashes as it issues another profit warning after horrible Christmas

The Scalextric to Airfix firm said it has continued to implement its strategy “to support the long-term value of the brands rather than the use of discounting to drive short-term sales.”

It added that, as reported in a January update, the lack of discounting coupled with late deliveries of product has continued to affect its sales rate.

The group said: “There was an improvement in sales towards the end of the financial year as some of the European product started to arrive, but as expected, the Group sales and profits were lower than last year.”

Hornby said it has now refined its strategy to enable the business to return to profitability, but the investment needed to support this strategy will require a larger facility than the one currently available to the group.

The firm added that, to support the new financing discussions, its current lender Barclays has agreed that it will support the group with a waiver in relation to the EBITDA covenant in respect of the quarter to 31 March 2018, which is required due to reduced sales volumes.

Hornby said that, at the financial year end, it had a net cash position of around £4mln.

Dust settles on strategy changes

Hornby’s interim chairman and CEO, Lyndon Davies, said: "As the dust settles on the changes to the strategy and we start to put together the line plans for 2019 and beyond, morale is starting to build in our hardworking staff and some trust is coming back with our retailers and customers; both in the UK and abroad.

“Whilst 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."

In early morning trading, Hornby shares held steady at 24.5p.

Quick facts: Hornby PLC

Price: 40 GBX

LSE:HRN
Market: LSE
Market Cap: £50.1 m
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